Report No. 8643-BO

BoliviaPoverty Report

October 3, 1990

Latin America and the Caribbean RegionCountry Operations Division ICountry Department III

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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Fiscal Y-earJanuary 1 to December 31

Curroncy EauivalentsCurrent Unit: Boliviano (Be)

Exchange Rate Effective July 31, 1990US$1.00 Bs 3.17B51.00 = US$0.32

ABBREVIATIONSBAB Bolivian Agricultural BankCEM Country Economic Memorandum

CIAT Center for Tropical Agriculture ResearchCOMIBOL Bolivian Mining Corporation

CONEPLAN National Economic Planning Council

CONES National Council for School ConstructionCORACA Peasant Agricultural Development Corporation

DHS Demographic and Health SurveysEIH Integrated Household Survey

ENSO Economic Management Strengthening OperationENPV National Survey on Population and HousingEPH Permanent Household uurveysESF Emergency Social FundFDC Peasant Development FundFDR Regional Development FundGDP Gross Domestic ProductHD Pealth District

IBTA Bolivian Institute for Agricultural TechnologyINAN National Institute of NutritionINC National Colonization InstituteINE National Institute of Statistics

MACA Ministry of Campesino and Agricultural AffairsNEC Ministry of Education and Culture

MHCSP National Maternal Health and Child Survival ProgramHINPLAN Ministry of Planning and Coordination

MPSSP Ministry of HealthMTC Ministry of Transport and CommunicationsNGO Non-Governmental Organization

PDIs Private Development InstitutionsPSM Public Sector Management Program

PVOs Private Voluntary OrganizationsRDCs Regional Development Corporations

SENALEP National Service for Alphabetization and PopularEducation

SENAC National Road Service

SENET National Technical Education ServiceSIF Social Investment Fund

SNDC National Service for Community DevelopmentSU Sanitary Unit

SVEN National Nutritional Surveillance SystemTGN National Treasury

UDAPSO Social Policy Analysis UnitUN United Nations

UNICEF United Nations' International Children's Emergency FundVAT Value Added Tax

FOR OMCIAL USE ONLY

This report is based on the findings of various missions to Boliviabetween June 1589 and March 1990. The report was discussed with the BolivianGovernment in June 1990. Bank participants in the missions were: Steen LauJorgensen (Country Officer, Task k,ager) Izumi Ohno (Economist), LindaMcGinnis (Consultant, Nconomist), Julie VanDomelen (Consultant, Economist),Juan Carlos Aguilar (Economist), and William Shaw (Country Economist).

The following background papers were written for the report: "PovertyReport: Agriculture" James Cock and Douglas Forno; "Poor Rural Women inBolivia" Ann. Webb; "The Importance of Rural Infrastructure for PovertyAlleviation" (in Spanish) Rodrigo Cisnerosl "Non-Governmental Institutions inCore Poverty Areas of Bolivia" (in Spanish) Christina Mejia, et. al.; "Povertyin the Lowlands of Bolivia" Cowi Consult; "Institutional Aspects of PovertyAlleviation" Linda McGinnis; "The Government's Strategy and Investment Programand Poverty Alleviation" Izumi Ohno; "Donor Activities in Poverty Alleviation"Izumi Ohno; "Education Reform and Poverty" Dan Newlon; "Annotated Bibliographyon Poverty in Bolivia" Malene Hedlund.

The report was written by the task manager with substantial inputs from:Izumi Ohno (strategies and investment), William Shaw (macroeconomics), LindaMcGinnis (institutional issues), and Julie VanDomelen (efficiency issues).The preparation team is especially indebted to Emergency Social Fund staff,CEDRAGRO and PROANDES in Cochabamba, and IPTK in Ocuri for arranging fieldtrips. Several background papers were financed by trust funds including theconsultant trust funds of Denmark, the Netherlands and Norway. Diana Cortijodid the typing and formatting and provided research assistance.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

TABI or CONTENTS

SUNHARY AND CONCLUSIONS. . . ... . . . .. . . . . . . . . . . . . . .. l-vii

CHAPTER1: INTRODUCTION AND AACKGROUND . . . . . . . . . . .. ....... 1

INTRODUCTION . . . . . . . . . . . . . . . . . * . .. . 1Ratlonale for the study . ......... ..1

OUTLINE OF THE REPORT . . . ... . . . .. . . . . . . . . . 1BACKGROUND ... .. . . . ... . . * . .. . .. * 3

Geography .. . . . . . . . . . . . . . . . 3Hlstory . . . . . . . . . . . . . . . . . . ............................................... 4

CHAPTER 2s DI4ENSIONS OF POVE RTY . . .. . .. ............... 6INTRODUCTION . ..... ....... .. . . . . . . 6

The Data .... . . . . . .. . * * * * *.... .. .*..... 6DESCRIPTION OF POVERTY ... . . . . . . . . . . . . . . . 7

Poverty in General ... . . . . . . . . . . . . . . . . 7Poverty Over Time - A Paradox.. .. . 8Poverty in Rural and Urban Areas . . . . . . . ..... 12Poverty by Region ..... .. . .. . . . .. . . . . 13Poverty by Sector and Occupatlon . . . . . . . . . . . . 18Poverty by Gender. . . . . . . . . . . . . . . . . ... 18Ethnic Groups and Poverty . . . . . . . . . . . . . 20

POVERTY PROFILES . . . . . . . . . . . . . . . . . . . . . 21CAUSES OF POVERTY ...... . . .. . . .. . . .. . . . 22

CHAPTER 3: MACROECONOMIC POLICIES AND THE POOR. . . . . . . . . . . 25INTRODUCTION . . . . . . . . . . . . . . . . 25IPACT OF THE 1980-85 ECONOMIC CRISIS . . . . . . ..... 25

Government Policies and the Poor. .. . ......... . 26Impact on Agriculture ... ...................... . 27

IMPACT OF THE STABILIZATION IN AUGUST 1985 . . . . . . . . 28IMPACT OF ADJUSTMENT POLICIES . . . . . . . . . . . . . . . 29

Public Sector Employment .. nt................... 30External Sector Policies . . . . . . . . . . . . . . . . 31Impact on Agriculture ..... . . . . . . . . . . . . 32Labor Markets .. . . . . . . . . .. 34Tax Reform ....... .. .......... .. . . 34

CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . 36

CHAPTER 4. INSTITUTIONS AND THE POOR . . . . . . . . . . . . . . . . . . 39INTRODUCTION . . . . . ... . . . . . . . . . . . .. . 39GLOBAL INSTITUTIONAL FRANEWORK . . . . . . . . . . . . . . 40COMMON INSTITUTIONAL CONSTRAINTS . . . . . . . . . . . . . . 43

Centralization and Urban Blas . . . . . . . . . . . 44Lack of Demand-Driven Orientation . . . . . . . . . . . 46Poor Planning and Policy Making . . . . . . . . . . . . 47Patronage, Poor Salaries and Poor Training . . . . . . . 48

Donor Dependence . . . . . . . . . . . . . . . . . . 50

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CONCLUSIONS AND RECOHNXIENTION . . . . . . . . . . . ... 51The Demand-Driven Approach . . . . . . . . ....... 52Decentralization ... ..... .. . .. .... ..... 55Improved Policy Making, Planning and

Coordination . . . . . . . . . . . . . . . .. . . * . . 56Donor Coordination . . . . . . . . . . . .. . . . .. . so

CHAPTER S: HEALTH . . . . . . . . . . . . . . .. . . . 59INTRODUCTION . . . . .. . . . . . . . . . . .. . . . . 59INSTITUTIONAL FRAMEWORK . . . . . . . . . . . . . . . . . . 60GOVERNMENT POLICIES AND INVESTMENTS . . . . . . . . . . . . 61

Sector Strategy and Expenditures . . . . . . . . . . 61Nutrition Pclicies .c.i ................... 63Water Supply .. . . . . .. . .... .. ..... 65Investment . .. . . .. . . . .. . . . . . . . . . 66

SECTOR CONSTRAINTS . . . . . . . . . . . . . . . . . . . . 67Centralization and Inadequate Coordination . . . . . . . 67Low Salaries and Poor Personnel Management . . . . . . . 68Poor Financial Management . . . . . . . . . . .... 69Inappropriate Training . . . . . . . . . . . . . . 69Lack of Beneficiary Participation . . . . . . . . . 69Insufficient Use of Non-GovernmentalInstitutions . .. . . . . . . . . . . . . 70Women's Issues . . . . . . . . . . . 72

RECONMENDATIONS ..... . . . . . . .. .. . ... . 73Implement Existing Policies . . . . . . . . . . . . . . 73Shift Expenditures . . . . . . . . . . . . . . . .*. . . 73Institutional Recommendations . . . . . . .. .. . 73Coordinate NGOs . . . . .. . . . . . . . . 74Encourage Beneficiary Participation . . . . . . . .. . 74Upgrade and Reorient Training . . . . . . . . . . . . . 75Integrate Traditional and Xodern Medicine . . . . . . . 75Nutrition . . . . . . . . . . . . . . . . . . . . 76Women's Issues . . . . . . . . . . . . . . 76

CHAPTER 6: EDUCATION . . . . . . . . . . . . . . . . . . . . . . . . . 77INTRODUCTION . . . . ... . . . . . . . . . . . . . . . 77INSTITUTIONAL FRAMEWORK . . . . . . . . . . . . . . . . . . 78EXPENDITURES AND GOVERNMENT POLICIES . . . . . . . . . . . . 79

Expenditures . . . . . . . . . . . . . . . . . . . . 79Reform Plans . . . . . . . . I . . . . . . . . . . . . . s0Public Investment . . . . . . . . . . ... . . . .. 81

SECTOR CONSTRAINTS .... . . . . . . . . . . . . . . * . 82Inflated School Staffing . . . . . . . . . . . . ... 82Low Salaries . . .. . . . . . 83Weak Planning and Policy-Making Capacity . . . . . . . . 83Inadequate School Administration . . . . . . . . ..... 84Legal Impediments to Education Sector Efficiency . . . . 85Inadequate Non-Formal Education . . .. . . . . . . 8SUnder-Utilization of the NGO Option . . . . . . . . . 8S

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RZCCOOENDATIONS . . . . . . . . .. . . .* . * # * * * . * 87Expenditures . ..... . . . . . . . . . . ... . ... 87Improving Teachere' Salaries . . . . . . . . . 87Limit Rural/Urban Differences . . . . . . 89Efficient Allocation of Resources .. ... 90Decentralization . . 91The Role of NGOs . * . . . . . . . . . . . 92Community Participation ......... . 92Women' Issues .. . .. 93Phasing ... . . . . . . . . . . . . . . ...... . 94

CNRITER 7a AGRICULTURE . . . . . . . . . . . . . . . . . * . . . . .* 95IWTRODUCTION . . . ............. . . . . ............... . 95INSTITUTIONAL RMWEORK . .. . .. . . . 97GOVERNMENT POLICIES AND INVESTMENTS 98

Sector Strategy .. 98Sector Investment . 99

SECTOR OONSTRAINTS AND ISSUES. . . 101Land Use .... . . . . . . . . . . . ....... . . 101Land Titling .... . . . . ...... . . . . . . . . 102Food Donations .. 105Lack of Research and Extension . .108Women' Issues .*.*.108MACA Institutional Issues . 109Politicization . . . . . . .. . .... .... . . . . . . 119Week Human Res ources . ...... . 110Poor Central/Regional Coordination . .110

Weak Information . .............. . . lllLack of Beneficiary Participation . .111

ECOWNENDATIONS . . . . . . . . . . . . . . . . . ... 112Subsidize Poor Communities through Infrastructure . . 112Land Reform and Community Laws . .113

Appropriate Technology Development and Transfer . . 114Improve Agricultural Credit .*. .. .*.. * . 115Improve Small-scale Irrigation . . . . 116Linking the Poor to the Market Economy . .116Migration . . .. . . . 117Women'Q Issues . . . . . . . . . . . . . . . .. . 117Strengthen National Policy and Planning . . .118

CMAT8R 8t !RAXSPORTATION . . . . . . . . . . . . . . * * . * 119NTRODUCTION . . .. . . .119INSTITUTIONAL FRAMEWORK ................ 119GOVERNMENT POLICIES AND INVESTMENTS . ..... 120

Sector Str-ategy .. .. 120Sector Investment ....... .. . 120

SECTOR ONSTRAINTS 8. . . . . . . . . . . . . . 122Rural Roads . . . . . . . .. 122Weak Planning and Coordination . ... 122Scarcity of Operations & Maintenance Resources . .123Low Salaries . . . . . . . . . . . . . . . . .. 124

4

3ECOOM)NDATIONS . . . . . . . . . . . . . . . . . . . . . . 124Seotor Priorities and Expenditures . . . . . . . . . . . 124Institutional Recommendations . . . . . . . . . . . . . 125

CHUPTER 9s EFFICIENCY ISSUES . . . . . . . . . . . . . . . . . . . . . . 126INTRODUCTION * * * * . * . . .. . . . . 126CoSTS OF INVETENTS IN POOR AREAS . . . .. . . . . . . 126EFICIENCY AND IMPACT OF INVESTMENTS IN POOR AltES ... . 129

Roadt .S.up . . . . . . . . . . . . . . . . . . . . .. . 129errlgatCon . . . . . . . . . . . . . . . . . . . . .. . 130

Water Supply IVETNT . . . .. . . . . . . . . .. .. .. . . 131Health Care .. . ........................ ................ .. ... 132Education . . .............. ................................ .. 133

IUMMINO INVE8 XNTS8 . . . o-*-*. .............................. 134Financial Resources . . . . . . . .9. . . . . . .. . . 134Community Contributions . . . . . . . . . . . . . 135

CONCLUSIONS AND RECOMMENDATIOZ8 . . . . . . . . . . . . . . 136

CHAPTER 10s RECOMMENDATIONS AND ACTION PLAN. . . . . . . . . . . . .. 138INTRODUCTION . . . . . . . . . . . . . . . . . .. * . . 138THE CAUSES OF POVERTYREVISITED . . . ........ . 138CRITERIA FOR SUCCESSFUL POVERTY ALLEVIATIONINTERVBNTONS ....... . . . . . . . . . .. .*. 139ACTION PLAN . . . . . . . . . . . . . . . . . . . . . . 141

x Ideas for Poverty-Focused Projects and Studies . . . .. . . . 151II Various Poverty Naps of Bolivia. ........... .9..156III Bibliography . . . . . . . . . . . .. . .. 161

TABLES:

2.1: Social Indicators and Expenditures . 112.2: o0cial Indicators for Rural and Urban Areas . . . . . . . 132.3: Poverty by Area from ENPV . ... .. 153.1: Agricultural Production ... . . . . . . -.. . 335. 1 Distribution of Health Resource. by Area . . . . . . . . . 625.2t Consultations per 8taff-hour. . ...... 716.1: Distribution of Education Resources by Area . . . . . . . 796.2 NBC's Expenditure by Department ............... 807.1: Food Donation Programs . . . . . . . . . . . . 1057.2: Food Donation Volumes . . . . . .. . . . . .. 1067.3: Wh*at Donations and the Domestic Market . . . . . . . . . 1079.1: Cost/Unit Variations by Poverty Areas for ESP Projects . . . . 1279.2: Cost/Beneflciary Variations by Poverty Area ... . . . . . . 1289.3: Counterpart Financial Contributions .. ..... . . . . . . 1359.4: Counterpart Contributions to ESF. ................ . 136

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FIGURBS:

2.1s Poverty in 1976 . . . . . . . . . . . . . . . . . . . . . . . 82.2s Lorenz Curves for Urban Areas . . . . . . . . . . .. . . .. 92.3s Value Added in Agriculture . . . . .. .... . . . . . . . . 102.4: Distribution of the Poorest Provinces (Map) . . . . . . . . . 142.5s Relative Worsening of COre Poverty Areas . . . . . . . . . . . 162.6: Gross Migration Flows Among Departments . . . . . . . . . . 172.7: Native Languages and Poverty .... . . . . ..... . 203.1s Development of Real Exchange Rate . . . . . . . . . . . . . . 314.1: ESF Projects by Poverty Area . . . . . . . . . . ....... 394.2: Organization of the Public Sector . . . . . . . . . . . . . . 414.3: Requests to ESF from Poorest Areas . . . . . . . . . . . . . . 435.1: Infant Mortality Rates . . . . . . . . . . . . . . . . . . . . 595.2s MPSSP Expenditures by Department . . . . . . . . . . . . . . . 625.3: Chronic Malnutrition in Urban Areas . . . . . . . . . . . . . 645.4s NGO Requests to ESF . . . . . . . . . . . . . . . . . . . 706.1: Children's Health by Mother's Education . . . . . . . . . . . 779.1: ESP Standard Costs in Major Cities . . . . . . . . . . . . . . 126

30138:

1.1: Social Cost of Adjustment . . .. . . . . . . . . . 11.2: Outline of the Report . . . . . . . . . . . . . . . . . . . . . 31.3: Bolivia's Nine Departments . ...... . . . . . . . ... 42.1: ODofta Marta ........... . 222.2s Reasons for Poverty ........ . . . . ...... . .... 233.1: The Shoe-shine Boy and Structural Adjustment . . . . .. . . . 293.2: Gabriela, Rafael and the Land Tax . . . . . . . . . . . . . . . 374.1: Working with NGOs .. . . . . . . . . . . . . . 474.2: Framework for Institutional Reform . . . . . . . . . . . . . . 525.1: Maria and the Iodated Salt. . . . . . . . . . . 656.1s Cutting the Umbilical Cord . . . . . .. . . . . . . . .. .. 826.2: A Rural School . . . . . . . .867.1: To Migrate or Not, That is the Question . . . . . . . . . . . . 967.2: The Guaranies Working for the Company Store . . . . . . . . . .1047.3: Titling: A Bureaucratic Nightmare . . . . . . . . . . . . . . .113

8UMMARY AND CONCLU8OXNS

Outline of the report

1. The focus of the report is on sectoral nolicies and povertv, with aspecial emphasis on institutional issues. The poor have poor health andeducation indicators. They are largely involved in agriculture, and havelimited access to services and markets. Therefore, the report will focus onpoverty and a series of sector related policies.

Dimensions of Poverty

2. The voorest of the poor are rural smallholders and agricultural workersof Indian origin. This is brought out by analysis of poverty indicators' byregion, by urban/rural areas, by gender and race, and by occupation, overtime. Data from the last census (1976) show that 95% of the poorest 30% '.arerural peasants and day-laborers. Poverty was concentrated in the centralAndean area of Northern Potoui and Chuquisaca, and Southern Cochabamba. Sincethen, agricultural productior. and prices of the peasants' products havefallen. Recent surveys show that the poor geographical areas are worse offtoday relative to the national average than they were in 1976. Women andpeople of Indian origin are the poorest among the poor.

3. The core RoveAtv oroups are: (1) smallnolder neasants of Indian originin the central Andean region, (2) recent miarants to the Lowlands, (3)agricultural laborers (herders, sugar cane workers, and brazil nutharvesters), and (4) Amerindian tribes in the Lowlands. Thus, the reportfocuses primarily on rural poverty, as the poorest of the poor are in ruralareas.

4. Poverty is fundamentally a Droblem of low ooductivitv and resultina lowincome. The causes of low productivity can be divided into four majorcategories.2 First, ceneral development Droblems: as Bolivia is a poorcountry, there are many poor people. Bolivia's social indicators are worsethan GNP per capita would seem to suggest. For example, Bolivia's infantmortality is higher than in most of Sub-Saharan Africa. Second, the poor haveinsufficient human calpital. The problems of illiteracy and malnutrition areparticularly serious. Third, the poor have few Dhvsical assets. Even thougha land reform in 1953 distributed land, many have no title to their land. Lowproductivity and lack of access to productivity-improving investments or newtechnologies are associated with the land to which peasants do have title.Fourth, it appears that there is discrimination place on the basis of bothgender and ethnic background.

1 Malnutrition, illiteracy, infant mortality, incidence of water supplyand sanitation, and housing conditions.

2 Even though this linear causal relationahip is a simplification, ithelps to focus the analysis and the four causes of poverty mentioned areequivalent to the problems expressed by the population.

ii

Macroeconomics and the Poor

5. The stabilization oroaram probably heloed the relative osoition of thepoor compared to what would have happened in the absence of otabilization.The Bolivian economy disintegrated rapidly in the first half of the eighties,resulting in inflation of 24,000% and a fall in GDP per capita of 20s over 4years. In 1985, an orthodox adjustment and stabilization program was put inplace. Inflation was controlled and growth resumed. Price stability and thereduction of state intervention in the economy were achieved. The rentsavailable to groups with economic or political power were reduced and theburden on groups without such influence increased. Changes in the traderegime and the real appreciation of the boliviano probably impaired thecompetitive position of smallholders producing for the internai market. Itwas not possible to avoid the creation of a new class of poor when theinternational tin market collapsed and drastic reduction in employment in thestate mining company was needed. The tax reform did not greatly affect therural poor, who remain largely outside the tax system.

6. Bad macroeconomic oolicies hurt the poor. Interventionist policiesincrease the return to political or economic influence and are thus beneficialto the non-poor. But macroeconomic lolicies should not be used to improve thesituation for any poor qrouM directly. Such instruments are much too blunt.For example, although the rural poor would benefit from an appropriateexchange rate for agricultural production, the present exchange rate ismarket-determined. Similarly, a more progressive tax structure may bedesirable, particularly given the extreme inequality of income levels inBolivia. However, the Government's ability to monitor highly-differentiatedrates or to raise taxes on the rich is limited by administrativeconsiderations and by the need to encourage greater private sector activity.Finally, increases in expenditures to assist the poo_ must be carried outwithin the overall budget constraints necessary to maintain economicstability. Even so, there is enormous potential within the availableresources to reallocate expenditures to assist the poor and to improve theefficiency of programs which serve them. Increased tax collections would helpfund more poverty programs without compromising other goals of fiscal policy.

Institutional Issues and the Poor

7. Typically, many Bolivian institutions are inept or their efforts toreach the poor are insufficient. Institutions are overly centralized, areplagued by poor salaries and political patronaae, and have little history ofdemand-driven policy making. Poverty-oriented institutions should drawlessons from the Emergency Social Fund (ESF), especially in terms of itsdemand orientation, incorporation of small businesses and NGO participation.

8. Decentralization of specific responsibilities could be a partial solu-tion to these institutional problems. The process should begin in a limitednumber of sectors and expand gradually. The substantial regional differencesmust be addressed. From the central government (or donors and NOOs) trainingand technical assistance should be made available to the regional and locallevels. It would be appropriate to decentralize school management, managementof primary health care and road maintenance. Decentralization is not

IIi

appropriate for all sectors. There will still be a need for centrallycontrolled hospitals and universities, serving several regions, for example.

9. The primary obiective of central am ernment should be to not overallp^oicy auidelines, while allowing decentralized institutions to assume more

implementation responsibilities. The creation of the new Sub-seoretariat for8ocial Policy in the Ministry of Planning is a positive first step. The Sub-secretariat should be provided with sufficient financial and human resourcesto cre&te a small cadre of highly skilled experts in action-oriented povertypolicy analysis. Similarly, it is essential for sectoral ministries tostrengthen their policy and planning departments.

10. It is essential to gaise the galaries of key civil servants to competi-tive levels through a reduction in the total number of public employeesawithout this action it is unlikely that public agencies will be effective inany sector. This will imply greater emphasis on implementation of a publicsector management program. For such a reform to take hold, the present systemof appointments by oolitigal ostronace must be abolished. The shift towards aprofessional civil service working for democratically-elected officials is anessential step in the maturing process of Bolivian democracy.

11. Greater efforts must be made to coordinate 2overtv strateaies amonodonors. government and NGOs. significant duplication of projects continues toexist in some areas while in others there is virtually no intervention at all.Inter-donor coordination should also be strengthened. The successful expe-rience of the regular coordination meetings in La Paz should be sustained andexpanded. A leading donor agency should be identified for each sector andshould remain in continuous contact with the Government and other donors todiscuss policies and interventions in its sector, thus assisting the Ministryof Planning with coordination.

gmalth

12. Health o2ligies hav a strong 22yertyjalleviation focus. Expendituresand investments, however, do not follow these policies. The first recommen-dation is to implement existing policies and shift resources accordingly. Anumber of NGOs work in health, but their activities are uncoordinated and donot follow national standards (when standards exist, which they frequently donot). Greater beneficiary participation should be encouraged. The poor todaymainly use the traditional medical system. Thus, it is important to integratethe modern and traditional systems through training of practitioners. Mal-nutrition is a serious problem in Bolivia but there is no central policy todeal with it. The first task would be to monitor ongoing programs and assesstheir effectiveness. A pre-school nutrition program could prove to be a goodpartial solution. In terms of women's issues, the Government should implementthe very good Maternal Hbalth and Child Survzval Program that was presented inNovember 1989. Another serious health issue in Bolivia is the alarmingly highrate of life-threatening, illegal abortions. Bolivia needs a culturally andreligiously sensitive reproductive education program.

iv

Education

13. Education in Bolivia is in a crisis. Illiteracy is high, and surveysshow that only minimal learning is taking place. Expenditures are skewedtowards urban areas, and investment is scant except for ESF. Universitiestake up a large share of the budget, while rural schools go withoutblackboards or textbooks. Teachers are poorly paid, but salaries eat up morethan 95% of total education expenditures. Efficiency is very low: mostteachers work only half-time, and student/teacher ratioq are very low. LmeNGOQ have shown a capability to manage schoolo efficiently, but this option isnot widely used. Administration is very poor and complicated by the existenceof two separate systems for rural and urban education. Recommendationsinclude shifting exDenditures toward primary education and increasinoteaph,rs' salaries through higher efficiencv. This could be done by payingtrained teachers more for working a full week instead of the 20 hours per weekworked now. The differences between rural and urban education should beminimized through improvements in rural areas followed by a unification of thetwo systems. Improvements could include multi-grade teaching and pilottesting of boarding schools for dispersed populations. Multi-grade teachingwould also increase efficiency and again allow for well-trained, full-timeteachers to be paid more. Fees should be introduced for higher education.

Agriculture

14. Investment and exDenditures follow no discernible strategy and tend notto benefit the noor. The sector is full of semi-independent agencies, eachfollowing its own path. While the land reform distributed some land to thepoor, tenure and titling remain serious issues. As communal titles are notrecognized, some communities are in constant danger of being forced off theirland. It is very costly and time-consuming to obtain a title, so many poorpeople do not have title to their land. There is no centrally organizedextension service, and very little extension in the public sector at all.Food donations have been criticized for limiting local food production,although the data do not provide sufficient evidence to confirm this view.

15. Poor rural communities should be subsidized throuah the ofrovisionofinfrastructure without reauiring full cost recovery. The infrastructureshould be built with community labor and be designed in line with culturalnorms. In general, small projects have been the most effective. Therefore, anumber of small projects with beneficiary involvement shculd be promoted,instead of the massive integrated schemes currently in vogue in Bolivia. Therole of women needs to be taken into account, especially as temporarymigration removes the men from the day-to-day management of farms. Small-scale irrigation shows great promise and should be pursued. The land titlingsystem must be revised to make it simpler and more transparent. The extensionand research system should be reorganized. Joint private/public activitiesshould be undertaken to improve market access for the poor with somemarketable surplus.

v

TransoDort

16. Government strategy should be revised to emphasize cost-effectiveconstruction of rural and feeder roads. The current strategy fortransportation investments emphasizes connecting Bolivia with other countriesand linking major cities in Bolivia. By emphasizing rural and feeder roads:the development of local markets would be facilitated. This can beaccomplished, in part, through some of the community participation and labor-intensive means pursued by ESF. The transfer of responsibilities from ESFback to the sector agencies must ensure that the same types of poor commu-nities continue to be targeted with the same kind of labor-intensive projects.

Efficiency

17. Investments in poor regions, particularly rural areas, can be competi-tive in terms of efficiency. Economic viability of a project depends on thescale and type of technology implemented and the attention paid to issues ofmarket structure and commercialization. For projects providing socialservices such as health care and education, dispersed populations are decided-ly at a disadvantage. Large efficiency gains are possible in both health andeducation by rethinking approaches to service delivery. In health, there is aneed to build low-cost basic facilities and especially to improve the use ofexisting facilities. Outreach programs, education and community based servicedelivery are important in raising the efficiency of existing health infras-tructure. In education, focus should be on the better use of existingfacilities, repair of structures and construction of boarding schools. Inirrigation, projects should be followed up with training in new methods. Intransport, new roads should be built only where there is a competitivetransportation sector and where communities are organized, to assure that therents accrue to the poor.

Action Plan

18. The poverty alleviation action plan is focused on imrrovina sectoralgolicies and institutions. Actions are based on addressing the fundamentalcauses of poverty. To help improve general problems related to the overalllow development of Bolivia, macroeconomic policies should remain conducive toprivate sector development. To address the poor state of human resourcedevelopment, nutrition, health and education policies must be changed toimprove efficiency and remove inequities in spending. The low asset base ofthe poor should be improved through improved titling, access to appropriatetechnology, and rural credit schemes (private-sector based). Improvements inpublic services should be demand driven. Improvements in infrastructureshould focus on rural roads, small-scale irrigation, and community based watersupply. Discrimination is harder tc tackle, but at a bare minimum the lawsshould be revised to remove institutionalized discrimination. Bolivia is toopoor to limit che productivity of large segments of its population throughdiscrimination.

vi

A Summary of Recommendations

19. Key recommendations, by sector, are summarized below:

i) in fiscal policy, efforts to collect more taxes hould be inten-sified. This would enable more poverty programs to be financed,as specified below, without compromising other targets of fiscalpolicy.

ii) In health, the Government should implement the Maternal Health andChild Survival Prooram. This well-designed program has politicalsupport from the highest levels in Government and sufficientexternal financing. Hoslital and other tertiarv care investmentsshould be reviewed and most likely scaled back.

iii) In education, an extensive reform should begn. A phased approachbeginning with better pay for full-time teachers (primarily inrural areas), financed by savings resulting from the reduced needfor untrained teachers. In the longer run, a thorough educationreform is needed, but most short-term solutions could becomeineffective without sucF _- reform.

iv) In agriculture, titlino Drocedures should be streamlined bylimiting the number of offices involved in approval of documentsand eliminating the need for the President to sign individualtitles. Small sc5le irriaation schemes should be sum,orted. Suchschemes have proven to be both effective and efficient.Government subsidies should be shifted towards providing poorcommunities with productive infrastructure such as flood control,storage facilities, irrigation, etc. Communities should providelabor and local materials for such works.

V) In transport, a vroaram of economically iustified rural roadsshould be develoDed and carried out. There are several large roadprojects in the existing public investment plan with low rates ofreturn that should be scrapped in favor of rural roads with higherrates of return.

20. Recommendations that apply to all sectors are summarized below:

i) A civil service reform should be initiated. Key staff in planningand policy roles in areas important to poverty alleviation must beassured stable employment free from political interference atsufficiently high salaries. This key cadre of highly trainedprofessionals could be financed through efficiency improvements inpublic administration.

ii) A leading donor aaencv should be identified for each sector. Theagency should remain in cortinuous contact with the Government andother donors to discuss policies and interventions in "its"sector, backing up the work of the Ministry of Planning.Agreement should be reached by the 1990 Consultative Group.

vii

iii) The Government and external donors should encourage a multitude ofactivities, programs, solutions, rather than centralized,national, global solutions. National schemes have generally nottaken the concerns of the poor into account. An exception to thisrule is the natior.al vaccination campaigns and some of the othernational health campaigns.

iv) Activities should be small-scale. Small projects have a muchbetter track record in terms of poverty alleviation and efficientimplemen-tation than large multi-million dollar projects. Suchsmall projects include irrigation, local road projects, and simplewater supply schemes.

v) 8chemes must take into account the cultural heritage of theaffected communities. Communities and their superstructures(e.g., peasant unions) can become very efficient partners indevelopment if projects are developed in cooperation with thebeneficiaries. Many projects have failed when cultural norms werenot considered. The indigonous cultures have practiced sus-tainable agriculture for centuries. These traditions should bebuilt upon, not discarded as inferior.

vi) Proiects should be demand-driven. One way to involve communitiesis to react to demand for interventions, and not rely on acentralized, top-down planning process. A demand-driven systemmust be modified to include substantial outreach activities.Communities without the necessary capacities to develop projectproposals must be helped. The modified demand-driven systempresently in place in the Social Investment Fund could serve as amodel.

vii) Execute oroiects with local orivate oroanizations. Locally basedNGOs, communities, neighborhood councils, mothers' clubs, etc.,could all play an important role. At times community organizerssuch as NGOs might be needed. This could be an NGO interested inexpanding its geographical or sectoral scope.

viii) The fundamental principle in a strategy based on the outlinedprinciples is to help the poor help themselves. Only if thisroute is followed will interventions be effective, efficient andsustainable.

CRHr-R 1t !NTRODUCTION AND BACKGROUND

INTRODUCTION

1.1 This chapter provides a brief outline and introduction to the report,followed by a section with background information. First, the rationale forthe report is laid out. Second, the outline of the report is presented.Third, background information on geography, economic history, and administra-tive matters is presented. Readers familiar with Bolivia can safely skip thesection or background.

Rationale for the stugy

1.2 Since the resumption of Bank activities in Bolivia in 1985, there hasbeen a need for a thorough assessment of poverty. In previous economicreports, various aspects of poverty have been discussed including the avail-able data on poverty (Updating Economic Memorandum, 1988), an assessment ofthe Government's effort to alleviate the social cost of the crisis and sub-sequent adjustment through the Emergency Social Fund (Country Economic Memora-ndum, 1989), and analysis of expenditures in the social sectors (Public SectorExpenditure Review With a Special Emphasis on the Social Sectors, 1989). Whenthe Bank resumed lending, its strategy was focused on assisting thestabilization program through improving the balance of payments. Oncestabilization had been achieved, the Bank shifted its strategy toward the morelong-run goals of social development and poverty alleviation.

1.3 Many international financing agencies have asked the Bank to play aleading role in the analysis of poverty issues. Especially following thesuccessful collaboration in the Emergency Social Fund (ESF) program, manyexternal aid agencies felt the need for further collaboration andcoordination. The Bank was asked to take the lead in this exercise. TheGovernment of Lic. Jaime Paz-Zamora, which took office in August 1989,stressed its continued commitment to sound fiscal and monetary policy butwanted to move forcefully to alleviate poverty at the same time.

OUTLINE OF THE REPORT

1.4 The first order of business is to assess the extent of poverty in,Bolivia. Poverty will be analyzed from various angles. As data arenotoriously poor in Bolivia, the goal is to identify core poverty groups byassembling brief poverty profiles. These profiles are based on an analysis ofpoverty indicators in the past, their development over time, and theirdistribution by ethnicbackground, gender, region,sector and occupation. It is k Sxlt " i oa of dlutrntinalso important to analyze the : tfio h tn sjin thet.a pe*ncan ttcauses of poverty to identify Ifti a vination gakmt tvpholud, ithounntinpossible solutions. This *hai the v1ntionth pen might becanalysis is presented in wy ckorewn die.-Chapter 2.

Box 1.1: Social Cost of Adjustment

2

1.5 Following the UNICEF reports on the social costs of adjustment, suchthemes have been at the forefront of the discussion of structural adjustment.It has been argued that the poor were hurt by the policies necessary torestore order and growth to the economy. Although the social costs ofadjustment debate is rather general and not directly concerned with the poor,it is still very important to analyze how macroeconomic policies affect thepoor. This report looks at the effects of macroeconomic Policy both beforeand during Bolivia's adjustment program to assess the effects on the poor ofvarious macroeconomic policies. This analysis is included in Chapter 3.

1.6 Often poverty alleviation efforts are not implemented due to a lack ofinstitutional capacity. Increasing capital resources and redirecting publicpolicy toward the sectors directly affecting the poor is an important, but notsufficient, condition for alleviating poverty. Without appropriateinstitutions to implement the policies and direct the investment, theseefforts will rarely accomplish their objectives. "Appropriate" institutionsare important for two main reasons: first, in their absence, the benefitsfrom major inflows of physical capital tend to accrue to the elite and rarelyreach the poor; second, appropriate institut.ons not only help to distributebenefits more equitably, but also contribute to the sustainability of projectsand policies, and thus to sustainable growth. Very little effort has beenmade in the past to identify, strengthen or create institutions to reachthe poor effectively. This report will focus on institutional problems suchas excessive centralization, urban bias, low salaries, political patronage,and lack of planning and coordination. The general institutional problemswill be analyzed in Chapter 4 while the sector specific institutional issueswill be discussed with other sector issues in Cbapters 5 through 8.

1.7 The report looks at poverty alleviation from a Policy perspective. InBolivia, discussions of poverty alleviation are often carried out in a spatialcontext, emphasizing the geographical distribution of the poor, based on anyone of several poverty maps. There are several problems with such anapproach. First, the provinces identified as poor are very heterogenousinternally. For example, the capital of the province is often much better offthan the rest of the province. This makes it hard to justify spending more inthe province as a whole. Most inistitutions are concentrated in urban areasand thus are more likely to present projects and programs that would benefitthese areas. Second, there are important pockets of poverty that poverty mapsdo not capture. These include the indigenous groups in the Lowlands and ruralareas with little agricultural potential within non-poor provinces. The poorare mainly rural peasants of Indian origin with poor access to markets andsocial services. Thus, a better match can be made between the needs of thepoor and policies and interventions, if a sectoral perspective is taken.Analyses include policies in health (Chapter 5), education (Chapter 6),agriculture (Chapter 7) and transportation (Chapter 8).

1.8 In a situation of very scarce resources, as is the case in Bolivia,efficiency must be addressed along side of equity. When policies andinterventions that would help the poor have been identified, and institutionshave been created that could implement the policies, the question ofefficiency of interventions arises. It is often argued that interventions in

3

poor (rural and remote) areas are more costly'and have lower benefit/costratios. This assumption is analyzel in Chapter 9.

1.9 The final outcome of the report isa framework for an action plan for n ,

poverty alleviation. Because of the l d toawty 2focus of the report, the action plan Nc0>wpit* c ptr focuses on policies and institutional c-aptr4issues instead of a specific list ofprojects, each chapter contains a aglcPiir. C;apter?section on recommendations. These lsuttatcn Chaptr recommendations are summarized and -ChaPt 9presented in a matrix form in Chapter 10. &tm Plan a 1

1.10 In sum, the outline of the report Box 1.2s Outliae of the Reportis presented in Box 1.2. Each chapter isfairly self-contained, with an introduction, discussion, and conclusions andrecommendations. For readers with special sector interests, and with a basicknowledge of Bolivia, it is thus possible to read only the particular chapterconcerned maybe combined with Chapter 2, which presents the various dimensionsof poverty.

BACKGROUND

*5eoaralphv

1.11 Bolivia has a population estimated at approximately 7 million (the lastcensus was in 1976). The country covers an area of 1,098,581 square km. Thethree major ecological regions are the Highlands (the Altiplano) in the southand west, the Valleys (Valles and Yungas) of the mountain chain in centralBolivia and the Lowlands in the east and north. The average altitude of theHighlands is 3,700m and the areas has an average temperature of 10 C. Thisregion includes the major city, La Paz and the major mining areas of thecountry. Although this semi-arid region occupies only 23% of the total landarea, 38% of the population lives there. The Valleys region consists of smallareas of flat valleys and mountains. The major flat areas are the three semi-arid valleys of the Cochabamba region with a total area of about 100.000 ha.The Valleys occupy 27% of the area with 42% of the population. The vastLowlands (below 500m in altitude), the frontier lands of Bolivia, cover 50% ofthe total land area but are sparsely inhabited with only 20% of thepopulation. The Lowlands are below an altitude of 500 meters.

1.12 Administratively Bolivia is divided into nine Departments and 99provinces. Three of the Departments (La Paz, Oruro and Potosi) are mainly in

Annex 1 contains a preliminary list of projects which would complementthe action plan, but this is not the primary goal of the report.

4

the Highlands; 2 three (Cochabamba, Chuquisaca

DEPT. CAPITAL POPULATION and Tarija) belong mainly to the Valleys(thwANXaIS region; and three (Beni, Pando and Santa Cruz)

La Paz La Paz 196.6 are in the Lowlands. The three most populatedOruro Oruro 388.3 Departments are La Paz, Cochabamba and Santa

Cochabaa Cosaiba 982.0 Cruz. Six of the nine Departments have theChuquisaca Sucre 442.6 same name as their Capital, this isTarija ToriJa 246.6 occasionally a source of confusion.Santa Cruz Sants Cna 1110.1Beni Trinidad 215.4Pando Cobija 41.0 History

- n - 1.13 In pre-Colombian times under theBox 1.3: Bolivia's Niue Tiwanaku and Inca dynasties, the area aroundDeparments Lake Titicaca flourished. The Tiwanakus are

today's Aymara Indians, and the descendants ofthe Inca are the Quechua. The languages of these two groups continue todominate among the indigenous population. Agriculture was highly developedand the production most likely supported a much larger population than today.Under the Inca rule most of present day Bolivia was colonized and socialstructures that survive to this day were established, especially as concernscommunal land use (Chapter 7). The Spanish conquerors established many of thecities that exist today. La Paz was founded because of the discovery of gold,Potosi because of the rich silver ore in the famous mountain Cerro Rico. Inthe seventeenth century Potosi was the largest city in the Americas. TheSpanish rulers introduced a centralized urban-based bureaucracy. Large groupsof Indians were brought from the area north of Lake Titicaca to the highvalleys around Potosi to provide a labor pool and produce food for the mines.The vast Lowlands were not settled, except during a period of Jesuit influencewhen several important missions were established. The Jesuits quickly becametoo powerful for the King's liking and he forced them out.

1.14 Following independence, the centralized, urban- and Highlands-biaseddevelopment continued. By the end of the last century, Bolivia was basicallya feudal society with a small group of all-powerful landlords controllinglarge numbers of Indians, who were little more than serfs. When tin miningbecame very profitable, the industry was concentrated in a few largecompanies, controlled partly by foreign interests. Until the 1952 revolution,most Bolivians could not vote and lived on large estates or around the mines.Governments came and went as power shifted among the mining and land "barons."

1.15 In 1952, an armed uprising of farmers and miners defeated an attempt bythe armed forces to annul the results of an election. The winner of theelection, Dr. Paz-Estenssoro, came to power. The party he headed, theNational Revolutionary Movement, was held together mainly by opposition toprevious military governments. The Government nationalized the large miningcompanies, introduced universal suffrage and implemented land reforms thatbroke up the large estates in the Highlands.

2 The northern part of La Paz is in the Lowlands and forms part of theAmazon Basin.

5

1.16 From 1960 to 1981 various military governments controlled Bolivia. EachGovernment (regardless of political conviction) increased the role of thestate in the economy. The 1952 revolution's promise of a more equal incomedistribution was slowly eroded as new powerful groups formed. These newgroups were the (reorganized) armed forces, the miners' unions and variousprivate interest groups. All parties agreed that the state was the vehiclefor improving the lot of themselves and their supporters. Thus, instead offocusing on social reform, social service delivery, and infrastructure, thestate became involved in productive activities. Most of these activities wereheavily subsidized. The Bolivian Mining Corporation (COMIBOL) in particularbecame a heavy burden on public finances. Employees of COIBOL gainedsubstantially relative to the rest of the population. They enjoyed substan-tial benefits in addition to an income in the upper 30% of the incomedistribution.

1.17 During the seventies substantial hydrocarbon discoveries, relativepolitical stability and cheap money on the international markets following thefirst oil shock allowed Bolivia to borrow heavily to finance questionableinves.. ents. Most investments benefitted the friends of the people in power.Around 1980, serious questions concerning macroeconomic performance andpolitical stability arose. At the same time money became tight on inter-national markets, the inflow of foreign exchange stopped and Bolivia entered avery deep crisis during which the fiscal situation went out of control. Tharesults were a hyperinflation and a fall of more than 20% in GDP per capita.In 1984 inflation reached 24,000% p.a. and the public deficit reached 25% ofGDP.

1.18 Coming to power again in 1985, Dr. Paz-Estenssoro introduced an orthodoxstabilization and adjustment program. Prices were freed; restrictions in thelabor and capital markets removed; the currency was devaluated andliberalized, COIBOL was closed for restructuring, and the role of the statewas redefined. The state should be a provider of infrastructure and socialservices, rather than a producer. Following a change in Government in 1989,bringing a coalition of the socialist Left Revolutionary Movement and theright wing National Democratic Action to power, the general thrust of theadjustment policies have been continued.3 The new Government has pledged itsintent to improve social conditions in Bolivia.

For an analysis of the Government's economic policies see UpdatingEconomic Memorandum (8623-BO).

CHAPTER 2s DIMENONg OF POVER5Y

INTRODUCTIO

2.1 Definitions of poverty and resulting poverty indicators are many, andthere is substantial disagreement on which are most relevant. In this reporta household is considered poor if it lacks sufficient income to cover itsbasic needs. Lack of income earning potential can have many causes: lack ofgood education, poor health, inadequate housing, insufficient nutrition, poorinitial endowments (e.g. land), discrimination based on gender or ethnicbackground, etc. An improvement in one of these conditions can, by itself, beregarded as an improvement in welfare. For instance, good education bringsstatus, knowledge and social skills, and better housing or health conditionsare beneficial in themselves. often poverty is described as a vicious cycleinstead of the linear causality expressed here. Low income leads to lack ofeducation as children must work and to poor health. Poor human capitaldevelopment leads to low income, etc. (paras. 2.42-2.46).

2.2 This Chapter describes the various aspects of poverty in Bolivia.Poverty indicators are analyzed in global terms using internationalcomparisons, over time, by rural and urban areas (including a look at migra-tion), by geographic region, by sector of activity, by ethnic group and bygender. The indicators used include: income, production, health, education,nutrition, public services and housing. Finally, poverty profiles are drawnup based on both qualitative and quantitative evidence. The conclusion isthat the core Dovertv arOuRs are rural and-involved in small-holderagriculturM. This includes the peasants in the Highlands and Lowlands and theAmerindian tribes ir. the Lowlands.

The Data

2.3 Unfortunately the quality of data is extremely pour in Bolivia,especially for social indicators. The last census was done in 1976, anddiscussion continues about the reliability of the results. Apparently manyquestionnaires were lost and results for some areas were generated based on asample that could not be checked for representativity. Lately, three majorsurveys have been carried out by the National Institute of Statistics (INE):the 1988 National Survey of Population and Housing (ENPV) supported by the UN,the 1989 Integrated Household Survey (EIH) covering the major urban areassupported by IDA,I and the 1989 National Survey of Demography and Healthsupported by the USA and done jointly with Demographic and Health Surveys(DHS). Several priva.e and international organizations have also sponsoredsurveys of specific regions, e.g., UNICEF's 1989 survey of poor areas of theCentral Highlands.

2.4 The two national surveys (DHS and ENPV) have been heavily criticized fornot reflecting the Bolivian reality. The results show very rapid improvementin social indicators even during the crisis. In the preface to the report on

This survey is comparable with the previous Permanent Household Surveys(SPH) done yearly through most of the eighties in the nine DepartmentalCapitals.

7

FNPV the investigators mention that "remote and isolated" areas of the countrywere not visited. This would suggest that the indicators for the rural areasare probably too optimistic, making the national averages too optimistic. Onthe other hand, the urban numbers from ENPV appear consistent with the numbersfrom EIH, while the DHS survey comes out more positive than any other source.In this report, the DHS numbers are used mainly in a relative sense, e.g., howchildren's illness relates to the mother's education. The absolute levels of

indicators are not used. The non-official sources will be used inter-rmittently, mainly to illustrate points where the official sources are

inadequate.

DESCRIPTION OF POVERTY

Poverty in General

2.5 Most Bolivians are poor by international standards. GDP per capita isestimated at US$580 placing Bolivia in the very low end of the lower middle-income countries world wide and at the bottom of the South and CentralAmerican countries. Social indicators would place Bolivia even lower. ENPVestimated infant mortality at 102 per thousand during the first year of lifecomparable to countries such as Zaire and much worse than Ghana, Kenya or

India. Projections based on the 1976 cenaus show an infant mortality rate of117 or comparable to countries in the low income group such as Bangladesh andworse than many countries in Sub-Saharan Africa. Maternal mortality is 48 per10,000 live births, more than 10 times higher than other Latin Americancountries. The average population growth rate is estimated at between 2.2 and2.7%, and the median age of the population is estimated at between 15 and 18years.

2.6 Literacy defined as the ability to sign one's name or as any attendancein school is 82%, whereas functional literacy has been estimated as low as50%. 23% of households have access to sanitation, while 60% receive (largelynon-potable) piped water.2 Malnutrition is widespread. In 1980, 47% ofchildren under the age of five were malnourished according to Gomez'sclassification.3 Recent indicators show a daily calorie intake of 65% oGrequirements in El Alto (the poor city next to La Paz) and 59% in rural areas.Chronic malnutrition4 is also widespread, over 90% in some schools.

2.7 According to the last census, 80% of all Bolivian household were poor in

1976. A household was defined as poor if income could cover 70% or less of a

2 "Sanitation" includes any kind of waste-water or human excreta removalincluding public latrines. "Piped water" includes standpipes and otherwater supply outside the home.

Based on weight/age

4 Chronic malnutrition is measured as low height for age (stunting).

|Dis3tri but ion of Ho use holdisI

20% 2 69

Total Population Agriculture 0 Non poor(non salarled) Poor

R9 Very Poor

58% 1791 57_ ga13 Extremely Poor

Construcf Ion Services(non salarled) (non salcaried)

Source: Morales. R.(83)

Figure 2.1t Poverty in 1976

basic needs basket.5 Two subcategories of poor were identified: the very poorwhose income could cover 80% or less of the basic needs food basket, and theextremely poor who could only cover 30% or less of the basic food basket.Dividing the population by these criteria gives a distribution as in Figure2.1 where "poor" refers to poor but not very poor. More than 95% of theextremely poor are non-salaried persons working in agriculture. This doespoint to the problem of the valuation of auto-consumption of production.6

However, the fact that rural, agricultural communities are among the poorestis supportad by other indicators as well, as discussed below.

Poverty Over Time - A Paradox

2.8 Data on real income7 in urban areas show a decline in the eighties.Between 1980 and 1986 real urban income fell by 37%. From 1986 to 1988, realincome increased about 40%, resulting in a total fall from 1980 to 1988 of12%. The fall is worse in commerce, services and manufacturing. This mainlyreflects an increase in the share of employment offered by the informal

5 The basic needs basket used is developed by the Latin American branch ofthe International Labor Office (PREALC).

6 Estimates for consumption of own production are based on numbers foragricultural production and sales.

7 This section is based on Susan Horton's chapter on Bolivia for theforthcoming volume: Mazumdar and Horton (Zda.): Labor Markets in an Eraof Adjustment.

9

Percentiles of Income

100

70 .......... ...... ..-- .- ----------- ------------90 ....... ... .-......--...

I0 aD--- ---- -- ----------- .. ... ...................................................................

30 ------ ---- --- . . . . - . ...--. ,...-.; -20 ------- - ----- ----- --- ------- -- ---------- t- - -................ .. ......------ ----

o .- ...... .... ................ . .

20 . .. . --. . _ .__ .

10 _ _...... ==== =....

000 10 20 30 40 50 60 70 80 90 100

Percentiles of Urban Vorking Population

£982 1985 1988

Figure 2*2t Lorenz Curves for Urban Areas

sector. 8 From 1980 to 1988, informal employment grew from 54% to 64% of totalemployment in the major urban areas. There have been important shifts in thesectoral shares of the informal sector. The share of informal employment inmining has grown from 16 to 20% between 1982 and 1988, while the share ofinformal employment in manufacturing grew from 59 to 68% in the same period.

2.9 Lorenz curves for distribution of income in urban areas in 1982, 1985and 1988 are shown in Figure 2.2. There is very little difference between theincome distribution for employed people between 1982 and 1988. From 1982 to1985, the poorest 50% increased their share of total income from 18 to 22%,while the richest 5% doubled their share. However, this data was collected inSeptember, immediately following the stabilization of prices and thus mightreflect unsustainable relative prices. Between 1985 and 1988, the poorest 30-50% have lost ground together with the top 5. Between 1982 and 1988, thepoorest 3C, are slightly better off but still only earn around 12% of income.

Informal sector is defined as workers on own account (excludingprofessionals) and domestic employees, and employees, employers andunpaid family workers in establishments with less than five workers.

10

The richest 5% (who gained from the hyperinflation) were slightly worse off in1988 compared to 1982. The income distribution has changed very little, butit does appear that the poor and the middle classes are slightly better off.

I Value Added in Agriculture 1980 - 1987Agricultural Products Total and Selected Crops

Million 1980 Pesos25,000

20,000 __ / ................... .............................. .......................

20,000 --

5,000

01980 1981 1982 1983 1984 1985 1986 1987

2 Potatoes E Maize g Vegetables

g Fruits i Coca Leaf L OtherSource: INE

Figure 2.3: Value Added in Agriculture

2.10 Data on rural earnings are virtually non-existent, but it appears thatproduction has fallen over time, especially for the crops grown by the smallHighland farmers.9 INE has estimated value added in agricultural productionfor a series of products. These numbers (presented in Figure 2.3) show thatwhile agricultural incomes have increased overall, the increase is exclusivelydue to an increase in the value of coca production. Even though these numbersare of a doubtful quality in general and for coca in particular, they doconfirm anecdotal and micro study evidence.

2.13 Value added from the principal commodities produced by the poor show acontinued decline, with an extraordinary low in 1983 due to drought. If the1980-82 average is taken as the base, real value added from potatoes (mainincome source of High-land farmers) dropped by more than 5% per year up to

9 See Chapter 3.

1.

1987. Vegetable and maize production (produced in the Valleys region by smallfarmers) fell by It per year. In sum, this would suggest that earnings ofrural smallholders fell in real terms, except for those who have taken part inthe coca boom. These farmers, while better of in monetary terme, are facedwith all the negative social consequences of growing an illegal crop. For thepurely subsistence farmer only production volume is important not value-added.However, very few Bolivians are in a purely subsistence economy. Even thepoorest depend on the market for goods such as salt and cooking oil. Anyhow,both volume and value added of the goods produced by the poor have decreased,indicating a fall in welfare.

2.12 All social indicators show improvements over time, while social spendinghas declined. Table 2.1 summarizes these results for 1980 to 1988. The 1980

numbers are projectionsbased on the 1976 census.The expenditure data is

1980 1998 Cing based on the Bank's recentEducaton: Publ.c Sector Expenditure

JiMit Rate 36.8% 18.3% -50% Revic- (PSER).A° AllUAM ~ 15.2% 7.6% -50% indic.ators improve and all

Runl 53.1% 31.1% -50% expenditures fall, a

ExpcndkW (tmWin 1980 p@s) situation common toTota 5020 3011 40% several Latin AmericanBsic 3212 1807 -44% countriesil and to many of-pr studen 3339 1416 -58% the countries facing

(rml 1980 pmo) economic crisis and/or

adjustment. This wouldinfant Moua ty 123 102 -17% suggest huge productivity

Empeadivr.s: (1987 US$ per capiu) improvements in socialTON to MPSSP 6.6 2.5 462% service delivery.

Som: PSE WNE 2.13 Several explanationscan be put forward for

! !v_5o}**'.*-.+!.9-..-E=t - St4.zw-W-this apparent paradox.Table 2.1: Social indicators and Expenditures First, there are serious

data Droblems, especiallyin Bolivia. The expenditure data have to be deflated through a hyper-inflation and the social indicators are questionable, as discussed above.Some expenditures might not be reflected in the official expenditures as Non-Governmental Organizations (NGOs) (or Private Development Institutions (PDIs),as they prefer to be called) have played an increasing role in the socialsectors financed mainly from abroad. The substantial increase in fooddonations (see Chapter 7) is also only recorded to a limited extent. In somecountries it has been argued that the distribution of expenditures isimportant. The fall seen in expenditures is mainly a fall in real wages of

10 Bolivia: Public Sector Expenditure Review With a Special Emphasis on theSocial Sectors, September 1989, Report No. 7746-BO.

Social Spending in Latin America: The Story of the 1980s, (Report No.8450-LAC), The World Bank, forthcoming

12

the employees in the sector. This will have longer run negative incentiveeffects, but not necessarily immediate, negative effects on the indicators.However, in Bolivia non-salary items have fallen more than salary items, sothat is not a reasonable explanation. A related argument is that inputs, notexpenditures, are important, i.e., though inputs furnished by the publicsector fell, most i-.puts in schools are provided by the parents and are thusnot reflected in the statistics. However, as incomes fell over the period, itis unlikely that private expenditures increased substantially.

2.14 Another hypothesis, best explained in a production function framework,is that an improvement in knowledge of diseases and the importance of educa-tion is more like a ca2ital stock. Once a mother knows about oral rehydrationor the importance of vaccinations that knowledge stays with her. Once aperson is literate that will not change over his/her life. As long as expen-ditures are high enough to allow for "reinvestment," i.e., high enough toallow the capital stock not to depreciate, social indicators will improve. Attimes, this has been called the "inertia" effect. Social indicators show muchauto-correlation, and changes over time are relatively non-dependent on shortrun fluctuations in expenditures. A related explanation in based on time-laos. The fall of expenditures seen in the eighties will not have an effectuntil the nineties. By the same token, the improvement in social indicatorsseen lately is due to higher expenditures in past decades.

2.15 In conclusion, available data show that social indicators have improvedover the last decade while social sector expenditures and urban real incomeshave fallen. Rural incomes also appear to have fallen especially in theHighlands. Thus, the findings of the 1976 census that 80% of the populationearn incomes below the poverty line and 60% are very poor are likely not tohave improved. The relative situation of the poorest of the poor has probablygotten worse in rural areas and stayed relatively constant in urban areas. Ifthese trends continue, it is likely that the gains observed in the socialindicators will be reversed. Chapter 3 will discuss issues related to thesocial costs of the crisis and adjustment.

Poverty in Rural and Urban Areas

2.16 The poorest areas in Bolivia are rural. Table 2.2 compares a series ofstatistics between rural and urban areas. The data for water and sanitationare indicators of urbanization, and thus should be interpreted with care.Rural populations are younger, more children are born in rural areas, andinfant mortality is higher. Illiteracy is a more serious problem in ruralthan in urban areas. Household sizes, both in absolute terms, and relativeto the number of rooms are alike in rural and urban areas. A larger share ofthe rural population speaks a native language. Households headed by women aremore prevalent in urban areas. This is probably because men keep theirrelationship with the rural villages even when they move away, and thus(formally) remain as heads of households.

2.17 These average figures mask huge differences within urban and ruralareas. The indicators for some smaller towns (between 2,000 and 10,000inhabitants) are a lot worse than the average for urban areas, but stillnowhere near the rural levels. As an example of the differences within rural

13

areas, a recent survey offour communities found s.let r i2xnArbelow-five mortality ratesranging from 127 to 415 Indicat,r Total Urb' wtuf$per 1000 live births. Jfnt ortatity (r thouand) 102 a3 120Some well-established BIQsl fertility Rate (per inmw) 5.0 4.2 6S1communities in the gdi oA 18.4 19.0 18.2Lowlands and Valleys have Percent of Chi Wren OUner 10 2 27X 302good indicators and well t iteItry Rate (X 14 years) 19% SX 31Xfunctioning social Schoot Atteakne (ZX 6-19 yas) 74X1 84 64&services while somecommunities in the Houslhots USth Piped Water 601 89 31XHighlands or among the HehotdW With Sanitation 232 42% 31indigenous groups in the Person per Hoehold Roe 1.76 1.74 1.80Lowlands have no access to Sixe of Hosehois (person) 4.56 4.44 4.49public services and face amiserable existence based Houeotd Speakitg Native anguage 51X 361 68xon very low productivity Noehotds feoded by Wasn 14X 18X 14%agriculture.

Source: INE, 1982.18 The average annual growth rate of the urban Table 2.2: Social Indicators for Rural and Urbanpopulation between 1976 Areasand 1988 was 4.4% whilethe rural population onlygrew 1.2% per year. In 1988 it was estimated that 51% (3.3 million) of thepopulation lived in urban areas, up from 44% in 1980. Most of the rural-urbanmigration goes to the Capital of the Department from the interior of eachDepartment. Only the city of EL Alto12 attracts people from other Departmentsin greater numbers.

Poverty by Reaion

2.19 Several poverty maps have been generated based on the 1976 census. Thepoverty maps are based on a variety of indicators at the Provincial level,including infant mortality, illiteracy, water supply, migration, andagricultural production." Figure 2.4 shows such a map developed by theNational Council for Population Policy. A group of provinces in SouthernCochabamba, Northern Potosi, and Northern Chuquisaqa, the Central AndeanRegion, is depicted as poor in most of the maps.

2.20 Most of the poorest provinces are inhospitable, remote areas. Despitetheir poverty, few institutions work there. The public sector is totally

12 1E Alto was separated from La Paz in 1987. It is a recently settledcity consisting of largely unplanned urban areas surrounding theinternational airport of La Paz.

is Annex 2 contains a description of five different poverty maps andpresents another map dividing the country into S poverty areas. Thesefive areas will be used later in the report.

14IBRD 21869

Poorest Provinces-. |Province Boundaries-RLIntemational Boundaries

ARGENTINA ........................

,. _ ^ .L f A~~~~~~~~~Aeaof Ma

PERU ERAZIL

0imes 100 200 300 BO LMAl

0 100 200 >

I ARGENTINA Kh

2~~~~~,,

IPAAIJ1TARAUA

_EC~~~~~~~~~~~~~~Ae of Map

Jigure 2.4 DISTRIBUTION OF THE POOREST PROVINCES SPINRw

15

absent, with the possible exception of works financed by the ESF, and PDIs areonly active if the areas are not too remote. Even then they generally do notreach the poorest areas, but remain close to the provincial capital. However,there are a couple of notable exceptions where PDIO have managed to obtainalmost total coverage of a Province with very important results (see Chapter4).

2.21 Province-level data obscure many intra-provincial differences. Thereare generally large differences within a province, especially between theprovincial capital and isolated rural areas. Recently, efforts have begun tobreak the 1976 information down by Canton, the next administrative level downfrom a Province. Such efforts are unlikely to yield much new information asthe numbers are 14 years old and of doubtful quality (para. 2.3).

2.22 In 1976, the poorestDepartments were Potosi, Area Large Children/ Iltite- No Poor*

Pando, Chuquisaqa and Oruro. household household racy schooli n waterAggregating at the level of Chuqufsaca-Rural 13 5 I 1 3Department covers even more Potosi-Rural i5 13 2 2 7heoterogenous areas. As Cochabamba-Rural 17 9 3 3 5heterogenous areas. AS ~Tart ja-Rurat 3 4 4 4 1shown in the poverty maps, La Pz-Rural 16 17 5 5 4many departments cover both Oruro-Rural 6 3 6 8 9poor and non-poor areas, and Beni-Rural 2 1 7 6 8

Pando-Rural S 6 8 7 2provinces from 1 to 5 on the Santa Cruz-Rural 4 7 9 9 6

poverty scale (see Annex 2). PotosSiUrban 10 8 10 10 15Unfortunately, much data is Chuquisaca-Urban 9 16 11 12 16only available on a Depart- Tarija-Urban 8 12 12 11 13

La Paz-Urban 18 18 13 Is 18mental level, and thus Oruro-Urban 12 IS 14 17 17

generalizations such as Bent-Urban 1 2 15 13 12"Potosi is poor" or "Santa Santa Cruz-Urban 11 10 16 14 14

Cruz is not" need to be Cochabn"-Urban 14 14 17 18 10made.* Panda-Urban 7 11 is 16 11

- poor water" refers to bad sources

2.23 The ENPV data can onlybe broken down by rural and SrceNPY CNE)urban areas within each -

Department. Table 2.3 shows Table 2.3: Poverty by Area From ENPV

the ranking of these areasaccording to several indicators. A ranking of 1 is the poorest area; aranking of 18, the richest. Rural areas in Chuquisaqa and Potosi are stillthe worst off in many aspects. Only in housing are there substantial problemsin Beni, both in rural and urban areas. Most indicators are worse for ruralareas than for urban areas.

2.24 Regional differences have increased over time. Numbers for the CentralAndean Region for 1988 show substantial improvements in the absolute level ofinfant mortality and illiteracy but deterioration relative to the nationalaverage. I.e., these poor areas have improved less than the national average.Figure 2.5 shows infant mortality and illiteracy rates in 1976 and 1988 forseven provinces in the Central Andean Region. The numbers presented areindices using the national average as a base. All provinces except Zudanezwere relatively worse off in 1988 than they were in 1976.

16

Relative Worsening of Core Poverty AreasIlliteracy and Infant MortalIty Rates

Compared to National Average

Index (National Average - 1)4

2-....~~~~~~~. .. ............. .. I3-* .--------------- 1-----------------------IS--.-..........-N--.... ...

Arce Mlzque Campero Oropeza Zudanez Bllboo Charcas IbanezProvinces

Infant Mortollity~ Infant MortalityfS Illiteracy\ Illiteracyt 1976 V2J 1988 131976 |1988

Sources±IE.SVSST

Figure 2.5: Relative Worsening of Core Poverty Areas

2.25 Reaional migration takes place mainly from the Highlands to the Valleysand Lowlands. Figure 2.6 shows gross migration patterns among Departments.$he positive numbers indicate the number of people in the Depa.rtment in 1988who said they lived in another Department in 1983. The negative numbers showthe number of people living outside the Department in 1988 who lived in theDepartment in 1983. The main recipients of migration are the Departments ofSanta Cruz and Cochabamba. In Cochabamba this could be due both to bettersoils and to the attraction of the main coca growing region (Chapare). Hostof the migrants to Cochabamba come from the Highlands (La Paz, Oruro andPotosi). Migration is also important between neighboring departments (e.g.,oruro and La Paz) mainly reflecting rural-urban migration to the largercities.1' There is also a tendency to move gradually down through the al-

14 The migration from Oruro Department to La Paz Department also figures in

the data for migration into the city of El Alto (para. 2.18).Otherwise, as was stated above, the largest share of migration to thecities is from within the Department and, thus, is not reflected in theinter-Departmental migration numbers.

17

Gross Migrafton Plow Among Dpfef

70

60 it

50 To OpWl 40

30

201.~~~~~~~~~~~~~~~~~~~~~~.

0O 10

'U

(0)

( 60) CHQ LPZ CBB ORU POT TAR SCZ BEN+PAN. ESa~~~ Cituqulsoqo eD La Paz E9 Cochabantba 1Oruro

Figure 2 . 6: Gross Migration Flows Among Departments

titudes, e.g., the migrants to the Valleys come mainly from the Highlands,

while the Lowlands attract people from both the Valleys and the Highlands(e.g., the largest single group of migrants to Santa Cruz is from Cochabamuba).

2.26 2igration of the population from the Highlands to the Lowlands is notnew. Traditionally the Highlands were closely linked with the Valleys bytemporary migration.os Migration was stimu'ated on a more permanent basis bythe various "boom"e periods of crops with high labor requirements in theLowlands. The first of these was the collection of quinine in the 19thcentury, which was curtailed by the rising production in Africa. This wasfollowed by the rubber boom in which the native plants in the jungle weretapped. This boom ended with the large rubber plantations in Southeast Asia.More recently temporary and permanent migration has been stimulated by thecoca boom. In these cases the migrants had ready access to the productionbase, either in the form of wild native trees or land to cultivate. Theseexamples suggest that when a high value crop, which has high labor

15 See paras. 7.17-7.28 on land use and land reform.

18

requirements and an expansive market is identified, and migrants have accessto the production base, migration to the Lowlands will occur spontaneously.

2.27 In conclusion, poverty is geographically concentrated in the Altiplanoand high valleys in the Central Andean Region. Outside this region there arepoor provinces in Pando, in the Chaco region of Santa Cruz and in southernPotosi. Regional 'ifferences in social indicators have increased over timethough most areas have seen improvements in absolute terms. The regionaldifferences have induced substantial inter-Departmental migration mainly fromthe Highlands to the Lowlands and Valleys.

Poverty by Sector and Occuipation

2.28 The poorest of the poor are the households of rural smallholders. Sincethe last census their real incomes have fallen, their social indicators haveworsened relative to the national average, and they have continued to migrateto the cities. Typically the urban poor are found in small family businessesinvolved in commerce or simple manufacturing.16 Among urban occupations, thedomestic workers earn the least, followed by people in family businesses andworkers on own account. Among sectors, commerce pays the least followed bymanufacturing and personal services. Average earnings in the DepartmentalCapitals for employees in household enterprises were Bs.125 per month in 1989.

Poverty by Gender 1 7

2.29 Women have lower educational levels and higher illiteracy rates thanmen. ZNPV put female illiteracy at 25% (44% in the 1976 census) versus 14%for men (21% in 1976). Of an estimated illiterate population of one million,65% are women. Rural women exhibit the lowest literacy rates of all groups.Women earn less and have fewer training and employment opportunities. Ninety-five percent of women (and 60% of men) do not have access to credit. Some 81%of women in marginal urban areas are working in the informal sector.

2.30 Women's poor health and nutrition status and low standards of educationare leading causes of poverty. Poor health diminishes women's productivecapacity and endangers their personal and family well-being. Illiteracyconstrains women's social and economic participation. Long-standing socialdiscrimination based on gender denies women equal access to social, political,and economic power. Women are constrained by cultural norms and behaviors(notably "machismo") that accord men rights and privileges not enjoyed bywomen. This touches upon all aspects of family and social life. Women alsoconfront discriminatory practices in the areas of employment (pre-employmentpregnancy tests and lower wages), housing (national Housing Fund self-helphousing program directed at male heads of household), and law (family codestipulates that husbands must give wives permission to work). The agrarianreform discriminate against rural women in that only men and widows have the

16 Data based on EIH and other urban household surveys.

17 This section is based on the background paper: "Women and Rural Poverty

in Bolivia."

19

right to obtain land through the reform process, and rural syndicates areestablished for male heads of household.

2.31 Rural women bear more children than their urban counterparts. Ruralwomen have poorer health and nutrition status than urban women. Seventy-fivepercent of the rural illiterate population are women. Rural women in theHighlands perform an estimated 80% of agricultural and animal husbandry labor(with children), working on average 100-120 hours per week. In the Lowlands,women's time spent in production, domestic labor, and child care averages 14-16 hours per day. The usual pattern is for women and men to work togetherduring the short periods of planting and harvesting (3-4 months). Then themen migrate temporarily to exchange products in other areas or to securecasual labor. In men's absence, women and children perform all activitiesrelated to agricultural and animal husbandry besides domestic chores and childcare. Rural women from the Highlands have the advantages over their Lowlandcounterparts of the relative stability of Andean society and culture and whatis characterized as a "benign" environment. Migrant women living insettlement schemes may enjoy a slightly higher income level attributable to alarger proportion of production directed at the market and greater off-farmopportunities for men. These do not, however, obviate the daunting task ofadapting to a new environment.

2.32 Although women's agricultural role is equal to or greater than men's,they do not participate in agricultural development activities because oflanguage barriers; low educational attainment; dominance of men in leadershippositions; the "double day" of production work (heightened by male migration),domestic labor, and child care; and the lack of attractive incentives andsupport structures to overcome male resistance to women's participation,especially with regard to decision-making.

2.33 Mining women constitute a rural poverty group because some miningfamilies have yet to be successfully reintegrated into the economy followingthe 1985 lay-offs, and because miner's wives have been abandoned as theirhusbands relocate to seek work. Good data on this population is notavailable, but one example suggests the gravity of the situation. The RedCross in Potosi has identified 300 women who have been abandoned by theirhusbands and are living in mines with their children. The women collectmineral waste to sell to buyers who pay in either cash (at 1/10th ofsubsequent resale price) or goods (bread, rice). The women and children donot have access to medical care or education. Once a month, the Red Crossdelivers 40 grams of powdered milk, oats and margarine to each woman. Noother agency provides assistance.

20

Ethnic Grouns and Poverty

- Language Spoken and Social Indicators110%1 0 0% . .... ......... ........ ........ . ................ ..... ......... .. ......... 969s ... ......... ............................................... ...................

90%-S80%i~6^7--- ... .70% _ 70.

60%-50% .....- .... ... ... ..5 .. -

30% . .. ' .... .. 2. 1 ........ ... ...

20% _.... _.... .. ......T..

LI Spanish Only S Spanish/Native Lang. Native LanguagesSource: INE (ENPV)

Figure 2.7: Native Languages and Poverty

2.34 The relationship between culture/language and poverty is striking. One-

half of the population is of Indian origin (largely Quechua or Aymara).

Figure 2.7 summarizes the relationship between language of head of the house-

hold and various social indicator.. While 69% of Spanish speaking households

have access to piped water, that is the case for only 21% of households speak-

ing native languages. Ninety-six percent of native language heads of house-

holds have no education, and none have technical or university education.

Caution should be used in positing a causal relationship. The argument

reflects an unfounded, deterministic prejudice against the indigeneous

culture, i.e., a Quechua/Aymara speaker is somehow "destined" to be poor. One

recent studyl concludes that the inequality between the Indians and the

Spaniards is due to class and not ethnicity. Different factors influence

occupational success for the Indians and Spaniards. For the Indiana the

19 See Jonathan Kelley: Class Conflicts or Ethnic Onr2esion? The Cost of

Beina Indian in Rural Bolivia, Rural Sociological Society, 1988.

21

father's occupation is crucial whereas for Spaniards education is crucial.According to the author, these two economic worlds are equally rewarding. The(few) Indian sons born into families with an education and occupation typicalof a Spanish, did just as well as Spanish sons. So, the argument goes,inequality in Bolivia is a matter of class and not ethnicity.

2.35 it is, however, very hard to believe that no discrimination is takingplace as the output indicators show an almost perfect correlation with theincidence of indigenous languages. If access were equal, such differenceswould disappear over time. Whether discrimination is based on class, race orethnic background is almost purely of academic interest. The fact is that alarge group of poor Indians of a native ethnic background has remained at thebottom of society.

2.36 The indiaenous population of the Lowlands is another core povertygroup. Twenty-eight different languages are spoken among the indigenouspeople of the Lowlands. However, many groups are bilingual as Spanish is usedin the education system. Although some groups have abandoned their tradi-tional culture, there is an increasingly strong sense of consciousness or"reevaluated nativeness" among the indigenous groups.

2.37 Lack of property rights to large enough territories is the single mostserious problem facing the Lowland indigenous peoples. It implies that manyare not able to maintain their traditional way of life combining hunting,fishing and gathering with small scale slash-burn farming. Previously, manyindigenous groups were nomads but today almost all grotups have settled insmall communities and live from mainly subsistence agriculture often combinedwith hunting and fishing and/or off-farm employment for commercial farmers,cattle ranchers or logging companies. Most indigenous groups have limited orno access to public services within health, education, agricultural extension,construction and maintenance of roads, and provision of drinking water andelectricity. The assistance that is taking place is almost exclusivelyfinanced by NGOs operating in the area.

POVERTY PROFILES

2.38 The living standards of the groups identified ka poor in the 1976 censushave deteriorated relative to the population as a whole, or (especially forincome Indicators) have deteriorated in absolute terms. Thus, the characte-ristics of "the poor" identified in 1976 remain largely valid. Based on thatinformation updated with the more recent data presented above, the followingcharacteristics increase the likelihood of being poor:

a) living in a rural area,

b) owning little land,

c) being female,

d) being of Indian origin,

22

e) living in the Central Andean Region, and

f) working in agriculture or household industries.

2.39 As the 30% poorest in 1976 were rural smallholders, and as theirproduction has fallen since, it appears reasonable to assume that ruralpoverty remains the most severe. Core povertv arougs thus include:

a) Rural smallholder families in the iahilands especially in ioolatedareas where Aymara and Quechua dominate;

b) Rural women, especially heads of households;

c) Indicenous croucs in the Lowlands,

d) Recent miarants to the Lowlands.

2.40 Whether the recent migrants to the Lowlands should be included is acontested issue. One argument states that people migrate voluntarily to theLowlands because life is better there, i.e., recent migrants to the Lowlandsare better off. This, however, assumes no transaction costs (that peoplecould move back freely without costs) or perfect foresight. Unfortutunately,very little information is available on incomes to compare levels of welfare.A sample of farm budgets from the Lowlands show good potential for non-mechanized agriculture in terms of food security, but only limitedpossibilities for cash income. As long as cash income remains an unrealizedpotential, the migrants remain poor.

CAUSES OF POVERTY

2.41 The "causes* of poverty aremany. They can be described as in There is a peasant out the Wo.i8

Box 2.2, i.e., as a linear causality *inq. There is 8 culture out there thatfrom the four basic problems isbe tosurive. Itisestruegts wiOspecified to low income. A more bast survat evey day. te mod to tee,hovcommon way is to present a cycle of w O1ILn part of thepftithir sutatio 1poverty where each issue is tleir needs and their survival strategies asinterrelated. For instance, poor jfven a bel bein to hetp them hetphealth leads to low income, whichleads to no education, which leads to scS tv f te wee tlmrpoor nutrition, which leads to poor 4fscWs1#* cause Vd effect, theorticalhealth. No matter which causality Xaeectsof povertyandieologicallinks are postulated, the causes ,5 Thor 1* n ime fo debate

"Winte, T 8 Isn t1Dei for dXete; hat4s'specified in Box. 2.1 are the reasons r*W is afor their poverty given by many poorand their representatives. This Gartaarcia, CEEAGROreport will take a pragmatic view anddiscuss how each of these reasons for Box 2.1t wDoia Narta"poverty could be affected by a givenset of policies.

23

1) Poorly 2e2welorae4d HIM Fasital.

A. Low tevel of educationLack of education lowers productivity and inhibits social organization

B. Bad health conditionsGood heatth is an improvement in living standards by itsetf, and is directly related toproductivity.

C. Poor Nutritional StatusA matnourished child cannot tearn and is more tikely to fall itl. Adult malnutritionlowers productivity.

2) Lack of Physicat Asset..

A. LandThe problem is secure access to good land.

S. TechnotogyEspectally a problem in agriculture where there is a serious lack of appltied researchand extension

C. CreditCredit to the poor is onty available from the informal sector at prohibitively highinterest rates.

3) No Provision of Infrastructure

A. RoadsRurat roads are non-existent or in very poor condition.

B. WaterBesides the direct welfare improvement of clean water, poor water suppty is one of thewain causes of poor health

C. IrrigationNainly a problem in the Highlands.

4) Discrimination (ender or race).

Results in a loss of output as resources are not altloed to move to their optimal use.

Box 2.2: Reasons for Poverty

2.42 Most of the reasons described in Box 2.1 are not specific to Bolivia,some of them take different forms or are especially serious in Bolivia. Thelack of sufficient development of human capital is more serious in Boliviathan in other countries at comparable levels of economic development. Humancapital is so poorly developed, that it will become the major obstacle togrowth in the medium-term. As long as students learn virtually nothing ifthey attend school at all, large parts of the population are ill andmalnourished, Bolivia will be mired in a low productivity and thus poverty(see Chapters 5 and 6).

2.43 In terms of asset distribution, Bolivia has a better land distributionthan many other countries, at least formally. The problem is lack of secureproperty rights to good land. Without such rights, there is no incentive toattempt sustainable farming methods, and productivity suffers (see Chapter 7).Technology transfer is a serious problem especially in agriculture. Againproductivity suffers and thus incomes remain low. Credit is a problem for the

24

urban informal sector and for the farmers with marketable surpluses, not forthe subsistence farmer. This report will deal only with rural credit. 1 9

2.44 Insufficient provision of infrastructure is very serious in Bolivia.Through the first half of the eighties, public investment almost disappearedas the public sector lost revenues. Since 1986 the ESF has helped alleviatethe need for the provision of public services and infrastructure to the poor.It is often argued that it is prohibitively expensive to provide infrastruc-ture to the poor. The conclusion of Chapter 9 does not corroborate thishypothesis. If the technological level of infrastructure is adapted to localneeds and capabilities, it is equally cost effective to provide services inpoor and in non-poor areas.

2.45 Discrimination is a serious issue in Bolivia. Unfortunately, it is hardto evaluate exactly the extent of discrimination. Discrimination wouldusually take place on the input side where it is hard to detect, e.g., lack ofaccess to education, lack of health care, discriminatory practices in thelabor market, etc. On the output side, the results are very clear. Asdiscussed above, people of indigenous ethnic background are more illiterate,have higher infant mortality rates, etc. The high level of maternal mortality(the highest in the Hemisphere) shows the lack of concern and action toimprove the health situation for poor women.

For urban credit, the basic keed is to subsidize the setting up ofprivate credit institutions through technical assistance for the non-banking (development oriented) activities. Several PDI experiences havebeen positive in this field.

25

CIAPTER 3t MACROECONOMIC POLICIES AND THE POOR

INTRODUCTION

3.1 This Chapter describes the macroeconomic situation and macroeconomicpolicies and their effects on the poor. The focus is on the eighties. Thepresentation is divided in two main sections: (i) the interventionist policiesand serious economic crisis of 1980-85; and (ii) the liberal policies andeconomic recovery after September 1985. The conclusion compares the effectson the poor of the two periods.

3.2 The basic thrust of this analysis is that the inappropriate macroecono-mic policies of the early 1980s had a deleterious impact on the poor, both inabsolute terms and relative to other income groups. Although the Governmentshould avoid distorting key prices in the economy (for example, interestrates, exchange rates and public sector prices) to help the poor, it shouldtake into account the impact of its macroeconomic policies on the poor.Increases in taxes can assist the poor by financing programs to alleviatepoverty. Devaluation can have a considerable role in increasing the incomesof poor agricultural producers, although the magnitude of this effect isdifficult to measure.

IMPACT OF THE 1980-85 ECONOMIC CRISIS

3.3 Bolivia experienced a disastrous fall in output and income in the firsthalf of the eighties. GDP fell by 10% between 1980 and 1985, and by 24% inper capita terms. Per capita consumption is estimated to have dropped by 16%over the same period. There is some reason to believe that these estimatesoverstate the fall in output, however, extreme rates of inflation coupled withextensive price controls provided a growing incentive for the channelling ofproduction through the informal, and mostly unrecorded, sector of the economy.As the illegal trade in cocaine rose considerably during this period, the fallin the recorded economy was (at least to some extent) compensated for by therise in coca profits. The difficulty in interpretation is compounded by thelack of reliable time series data on welfare or employment. Still, it is veryunlikely that the errors of measurement were so great as to reverse thegenerally-accepted judgment that the Bolivian economy suffered a drasticdecline in output and welfare in the early eighties.

3.4 Although we lack time series data on either the distribution of incomeor welfare, the poor probably suffered relatively more than other groupsduring the pre-1985 crisis. Economic chaos and hyperinflation provided apremium to access to information and political power. Since the poor lackedboth, they tended to lose out in the sharp competition to maintain livingstandards in the face of the economy's decline. The process by which the poorwere penalized during the crisis can be seen in the distribution and financingof Government subsidies (see below).

26

Government Policies and the Poor

3.5 The Government had a large role in the al,ocation of goods and servicesin the economy, both through production by state enterprises and through sub-sidies. Direct transfers from the Treasury to support certain productiveactivities, directed credit at subsidized rates, and access to foreignexchange at the controlled (and heavily overvalued) rate were allocated basedon compromises among the important political actorss the Government, themilitary, the labor unions, the banks, and some richer Bolivian families.

3.6 While data on the distributional impact of Government subsidies is notavailable, anecdotal evidence suggests that the poor rarely benefited. Forexample, the allocation of agricultural credit was heavily skewed to thelarge estates in the Lowlands. Little of the credit provided by the Govern-ment found its way to the campesinos. The subsidy provided by agriculturalcredit alone was estimated to equal about 1% of GDP from 1982-85. Similarly,banks (or their owners) were in the most advantageous position to profit frominvestments in real estate and other real assets (the prices of which rosesharply during the hyperinflation), and to make speculative profits throughaccess to foreign exchange at the overvalued official rate and through accessto credit at subsidized rates. Thus, a recent review of the Bolivian bankingsectorl concluded that some banks survived the hyperinflation in relativelygood financial condition. The unions representing civil servants and workersat state enterprises could at least soften the fall in the purchasing power oftheir salaries, particularly through the proliferation of bonuses and in-kindbenefits. By contrast, public sector spending on programs to benefit therural poor, including agricultural extension services, health services, andeducation (particularly spending on basic education) fell sharply in realterms over this period (see below).

3.7 While the poor had little success in participating in the allocation ofresources by the state, they could not avoid helping to finance the ever-growing budgetary deficit that resulted. As the economy entered hyperinfla-tion, it became impossible to maintain the real value of tax receipts, whilecuts in expenditures did not keep pace with the precipitous fall in revenues.As a result, the budget deficit shot up from 9% of GDP in 1980 to 31% by 1984.As the Bolivian Government lacked access to either domestic or external loans,this deficit was financed largely through inflation, a regressive tax thatpenalizes those most unable to protect the real value of their assets orincomes. The size of the implicit inflation tax is generally rendered as therate of inflation (which is the rate of thrj implicit tax) times the moneysupply (the tax base). From 1982-85, the inflation tax averaged about 14% ofGDP a year.2

3.8 The incidence of tax on the poor varied greatly, depending on geogra-phical location and relationship to the market economy. Campesinoa far from

Bankino Sector Study (Report No. 6765-BO, dated November 1988).

2 The inflation tax is calculated from monthly data on the consumer priceindex and the money supply.

27

urban areas who depended on the market f or consumpt ion goods were mostseverely affected, as they lacked the information necessary to anticipateprice movements. On the other hand, campesin2os nearer to the cities and onthe frontiers may have benefitted from the opportunities for speculation.Price controls on many agricultural products, including coffee, milk, butter,rice, sugar, oil, wheat derivatives, meat, chicken, and eggs, maintainedofficial prices well below the market. These controls may have reducedcampeslno income, but were to some extent evaded as inflation increased.However, campesino products are bought by intermediaries (most often) at thefarm. Thus, camnpesinos could only benefit from non-controlled prices, as faras the intermediary passed on the rent gained by evading the controls. Insuam, it is therefore difficult to measure the impact of price controls onagricultural producers.

rmnpact on Agriculture

3.9 Some aspects of the crisis benefited agriculture, which may havecushioned the decline in campesino income. The hyperinflation resulted in asharp real depreciation of the peso in the parallel market, which providedsome protection to domestic production of agricultural goods. While theofficial rate was highly overvalued during most of the hyperinflationaryperiod, the parallel exchange rate was a more accurate index of the marketprice of foreigjn exchange.3 The parallel rate with the us dollar shows aconsiderable rise in real terms from 1982 to August 1985, when stabilizationtook place. This real depreciation, despite the dramatic rise in inflation,occurred because hyperinflation engendered a strong demand for foreignexchange to protect the real value of assets. Responding to this shift indemand for assets, the parallel exchange rate rose more rapidly than wouldhave been necessary to maintain equivalence between the real price of trade-ables in Bolivia and abroad.

3.10 In addition, agricultural production benefitted from other policies andeffects of the hyperinflation. For example, it is possible that the hyper-inflation increased the demand, at least temporarily, for some agriculturalgoods as hedges against inflation. In 1983 agricultural prices wereliberalized, freeing output prices while controlling input prices.Specifically, agriculture was subsidized heavily by the Government's decisionto maintain the price of gasoline well below international levels, because themarketing of agricultural products uses transportation intensively. Thissubsidy probably afforded further protection to campesino production, althoughit is not clear whether the campesinoa or the transport monopolies reaped thebulk of the benefit.

3.11 In conclusion, the economic policies followed prior to August 1985 had asevere impact on the rural poor, although some aspects of the macroeconomicenvironment helped to cushion the loss in welfare. The identity of winnersand losers from the hyperinflation and extensive state controls on production

Althougjh the parallel market was illegal during much of this period, therate was widely used.

28

depended greatly on geographical location (including rural/urban), marketaccess, and particular market conditions.

IMPACT OF THE STABILIZATION IN AUGUST 1985

3.12 The abrupt stabilization of the economy and comprehensive liberalizationof markets, which took place in late 1985, imposed a sudden and severe changein the structure of economic incentives facing Bolivian producers. Thissection analyzes the impact of these policy changes on the poor. It is usefulto differentiate between policies aimed at stabilization and those designed toliberalize markets, although in practice the two policies are strongly inter-related, and individual policies affect both. The specific policies under-taken and their general macroeconomic effects are analyzed in the recentCountry Economic Memorandum for Bolivia (7645-BO). Here we will focus ontheir consequences for the poor.

3.13 The Government of Mr. Paz-Eotenssoro stopped the hyperinflation bylimiting public sector expenditures to cash on hand (inducing a fall incentral administration real salaries) and by establishing a realistic exchangerate through a 93% depreciation of the peso. As a result, the consumer priceindex, which had risen by 57% in August 1985, fell by 1.9% in October 1985.With a few exceptions, price increases have remained below 20% at an annualrate since then. An end to the hyperinflation was essential to avoid an evengreater collapse of the economy than actually occurred, and was a prerequisiteto long-term growth. The control of inflation is generally recognized as amajor contribution of the Paz Estenssoro Government to Bolivian development.

3.14 It is less widely understood that stopping inflation probably had apositive impact on output and welfare.4 Stabilization made it unnecessary toengage in numerous time-wasting activities that had become common during thehyperinflation. For example, the rapid fall in the purchasing power ofcurrency led people to spend money as soon as it was received. By contrast,low inflation enabled the consumer to space purchases more conveniently andreduced the accumulation of real assets as a hedge against rising prices.Stabilization allowed people to spend more time in productive activities andless in speculative ones, facilitating a rise in output.

3.15 Unlike the experience of many countries, but similar to earlier hyper-inflations, there was no tradeoff between stopping inflation and growth.Economies with high rates of inflation frequently suffer a fall in output withstabilization. Economic agents under inflation typically make decisions and

Output did fall by 2.9% in 1986, but this reflected to a large extentthe collapse of Bolivian tin mining exports owing to the sharp drop (50%over the year) in international tin prices in late 1985. The prices ofBolivia's other major export-good, natural gas, fell by 12% in the sameyear. Export earnings from these two goods fell by US$130 million in1986, equivalent to 3% of GDP. Some demand effects must have hadnegative consequences as well as real income fell during 1986 beforepicking up in 1987.

29

enter into contractsassuming continuedinflation. An abrupt Poncho is 10 ot 11 years otd. He is a shoe-shine boychange in the monetary on one of the sqares in the otd part of La Paz from 7 in theregime that stabilizes mornfng to S at night, interrWted by a few hours of schoolprices can result in in the afternoon. Pancho does not wake auch but his income

rs his family's most ifrt,nt sore of incoW. His familyunexpected changes in consits of his mother ad four siblings: "We don't have arelative prices; for ex- father, I'm the man of the house."ample, increases in real Pancho said that "thirgs are much better now thaninterest rates or real wa- before." When asked about the hyperlnflation, he gave ages. Such unexpected biank stare, not understanding the words. #But," he saidchanges can severely re- eagerly. *the people in power before ruined my mother'sduce the profitability of money." Full of Indignation he explained that his mother had

saved up her money to buy a pit. AS she did not trust theexisting firms. However, banks, she hid her money in a tin can under the bed. Whenthis effect of stabiliza- she cams *own to the market to bu her pig, the farmertion was not relevant at laughed at her and said that her money bas worth nothing now.the extremely high rates "So we don't like the people who decided then. They cheatedof inflation experienced us out of a pig."in Bolivia. By August of Pancho goes to a center for shoe-shine boys every day.1985, the population had The boys set a hot moal at noon foltowed by "academiclargely abandoned the nutritiontf in the form of help with their homework, but only

If they go to school in the afternoon. "tThat's a0," saysBolivian peso as a store Pancho, "people are at work anyway during those hours, soof value or unit of there is nothing eise to do." The boys leave their sear ataccount. Even contracts the oenter every night. Previously they had to pay up tolasting a short time were half a day's wages to store theie things. The center has a

bakery, a tailtors' shop and a wood-working shop where thedenominated in dollars, boys can learn these crafts. The income from the sale of thenot pesos. Since prices bread wnd prtvate donations pay for the recurrent costs ofwere not fixed for even the center. £SF paid for repair of the center and furniture.short periods of time interms of pesos, stabi- ox 3.1s The Shoe-shine Boy and Stabilizationlization had little impacton relative prices (exceptfor activities dependent on Government subsidies or access to subsidizedcredit or foreign exchange), and did not reduce output. While recorded realinterest rates did rise, this reflected a shift from quantity to pricerationing of capital, not a rise in the cost of capital except for formerlysubsidized activities. It is likely, that the position of the poor itprovedgreatest, relative to what would have occurred by continued hyperinflation, asprice stability reduced the premium for access to information.

IMPACT OF ADJUSTMENT POLICIES

3.16 The impact on the poor of the comprehensive liberalization of marketsbegun in 1985 is more difficult to judge. The Paz-Estenssoro Governmentundertook several drastic policy changes to increase reliance on the market,rather than the state, for the allocation of resources. Briefly, the initialstabilization package removed all price controls on goods produced by theprivate sector (except wheat); eliminated controls on interest rates; removedrestrictions on the buying and selling of foreign exchange; established amarket-based auction mechanism to determine the exchange rate; drasticallyreduced tariff rates and moved toward a uniform tariff structure; and eased

30

restrictions on wage setting by the private sector.5 The Government also tooksteps to reduce the role of the public sector in direct production, increasethe efficiency of public sector operations, and reform the tax system toreduc. Bolivia's dependence on hydrocarbons earnings. In addition, thecollapse of the international tin market in late 1985 made necessary a drasticreduction in employment at COMIBOL, the state mining company, and greatlyreduced Bolivia's export earnings in 1986.

3.17 The reforms vary greatly in their impact on the poor. The eliminationof price controls improved efficiency by reducing opportunities for corruptionand increasing the incentive to channel goods through the formal sector of theeconomy. However, most small scale producers, particularly in rural areas,already evaded the controls. Removal of interest rate controls probably hadlittle impact on the poor, whose access to loans from the formal bankingsystem was, and remains very limited.

Public Sector Employment

3.18 The reduction in public sector employment created a new class of poor.Approximately 23,000 COMIBOL emnloyees, who had benefitted from publicsubsidies prior to 1985, lost their jobs. Opportunities for other employmentfor the miners were few, owing to the lack of transferable skills for mostminers,6 and the depressed state of mining and domestic production. As aresult, mining communities have suffered a drastic rise in unemployment.Further, the fall in mining output has depressed incomes of communities whichprovided goods and services to the miners. The most dramatic example of thedepression in mining areas can be seen in Potosi Department. In theory, theeasing of labor market restrictions could have increased the demand for laborand eased the absorption of newly-unemployed workers. However, slow growth indomestic demand and high interest rates have limited the investment necessaryto take advantage of more flexible labor policies. Further, the easing ofrestrictions on firing may have led to the dismissal of redundant workers.Therefore, the new labor regulations may have had little impact on demand forlabor and made little contribution to easing the burden of the fall in miningemployment.

3.19 It is important to realize, however, that the collapse of the tin marketmade the cut in public sector mining unavoidable. Even before the collapse oftin prices in late 1985, COMIBOL was losing about US$2 million per month. Itwould have been impossible to maintain employment in COMIBOL without massivestate subsidies that would have destroyed the economic program and could not,in any event, have been sustained for any significant period of time. Thus,while the creation of a new class of unemployed poor was a human tragedy, itis difficult to see how it could have been avoided.

See the CEM (7645-BO) for a review of the liberalization measures andtheir implementation.

6 COMIBOL workers such as carpenters, mechanics and other specialists hadless problems finding new employment.

31

External Sector Policies

3.20 The changes in the trade regime may have reduced the competitiveposition of poor producers. Effective rates of protection on consumer goodswere extremely high prior to the 1985 reforms. The average rate of effectiveprotection in mid-1985 was 44%, with relatively low rates on capital goodsimports. Many consumer goods enjoyed effective protection rates in excess of100%. The Government reduced tariff rates on coneumer goods to only 20%,which contributed to the substantial rise in consumer goods importsexperienced in 1986-87. In particular, strong competition from agriculturalproducts of neighboring countries, some heavily subsidized, probably reducedthe demand for camp.aino production. The elimination of the subsidy togasoline products further exacerbated the problems affecting campesino

agriculture, which is heavily intensive in transportation to reach markets.

Real Exchange Rate(Bolivian Pesos per US$)

Index (January 1982 = 1)

2.82.4 ..__ ................................

2.2 ....... . . .. ....................................

1.4 . ... .. ............. .. -- ....................

1 .2 ... ........ .............. .

1 F~~~~~~~~~~~~~~~. .. ........... ..... . ...... ........ ..... ............ ................ ........................ .

0.8-1982 1983 1984 1985 1986 1987 1988

Source:Staff calculations based on Tnfornotlon from INE

Figure 3.1s Developmeat of Real Exchange Rate

3.21 The stabilisation and unification of the exchange rate also may ihaveimpaired the competitive position of domestic production. Prior to stabiliza-tion, the parallel exchange rate (the one used in most private sector transac-

32

tions) was relatively high.7 The Government increased the official exchangerate by 93% in August 1985, and for most of the time after that littledifference existed between the parallel and official rates. Comparing theparallel rate prior to August 1985 with the official rate afterwards (bothrepresent the rate actually used in private sector transactions, particularlyin small scale production), one can see a significant appreciation of thedomestic currency, due to a rise in demand for domestic currency owing tostabilization. Figure 3.1 shows the development of the real exchange ratewith the US dollar from 1982 through 1988 in the unofficial (parallel) market.Although the real exchange rate shows considerable variability during thehyperinflation, the level of the index averaged about 2 (January 1982 = 1)from 1983 through August 1985. The real exchange rate index fell by almost60% with stabilization in September 1985 (implying an appreciation of thedomestic currency), and thereafter averaged about 1.1, well below the levelsexperienced during the hyperinflation.

Impact on Acriculture

3.22 These factors have resulted in a decline in the real price and quantityof agricultural products, particularly affecting production by campesinos. Aprice index of agricultural products declined by 29% from the stabilization tothe end of 1988 relative to overall consumer prices. Some of this relativedeterioation in prices are probably due to the substantial appreciation of thecurrency in the parallel market. Further, campesino production, particularlyfor the internal market, has fallen since 1985. Table 3.1 shows the evolutionof agricultural production since 1985, expressed as a percentage of theaverage for 1980-85 (excluding the drought year 1983).8 Total agriculturalproduction fell 17% from 1985 to 1988 in volume terms, and in 1988 remained15% below the 1980-85 average. The decline in 1988 was in part due to adrought that affected some areas of the country. Nevertheless, the samedeclining trend is apparent through 1987.

3.23 Production of many goods produced by campesinos for the internal market(corn, wheat, potatoes, onions, sugar cane, and alfalfa) have fallen sig-nificantly since 1985, and in 1988 production remained well below the 1980-85average. By contrast, production of export crops has increased relative tothe early eighties, particularly quinoa, fruits, soya, and coffee. Thisincrease, despite the relatively low level of the exchange rate, is due toincreased yields per acre and a rise i- international prices of some keyexport crops. This trend largely refljcts increased output from the largerestates in the Lowlands, although campesino production of quinoa and coffee,

7 The Latin American Region defines the exchange rate as units of domesticcurrency per unit of foreign currency. Therefore, an increase in theexchange rate implies a depreciation of the boliviano (prior to January1987 the Bolivian peso).

Table 3.1 is based on data on tons produced, rather than constant pricedata, owing to the lack of consistent series for production and prices.Thus, the weights used in calculating the total are tons produced,rather than the value of production in the base year.

33

which is partly forexport, has also Hwdred oetric Tong Inrx, 1980-85=100benefited. Overall, (merW 1980-85) 198 1906 19 190 1989the appreciation of Comas 710 104 99 92 84 74the exchange rate Rice 125 138 109 108 129 94following stabiliza- torn 478 116 96 96 83 66

tion and he reult- Quisina is 138 138 158 151 128tion (and the result- 7uirea 1 104 114 107 90 STing fall in therelative prices of Tubers 1121 99 98 97 94 Aagricultural Potato 809 95 86 93 87 67products), and the Yucca 239 110 130 101 110 MAIncrease in gasoline Frits and vog. 890 98 102 83 92 NAprices clearly had a Onion 34 102 105 93 96 #Asubstantial negative Tohto 30 96 156 1U 129 NAimpact on campesino orangsh 63 91 t10 99 90 NAproduction.

Fodde 5' 79 83 82 83 VA3.24 The impact of Alfalfa - 72 73 56 57 u -these changes on the Onions '2 94 101 124 126 NAwelfare of the poor is Other 3160 104 99 90Q 94 XAmore difficult to Sgar cane 3042 104 94 78 70 63determine, as the Swa 69 120 195 169 236 353appreciation of the Coffee 22 107 111 116 116 NAexchange rate also Totsl 12165 103 98 91 as MAwould have reduced the rdomestic price of Note: Subcate"ories iiithin each major groW are not exhaustive.imported inputs and Sourcet Ministry.of Agricultureconsumer goods. The ______________________________________________poor farmers who Table 3.ls Agricultural Productionproduce food formarket and whose majorpurchase is domestic energy experienced a significant fall in welfare, asproduction and prices of their crops fell while the cost of energy rose,relative to pre-stabilization levels. The urban poor would have seen a risein their purchasing power, reflected in the reported, although poorlydocumented, sharp increase in unrecorded food imports.

3.25 The conclusion that the exchange rate since 1985 has been too low topermit the level of agricultural production prior to 1985 does not imply thatthe Government has maintained an artificially low exchange rate. The presentexchange rate is determined by the market, with only minimal attempts toinfluence the rate directly through the auction system. The parallel marketstill exists, and with very few exceptions the parallel rate has been within1-2 percentage points of the official rate since September 1985. An importantreason for the low level of the exchange rate is the inflow of coca money,which in the short term is largely outside the control of the Government.Still, Government policy has contributed to the low exchange rate by running aconsiderable fiscal deficit financed by inflows of foreign assistance, and bysetting relatively high interest rates on Certificates of Deposit. Togetherthese factors have reduced the real exchange rate to the point that domesticproduction of some agricultural goods formerly produced in Bolivia is nolonger competitive. Increasing the efficiency of customs to reduce the amount

34

of goods which evade import duties and other taxes would improve theprofitability of domestic production. Fundamentally, however, increases intaxes and some reduction in interest rates may be necessary to increase theability of poor producers to compete.

Labor Markets

3.26 In an economy with a high degree of mobility of labor and capital, thosehurt by the abrupt changes in the relative profitability of different economicactivities described above would suffer only temporary losses. Indeed,Bolivian labor has reacted to the change. instituted since 1985 by switchingto other activities. A degree of labor mobility traditionally has existedeven in poor communities. Short-lived booms in commercial agriculture in theLowlands (quinine in the 19th century, rubber, cotton, and coca) haveattracted migration from the Highlands. Further, the common practice ofsending family members from the Highlands to work in the Valleys has providedmome flexibility in the sources of family income.

3.27 Even so, the significant constraints on labor mobility persist in theHighlands. Alternative employment for miners who have lost their jobs andfarmers who can no longer earn an acceptable living is extremely limited inthe Highlands. Therefore, changing jobs generally means moving to the citiesor Lowlands, either permanently or for extended periods of time. In thoseareas where land is still held communally, migration of a family may result inforfeiting property rights. Leaving one's traditional community may alsoreduce access to systems of support that had afforded protection from thevicissitudes of the market.9 The danger of disease to Highlands peopleunaccustomed to the Lowlands is significant, as are the social problemsrelated to growing coca in the Chapare province of Cochabamba. Further, thelack of growth in the economy has generally limited new jobs to extremelyunproductive activities. For example, the hormiga ("ant") trade, under whichcontraband imports are carried by hand across the border, has enabled manyworkers to survive, but the returns to such activities are very low. In sum,labor has moved in reaction to the changes in the economy since 1985, but thecosts involved have limited opportunities for the poor.

Tax Reform

3.28 The Paz-Estenssoro Government instituted a drastic tax reform in 1986.The hundreds of domestic taxes that existed in the old system, including acomplicated personal income tax with numerous deductions, were replaced by asimplified group of taxes. Emphasis was shifted from direct to indirecttaxes, with a 10% value added tax (VAT) the major source of revenue.10 Aprogram of administrative reforms was undertaken to improve the administrationof the tax system. The new system has been successful in greatly increasingdomestic tax revenues compared to the period of the hyperinflation. Domesticrevenues equalled 6.1% of GDP in l;S8, compared to less than 1% in 1985.

9 More in Chapter 7 on Agriculture.

10 See Chapter 3 of the CEM for an analysis of the new tax regime.

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3.29 The tax reform has been criticized as regressive (in comparison to theold system), because it relies heavily on indirect taxes rather than aprogressive income tax. In fact, the system as a whole is somewhat progres-sive, probably more so than the system in force prior to 1986. The VAT isimposed in tandem with the complementary tax, a 10% tax on income. Receiptsfor payments under the VAT are deductible from the taxpayer's liability underthe complementary tax. The complementary tax is designed to encouragecomplia;ce by the taxpayer and the retailer with the VAT, rather than tocollect additional income. Together, the two taxes constitute a 10% tax onall income, whether consumed or saved, and are therefore neutral with respectto income. Further, the tax system includes excise taxes on luxury itemswhich are bought only by the middle and upper classes, and persons withincomes below a certain minimum are exempt from the complementary tax.

3.30 That is not to say that tax collections are the same share of income forall income groups. Data are not available on the distribution of tax paymentsby income levels. It is likely that the poor pay little in the way of taxes,as they are exempt from the complementary tax, do not purchase many of theitems subject to excise taxes, tend to work in the informal sector in whichtaxes are evaded, and tend to patronize stores in the informal sector that donot pay the VAT. The tax burden falls relatively heavily on workers in theformal sector of the economy, since the complementary tax is deducted directlyfrom their salaries. Considerable anecdotal evidence exists that the richevade taxes on their dividends and interest income. A major effort isunderway to collect taxes from the richer taxpayers, through separate officesin the three largest cities. While these offices have had considerablesuccess in capturing greater tax revenues, clearly more work needs to be done.The proposed land tax has begun to be implemented but only slowly. The landtax has generated much fear among the campesinos even though they would nothave to pay the tax, as smaliholders are explicitly exempted.

3.31 It would be possible to modify the present tax structure to make it moreprogressive. For example, multiple VAT rates could be introduced to increasethe tax burden on luxury goods, or the complementary tax rate could be raisedfor higher-income wage earners. Such changes would complicate the administra-tion of the tax system, but would be worth investigating if a greater degreeof progressivity is desired. In summary, the tax system is somewhat progres-sive, and is superior in terms of progressivity, efficiency and taxescollected, to the reliance on the inflation tax prior to August 1985.

3.32 Public investment had fallen dramatically between 1980 and 1985.Furthermore, many of the projects implemented were of questionable quality.This fall was reversed with the stabilization program. By 1988 publicinvestment had doubled compared to its 1985 level. At the same timecontinuous effort was put into "cleaning up" the investment program andimproving control and planning mechanisms. 11 The improved quality andquantity of public investment have been an important factor in turning aroundthe economy and setting the stages for future sustained growth. The reforms

More about 1980-88 public investment in Public sector Expenditure Reviewwith a Special Emphasis on the Social Sectors (Report No. 7746-BO).

36

in the public investment program and its management need to be continued anddeepened. It is a very slow process while the old projects are being phasedout. The following chapters analyze the public investment program in foursectors, and make recommendations for changes. On the macro level each newproject ought to be screened for its social (employment) effect as an integralpart of the economic evaluation. This is one key area where government policycan influence the development path of the country.

CONCLUSIONS AND RECOMMENDATIONS

3.33 The stabilization Probably helped the relative position of the Poorcompared to what would have happened in the absence of stabilization. Whileit is impossible to measure precisely the impact on the poor of the policyreforms initiated in August 1985, the impact of different policies can bejudged in qualitative terms. Price stability and the reduction of stateintervention in the economy reduced the rents available to groups witheconomic or political power, and reduced the burden on groups without suchinfluence of financing the deficit. Changes in the trade regime and the realappreciation of the boliviano probably impaired the competitive position ofcampesinos producing for the internal market, compared to the degree ofprotection they had enjoyed prior to the 1985 reforms. The collapse of theinternational tin market and subsequent drastic reduction in COMIBOL employ-ment created a class of "new poor," but this was unavoidable. The tax reformdid not greatly affect the rural poor, who remain largely outside the tdxsystem.

3.34 What emerges most clearly from this analysis is that macroeconomicpolicies have considerable impact on income distribution. It is important forthe Government to consider the impact of its overall economic program on thepoor. However, this does not imply that interventions which distort keyprices are justified in the name of alleviating poverty. Indeed, a majorlesson of the early 1980e is that such interventions tend to penalize the poorby making political influence the determinant of economic success, rather thanthe market. Thus, our central recommendation is to strenqthen theliberalization of markets and pursue fiscal balance. Fiscal stability isessential to avoid the regressive inflation tax. As the poor are p^werless,it is important not to introduce constraints in the economy that i.- subjectto manipulation by the powerful.

3.35 The rural poor would benefit from an exchange rate which is moreappropriate for agricultural production. The present exchange rate isrelatively low due to the large fisc&l deficit, high level of interest rates,and the inflow of money from the illegal coca trade. To the extent possible,the Government should maintain an exchange rate which takes into account thelong run competitive position of agriculture, and certainly should avoidsupporting an unrealistic exchange rate through an outflow of reserves.Increases in taxes to reduce the fiscal deficit would help to depreciate theexchange rate and improve the position of the rural poor. However, exchangerate policy must be determined on the basis of macroeconomic considerations.Attempts to adjust the exchange rate through administrative actions to assist

37

particular sectors or groups are likely to have heavy costs in terms ofefficiency and engendering increased infiacion.

It was Sunday, but that did not make any difference to Rafael end his wife, Gabriela. They had leftthe village early in the morning, with Libardo the youngest of their eight children, wrapped in hismother's shawl and slung across her beck, to walk to their terrace in the mountains overlooking thegreat take Titicaca. Rafset and his brothers had atreeady cultivated the land using hand hoes and hehad planted rows of coca a month before. Today he was going to plant his rows of potatoes, with thesamllest potatoes that he had saved from last year's harvest. Re trudged up the hill poking a holein the ground with a stick as Gabriela followed behind picking the little tubers out of a fold inher skirt and placing them in the holes letft by her husband. She hoped that it would rain soon sothat they coutd get a good harvest. They did not have enough money to buy food end depended on theharvest to eat, and if they were very lucky, to sell a few potatoes or fava beans in the localmarket. That was not very likely. With so little tewd and all the children to feed, they would belucky just to produce enough to fill their stomachs for another year. Gabrieta also worried aboutthe new land taxes they had to pay. Rafael had spent 530 to go to town to find out about the taxesand although he was not sure he thought he and his brothers would have to pay over $300 in taxes.She would not be able to pay this amount with thet little extra money she made from knitting and ifshe did she would not be able to buy more wool.

lBox 3.2s Gabriela, Rafael and the Land Tax

3.36 Similarly, a more progressive tax structure may be desirable, par-ticularly given the extreme inequality of income levels in Bolivia. However,the ability of the Government to monitor highly differentiated rates or toraise taxes on the rich is limited by opportunities for evasion, administra-tive considerations and by the need to encourage greater private sectoractivity. It would be beneficial to review the collection of taxes to ensurethat the rich do pay taxes. Estimates by the Economic Policy Analysis Unit ofthe Ministry of Planning show that 45% more revenue could be raised withoutchanging the tax code. This would mean a continued emphasis on collectingtaxes from the large taxpayers. The recent establishment of offices for largetaxpayers in the major cities is an important first step. The progressiveland tax should be implemented with a sufficiently large exemption for smallland-holders to allow the majority to pay nothing (see Box 3.2). At the sametime, tax rates should be increased to limit speculation and improve thedistribution of land, especially in the Lowlands. The customs service shouldbe improved to ensure an adequate level of Government revenues while providingsome protection for campesino production against subsidized goods fromneighboring countries. The public investment program should continue to bemonitored and improved to reflect the Government's strategy of improvingsocial conditions.

3.37 Finally, it is also important to point out that increases in expendi-tures to assist the poor must be carried out within the overall budgetconstraint necessary to maintain economic stability. Therefore, increases intaxes will be necessary to implement some of the recommendations of thisreport. More importantly, enormous potential exists within availableresources to reallocate expenditures and public investment to assist the poor,and to improve the efficiency of programs that serve the poor, issues whichwill be dealt with in Chapters 5 through 8. Therefore, although the scope formanipulation of macroeconomic policies to assist the poor directly is limited,the Government has other policy instruments to do so. Shifting expenditures

38

is not an easy task. Powerful interest groups will strongly resist anyreduction of their subsidies for the benefit of the poor.

39

CBAPTER 4s -X8TXTUTIONS AND THE jORS

INTRODUCTIO

4.1 The ourvooe of thie chapter is to focus on the institutional aspects ofpoverty alleviation. By focusing on institutions, the analysis highlights theimplementation aspect of poverty alleviation. Increasing capital resourcesand redirecting public policy toward the sectors directly affecting the poorare necessary, but not sufficient, conditions for alleviating poverty.Without appropriate institutions to implement the policies and direct theinvestment, these efforts will rarely accomplish their objective. In thiscontext, the chaoter is divided into three narts: (1) an outline of theexisting institutional framework; (2) an analysis of the commoninstitutionalconstraints found across DISTRIBUTION OF ESF PROJECTS BY POVERTY AREAsectors; and (3) a I = RTchest, 5 = Poradseries of generalrecommendations toimprove the capacity ofinstitutions to reachthe poor and to broaden 11.4 the scope ofinstitutions involved inimplementing poverty-oriented programs. 5.6%Chapters 5-8 contain a201.2more detailed assessment i.L *6% 21.Mof the specificinstitutional Distributlon across DtstrlbutTon ofconstraints and P Areas Populonrecommendations relevant I O AREA I IN AREA 2 3 AREA 3 0 AREA 4 U AREA 5to each sector. Areas Refer to the Pov"ey Map

Source: ESF

4.2 Until the creation Figure 4.1t ES? Projects by Poverty areaof the ESP,I many remoteareas of Bolivia hadnever seen central or regional Government intervention. Yet not even the ESFhas extended a proportional share of its investment to some of the Poorest

The positive aspects of the ESF experience will be highlighted in thisreport as these should be adapted by other public institutions. Thisreport will thus not present a balanced review of the ESF experience,but rather only highlight lessons which are applicable to otherinstitutions.

40

orovinces (see Figure 4.1).2 Local government agencies are of very lowquality (where they exist), and are often controlled by local elites. In manycases, these elite groups show even less regard for the poor than centralgovernment agencies. Although NGOs have filled the gap in certain regions,many of the very poorest areas remain almost untouched by outside service-delivery institutions, private or public. In sum, a viable poverty-orientedstrategy must include efforts to reform the current institutional frameworkfor reaching the poor or benefits will continue to bypass those who need themthe most.

4.3 Careful thought mi 3t be given, however, to the political and economicconstraints inherent in modifying any system in which there are considerablevented interests. Recommendations which focus on ways to reach more effec-tively the poor (decentralization with local institution building, increaseduse of NGOs, and demand-driven investment) are all actions that willultimately reduce the political and economic power of some groups. Besides,benefits from investing in institutions often require a longer termprespective and a firm commitment to the overall objective of reaching thepoor.

GLOBAL INSTITUTIONAL FRAMEWORK

4.4 Within the public sector, institutions with the potential to affectdirectly the poor can be subdivided into four broad categories: (a) centraladministration; (b) regional governments; (c) local governments; and (d) theESF. While further detail is provided in subsequent chapters, the generaldescription is as follows (see Figure 4.2 for organizational chart):

Central Administration consists of central government, universities, andthe socia] security system; it accounts for about 80% of general govern-ment expenditures. Presently, there are 18 Ministries, but the numberchanges over time. Line ministries' investment is funded by theNational Treasury (TGN), cost recovery, and external resources providedby donors. Some miriat-ries oversee "deconcentrated"3 agencies, whichare still considered a part of central government, yet often receivetheiz own donor financing.

2 It should be noted that any given province is very heterogenous (seeChapter 2). Thus, a project in a non-poor province might benefit a poorpopulation group. ESF targets its projects mainly by assessing thepoverty levels of the project beneficiaries and not through geographicaltargeting.

Deconcentration is the handing over of some amount of administrativeauthority or responsibility to lower levels within central governmentministries and agencies. It is a shifting of the workload fromcentrally located officials to staff or offices outside the nationalcapital, but is not equated with the more far-reaching measures ofdecentralization.

41

INon-financial Public Sector l

F_~~~~~~

Public GeneralEnterprises Government

Central Local j RegionalAdministration Governments Governments

Municipalities I_____,___ I

Central Social RegionalGovt. lUniversity Security Prefectures Dev. Corp.

|3ESF | |Ministries

Figure 4.2: Organization of the Public Sector

Reaional oovernments include regional development corporations (RDCs)and prefectures. RDCs' projects are financed by the central government,their own resources (revenues generated from taxes and royalties, etc.),and external resources. While autonomous in their management, they fallunder the jurisdiction of the Ministry of Planning (MINPLAN) and their

42

Directors are political appointees. Their performance and impact varywidely by department, depending largely on their capacity to generatetheir own resources. Prefectures are the regional arm of the executivebranch of government and play a limited, almost purely ceremonial role.Current proposals for decentralization, however, have suggested that theprefectures be targeted as the key institutions for increased regionalresponsibilities.

Local aovernments are municipalities in urban areas and similar localgovernment entities in more rural areas (all called "Municipios").Leadership positions are occupied by officials elected by residents.

Emergency social Fund. Beginning operations in 1987, the ESF wasestabliehed as a short-term emergency funding agency independent ofsectoral ministries and acting in response to requests from communitiesto finance projects. It is scheduled to terminate its disbursements byMarch 1991. Since April 1990, a permanent agency forming an integralpart of central government--the Social Investment Fund (SIF)--has takenover the ESF's functions in the social sectors.

4.5 Within the private sector, the institutions with the greatest capacityfor reaching the poor have been the non-governmental oroanizations (NGOs).NGOs, have had an increasingly visible profile in Bolivia and their impact onthe poor has been impressive in certain areas. NGOs began to emerge in forcein Bolivia in the seventies with the general mandate of targeting thosepopulations not reached by existing institutions. Most of these organizationsheld the conviction that the Government had neither the intention, the means,nor the capacity to meet the basic needs of the poorest segments of the popu-lation. Many external funding sources viewed NGOs as viable alternatives toreaching the poor and provided support for their activities. Consequently, innearly 20 years of existence, NGOs have strengthened and legitimized theirpresence in civil society. They have contributed significantly to delivery ofservices to rural, migrant and marginal urban populations.

4.6 There are three general types of NGOs operating in Bolivia: religiousorganizations, international private voluntary organizations (PVOs), andnational NGOs, or Private Development Institutions (PDls). The church hasbeen active for the longest period and has a large infrastructure in healthand education. The international PVOs focus their activities in a number ofclearly delimited geographical areas, and generally seek to provide integratedbasic services including health care, education, water supply and sanitation,and agricultural development. PDrs are extremely heterogeneous. Most operatesmall projects with an emphasis on community education and participation.Many have a political or ideological edge honed during the years ofdictatorship in Bolivia. Recently, PDIs have begun to form associations andnetworks along sectoral, geographical and thematic lines.

4.7 To illustrate the poverty focus of NGOs as compared to other types ofinstitutions in Bolivia, it is useful to examine the vroject requests receivedby the ESF by type of institution and across poverty regions. Although noteven NGOs have reached sufficiently the most critically poor areas, they farexceed most other organizations in the share of project requests in the two

43

poorest regions (Poverty Areas4 and 5 of Map IBRD 22289 in Requests to ESF for Projects in Poorest AreasAnnex II). As illustrated in IP Typo of IflUttlon

Figure 4.3, the share of KoO Shwe of Totdl Requstsproject solicitations in these 5ABregions is much higher (nearly40%) than any other type ofinstitution except the National 3a _Road Service (SENAC), theprincipal institution respon- 205 l 11-9 asssible for roads.

4.8 Other important institu- oxtions to consider are the com- q^' 5 0 < o fmunity and grassroots organiza- *Ox-° 1 0-r

tions, or "organisaciones de "Pews As" e amas 4an wV mQPbase." organizations such as Source: ESFMothers' Clubs, NeighborhoodCouncils, Farmers' Unions, Figure 4.3t Rquests to ESP fron PoorestPopular Health Committees, AreasParent-Teacher Associations, and so on abound in Bolivia and can beinstrumental in mobilizing local resources and generating community parcipa-pation in the identification, design and delivery of services to the poor.While various NOos, the ESF (to some extent) and a few other public sectorinstitutions work with these groups, much of their potential remains to betapped.

COMMON INSTITUTIONAL CONSTRAINTS

4.9 Most of the sectors involved in Povertv alleviation share a common setof institutional constraints to meeting their poverty alleviation objectives:

a) centralization of decision-making and urban bias;

b) lack of demand-driven orientation and beneficiary participation;

c) weak plannina and volicv-making;

d) ineffi2ienvy characterized by overstaffing in administrative jobs,low salaries, poor training, and patronage; and

e) donor dependence created by a lack of sufficient resources.

It is argued that poverty alleviation efforts will never adequately reachtheir objectives without effective institutions at all levels of intervention,from central government to community organizations. An analysis of institu-tional constraints should, therefore, include both those that affect the poordirectly, and those that, by improving the general efficiency of the publicsector, will affect the Government's ability to focus on issues of povertyalleviation.

44

Centralization and Urban -BEs

4.10 The Bolivian public sector has a long history of highly centralizedplanning, decision-making, and investment. This has resulted in: (1) asubstantial bias toward urban and central government demands and institutionsat the expense of regional and rural development priorities; and (2) a highlyinefficient execution of public service delivery incapable of reaching thepoorest areas. Those who have suffered most under this centralized schemeare, of course, the rural poor.

4.11 Urban bias can be found across all sectors. In health, urban hospitals,social security, and curative care receive much greater emphasis than ruralhealth posts and primary health care. In education, universities are guaran-teed a significant portion of annual tax revenues, while rural schools gowithout books and their teachers' salaries remain abysmally low. in trans-port, public investment centers on a few large projects, while the RDCs havelimited resources to meet even a small percentage of demand for rural accessand feeder roads. In agriculture, the larger (urban based) producers frompolitically powerful regions have received the greatest assistance.

4.12 Centralization has created a public sector virtually paralyzed byexcessive concentration of responsibilities. This prevents the centralsectoral ministries from assuming their normative and coordinating roles,e.g., the Ministry of Education is charged with both setting overall policyfor the education sector, and with approval of the purchase of pencils forremote primary schools. At the central level, this has resulted in overstaff-ing, no clear lines of responsibility, inefficient program execution, lack ofclear priorities, proliferation of self contained project units, and insuffi-cient sectoral policy guidelines. Decisions are generally made on an ad-hocbasis, depending on whose interests are best represented at the center, andthus disregarding the interests of the poor. Central Government staff cannotknow the complex variety of factors that affect the success of projects inlocal communities throughout the country. This often leads to inaction onessential decisions.

4.13 At the local level, centralization has contributed to the weakening ofinstitutional capacity to carry out even the most minor implementationresponsibilities. The inefficiency associated with central execution isexacerbated by severe communication constraints leading to inadequate informs-tion flowe and monitoring capability. An absence of guidelines for programimplementation is then combined with lack of accountability to perpetuate theweak technical and programming capacity at the local level.

4.14 The result is a stratification of political, economic, social, andcultural life along central/peripheral and urban/rural lines. Given that moststate institutions are found in the large urban centers, they have a signifi-cant influence over the delivery of social services and provision of infras-tructure. By contrast, because rural institutions are not a legitimate partof the state system, they often lack the legal, financial, and political meansto initiate or sustain local development efforts. This dichotomous system hasremained remarkably stable since colonial times. Colonists imposed a systemof government based on "urban" centers, designed to control the indigenous

45

population. The indigenous population was--and is--found mostly in ruralareas, and continues to constitute the poorest group.4 Even the reforms inland tenure and education following the revolution of 1952 were based on theidea of an all-powerful central government creating national and verticallyintegrated institutions to develop the rural sector. Entirely dependent onexternal (urban or foreign) initiatives to take action, the rural sectorremains at the bottom of the hierarchy.

4.15 The limitations placed by history on the rural sectors are severe.Without being able to establish formal units of government at the local level,agricultural and rural sectors face insurmountable obstacles to taking suchactions as building and maintaining farm-to-market roads, or constructingirrigation or drainage infrastructure. The rural population cannot legallytax itself to provide this kind of infrastructure or rural service. It cannotinfringe on private land for access or drainage ways. The local communitycannot open a bank account, hire staff, or enter into any kind of contract.

4.16 In 1985 the Government began to transfer several important economicresDonsibilities to the RDCe. These measures met with limited success,however. Today, the RDCs are formally responsible for a variety of publicservices and economic activities formerly under the purview of the centralgovernment (e.g., rural electrification, secondary roads, forestry services,community development, and some agricultural extension services). The problemis that responsibilities were transferred without taking into account thetechnical, administrative and financial capacities of RDCs. Several RDCs havevirtually no financial resources of their own. These RDCs are generallylocated in the departments with the greatest incidence of poverty. Conse-quently, they continue to be too dependent on scarce and unreliable TGNsupport and central government micro-management. This has further exacerbatedalready significant interregional disparities by favoring those who receiveroyalties from the exploitation of their natural resources (e.g., Santa Cruz).The public investment program continues to be the primary channel for projectformulation. This leaves little room for each department to address itsdistinctive poverty problems.

4.17 The Government's 1990 pronosals for decentralization must be verycarefully assessed in this context. The transfer of responsibility may wellhelp to redress the ingrained centralization described above. If that is thecase it will help address regional poverty issues more effectively. It mustbe ensured, however, that any delegation is accompanied by sufficient techni-cal and financial assistance to the weakest (and poorest) sub-national levelsof government. Furthermore, poverty reduction priorities should be given ahigh profile. Decentralization gives rise to a host of institutional and ad-ministrative issues that affect the design and implementation of sectoralprograms and projects: (a) the difficulties involved in implementing reformsin many local jurisdictions with widely differing technical and administrativecapacitiest (b) the need to integrate planning and budgeting between thecentral Government and the sub-national levels; (c) uncertainties about thefuture role of some central agencies; (d) uncertainties about the role of

See Chapter 2.

46

departmental authorities; (e) the absence of policies and mechanisms for

extending credit to local governments; and (f) the lack of a coherentfinancing strategy between central agencies and local governments. Each of

these issues must be carefully addressed before wholesale decentralizationtakes place.

Lack of Demand-Driven Orientation

4.18 The constraint most directly related to efforts at alleviating poverty

in Bolivia is a lack of a demand-driven orientation. Successful poverty-oriented programs are carried out by institutions that provide services inresponse to soundly assessed demand. This contradicts the supply-drivenpolicies of many service organizations that try to induce clients to consumewhat is judged best for them. Because virtually all ministries and public

institutions in Bolivia are structured along the same hierarchical andcentralized lines, there exist few mechanisms by which to incorporate the

demands of the poor into any level of policy-making or even project design.Except for the efforts of the SIF and ESF, the demands of the poor are

inadequately understood and improperly linked to supply in most sectors in

Bolivia. The ESF has confronted numerous difficulties associated with thelack of technical expertise among the poor to present their demands as project

proposals leading to improved outreach activities in the SIF.

4.19 Local oraanizations of the Poor, such as community associations,cooperatives, peasant unions, and women's groups abound in Bolivia, yet remain

largely untapped as intermediaries between government agencies and commu-

nities. On one hand, representatives from these groups are not included in

regional planning efforts. On the other hand, they often do not have suffi-cient technical capacity or contacts to initiate and promote their proposals.

Even if they had such capacity, local organizations generally do not have

sufficient financial resources to implement projects. No formal local govern-

ment institution is accountable or responsive to the needs of the rural

inhabitants. Thus, the rural poor have no institution with the capacity or

responsibility to address the provision of public goods.

4.20 Community labor input, in particular, is an important mechanism for

beneficiary participation, a cost-effective means of executing projects,5 and

an opportunity for the community to "own" projects. Different organizationalarrangements can also lead to responsiveness from different types of

clientele. The broader and larger the organization, the more likely it is to

have heterogeneous clients and to be dominated by local elites. The smaller

and more vulnerable the organization, the more likely it is to needintermediary organizations that are particularly dedicated to its existence.

This is where NGOs can play an important role.

4.21 Little has been done to examine the most effective ways to intearateNOgs into national poverty alleviation strategies. Although many donors use

NGOs as intermediaries, there is little coordination of strategies or even

sharing of information among them. NGOs can bring the following strengths:

5 See paras. 9.32-9.37.

47

(1) detailed knowledge of localconditions, (2) experience in "In the baginning it was hard for ESfcommunity development, (3) a to work with MWOs, they did not want statewillingness to experiment with non- interference, they didn't know how it vastraditional forms of service going to work. Later they saw that we ontyprovision, and (4) staff commitment evatuated the tychnficioprt.nt to work withto poverty alleviation. Much greater NGos. Especialty in heatth, NGOs are veryeffort should be made to ensure that well organized, they can give a continuity tothese strengths be effectively the projects that the public sector oftencombined with those of government and cant.community groups. This would make OBy now, we have gotten the NGOs tobasic social services more accessible work as fast as we do.... to prepareto the poor and let NGOO serve in an reports... they never used to prepare reports.

We say: "if you went us to give you money, youintermediary function by assessing or have to give us regular reports, we wilt visitgenerating the demand for services the project, you have to work fast, you havefrom the poor. The challenge of to have records of how many children getinvolving NGOs in large-scale poverty breakfast every morning, you have to show us

how the fofey is spentu. The NGOs were notprograms will be twofold: first, to used to that."encourage their cooperation with aGovernment that has historically uThe best supervisor of a project isgenerated resentment among NGOs for the colnudity, the nmunity has to getinvolved, that's the onLy way we can have aexcessive intervention; and second, good project"to assess the comparative advantages--and disadvantages--of the different Renate Ctaros, Supervisor for ESFtypes of NGOs, and utilize them .___________________________________accordingly. Box 4.1 Working with NOOs

Poor Plannina and Policy Making

4.22 If a national poverty alleviation strategy is to be effective, theinstitutional capacity to formulate Policy and coordinate its implementationis of primary importance. Within the public sector in Bolivia, this capacityis extremely weak and past attempts at reaching poverty alleviation objectiveshave often failed as a result. This weakness can be attributed to severalfactors:

a) excessive centralization (see above);

b) Door communication with ad little planning input from poverty-stricken regions and institutions (e.g., NGOs) working in theseareas;

c) no capacity or nower to coordinate the plethora of donor and NGOintervention;

d) a oroliferation of self-contained nroiect units with virtual in-dependence from the 'coordinating" ministry, yet carrying out linefunctions; and

e) a general lack of will to maintain cood nolicv units at the center.

48

The result has been duplication of poverty projects in certain areas andcomplete absence of intervention in others. Many ministries have becometotally ineffective in providing the normative role they were intended toplay. Sub-national levels of government have little authority to fill thegap.

4.23 From a cross-sectoral perspective, the President of the Republic and theNational Economic Planning Council (CONEPLAN) are jointly responsible fordefining overall development objectives and national development policy.CONEPLAN relies heavily on MINPLAN to coordinate technical planning at thesectoral and regional levels. There is very little reliance on the RDCs inpolicy formulation, and the coordination of planning among the RDCs, thesectoral ministries, and the MINPLAN is very weak. Until 1989, no specificinstitutional emphasis had been placed on poverty-oriented strategies. In1989, however, a new Subsecretariat for Social Policy in MINPLAN was createdwith this objective in mind. Still in its formative stage, it is difficult toassess just how influential this Subsecretariat will be. It does not yet havethe capacity to incorporate a demand-driven mechanism into policy formulation,its primary focus is on the theoretical aspects of poverty, and its staff issmall and were originally hired for other tasks.

4.24 At the departmental level, RDC coordination of the planning of sectoralinstitutions is very difficult. In agriculture, for example, the Ministry hasregional offices in each department, w.hich report directly to headquarters inLa Paz. In addition, seven decentralized public agricultural sector institu-tions have independent planning units over which the RDCs have no formalcontrol. Thus, while the RDCs are responsible for coordinating departmentalplanning, they have little authority to do so. In practice, coordination is afunction of the goodwill of the parties involved. In some departments,various sectors take pains to ensure that their collective proposals ofprograms and projects form an integrated whole. In other departments (mainlythe poorer ones), annual operating plans are proposed in isolation from eachother. In summary, RDCs have become decentralized planning entities withoutauthority or normative guidance.

Patronaae, Poor Salaries and Poor Training

4.25 No poverty strategy can be successful if the institutions responsiblefor delivering services are characterized by inefficiency and weak humanresources. One of the most fundamental constraints confronting the Bolivianpublic sector as a whole is that of surplus employment combined with lowwages. Poor salaries have driven away many of the best employees and manyinstitutions are unable to attract qualified new personnel. Patronaae hasinflated personnel rosters throughout the government with people whose skillsare poorly matched to the demands of the respective positions. To makematters worse, there is little emohasis Placed on in-service training, therebymaintaining the poor skill level already in place. Real wages in the publicsector plummeted during the first half of the eighties and have only recoveredin parastatals. Today they are well below wages received for comparable,competing jobs in the private sector. Central government salaries rangebetween US$31/month for a messenger to US$210/month for a director-generalposition, and US$960 for a Minister. These salaries are roughly half that

49

paid by state enterprises (which also add other benefits) and even less thanthat paid by the private sector.

4.26 The effect on the poor, while indirect, has been a public sectorconstrained by a burdensome wage bill, with insufficient resources forsupplies and services to reach the poorest populations, and with under-qualified staff to deliver what few services exist. By 1985, the Governmentwage bill accounted for approximately 80% of total public expenditures. Thiswas a particularly severe problem in the health and education sectors. TheEducation Ministry, for example, devotes 99% of its budget to salaries, withno public resources for textbooks, writing materials or teaching aids.Although reforms aimed at resolving some of these pay and employment problemswere undertaken in 1985, available data Fuggest the reforms have not achievedthe souaht after efficiencies. Efforts to contain the wage bill have beenstalled in recent years. Personnel costs jumped from 48% of totalexpenditures in 1986 to 58% in 1988, varying inversely with expenditures onmaterials and supplies, which declined from 15% to 11% over the same period.

4.27 Compounding these difficulties are the distortions created by bothGovernment and donor provision of salary supplements and non-salary bonuses(see next section). Because enforcement of a rational, equitable system forawarding bonuses is weak, international donors and the Government findthemselves competing for the scarce human resources available in Bolivia.Depending on the sector, the result can be close to anarchy in planning,evaluation and implementation of projects (e.g., agricultural sector). Toppublic administration talent is perhaps scarcer overall than sector-specifictechnical personnel. This is because of the virtual absence of training forpublic administration either at the university level or within the publicsector itself.

4.28 A related problem is the lack of continuity in leadership positions andthe concomitant change in institutional objectives. This problem is par-ticularly acute in Bolivia because of the high number of political appointeesat all levels. Under the 1985-89 Government, there was some tendency to hiretechnical staff based on merit instead of political affiliation. Thispositive tendency has been reversed under the present administration. Thecontinual changeover of those in power in the planning, and even executing,positions creates a serious underlying sense of discontinuity. This resultsin a reluctance of lower level civil service staff to invest any significantlevel of long term commitment in specific initiatives from above, and atendency for higher level officials to fire all previous appointees and tostart over with their own. In agriculture alone, this has resulted in thedevelopment of seven restructuring plans for the Ministry, none of which haseven begun to be implemented. This has a particularly deleterious impact onpolitically sensitive poverty programs. Although it appears that very few ofthe present Government's overall policies have changed substantively from theprevious Government, the underlying sense of discontinuity and uncertaintyprevails. Under the current admin.istration, for example, most o. the RDCDirectors, their sub-directors and, in some cases, virtually all staff have

so

been changed6 under the new administration, and the adjustment period hascreated substantial delays in project design, implementation, and evaluation.

Donor Dep-endence

4.29 aolivia is becoming increasingly dependent on donor funds and interven-tions. On one hand, because the resources from the TGN are generally insuffi-cient and difficult to depend on, most public institutions are largelydependent on external funding to carry out their programs. In health, forexample, foreign aid financed 20% of recurrent costs and 100% of investment ofthe Ministry in 1988. On the other hand, because of the considerable institu-tional weaknesses in the public sector in general--and in targeting the poorin particular--donors have tended either to create their own implementingagencies, or have provided salary supplemente to existing public sectorofficials.

4.30 The result is twofold. First, it creates a plethora of independentagencies with uncoordinated Poverty agendas. This contributes to the weaknessin policy formation and cohesion in sectoral programs. The dilemma isparticularly evident in the agricultural sector. While the urgency of aidagencies to do something to alleviate poverty is understandable and commen-dable, these same actions are creating major institutional distortions. Notonly are many <development efforts duplicative, but some also serve at crosspurposes. Government, sectoral or institutional planning becomes a misnomerfor meeting exrernal conditionality, and coordination of regional, nationaland sectoral priorities becomes extremely difficult.

4.31 Second, donor dependence further weakens the public sector by attractingthe most aualified officials away from existina Dositions. It also encouragesstaff to follow the directives of the aid agencies rather than the officialministry policies (if such exist). Until 1989, aid agencies providedsubstantial salary supplements to critical project personnel receivinginadequate remuneration under the government's pay policies. Thesesupplements often reached -Žisurd levels where the topping off was severaltimes the official salazy. Although there was an official prohibition of suchsupplements in early 1989, many donors continue to pay them on an informal orin-kind basis. It is even more common to employ local consultants in linepositions in key government agencies. In these situations, the nationalgovernment official with good skills (and no private income) either leaves thepublic sector altogether to become a private consultant or seeks aid projectsfor which to work within the public sector. The fundamental issue is that

6 In CORDECRUZ (the Santa Cruz RDC), a list was drawn up of all staff(including secretaries and drivers) including party affiliation and anyone who did not belong to one of the ruling parties was fired.

51

donor financed employment is unsustainable and antithetical to the notion ofbuilding solid and effective public sector institutions.7

4.32 NGOs are not immune to this distortion. Many NGOs have noted thatbecause of donor dependence, staff are unable to meet internal priorities.One example is in the area of food donations. While certain NOOs continue toprovide and administer some form of food donations, many have concluded, thatthese donations negatively distort production, consumption and generalincentive patterns among the poor.8 As a consequence, many (who can afford todo so) are refusing to work with these donations. For others, however, fooddonations represent a major source of income, and refusing to work with themrepresents too big a financial risk. Consequently, their priorities continueto be driven by external sources, despite their internal reservations. Fooddonations can also create distortions in community OarticiDation. Specifi-cally, once a community has benefited from projects in which food is exchangedfor labor participation, it expects similar compensation for all projects.NGOs have reported that communities are refusing to participate in projectsfor which no food is provided in return. This, despite the fact that theseprojects provide skills or assets important to the community. Over time, asuccession of food-related projects can leave communities locked in a cycle ofdonor dependence.

CONCLUSIONS AND RECOMMENDATIONS

4.33 In conclusion, many Bolivian institutions are inept or insufficient intheir efforts at reaching the poor. This can be attributed to severalfactors. First, many institutions nominally charged with assisting the poorare overcentralized in their decision-making and apt to impose models that donot sufficiently consider the needs or demands of the poor. This has lead toa concentration of development efforts benefiting the privileged urban areasat the expense of the rural and peri-urban poor. Second, many of these sameinstitutions are overly denendent on external funds and are thereby driven bythe agendas of donors and overburdened with an excess of autonomous or semi-autonomous project management units substituting for line agencies instead ofstrengthening them. Third, nearly all public sector institutions are plaguedby the dual-edged dilemma of Door salaries and vatronage creating an under-qualified, yet overstaffed, civil service incapable of reaching the poor.Finally, and most important, there is little history of demand-driven nolicv-making in that which affects the poor. Most policies are made in a top-downfashion and take little advantage of the wealth of existing non-formal andnon-governmental institutions existing at the local levels.

Even though only donor financed positions provided continuity in staffin several agencies following the advent of the new administation in1989.

S See Chapter 7 for an analysis of the effect of food dorations onagricultural production.

52

FRMANEWORK F2 INSTITUTIONAL REFORN

1) Ircorsorate a demand-driven ap_roach into Poverty alteviation 2olicy;e strengthen local organization capacity to propose projeets* increase use of non-public sector institutions* establish specific linkages between institutions (e.g., Government/NGO)* increase beneficiary participation in planning* draw lessons from the ESF

2) Decentralize specific manasement and invlementation responsibilities* support a phased approarh* establish mechanism to mitigate regional disparities

provide training and technical assistance to subnational levels of goverrnent* consider mechanisms to utilize labor union networks

3) Strengthen Policy-makina. PLanning and Coordjnation* support §INPLAN Subsecretariat for Social Policy Cand UDAPOS)* incorporate demand mechanism into formutation of policy* redirect sectoral ministry resources towards policy and planning and away from program

and project execution* raise the sataries of civil servants to competitive tevets* strengthen implementation phase of Public Sector Management Scheme* reform system of appointments by political patronage* increase emphasis on training in public sector administration and economics

41 Increase donor coordination* coordinate poverty strategies* pursue greater identification, monitoring and utilization of NGO activity* strengthen donor monitoring unit under NINPLA1 Subsecretariat for Public Investmente identify leading donor agency for each sector

Box 4.2: Framework for Institutional Reform

4.34 Institutions which have an effect on the poor in Bolivia range from thelarge national planning and sectoral ministries to small local grassrootsorganizations ("organisaciones de base"s). Many are not only inefficient inreaching the poor, but also inefficient in all their activities. Consequent-ly, in certain cases, internal efficiency improvements are the first step indeveloping the capacity to tackle the broader issues of reaching the poor moreeffectively. In this respect, certain recommendations delineated below willconcentrate on improving the efficiency of institutions internally, whileothers will focus on the more global issues of how to reach the poor moreeffectively. Box 4.2 illustrates a general framework for institutional reformfrom which specific sectoral recommendations are drawn in subsequent chapters.

The Demand-Driven Anproach

4.35 A demand-driven approach is the most effective means for reachina thepoor. Specifically, this approach includest (a) strengthening localorganizations; (b) supporting institutional pluralism; (c) buildinginstitutional linkages between all levels of intervention; and (d) fosteringbeneficiary participatic*n and local resource mobilization. In general, thegoal of poverty intervention should be to help the poor help themselves, whichwill require not only resource commitment, but willingness to support localcapacity to use the resources effectively.

53

4.36 The importance of local organizations is twofold. Not only do theyprovide a mechanism for participation to the poor, but they also improve theaccess of the poor to resources and enhance their bargaining power. Commonly,they will take the form of membership organizations (e.g., user groups inirrigation or credit, or women's groups), local government, service organiza-tion (e.g., NGOs), or even private business. In health cars, for example,Mother's Clubs, Popular Health Committees and Neighborhood Councils areexisting community organizations with a broad knowledge of local health needscombined with experience in community mobilization. In education, parent-teacher associations and community councils are already active in certainareas mobilizing resources for supplies, monitoring quality of teaching, andbuilding additional schools. Given this experience and knowledge of localneeds, these groups should also be placed on Departmental planning boards. Intransport, the regional engineers affiliated with SENAC and RDCs have exten-sive knowledge of rural road demanas, yet have insufficient funds to implementprojects. Moreover, they were rarely consulted in the past. In each of thesecases, institutional support can be provided by Government and donors alikethrough specific project intervention. Where community organizations do notexist, it may be necessary to employ community organizers (e.g., NGOs withexperience in other areas) to help them be formed, to design incentives forparticipation in a given project, or to train the poor in basic organizationalskills.

4.37 Strengthening these local organizations is an important part of a largerstrategy that suggests the need for complementary and competitive organiza-tions in the public, private, and NGO sectors as well. In other words, thepoor benefit from institutional pluralism and the Government should increasethe scooe of the tvyes of institutions it currently utilizes to deliverservices to the noorest seaments of societv. Different organizations havevarying capacities to work with people living in different conditions ofpoverty. Organizational comparative advantage calls for cooperation betweenagencies with different skills and resources. In this context, there is muchroom for increased Government-NGO cooperation, with the Government takingadvantage of NGO flexibility and grassroots orientation and NGos benefitingfrom central resources, increased information on donor priorities and funds,access to scarce information on regional and sectoral priorities, and nationalnorms. Similarly, there should be increasing consideration of possible usesof the for-profit private sector in the delivery of specific services.

4.38 Institutional linkages and access to local information have importantimplications for implementation of poverty programs. They should be struc-tured so that communications can flow back and forth between central, inter-mediate and local levels. This requires emphasizing linkages that encouragerepresentation of interests, and include a combination of assistance andcontrol. Control linkages enable one institution to determine some aspect ofanother's performance, while assistance linkages ease program implementationby compensating for gaps in the performance of implementing organizations. Aneffective institutional development strategy should stress the latter over theformer. Examples of linkages the Government should pursue include: (a) aformal mechanism by which lGOs and local representatives can participate inregional planning (e.g., the regional planning groups included under the EMSOdecentralization proposals); (b) technical and personnel assistance to local

54

organizations in areas such as designing project proposals, undertaking needsassessment, or forming credit groups; (c) technical assistance among RDCs,such that those with effective technical capacity can set up programs andtrain personnel in weaker PDCs; and (d) regulation and monitoring of alllevels of intervention to avoid duplication and improve efficiency (e.g.,audits or registration of local organizations).

4.39 Finally, increased beneficiary participation and local resource mobili-zation are important because they increase the influence of the poor indecision-making in poverty reduction programs, while cont-ibuting to thesustainability of intervention. Poor communities have provided large counter-parts to ESF, for example, as labor inputs.9 Participation will have severalbenefits. First, it will enhance the project effectiveness as poor people'sinput helps to identify needs and local constraints. Second, participationwill improve project targeting by reducing leakages of benefits to elites.Third, resource mobilization will play a very important role in generatinglocal commitment to program goals. Fourth, peoples' involvement will reducethe financial and administrative pressures on overextended governments.

4.40 Taking all these factors into consideration, Poverty-oriented institu-tions should draw on the positive lessons from ESF. The major lastingdevelopmental impact of the ESF may well have been to strengthen Bolivia'sinstitutional response to poverty reduction. ESF was for the most part well-administered, fast, and responsive to initiatives from local institutions(both public and private). It channeled more money to more poor people withwider coverage throughout the nation, reaching areas until now untouched byany government program. The following factors could be particularly relevantfor other public institutions:

a) its demand orientation: by responding to proposals written for andwith communities by local governmental agencies or NGOs, ESF ensuredthat projects would be adapted to local preferences and needs;

b) the incorporation of small businesses (often in construction-relatedactivities): ESF activated this segment of the private sector in anotherwise stagnant economy, giving them experience in socialprojects;

c) NGO narticioation: NGOs came to work with Government as a result ofESF experience as they never had before.

4.41 While ESF was not a substitute for line ministries, it has actse as acatalyst to their strengthening in a number of ways. First, it has shown thatthe poor can be reached with a minimum of red tape (ESF staff totals 87, andadministrative costs are 3%). Examples have already been reported wherecommunities have referred to the positive experience with ESF in conversationswith line ministry personnel to upgrade the quality of service they receive.Second, it should also serve as an example for civil service reform todemonstrate what levels of salaries actually do attract competent staff and

9 See Chapter 9.

55

motivate it to perform (ESF salaries are about three times normal publicsector salaries).10 Third, it has provided a model of how the center may besupportive of local institutions. Finally, the ESF has demonstrated thatgovernment programs that reach the poor--in a soundly reformed economy--attract substantial foreign assistance.

Decentralization

4.42 One means by which the preceding objectives can be achieved is bybringing the poor into direct contact with institutions that have the powerand responsibility to intervene in poverty-stricken areas. Given the substan-tial ineffectiveness of Bolivia's public sector in reaching the poor withinits highly-centralized system, decentralization of specific resMonsibilitiesto subnational levels of aovernment apnears to be at least a partial solutionto the problem. However, it is important to remember that centralization anddecentralization are not mutually exclusive or dichotomous arrangements forgovernance. The challenge is to find the proper balance between them, topromote poverty &lleviation most effectively. Carefully managed decentraliza-tion can achieve improvements in resource distribution, local participation,extension of public services to rural areas, project identification andimplementation, and employment generat.on. Of equal importance, decentraliza-tion can open the door to significant rationalization of the public sector atthe central level by transferring responsibilities (and resources) of programmanagement and implementation to the local level.

4.43 While this recommendation appears appropriate for Bolivia in theory, andin fact, seems to have substantial support from many key decision-makers, itis important to proceed with caution. Certain key issues must be resolvedbefore any sweeping plan (such as that proposed to Congress) can beimplemented effectivelys

a) The Phasing of decentralization must be addressed in the earlystages. Based on Bolivia's own experience and that of other Latincountries who have undergone wide decentralization, it is recom-mended that the Process begin in a limited number of sectors, usinaa pilot scheme avoroach, and exDand carefully and incrementally,realizing at the outset that progressive change will take a longtime to achieve.

b) Mechanisms to avoid increasina already sianificant regional andsubreaional disparities during the process of decentralization mustbe explored. 7lthough further assessment is required, it may bepossible to utilize the existing Regional Development Fund (Fondo deDesarrollo Regional) as such a mechanism.

c) Trainina and technical assistance should be made available from thecentral government (or donors and NGOs) to the regional and locallevels. Particular emphasis should be placed on: planning (and

t0 Salaries are, however, in line with those of other donor financedpositions.

56

mechanisms to incorporate community-level demand into planningefforts): project design, implementation and evaluation; cost-recovery mechanisms; and options for contracting the private sectorfor specific service delivery. RDCs and Municipalities with sub-stantial experience could be contracted to train those with lesstechnical capacity.

d) Greater continuity in key iositions must be achieved in sub-nationallevels of government. This could take the form of longer terms forelected positions and establishment of political civil servicepositions for key technical staff (see below for more details).This would be especially important for the proposed regionalsectoral committees of the prefectures.

e) Because of the negative response of many of the more powerful laborunions to proposals for decentralization, it may be useful to pursuegreater dialogue with them in decisions regarding the implementationof decentralization measures and in utilizing their local branchesas one option for delivery of certain services.

4.44 Donor assistance in supporting decentralization efforts should beconcerned principally with how best to help local government units build-uptechnical and administrative capacitv to assume increased responsibilities andto target the poor miore effectively. This is likely to take the form of: (a)technical assistance and training components of particular sectoral projects;and (b) working with the Government to devise flexible and pragmatic arrange-ments that take account of the enormous disparities in administrative andfiscal capacity among regions and municipalities. Donors should help theGovernment ensure that this institution building objective not lead to theduplication of the number and skills of staff at the center and the sub-national levels. In particular, decentralization should not result in alarger government sector or in decentralizing institutional weaknesses andinsufficient resources to the local level.

Improved Policy Makina. Plannina and Coordination

4.45 The primary objective of central government should be to set overallpolicy guidelines, while allowing decentralized institutions to assume more ofthe program and project implementation responsibilities. From a povertyperspective, the creation of the new Subsecretariat for Social Policy inMINPLAN is a Positive first step. but should be further surnnorted and promotedas a guiding force in poverty alleviation throughout each of the sectoralministries. In doing so, this Subsecretariat should develop the capacity toincorporate a demand-driven mechanism in the formulation of policy. Now, thefocus of the Subsecretariat appears to be on theoretical aspects especiallythe health and education sectors. While these sectors are essential intargeting the poor, others such as agriculture, transport (i.e., roads), andhousing are equally important and should receive assistance in developingpractical poverty alleviation strategies.

4.46 It is, therefore, recommended that the Subsecretariat should be providedwith the sufficient financial and human resources to create a small cadre of

57

highly skilled experts in poverty policy analysis (the proposed Social PolicyAnalysis Unit)"1 to prove the cross-sectoral guidance necessary in a globaleffort to reach the poor. In this way, the Subsecretariat should not onlyassist in proposing a concrete practical poverty alleviation policy, but itcould act as a technical assistance resource to those ministries whoseplanning resources are too stretched (or non-existent). Similarly, it isessential for sectoral ministries to redirect their resources towardstrengthening the technical capacitv of their Policy and nlannino departments,while de-emphasizing the current focus on proiect and Proaram execution. Thiscombination of reforms would allow for the elevation of poverty alleviationconcerns to the sectoral policy level, while allowing the sub-national unitsof government to focus more on delivery of services.

4.47 Any efforts to improve the efficiency of public institutions in Boliviaare inextricably linked to overcoming a much pervasive constraint in thepublic sector--a weak civil service. The Government will find it much harderto attract and/or retain qualified staff for a more efficient management ofthe various sectors unless it pays competitive saiaries and provides its staffwith an adequate work environment. It is, therefore, essential to raise thesalaries of civil servants to competitive levels; without this action it isunlikely that public agencies will be effective in any sector. This should bedone even if it means reducing the scope of activities to be undertaken by thepublic sector. The public sector continues to lose qualified people tohigher-paying private and donor-funded organizations and projects. Thisproblem is perhaps most acute in those areas where the greatest povertyexists. Only when incentives (preferably financial) are provided to work inthese areas will the constraint of under-qualified staff be overcome.

4.48 In this context, greater emphasis should be Dlaced on the imnlementationphase of the Public Sector Management Program (PSM'f to meet the lproaram'sobiectives of: (a) rationalizing the existing uneven wage structure; and (b)creating conditions of stability in the public sector which would attractqualified personnel to the public sector. Although it is recognized that sucha program will take at least ten to fifteen years to reach these objectives inall public agencies, it is essential that they continue to be pursued toestablish a stable cadre of technical and professional public sector servants.The reform can take place in several phases. The first step, recently agreedupon, is for donors to implement unilaterally a salary scale for all donor-financed positions. Second, a similar salary scale must be adopter for allpositions financed by counterpart funds. Third, emphasis must be placed onthe creation of a Civil Service Fund (CSF), as the first step to increasesalaries for key staff (including those with responsibility for povertyalleviation), and provide a mechanism for providing continuity for civilservice staff. Finally, once this system is in place and sufficientrationalization has taken place, the CSF norms should he adopted as thecountry's civil service code.

4.49 For such a reform to take hold, however, the prese c system of appoint-ments by nolitical patronage must be abolished. A first step would be an

11 "UDAPSO" (Unidad de Analisis de Politica Social)

58

agreement among the major political parties to protect the central cadre ofprofessionals to be formed under PSM from political removals. The second stepshould be an agreement limiting the number of political appointees to acertain level in each agency (e.g., only levels of Director and above will bepolitically appointed). The shift toward a professional civil service workingfor democratically-elected officials is an essential step in the maturingprocess of Bolivian democracy.

4.50 Finally, improved planning and policy-making can only take place ifthere is increased emphasis on strengthening human resources throuch traininoand nrofessionalization of existina Eersonnel. Particular emphasis should beplaced on the technical skills associated with planning, monitoring andevaluation of specific projects and programs within each sector, and coor-dinating activities of implementing agencies. There should be greater effortsat the university level to training graduates in areas directly related topublic service, particularly in public sector administration, public finance,applied economics, and project evaluation.

Donor Coordination

4.51 Greater efforts must be made to coordinate 20verty stratecies amonadonors. aovernment and NGOs, and identify weaknesses in the coverage of thePoor at all levels of intervention. Significant duplication of projectscontinues to exist in some areas while in others there is almost nointervention at all. In general, it is the poorest regions that receive theleast attention from any institution, external or domestic, private or public.Greater coordination can be pursued in a number of ways--the ConsultativeGroup meetings, mobilizing increased cofinancing, greater utilization bydonors of the donor monitoring unit under the Subsecretariat for PublicInvestment--but all efforts should concentrate on maintaining a cohesive andcoordinated framework for a poverty alleviation program. These efforts shouldinclude greater identification and monitoring of NGO activity, as there is acertain amount of duplication at the local level that goes unnoticed. The ESPexperience showed that international agencies can be convinced to finance agovernment-sponsored and coordinated program instead of the usual insistenceon detailed involvement in selection and design of individual projects.

4.52 Inter-donor coordination should be strengthened as well. The successfulexperience of the regular coordination meetings in La Paz should be sustainedand expanded. A leading donor agency should be identified for each sector andthis agency should remain Jn continuous contact with the Government and otherdonors to discuss policies and interventions in "its" sector as an assistanceto the efforts of MTNPLAN. For coordination purposes it might be useful toformalize sub-groups with regular meetings under the chair of the lead agency.Whenever a donor wants to enter a sector, has a programming mission in thefield, etc., a meeting with the lead agency should be high on the agenda forthe new agency. Finally, if any additional donor activities result from thisreport, utmost effort should be made to coordinate efforts so that policies orinstitutional arrangements proposed in one project are not inconsistent withthose recommended under others.

59

CEAPTRR 5:t NEU=

INTRODUCTION

5.1 Bolivia's health conditions are worse than those of countries withsimilar levels of income per capita. Figure 5.1 shows two regressions ofinfant mortality rates on GDP per capita for all low and lower-middle-incomecountries who reported indicators to the 1989 World Development Report.Bolivia is above the level of comparable countries (as indicated by the

International Comparison of Infant Mortality

Infant Mortality (per thousand live births)170-

i6O --150_ - +

140 + + Bolivia (Census)i30 ++ + +

*1 {1- + vOlivia (ENPY)

ice + +\ + +

so - + |

60-

so - E1 Salvador tea ia a + +Iexico

40 - + +Paraguy +

20 + Cil20 - + Chi + +

£00 300 500 700 900 1100 £300 1500 1700 £9c0

GDP per CapitaRegressiom Lines + Actual

Figure 5.1: Infant Mortality Rates

regression lines) even when the newest--and most optimistic--figures are used.The result holds both for the linear and the exponential models. The linearmodel gives best fit. It is, however, plagued by heteroscedasticity makingthe significance levels unreliable. This problem is reduced in the

60

exponential model.' It is noteworthy that the two South American countrieswith strongly above average levels of infant mortality, Bolivia and Peru, havelarge indigenous groups who are largely outside the power structure, and amongwhom poverty is concentrated. The health problems are worse among childrenand childbearing women. Poor health conditions are related to lack of cleanwater, poor nutrition and (for women and infants) frequent childbirths.

5.2 This chapter analyzes policies, expenditures and institutions in healthwith a view to improve the delivery of health services to the poor. The gy-line of the chapter is as follows. First, the institutional framework cover-ing both public and private sector entities is described briefly. Then sectorpolicies and expenditures are analyzed. Policies have a strong poverty focus(except those regarding nutrition), but expenditures do not foliow thepolicies set. Third is a section on sector constraints. These includeexcessive centralization, inadequate coordination, low salaries, weak manage-ment, lack of beneficiary participation, poor use of and coordination withNGOs, and women's issues. Finally, recommendations focus on implementingexisting poverty alleviation policies; shifting expenditures toward ruralareas and primary health care; increasing the involvement of NGOs and com-munity groups; improving training of personnel; integrating the traditionalsystem of medicine into the modern one; and assessing the ongoing nutritionprograms to improve targeting.

INSTITUTIONAL FRAMEWORR

5.3 Institutions of the health sector can be divided into four major groupos

a) The State apnaratus: Ministry of Health (MPSSP) and the SocialSecurity system. MPSSP serves about 30% of the population, mostlyin cities. The Ministry includes a sub-secretariat of PublicHealth and one of Social Security. The Public Health Sub-secre-tariat includes eleven Sanitary Units (SUs) with regional hospi-tals responsible for ambulatory and inpatient curative care; 93health districts (HDs) for specialized health care and referralcenters; and 451 health posts in charge of outreach and basichealth care. The social security system provides curative carebenefits for the households of insured wage-earners employed inindustry, commerce, mining, and government services. Benefittingonly about 20% of the population, this system rarely reaches thepoor.

b) State iurisdiction. but subiect to autonomous manaaement: RDCs,Municipalities, local water and sanitation companies, and univer-sities. Only a few municipalities and RDCs are active in the

The fundamental result holds for slightly more sophisticated modelsexplaining infant mortality rates using more explanatory variables(e.g., fertility rates); further transformations of the variables toreduce heteroscedasticity; and instrument variable approaches (to takethe endogeneity of regressors into account).

61

health sector, with less than 1% of their respective investmentportfolios targeted toward health. In the larger cities,municipalities have formal titles to almost as many healthfacilities as MPSSP, but do not operate them. Regionally, thewealthier RDCs (e.g., Santa Cruz) have played a limited role inplanning, executing, and maintaining health facilities, principal-ly in rural areas.

c) N00s. orivate institutions, and traditional medicine: The non-profit private sector serves about 20% of the population, mostlyin peri-urban and rural areas, and is comprised of about 300 NGOsworking in health and nutrition. Accounting for approximately 28%of total health expenditures in 1988, these NGOs contributednearly $20 million to the health sector (including both investmentand current expenditures). Recent initiatives to promote coor-dination among them have yielded modest results. Funded primarilyfrom North America and Europe, only a few NGOs have nationalcoverage. Most are limited to the financing and management of asingle or a few service centers. The private for-profit sectorserves a small portion (no more than 5%) of the population thathas decreased in recent years with the general impoverishment ofthe country. Traditional medicine is the only recourse of largesegments of the population, particularly in rural areas.Traditional health practioners number some 12,000 and includeherbalists, healers, and midwives.

d) The Emercencv Social Fund: ESF has played an important rolethrough supplementing the extremely low level of MPSSP investmentdirected at vulnerable groups. To reach the poor, ESF-fundedhealth projects have focused on primary health care programstargeting mothers and infants, vaccination programs, nutritionintervention programs, and rehabilitation and construction ofhealth posts. The Social Investment Fund (SIP) will soon replacesome functions of the ESF, as the ESF winds down its activities.

GOVERNMENT POLICIES AN1D INVESTMENTS

Sector Strategy and Exoenditures

5.4 Until recently, Bolivia lacked well-defined official health policies inattacking the country's long-standing health problems. In the past, the NPSSP(supported by some external donors) considered hospitals the center of healthcare and directed health resources toward hospital construction in urban areasand provision of curative care programs. While primary health care and ruralhealth services were supplemented by other external agencies, weak interagencycoordination resulted in sporadic and un-targeted program design.

5.5 Recent policy statements show a renewed effort to develop more clearlydefined health policies in order to address structural constraints facing thehealth sector. An increased emphasis on decentralization as well as on

62

primary health care -has become thecenter of the Distr(bjttnof Hel Iuses b ANS (IWS)health sectordevelopment 0toflmmnt A tstrategy in themedium- and long- Urba Rurat Urbn trel Ubn Q*tIterm. The highestpriorities have Chuatfaca 132 (71.?) 52 (28.9) 834 (73.2) US (26.8) 19.3 $1?been placed on: (a) Cads 156 (778 ) 45 (22.2) 475 (69.) 20 30.5) 3S.5 64*5a multi-sectoral a" Cear 210 (70.?) 87 (29.3) n.ae na. 48.0 52.0approach aimed atimproved planning Soure: Mo. Juw 1989.and coordination intG: Percnta erein prernthems.among varioushealth serviceproviders; and (b) Table 5$.1 Distribution of Health Resources by Areaimprovingefficiency and equity of public health service deliveries through attentior toprimary health care for the most vulnerable groups. Most notably, recentstatements have emphasized a need to allocate Increased health resources tothe extremely poor areas--the northern part of Potosi, the southern andwestern parts of Cochabamba, Chuquisaca, and Pando (for rural areas) and E1Alto (for peri-urban areas). Special efforts will be made to lower infantmortality, malnutrition, and the incidence of prevalent diseases. Furthermore,the intent is to provide access to simple curative care and basic sanitationservices.

5.6 Expenditureshave yet to be

MPSSP Expenditures by Department in 1988 shifted toward theUS_ per copffa most vulnerable

c groups. Health per-t .9 sonnel and hospital

6 5 I0 beds are still con-5 centrated dispropor-4'$0 tionately in urban

3 ~~~~~~~~~~~~areas. During 1984-87, on average, 51%

2 of the HPSSP's healthI ~~~~~~~~~~~~~expenditure was

directed toward0 o J 4 0 health care services

4,e ? o e in rural areas. For6¢ 9 g iN example, while 80% of

the population of

Ndot: Chuquisaca is rural,Excludes Not. Projects and Central Admln. Exp. only 29% of doctorsSource: ESO are in rural areas

L_ ______________________________________________ (Table S.1) and onlyFigure 5 * 2t *PS5P Expmeditures by Department 20% of health

expenditures go to

63

rural areas. Furthermore, geographical distribution of the MPSSP'sexpenditures has been skewed, without sufficient regard to the population sizeor the poverty level of each department. While the Potosi Department suffersfrom the poorest health conditions, its per capita allocation of healthexpenditures was only US$1.6 in 1988 (national average US$3.2), the smallestof the nine departments (see Figure 5.2).

5.7 The distribution among types of expenditures does not reflect the newstrategy either. Between 1984 and 1988 the share of curative care increasedin the three largest sanitary units (there is no time series informationavailable for the rest). Cost recovery for public health services andsupplies has increased significantly over time (600% in real terms between1984 and 1988). These funds have been used mainly to pay bonuses to healthworkers. Simultaneously, the wage bill has decreased (even including thesebonuses), while the number of persons employed in the sector has increased by7%. Thus, the health sector provides a classic example of the pervasive pro-blems in the Bolivian public sector--a large number of poorly paid staff. Ona positive note, spending on medicine has increased over time, both as a shareof total expenditures and in absolute (real) terms.

Nutrition Policies2

5.8 Even though nutrition indicators are very low in Bolivia and poornutrition is a major cause of the poor health status, the Government does nothave a clearly formulated nutrition policy. Data on nutritional status are ofvery poor quality. Estimates of malnutrition using height for age varywidely. The DHS survey found that 38% of children between 3 and 36 monthswere malnourished,3 the number was 31% in urban and 45% in rural areas. A1981 survey by the National Institute of Nutrition (INAN) found similarresults (33% in urban areas and 46 in rural areas). Nutrition indicatorsfollow the poverty map closely. Malnutrition is higher in the Highlands thanin the Lowlands. A recent urban survey by the National System for NutritionSurveillance (SVEN) found high rates of chronic malnutrition resulting instunting (low height for age) among first graders in seven urban areas.Figure 5.3 eummarizes the results of this survey. The Figure shows theaverage prevalence of stunting among first grade students, as well as the ratein the worst and the best (public) school in the seven Departmental Capitalscovered by the survey. As is clear from the graph, incidence of malnutritionvaries substantially within a city. For example, in one school in Potosi 93%of students were malnourished, while only 10% were malnourished in the bestschool. These numbers show the difficulty of attempting to target nutritioninterventions by geographical areas.

5.9 Assessments of existing local nutrition programs vary. Limitedexperiences from El Alto with school feeding suggest that there is a strongsubstitution effect within the family when a child gets a meal in school. The

2 Food donations are discussed in paragraphs 7.29-7.35.

3 Defined as those with a height for age at or below two standarddeviations below the norm.

64

Malnutrition Among First Grade Children(% of children 2 standard dev. below standard)

(height for age)

_~~~~~~~

Potosi '4 93

Trinidod

La Paz 77

Torija _77 57

Sucre so

Oruro 48

Cochobamba 34:

0 20 40 60 80 100 120

(%)0 Average D MaxImumg Minimum

Source: SVEN, MPSSP

Figure 5.3x Chronic Malnutrition in Urban Areae

child may not receive any food at all at home and may actually end up worseoff than before. However, numbers from NGO-managed health posts with nutri-tion programs4 show substantial improvements over a short run as far asweight/age indicators are concerned.

5.10 The Government is planning to introduce a national school breakfastprogram. School breakfast programs are traditionally not a good type ofnutrition intervention. First, as the damage done by malnutrition has alreadyhappened by the time children reach school age, a much larger effect wouldoccur if the nutrition was given earlier in life. Second, the poorest of thepoor don't go to schocl. On the other hand, the schools provide a veryconvenient distributicn channel, as the physical and human infrastructure isalready in place.

4 One experience, also in El Alto, shows a substantial improvement inchild nutrition during the strictest part of the stabilization measures.This indicates that it is indeed possible to protect the urban poorduring adjustment, if the correct mechanisms and institutions exist.

65

5.11 The school breakfast program should be carefully analyzed, taking intoaccount the possible effects of spending the same amounts on other schemeswith potentially higher benefits. INAN is working with the RDCs to introducenational system of information gathering and processing for nutrition Theresults of this exercise, combined with the information already availaAle inMPSSP, could provide a basis for targeting nutrition interventions.

5.12 The composition of the breakfast suggested depends heavily on the use ofmilk. This is a potentially serious issue as many poor Bolivians arephysically unable to absorb lactose. Furthermore, milk is a very expeneivesource of calories. The extraprotein provided by the milk will not M=Q'3X==be absorbed as long as the children Maria lives in the high parts of the Cochabambareceive insufficient calories. Valley. She is the mother of four chitdren fromInstead, serious consideration ought a small baby girl to a seven year old bay. Highto be given to INAN's newly developed up in her "pantry" (one shelf in a corner of thebasic food basket, which relies on Salt. Proudly she shose) ith e ba of saltadtraditional cereals and tubers. This explafns that she knows how irportant it is todiet is better suited to the local use the salt to avoid "a serious disesse." thenpopulation. While there are no asked why the bag ist unopened, she answers:pouation.lo Whgionle thverenaeno '"out Sir, none of my children are sick now.national or regional Government This salt is for ule hen Ithey arE ; sirl Assponsored nutrition programs at long as her children are not ilt with fever shepresent, many NGOs are involved in continues to use salt from the block she boughtcommunity nutrition programs. There at the local market last month.is a dire need to assess theaeexperiences and coordinate the Box 5.1 Maria and the Iodized Saltactivities.

5.13 As far as micronutrients are concerned, there is a generally well-regarded national iodine supplement program in place. The first stages of theprogram have had good effects. The main remaining issue is to iodate theblocks of salt from the salt flats. These blocks of salt are the traditionalform in which salt is sold, and though many mothers are aware of the need forusing iodated salt, they are skeptical about the "new" packaging in littlesacks. There are some technological problems as the iodine tends toevaporate, before a block of salt is used up. A solution does appear to havebeen found to this problem. Another micronutrient problem is iron deficiency(especially for women). There are no programs in place to alleviate thisserious problem.

Water Suonlv

5.14 Lack of clean water is a major cause of poor health conditions,especially In rural areas. At any time about 30% of children under the age offive suffer from diarrhea, mainly related to the poor quality of water. Whilerelatively good water companies take care of water supply in the major cities,rural water supply is often without an institutional "home." Experimentsusing hand-pumps and other appropriate technology have shown that withtechnical assistance in the formation of water coopitratives, substantial costrecovery, i.e., good sus tinability, is possible even in remote rural areas.Rural water supply is the responsibility of the MPSSP's Directorate ofEnvironmental Sanitation, which is a very weak institution. Some RDCs are

66

involved, but only to a limited extent. There is a need to build on thepositive experiences of some projects funded by the World Bank, UNICEF, EECand others. The financing of rural water supply will be the responsibility ofthe Social Investment Fund, which could restore the importance of the sub-sector. It will be important for the SIF to assess the various experienceo,especially in the Highlands, and help develop a standard package for watersupply.

Investment

5.15 Public investment in health totaled US$3.2 million (US$4.5 million wasprogrammed) or 0.9% of public investment in 1988. Except for three non-poorDepartments, RDCs were inactive and most investments was undertaken by MPSSPon a national scale. Primary health care projects accounted for the largestshare (76% of the total), followed by hospital-related projects (16%).External agencies provided 92% of the sector's investment.

5.16 In the investment program for 1990-92, investment should increase toUS$15.1 million per year (or about 3.8% of total public investment). UNICEFand USAID plan to allocate increased resources to ongoing projects and a newIDA-assisted project will start during this period. External funds willcontinue to cover most investments (88% of the total). Therefore, donorcoordination with regards to Bolivia's health sector development will becritical in determining the composition of projects.

5.17 Over the next few years, there will be an important shift in the tvpe oforoiects as several new integrated health care projects will be added. Theseprojects are supportive of the Government's general health strategy and willserve to improve health and nutrition status of mothers and children, espe-cially in poor rural areas. The 1990-92 public investment in health will bedistributed as follows: primary health care (38%), integrated health care(30%), hospital-related health care (19%), and others (13%). Most integratedhealth care projects are to be implemented by the MPSSP with the assistance ofexternal donors. The IDA-assisted Integrated Health Development Project willhelp enhance efficiency and effectiveness of the health care system throughimproving management of the sector.

5.18 Although the general direction of future public health investment iscommendable, care should be taken in treatment of several hosnital-relatedinvestments. The major hospital-related projects include construction ofBracamonte Hospital in Potosi and modernization of hospital equipment andfacilities in Pando and Beni, financed mainly from external sources. Inparticular, economic justification for the Bracamonte Hospital is highlydoubtful. The wisdom of devoting the entire health-related budget of thePotosi department in 1989-92 to this single project, forgoing all otherprojects, is questionable. Especially as an externally financed study showedthat a hospital at one fifth of the cost would meet the expected demand forhospital services. Although not included in the 1990-92 public investmentprogram, the Government envisages constructing two additional hospitals inCochabamba and Pando. Even if externally financed, these large projects wouldrequire sizable counterpart funds and operating expenses that would compete

67

with more useful projects. MPSSP's budget is already incapable of staffingfour hospitals built through bilateral donations over the last several years.5.19 Since 1987, AU has supplemented )PSSP investment. As of mid-1989, ESFhad financed US$2.3 million for 95 nutrition projects, US$1.3 million for 34health care projects, and US$3.4 million for 121 health infrastructureprojects. ESF-funded health projeci s have focused on primary health careprograms targeting mothers and infants, vaccination programs, nutritionintervention programs, and rehabilitation and construction of health posts.In 1988, ESP disbursed US$2.6 million5 by mobilizing various organizationsbelonging to the public and NGO sectors. This amount was equivalent to about80% of investment provided by MPSSP and RDCs.

5.20 SI1 started its operation in April 1990, and will extend the work ofESF. The health sector is expected to be granted US$26 million a year forassistance and infrastructure projects during the first two years.6 If theSIF contribution is added to the annual public investment planned by the MPSSPand RDCs, the health sector will receive US$38.4 million in 1990 and US$43.5million in 1990. Each of these amounts is more than six times what the healthsector received in 1988 (including ESF-funded investment). One area that SIFis considering is how to enhance its effectiveness in reaching the poorest ofthe poor. The demand-driven mechanism will be adjusted with outreachmechanisms to enable the least fortunate to prepare and present projects.

SECTOR CONSTRAINTS

Centralization and Inadeouate Coordination

5.21 Excessive centralization has prevented MPSSP from assuming its normativeand coordinating responsibilities. Executive functions in MPSSP are con-centrated in the National Directorates in La Paz, and the SUs can only decidethe allocation of about 20% of the budget, consisting of the revenuesgenerated locally from cost recovery. The inefficiencies associated withcentral execution are exacerbated by severe communication constraints amonglevels of government. This leads to inadequate information flows andmonitoring capability. Lack of guidelines for program implementation and lackof accountability perpetuate the weak technical and programming capacity atthe local level.

5.22 The proliferation of self-contained project units in MPSSP also disruptsthe fulfillment of its coordinating responsibility. Besides the work of theMPSSP, much of the public health care available comes from Social Security,which in turn is composed of independent agencies. The National Directorateshave gained virtual independence through the execution of projects financed by

This figure does not include disbursements for nutrition programs, whichamounted to about US$1 million.

6 The official figure in the 1990 investment program is only $1.5 million,a more realistic figure as SIF is only getting of the ground slowly.

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donors. The General Secretariat, which hag not been the object of specificcooperation programs, is weaker than the directorates under its supervision.

5.23 The weak enforcement of MPSSP's plan of activities prevents the Ministryfrom integrating and coordinating donor support and the work of the privatesector. An obvious problem resulting from this complex structure is thedifficulty in coordinating the work of these groups into an efficient andequitable health care system. This has led to the development uf 16 majornational programs, with overlapping objectives and beneficiaries, and inade-quate monitoring.

5.24 Coordination between MPSSP, the Social Security System and NGOs isstarting to be addressed in the SUs. At the central level, coordination isdifficult because of incomplete inter-institutional information, the manynational programs, and the separate legal and operational system of the SocialSecurity System. The relationships between NGOs and the MPSSP have often beendifficult, and occasionally marked by mistrust. Impediments to Government/NGOcoordination includes (a) lack of an effective identification and selectionsystem for NGO presence and activity combined with cumbersome andcontradictory registration procedures; (b) lack of SU credibility among NGOsas relevant partners in delivery of services; and (c) inadequate informationabout MPSSP and SU services. In 1988, a survey in four major cities showedthat only 45% of institutions providing health services were aware of MPSSP'sprograms. General awareness is much lower in rural areas. More recently,coordination and cooperation with NGOs and local governments have beenachieved, helped by the renewed confidence in the public sector from fundingof over 300 NGO projects through the ESF.

Low Salarieb and Poor Personnel Manaaement

5.25 Health workers' salaries fell by 30% in real terms over the last decade.The salaries in the Public Health sub-secretariat, ranging from US$31 toUS$240 per month, are the second lowest in the public sector. Accordingly,staff seek better salaries and working conditions (especially in NGOs), andtend to move away from those regions which are the most difficult--and poor.Personnel turnover is 30% annually. Doctors in HDs, for examplc, have lowerstatus and pay than doctors with comparable training in hospitals or withadministrative functions. This discourages able staff to move to the areas ofgreater needs. Weak personnel policy &nd management c'- .ound tne ealaryissues in the public health sector. SUs and many hospitals have no adminis-trative committee, no organizational plan, no job description for personnel,and erratic hiring and personnel procedures. Not only are the demands of thepoor difficult to consider in such an inefficient system, but patronage andco-ruption abound at the expense of service dalivary.

5.26 Medical personnel working for NGOs typically receive higher salaries orbenefits than those in the public system. Often, doctors and nurses receiveiase pay from the MPSSP and a supplement from the NGO. Base salaries fordoctors in NGOs are typically 20% to 50% higher than public sector wages.According to NGOs, this salary policy is justified since personnel working inNGOs are expected to work longer hours and provide additional services, suchas community education and extension services. To compensate for the hard-

69

ships of Bolivia's rural areas, medical personnel also receive support fromthe community, often in the form of free housing and food donations organizedthrough the NGO. Similar incentives for personnel working in poorer areasshould be considered in the public sector if implementation of povertyobjectives is to be sustained.

Poor Financial Manacement

5.27 Financial management of the health sector is weak because of theinadequate distribution of financial responsibilities, the outdated structureof information used for budgeting, 'd the inefficient procedures for budgetpreparation and execution. The inadeqjuate distribution of financial respon-sibilities stems from a combination of excessive centralization of functionswithin MPSSP along with an inadequate management information system. Combinedwith inadequate accounting practices, these factors inhibit any meaningfulcontrol of budget implementation and make formulation difficult and inac-curate. Budgeting is also separated from planning, and budget categoriesreflect inadequately the sources and uses of funds. At the local level, HDsfollow only rudimentary financial procedures and the health posts have nofinancial planning capacity at all.

5.28 MPSSP probably depends too much on cost recovery to ensure adequatecoverage of, particularly, basic health care. Programming and execution havebeen complicated by the dependence on project-specific donations from theinternational community. Until such projects and programs are coordinated andset within a national health policy framework, financial management willremain problematic. Uses of funds favor secondary and curative care and theshare of basic health care does not reflect the government priorities. Insum, too much cost recovery and too little primary care place a high price onhealth for the poor.

Inappropriate Training

5.29 Although the capacity to train the necessary health staff exists inBolivia, the design of curricula does not respond to the staffing requirementsfor basic health care, and the education process is not conducive to theextension of serZ'ices in low-income areas: the autonomous medical schools inuniversities offer a curriculum for medical doctors and nurses that is notdirected to the epidemiological and social reality of the country. Inparticular: (a) maternal and child care, community medicine and nutrition donot receive the necessary attention; (b) no training is given on the adminis-trative and team management responsibilities of doctors and nurses; (c) thehealth perzornnl are often ill-prepared to deal with illiterate and Non-Spanish-speaking patients; and (d) the educational process is not supportiveof the objectives of basic health care in impoverished communities. Inaddition, the professional ties between teaching personnel and the hospitalsare much stronger than those between teachers, personnel, and MPSSP authori-ties responsible for basic health. Too few auxiliary nurses are trained, fewstaff are prepared to serve in remote areas, and no manual of standardprocedures for the provision of health care is distributed to the graduatingstudents, or updated for their uso.

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Lack of Beneficiary Particloation

5.30 In Bolivia, organized groups of beneficiaries could overcome the lack ofinstitutional capacity in the formal public sector. Their potential, however,remains largely untapped. Despite the heavy emphasis placed by MPSSP oncommunity participation in its policy statements, effective participation hasbeen mostly limited to vaccination campaigns. The support and participationof the community in the health delivery and referral system is essential forthe system to work. Such participation is effective and sustainable only whenthe community is present in the design, execution, evaluation and control ofactivities. It is useful to examine the type of beneficiary participationenjoyed by some NGOs in the sector. This support has three forms: directpayment of fees for serviceJ, community provision of health infrastructure,and community provision of benefits to health care workers (e.g., housing,food, etc.). Often, NGOs operate community-owned infrastructure and thusavoid the capital cost of constructing their own facilities.

Insufficient Use of Non-Governmental Institutions

5.31 NGOs have taken onan increasingly important DTstrTbutlon of Requests from Health NGOs to ESFrole in providing primaryhealth care services inBolivia. In many ruralareas, they are the soleproviders of services.However, their services 22.2 \are uneven and lack coor-dination. It is estimated 67%that of the 300 NGOs inthe health sector, fewer 30.tthan one-third have for-malized relationships with Dlstrlbutlon acrossthe Government. In some Poverty Areasregions (e.g., central Co- ochabamba), NGO presence is C0 AREA I (rchest) AREA 2 E AREA 3large, while in others 2 ARE 4 S AREA 5 (poore3i)(e.g., northern Potosi), Source ESVthey are almost non-existent. Unfortunately, Figure 5.4: GO Requests to ESPalthough NGOs are morelikely to be established in poorer areas than most public sector institutions,they also have bypassed many of the poorest regions (see Figure 5.4). Becauseof lack of coordination between the various types of NGOs, there is oftensubstantial duplication of services in some areas and non-existent coverage inothers. In one region of the Altiplano with 80,000 inhabitants, for example,an estimated 30,000 people are receiving duplicate services from more than oneNGO, while in Northern Potosi, there are communities that have never seen anyintervention, public or private.

5.32 As with most other institutions in the health sector, NGOs have facedsignificant obstacles to efficient service delivery. These obstacles include

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cultural beliefs and customs among indigenous groups, a strong presence oftraditional medical practitioners, economic constraints on paying for itemslike medicines among largely subsistence populations, and a lack of infra-structure for access to facilities. They have been more successful atproviding primary services outside health establishments, such as mobilevaccination campaigns.

5.33 There is generally a low rate of return on NGO investment in infrastruc-ture, particularly in rural areas. On the positive side, NGos appear to bethe most efficient of the institutions in the health sector if measured interms of consultations per staff per hour. The figures for the three maininstitutions are presented in Table 5.2. Furthermore, there is some evidencethat NGOs can provide health services at a lower cost than other institutions.The primary factors that contribute to this are the concentration of NGOswithin lower cost, primary health care. There are also Ministry personnelworking with NGOs whose salaries are not included as part of NGO expenditures.Finally, NGOs have a general ability to stretch resources further and securedonations for their needs.

5.34 Not all NGOs workingUti±erI of Consutatiom per Staff per ftw in health have proven ef-

by Tvpe of 0rgAlzathisn ficient, however. There

Center Center Ave- is a wide variance inPost w/o Saed, /Beds Wospitat rage efficiency among NGOe and

among projects. In aMPSSP 0.29 0.45 O.ZO 0.06 0.11 study, which reviewedscial Sec. 0.76 0.29 0.38 0.17 0.3 thirteen health projects

9GOs WO n.s. 0.37 0.17 0.38 located in six different

Source: PSER departments, it was shown_______________________________________________ that NGOs varied

Tablo 5.2: Consultations per Staff-hour dramatically in the numberof patient visits per postper month and in their per

capita expenditures. 7 The average number of patient visits per day to NGOhealth posts in the rural area ranged from one to three. Urban-based NGOsshowed a much higher concentration of patient visits, even where NGOs operatedunder a -1-icy of full cost reccvery.

5.35 Finally, NGOs have historically had unproductive working relations withMPSSP, although their relations with the SY8 are better and more concrete,Onle reason for these poor links is the failure by MPSSP to make sensible useof the agreements signed to coordinate and rationalize the activities of NGOs.Moreover, a history of mistrust and skepticism exists on both sides. AmongNGOe, there is a consensus that MPSSP is inefficient and ineffective due toits l_rge n-aSber of pzograr,, poor'.y tral-.a.6, u..da.paid and poorly distributedstaff, vertical management, and lack of community participation. On the otherhand, MPSSP faults some NGOs for not following national health policy or fornot being fully integrated with the SUe. This, in part (according to MPSSPand some critics), is due to an operational style of NGOe, which pays more

I From PSER, September 1989.

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attention to its financing agency, admiiistrative budget and communitycounterpart than to the national health system and policy.

Women's Issues

5.36 In comparison to other ministries, MPSSP has the best-articulated andmost far-reaching program reflecting women's concerns. The priority policy ismaternal-child health care, and 83% of ministry programs are directed at womenand children. Seventy percent of health service beneficiaries are women.Many health committee members are women. In 1989, the Ministry established"Women, Health and Development" program to "increase women's participation indefense of the right to health, contribute to the improvement of quality oflife, and give renewed value to the role of women in the development process."

5.37 MPSSP's program goal is the active participation of women in the designof health policies and strategies. The program's four action lines are: (1)social support for child care and home-making through integrated centersoffering supplemental feeding and child care; (2) non-formal education,including training for community health workers, traditional midwives, commu-nity child care workers and community organizations; (3) health activitiesfocusing on women such as pre- and post-natal care, detection and treatment ofuterine/cervical cancer, and mental and occupational health care; and (4) thetraining of women's health care providers.

5.38 The National Maternal Health and Child Survival Proaram (MHCSP) wasissued in November 1989. The plan's objectives include universal immuniza-tions and the eradication of polio by 1990, increased coverage of growthmonitoring and development for children under five years, increased prenatalcoverage, reproductive health services in all health facilities by 1992,universal human sexuality and family life education by 1993, development oflocal integrated health systems throughout the country by 1993, and nationalapplication of integrated health attention norms for women and children (ages0-5). The goals to be reached by 1993 are a 50% reduction in maternalmortality, 30% reduction in infant deaths within the first month of life, 50%reduction in infant mortality (0-12 months), and 30% reduction in mortality inchildren 1-4 years old. In the months that have passed since the highlypublicized introduction of the MHCSP, nothing has happened. Unfortunatelythis is becoming an all too familiar problem. Very good policies orstrategies have been presented but implementation is lacking.

5.39 MPSSP estimates that 30% of deaths related to pregnancy and births aredue to induced abortions. Though abortions are illegal, the Ministry esti-maw.ea that up to 20,000 were performed in 1989. Of this number, 30% will beadmitted to a hospital subsequently. An estimated 80% of femalehospitalizations are abortion related. The Departments of Oruro, Cochabamba,Sucre, and Trinidad show the highest abortion rate in the country: 20 perthousand women of child-bearing age (15-49 years) per year. Poor women mayinduce abortions because family income will not support another child. Poorwomen in marginal areas in Santa Cruz report that they perform abortions ontheir daughters because the latter are victims of rape or incest, areunmarried or cannot afford to have children. CIES, an NGO that offers

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maternal-child health services, found that 40.4% of 2,776 low-income women whovisited its La Paz clinics during 1987-88 had had at least one abortion.Reasons for abortion ranged from lack of knowledge of human physiology andknowledge/access to birth control methods to the economic crisis and therelated perceived necessity of limiting family size.

5.40 The high rate of abortion seems to show a large, unmet dewand forreproductive health services. Better access to reproductive health serviceswould have many other positive effects. For example, the DHS survey showedthat infant mortality was three times higher for children born within twoyears of a previous birth than for children born after four years or moresince the last birth. The seventh child born to a family is 35% more likelyto die within the first year than the first born child. 44% of children belowthe age of three born within two years of the last birth were malnourished,while 29% were malnourished when four or more years had passed between births.

RECOMMENDATIONS

Implement Existing Policies

5.41 Several well-designed programs and policies are already in place, butare not being implemented. A good example is the Maternal Health and ChildSurvival Program (MHCSP). This extremely important program, which is ready tobe supported by several external agencies is still just a program. Nothing ishappening in the field. Many other national campaigns are working well, likethe vaccination campaigns. Anecdotal evidence shows that supplies for thesecampaigns are the only supplies that ever reach remote areas. The Ministryshould build on these positive experiences and begin implementing otherpromising policies.

Shift Expenditures

5.42 The first priority in the health sector should be to ahift expenditurestoward Primary health care, rural and peri-urban areas, with a special focuson mothers and children. This has been the Government's stated intention, butactuai expenditures ano investment programs do not reflect these concerns.Intermediate steps would entail implementing the MHCSP (see preceding para-graph), nna lirmiting necondary health care expenditures to a certain share oftotal health spendiig, in th-e shott-Let--n, an inventory of health facilitiesand staff should be madeB to assess needs and priorities; and donors should berequired to follow the Ministry's plans to avoid more empty hospitals withfaincy aquApuIfiat thit# h be eih- q,alnkaXeed nSo 4t ete*t

The Ministry should coordinate with SIr's ongoing activities in thisarea.

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Institutional Recommendations

5.43 Institutional improvements must be centered on better financial manage-ment and imgroved human resources. A first important step will be to imple-ment the financial control systems envisaged in the integrated health develop-ment model, supported by several external agencies. This system would improvebudgeting and control at all levels within the health system. Salary issuesare as hard to resolve in health as in any area, but without substantialimprovements in salaries the effective implementation of policies cannot beensured.

Coordinate NGOs

5.44 The Ministry should assume its normative and coordinatina role. whileleaving the implementation and service delivery responsibilities to the Sani-tary Units (SUs). selected NGOs. and community organizations. Also, it shoulddevelop a coherent program to govern, assist, and coordinate NGOs in thehealth sector. Improved working relations with and among NGOs are essentialto extend coverage to rural and peri-urban areas, to avoid duplication ofefforts and wasted resources, and to achieve a truly national health policy.

5.45 NGOs are showing an increased willingness to cooperate with MPSSP,principally at the SU level, and incentives should be pursued to furtherencourage this participation. Practical recommendations include: (a) NGOparticipation in the Departmental "Consejo Tecnico"; (b) NGO participation inthe development of national and regional health strategies, possibly throughan NGO network; (c) increased contracting out to NGos and certain privatebusinesses for service delivery through effective "convenios" (agreements)with the Ministry; (d) assignment of budgeted staff slots to NGOs that havedemonstrated a capacity to work efficiently with poor populations; and (d)systematic use and follow-up of information provided by NGOs on the needs ofthe rural poor.

Encourage Beneficiary Particination

5.46 The support and participation of the community in the health caredelivery and referral system, iz cc^:ntial for intcrvcntionz to reach the poor.The community should be present in the design, execution, evaluation andcontroi of activities directed at improving its well-being. Freauentlv theas6essments of a communitv ' health needs are not presented to the community.This should be the first step toward organizing the community into action.There are three stable community organizations that could be increasinglyLnvolved in health care:

(a) Xotlar Clubsh a 20-year I;i6Lciy n ace presently involvedprimarily in channeling food donations.

(b) Popular Health Committees (CPSs) have been promoted by the MPSSPsince 1982 as a means to mobilize community participation in theorganization and delivery of primary health care. They areelected by Neighbors, Councils for matters related to health. TheCPSs are organized at the district, departmental and national

75

level and assist in the definition of priorities, planning,execution, and evaluation of health activities.

(c) Neighbor's Councils are traditional civic groups organized aroundcommunity interests and are the basis for participation of thecommunity in municipal and labor activities, particularly for theexecution of self-help projects.

Upgrade and Reorient Training

5.47 Community health workers are the first point of contact and, thus, thecritical link between the community and the system. There are two kinds ofcommunity workers: the auxiliary nurse and the health promoter. The auxiliarynurse provides medical support services supervised by health center/postdoctors and nurses. The health promoter is usually selected by the community,trained in the promotion of primary health care and is generally not paid.MPSSP and SUs should u2crade the training prooram for auxiliary nurses. aswell as doctors and nurses. including courses on community iarticipation. Therole of the health promoter should be clearly distinguished from the auxiliarynurse to avoid duplication of efforts. One possibility is to train thepromoter in traditional medicine to serve as a bridge between the traditionaland modern medical systems (see next section).

5.48 Training of health staff and education of medical students should bereoriented to more effectively meet the country's requirements for basichealth care. This would include: (a) increased emphasis on maternal and childcare, community medicine and nutrition; (b) training to deal with illiterateand non-Spanish speaking patients; (c) increasing links between teachingprofessionals and authorities responsible for basic health; (d) internshipsfor students, and increased incentives for staff to work in remote ruralareas.

Intearate Traditional and Modern Medicine

5.49 Given that many rural poor continue to rely on the traditional medicalsystem--by choice and by necessity--an integration of traditional and modernmdicit-e systema zould prove wore eaffctive in reaching these populations.Such integration could include: (a) training community leaders and traditionalhealth practitioners as health promoters; (b! training traditional midwivesin modern medical practices regarding prenatal care, childbirth, etc.; (c)coordinating training between MPSSP, the Medical College and the BolivianSociety for Traditional Medicine; (d) requiring doctors and nurses to travelperiodically to the communities to understand the social context of health andIllness; (e) incorporating the option of using the system of labor exchange--instead ot casn, doctors can request work obiigatiuns, whieh would iower Lhupublic sector coats of providing, e.g., an improved sewerage system;9 and (f)

9 This could be implemented through each community having an "account" inSIF with labor owed for services rendered. Thls "account" would then beactivated as community contributions to lower the financial costs of SIPprojects in the community.

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increasing use by doctors of medicinal plants as much as possible, recognizingtheir efficacy and the widespread unavailability and high cost ofpharmaceutical products.

Nutrition

5.50 Nutrition interventions should be closely monitored and coordinated.MPSSP has the formal responsibility to coordinate and monitor nutritioninterventions but has not fulfilled its role. The first step would be tostudy the effects of present nutrition interventions to understand the effectsof current programs and to better target future programs. Such efforts shouldinclude strengthening of the National Nutritional Surveillance System and areassessment and possible strengthening of the National Institute ofNutrition. The ongoing iodine program should be continued and expanded toinclude the traditional block salt. Other nutrition interventions much asschool breakfasts and other education related programs should be evaluated toobtain better targeting. Over time nutrition programs' reliance on fooddonations should be limited, allowing for purchases in local markets, and thusstimulating local production.

5.51 Specifically, individual community nutrition Droarams should be improvedby assessina the nutritional value of foodstuffs and usina local products.Women should be trained in how to care for severely malnourished children andcommunity-based intervention programs for these children should beestablished. For communities dependent on food donations, a short-term schemeto rationalize the use of foodstuffs should be implemented in which certaindonated items are used to complement, not replace, local products.

Women's Issues

5.52 Immediate actions to improve the situation of women would be the imple-mentation of the MHCSP. Another immediate need is to follow up on the recent-ly held conference on abortions, with an action plan agreed upon by allparties involved. At a minimum such action Dlan should include a simple buteffective oroaram of revroductive education. rn the longer run, it is hard tosee how the alarming maternal mortality and infant mortality rates can bebrought down without a substantial increase in child spacing. Family planningand sex education are very sensitive issues, and extreme care should be exer-cised in introducing programs that are sufficiently sensitive to cultural andreli2jous beliefs. There is some hope to be found in the increasing femaleliteracy rates (see next chapter). Cross-section analyses and results fromother countries show that increased female literacy will lead to improvementin both maternal and child health.

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CHAPTER 6 i EDUCATION

INTRODUCTION

6.1 Educational achievement is very low in Bolivia. Official illiteracyratee are among the highest in Latin America. The last nationwide testing (in1979) showed no statistically significant learning' for rural education inboth reading and mathematics. Urban schools did show statisticallysignificant learning in reading but not in mathematics. Since then theeducation system has deteriorated according to anecdotal evidence fromparents, students and universities. For instance, the university in La Pazhas to have its students take basic mathematics and Spanish before allowingthem to start a university degree. The number of students failing suchcourses has been increasing over time. Rural poor areas are especially hardhit by the crisis in education. Poor rural areas have lower participationrates and higher repetition rates, and higher illiteracy rates.

6.2 Besides the direct posi-tive welfare effects of educa- Children's Health by Mother's Z'ducationtion, good education is highly x

correlated with other social 50indicators. As shown in Figure6.1, women with better educa- 40l

tion have fewer sick children,and when the children become 30 lIsick they are treated more of-ten. There is also a strong 20-positive correlation betweenthe incidence of vaccinations 1oand the level of education ofthe mother. 0

Cough Dkrrhea Voccinctod-of which saw doct.r -of which oral rehyd

6.* 3 The fundamental problem Nne 0 Basic a Intermediate 0 Higher 0 Totalin the Bolivian education sys- SIa,=ENsP

tem is inefficiency. Student/ FIteacher ratios are low. Figure 6.1s Children's Realth by Mother'sTeacher salaries are low, but Educationthe total wage bill covers 98%of all non-university spending. The average rural student takes five years tocomplete grade 1 through 3. School administration is doubled all the waythrough because of a dual rural/urban school system. In an inefficient systemsuch as this, equity improvements are hard to come by.

6.4 This Chapter focuses mainly on how to improve efficiency. First, theprincipal institutions in the sector are described. Second, educationala2endino is analyzed, focusing first on the inequity of spending (the bias infavor of urban areas and universities). Third, the Government's draft reform

1 The answers given on the tests were not significantly different fromrandom answers.

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p.= is analyzed. Fourth the public investment program in education isreviewed, contrasting the investments by the Ministry with those of the ESP.Fifth, a series of sector constraints and issues is discussed, mostly relatingto the low efficiency of the system. The constraints include weak planningand policy-making capabilities, inflated school staffing, low teachers'salaries, inadequate school administration, legal impediments and under-utilization of NGOs. Sixth, a set of recommendationa is presented. Theseinclude improving equity of expenditures by spending more on non-universityeducation, raising teachers' salaries through efficiency improvements;improving the allocation of human and physical resources, improving planningand financial management, increasing the role of the communities and of NGOs,improving women's access to education and increasing emphasis on bilingualeducation. Finally, the recommendations contain a brief outline of a possiblephasing of the daunting reforms needed to improve education for the poor.

INSTITUTIONAL FRAMEWORK

6.5 Within the education sector, the principal institutions affecting thepoor can be categorized into four broad groups:

a) The Ministry of Education and Culture (MEC) and its corresoondinaagencies. Education in Bolivia is the responsibility of thegovernment in general and the MEC in particular. MEC formallycontrols almost every aspect of public and private educationexcept for the autonomous university system. In the publicsystem, MEC defines the content of the curriculum, pays theteachers, finances the construction and repair of schools andadministers the operation of the schools. MEC is also responsiblefor the private school system. It negotiates and monitorsagreements on education with the Catholic church, other religiousorganizations, private schools, educational cooperatives andsecular NGOO. There are three independent agencies within MEC:the National service for Alphabetization and Popular Education(SENALEP), established in 1983 to help achieve the goal ofeliminating illiteracy by the year 2000, an agency that did havesome good programs in the past but is presently without funding;the National Technical Education Service (SENET) and its fourteentechnical education institutes, created in 1978 to improve thequality of industrial, agricultural and commercial education; andthe National Council for School construction (CONES), responsiblefor the infrastructure of the educational sector. Until 1987,earmarked taxes financed CONES. Since then, it has depended ongrants from the ESP for most of its investments.

b) Denartmental Education Administration. Each of the nine depart-ments has its own administrative structure for education. Eachdepartmental educational system is headed by an Executive Council,and includes two directorates responsible for the separate ruraland urban school systems, respectively.

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C) Church organizations and other NGOs. By supervising and con-structing schools in areas in which they are active, organizationssuch as Fe y Alegria, Accion un Maestro Mas, and Escuelas deCristo provide educational access to poorer children. Althoughthe private for-profit educational system in Bolivia is also veryactive and diverse, it reaches virtually none of the poorersegments of the population.

d) The Emergencv Social Fund. ESF has met specific construction,materials and training needs of local communities easing theinequities of the uneven public investment program in theeducation sector.

EXPENDITURES AND GOVERNMENT POLICIES

ExpendituresDistribution of vd=atfon Resoureot by Area (1988)

6.6 Expenditures

Perseml Expenditures Nuber of Teachers Population are skewed toward(in afU ions of as.) (X} urban areas and

Dertment Urban Rural Urban Rural Urban Rural non-poor Depart--_______ ________ _______ ________ _____ _ ments. It is

Santa Cruz 16.6 (75) 54 (25) 7,02 (61) 4,251 (39) (48) (52) estimated that 80-Cochaba*9 23.1 (65) 12.7 (35) 6,490 (64) 3,719 (36) (36) (64) 90% of rural schoolcubquf ac 6.4 (68) 3.0 (32) 2,703 (58) 1,946 (42) (19) c81) children, as

compared to 40-50%

ourcet t'S0 Project, J e 1,§ of urban schoolMote: Percentage share in parenthese. children, lack

textbooks. In the

3a-E;vXsF-ByE=ne< tv;<M W Chuquisaca Depart-Table 6.1: Distribution of Education Resources by Area ment where only 20%

of the populationis urban, 68% of

personnel expenditures and 58% of teachers have been devoted to urban areas(Table 6.1). Second, geographical distribution of MEC's expenditure does notreflect the poverty level nor the population size of each department. Despitetheir low level of educational development, the Potosi and Pando departmentsreceived the lowest per capita allocation in 1988, at US$11.1 and US$12.7respectively (Table 6.2). Third, Government spending has favored highereducation (university education in particular) at the expense of primaryeducation, and this tendency has tntensified over the past yeara. The shareof university education in the total public education expenditture increasedfrom 10% in 1981 to 20% in 1988.2 Fees for attending universities are lowerthan those for attendir.g basic education. Furthermore, university studentsreceive subsidized lunches, which are not available to other students.Because university students are largely from the middle and higher income

2 Since the tax reform in 1985, univeraities have received an annualtransfer of 5S of gross internal tax revenues.

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groups, the present allocation policy heavily favors the rich at the expenseof the poor, accentuating educational inequity in Bolivia.

6.7 MEC expenditures are usedalmost exclusively for salaries. EC's Expmdittre by Deprtmt (198)From 1980 to 1987, the percentageof the MEC budget used to finance oepartment NEC EExpditure Per capitasalaries de reased only from 99% to (thousands of U) (US)98%. Meanwhile the share of theMEC's expenditures on materials has .huquisca 79037 15.9gradually decreased to only 0.1% of La Paz 28799.2 13.5the total education expenditures in Cochabama 17226.1 16.01987.3 Orgro 7085.1

Potosi 10640.2 12.'Tarija 5038.2 17.2

Reform Plans Santa Cruz 17788.8 13.5Bni 5190.0 18.3

6.8 In November 1989 NEC was Pa6o 07.9 11.1asked by President Paz Zamora to Centrat 41Z1.2prepare an educational reform planwithin 30 days. The plan has notyet materialized, but a prelimi- TOTAL 104400.4 Ae r. 14.4nary di.scussion piece was issued.The components under discussion Source: E4SO Project, Jun 1989.most relevant to poverty issues arehigher priority for rural andperi-urban areas; higher priority Table 6.2: NEC's Expenditure byfor the education and the rights of Dpartmentwomen; national mobilization of allgroups in Bolivia (Armed Forces, Church, NGOs, private enterprises, unions,etc.) to combat illiteracy; higher priority for basic education; Integrationof rural and urban education with higher priority given to raising the qualityof rural schools; availability of a school breakfasts program in all zones ofcritical poverty; construction of annexes to rural schools where studentscould work when not attending class; more volunteer activities to aid thedisadvantaged, sick, children and elderly; visits and assistance by privateschool students to public schools in a "Colegios Hermanous program (n-oemphasis given to helping public schools in poorer areas); and more centers,cooperatives and private establishments for training the handicapped andreintegrating them into society. The specific plans for basic educationinclude coverage of all urban and 60% of rural areas,4 extension of the basiccurriculum down to age one or two in rural sectors, one day off forextracurricular activitiee or work p(e week, reform. of the grade achoclcurriculum to emphasize core needs, and larger absolute and relative budgetsfor grade school education. The reform plans for basic education are

3 See PSER for a review of social expenditures.

4 If INE statistics on coverage could be trusted, then this target hasalready been reached. What appears to be happening is that children inthe communities without schools eventually go to relatives in raighbor-ing communities with schools.

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potentially very dangerous. As long as numeracy and literacy is not achieved,children should not be given a day off for extracurricular activities.

Public Investment

6.9 Owing to the government's tight budget situation, public investment ineducation amounted to US$0.9 million (US$0.4 million was initially projected)in 1988, down more than 40% from the level of 1987. Public investment ineducation was stagnant in 1989 (US$0.9 million or 0.2% of the total), and willnot increase much in the 1990-92 period. Investment during the next two yearswill be mainly financed by external donors increasing the dependence onexternal funds from 59% in 1988 to about 80% in 1990-91. Many previousprojects did not address the national priority to enhance the coverage andquality of primary education, particularly in rural areas. Out of 12 projectsundertaken in 1988, only two appeared to have had major positive impact on thepoor. The other ten projects were weak in poverty focus, aiming atimprovement in urban education system, university education, technicaltraining, and cultural preservation.5

6.10 This insufficLent poverty focus in the education sector is likely tocontinue over the next years. Except for two UNICEF-supported projects, itappears that all projects planned for 1989-92 pay insufficient attention toproviding primary education to the neediest groups. More than half theinvestment program for 1989 was planned for strengthening the televisededucation system. Separately, the Government intends to initiate a schoolmapping project in 1991 that would be a very important project providing aninformational basis by matching under-utilization and shortages of educationalfacilities, and preparing for providing adequate and equitable educationInfrastructure across the country. However, neither the funding source northe basic concept has yet been determined for this project. Several importantprojects, which could have had an impact on poverty alleviation, have beenexcluded from the core program, downgrading them to lower priority. Theseprojects would aim at development of bilingual textbooks for primary education(Spanish, and Aymara or Quechua) and promotion of intercultural education toaddress disparities in educational opportunities among different ethnicgroups.

6.11 ES has been providing resources for the expansion of primary education.In 1988, EST financed US$6.0 million for the education sector, which was aboutseven times as much as the MEC and RDCs. As of mid-1989, ESP had disbursedUS$13.3 million including USS3.2 million for 100 projects for educationalassistance (i.e., school desks, textbooks, teachers' training, and othereducation programs) and US$10.1 million for 415 act:ool repair and constructionprojects. In 1989, ES? financed US$9.2 million worth of education projects(about ten times the rest of the public investment in education).

6.12 3SF-financed education projects were well distributed among departments(except for Pando). Especially, the Cochabamba and Potosi departments, whichwere largely neglected by the MEC and RDCs, received a fair portion of funds.

5 Restoration of museums and churches in La Paz and Potosi.

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3SF-projects have focused on primaryeducation and have mobilized partici-pation of various organizations inthe public, private, and NGO sectors. oiUvtet' adjustnt, en thogh It was

written In Oconyfc ters, due dep into theimnsemos bebviwral patterns of cwiety. we6.13 Upon the terminaticn of ESF, 1 d* 4. C 1, * r

SIF will take over and expand ESF ac- A th wbit{ct cord that has bn devltopedtivtties in the social sectors. In throug .tnwies between the state and theedacation, US$14 million is expected tta..R tI$ going to help you with whateverto be available for education m""", hoveI,btfirst I tv heOMean, ad ecOndty I "m only golrg to heap you "infrastructure, education materials, In thoo roas were you ask for heLp. I'mand program assistance annually not goinm to try to figure out your needsduring the first two years. If the a8yfcO. Forget abou patenalIs; theSIP contribution is added to the co'etsoateotlonia-xetrorys ridalready planned public investment, forer".the total investment in publiceducation will amount to US$16.3 Ferncw ottSfumillion in 1990 and US$19.0 millionin 1991, which is two to three timesas large as that in 1988 (including --. - ,:

NSF). Box 6.1: Cutting the Uzblilcal Cord

SECTOR CONSTRAINTS

inflated School Staffina

6.14 The average student/teacher ratio in Bolivia is about 17, much lowerthan in comparable countries. School staffing is inflated in large part bythree main factors* teacher specialization, allocation of "Items," and "ghost"teachers. First, there are five special fields in Bolivia's primary schoolsand eleven special fields for middle and superior schoole. A teacher trainedfor one specialty, such as music, will not teach any other specialty if it canbe helped. This means that a fully staffed primary school should have fiveteachers for each grade, while middle and superior schools should have eleventeachers per grade. As a consequence, Bolivia's primary school teachers aresupposed to work loes than twenty hours a week, though paid for forty.Similarly, teachers for higher grades are supposed to spend only two hours andten minutes per day in the classroom. The remaining time is supposedly spentgrading homework and tests (although there is considerable evidence thatlittle homework or tests are given) and improving teaching skills (althoughthere are no teacher training programs). In reality, about 20% of the urbangrade school teachers use this time to teach in private schools. In mostrural schools, teachers are forced to teach several specialties despitetraining and a curriculum that assumes specialization. These schools usuallyhave small student populations served by one or two teachers. These teachershave to cover the entire range of courses and several grades. They alsousually do not have access to the same employment possibilities as urbanteachers and are often sepazated from their families for long stretches oftime. Yet they have to work twice as long for the same basic pay as the urbanteachers.

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6.15 Over-staffing is also due to the way the NEC allocates Items (teacherequivalents) to schools. once an item is given to a school, it is almostnever withdrawn even if the community served by the school changes and most ofthe families migrate elsewhere. Politically, MEC is unwilling to face theconsequences of closing a school and technically it lu unequipped to re-evaluate the justification for items. Each year several thousand requestscannot be filled because the budget is not large enough to finance therequests. These are usually small, rural, communities that are willing tobuild a school by themaelves if the Ministry would finance the item. Finally,the budget is in essence overstuffed by "ghost" teachers receiving checksalthough they are not on MEC records. In 1988, the number of teachers paid bythe Ministry of Finance was 14,500 or 23% larger than the number said to beteaching according to MEC. The Government is implementing a computerizedtracking system to make sure that everyone who receives a check is in factteaching.

Low Salaries

6.16 Bolivia can no longer afford large numbers of low paid teachers. Almostevery problem in the education sector can be linked to the poor performanceaitd the low incomes of teachers. As salaries already absorb the vast majorityof expenditures, substantial increases in salaries can only come about throughincreased efficiency of the system. The previous Government developed a planwhich places more emphasis on raising teacher incomes than the current draftplan. The previous plan sets an explicit goal of recapturing for teacherstheir real salaries of 1980 by improving the efficiency of the educationalsystem. It proposes an explicit target percentage of GDP for educationalexpenditures. The new draft plan attacks the "myth" that higher teachersalaries are essential to effective reform. This plan does promise highersalaries and more prestige for basic education, but the promises are vagueand, given the recent conflicts between the teacher unions and the Paz ZamoraGovernment, probably unpersuasive. The demands for higher teacher salariescrowd out other budget items, so there are inadequate funds for supervision,construction and repair of school buildings, texts, classroom supplies,training and special projects. The low income of teachers creates a shortageof qualified teachers and makes it difficult to set reasonable teachingstandards. These problems are worse in the rural areas and the poorer regionsof the country, so low productivity increases the inequity of the educationalsystem.

Weak Plannina and Policy-Making Caoacitv

6.17 NEC is faced with serious problems in administration, planning andcoordination between the central and regional levels. Important contributionsto this problem are: (a) the organizational structure of the Ministry thatconcentrates decision-making in high-level central administrators, (b) the lowlevel of professional training of many Ministry employees, and (c) the limitednon-salary budget that makes travel and communications between the Ministryand the regions extremely difficult. The administrative structure of MEC ishighly centralized and hierarchical. Educational policies are made by theMinister and in the four Sub-secretariats for Coordination, Financial Ad-ministration, Rural Education, and Urban Education. The National Office of

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Educational Planning monitors the effects of MEC decisions and assemblesstatistics on the educational sector. While these offices are physicallylocated in La Paz, there are two parallel administrative systems, one for therural sector and the other for the urban sector. Both systems stretch downfrom a national director in La Paz to the departments, zones, regions, localdistricts, and individual schools. As a consequence of this structure, MEC'sadministration often substitutes administrative routine for responsivedecision-making. This is due in part to the low quality of most of MEC'sadministrative staff; it is easier to do the same thing year after year thanit is to try to improve or adapt to changing conditions. This inertia alsoreflects the centralization of authority in La Paz, combined with weakplanning capacity and the overlapping and often redundant layers of admini-stration within NEC. Finally, the separate rural and urban systems, theautonomy of the Universities, and the teacher unions create additionalbarriers to change.

6.18 At the planning level, the Plarning Division within the Ministry lacksqualified staff and effective ties with other internal offices, particularlythe Budget ofZice. It lacks control, for example, over how many teachingpositions to request for each fiscal year. The Ministry of Finance simplyallots a given number and increases it by a small percentage each year. Eachregion is then allocated a given number of teaching spots rather randomly.Another problem is the lack of a sufficient data base from which to plan.Lack of updated census information, as well as an inadequate informationsystem in the Ministry of Education, make it very difficult to determineaccurately where teachers, materials, and school buildings are needed. At thebudget level, the Ministry's Budget Office has responsibility for drafting thebudget but has little knowledge of actual needs because it lacks the data baseand skills for conducting the necessary analyses. Consequently, inadequatejustifications for budgetary items are offered to the Ministry of Planning,which in turn reduces Ministry of Education proposals to little more thansalary requests for the existing teachers. Another problem is that at boththe central and departmental levels many units are over-staffed, including:curriculum development, evaluation, vocational counseling, and studentservices departments. To carry out the principle of providing differentcurricula to urban and rural students, there is a tremendous amount ofduplication in all line positions.

Inadeauate School Administration

6.19 Individual school administration is theoretically the responsibility ofeach school principal. These officials, however, spend most of their daysteaching and have no real decision making power in matters of personnel,budget, or obtaining materials. There is no special training available toenable them to provide instructional leadership In many locations, schoolsare grouped together into a "nucleus* under one director. Howeiier, nucleidirectors are provided no means to visit their schools on a regular basis.

6.20 All positions and procurement for local schools are filled or carriedout centrally, thereby removing any responsibility or power from local schooldirectors to run schools in a manner they deem most efficient. Each year, allteaching poeitions are filled during a three month period called the time of

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permuta or barter. Vacancies, candidates for those vacancies and requests fortransfers to new positions are passed on from the local school director to thezonal supervisor, to the regional supervisor, to the departmental director,and then to the general director of the urban or rural educational systems.If no qualified candidates can be found within the centralized system, thenthe school director is given permission to hire an interino, someone who isnot a graduate from a teachers' college. In theory, the Interi-io can bereplaced by a more qualified teacher during the next barter period, but inpractice this happens infrequently. Teachers' unions claim that the interinosystem is used for political patronage and that many Interibos never teach.

Leocal Impediments to Education Sector Efficiency

6.21 The charter for the Bolivian educational system is the Bolivian Educa-tional Code of 195S. The Code has been modified and elaborated by Presiden-tial decrees, laws and practice. The most important are the EducationalReform of 1969 and the Law of Bolivian Education of 1973. Some loftier goalsof the Code were not realized, but it remains the key legal document forBolivian education. The centralized administrative structure, the dual ruraland urban educational systems, and the hierarchical curriculum ere allmandated by it. The rules make employment depend on the supply of teachersand not demand for teachers. Graduates fzom teachers' colleges are placed onthe payroll on receipt by MEC of a diploma from a Bolivian. teacher's collegeand cannot be removed from the payroll unless tried and convicted of seriousmoral or disciplinary offenses. Promotions and pay increases follow seniorityrules (the Eacalafon) without any regard to job description or merit.Teachers can choose to take a test every four years that will award them oneextra year of seniority if they pass. The tests are entirely voluntary and nopenalty is imposed for failing. Administrators are paid according to theirseniority as teachers as well, i.e., an administrator does not get paid extrafor extra responsibility.

Inadeauate Non-Formal Education

6.22 The NEC is supposed to provide a number of educational opportunities forthose ineligible for the regular school cycle. Among other things, it issupposed to provide formal education for adults 15 years or older, specializedcenters and vocational institutes for the handicapped, and special educationalprograms and extension services outside the school system for the generalpublic. These laudable goals are still unrealized. The existing institutesare very expensive and reach on]-, a small portion of the adult population.For example, there is no adult education in the rural sector, and although theGovernment is now proposing to expand educational programs for the handicappedand provide non-formal education, it was supposed to provide this service over35 years ago. Currently, the only significant programs in non-formaleducation are conducted by NGOe.

Under-Utilization of the NGO Oction

6.23 The Bolivian Government is not utilizing fully the option of allowingNGOs, religious associ&tions and private schools to compete with the publicschool system. NGOo, in particular, can often provide a type of education

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that is much cheaper and more effective for the poor than the usual publicmonopoly,6 but inadequate Government support and financing limit theirpotential and leave significant demand for their services unmet. For example,some observers estimate that the number of public schools managed by theCatholic Church would double if the government approved all community requestsfor their services. In 1988, over seventy communities petitioned for Fe yAlegria schools (one was approved). There is also a similar queue of com-munities that would like to have schools managed by Eacuelas de Cristo. Onthe other hand, Accion Un Maestro Mas (AUMM) had a tradition of startingschools that eventually were incorporated into the public education systemthrough an agreement with the Government. In 1987, however, they stoppedturning over their schools to the public school system because of complaintsfrom communities about a decline in the quality of the education after theirAUMM schools became public. Furthermore, none of the public schools that wereonce AUMM schools have retained the integrated approach to education andagricultuzal production that was and is AUMM's tradition and strength.

The Escueta de Cristo, located in the agricuLtural community of Totorapampa, 20 km. from Potosi,is sdministered by the Franciscan religious caummuity. There are 185 students (74 girls) and tenGovernoent teachers. The schoot offers classes from kindergarten through eighth grade and serves asthe central school for surrounding, smaller communities with "feeder" schools which each have oneteacher for grades 1-4. The total student populatfon In this system is 550.

The system is welt oranized and follows the state rural education curricutum in the context ofFranciscan poputar education methodology. The curriculum includes agriculture/animal husbandry andreligious Instruction. Of special interest is the active participation of parents and the comnwityin general in school affairs. The parent/coommity school auxiliary is led by a Board composed of apresident, vice-president, treasurer and secretary. The Board supervises three school committeescharged with, respectively, CiO the coltection of monthty quotas from families (Bs.50 or one arroof agricultural products) used to purchase materials, pay for building upkeep, and remwwerate thewomen uho prepare the school breakfasts; (ii) the organization of manual labor for schoolmaintenance and work in the school garden whose potatoes and beans are sold with profits returrned to

school; and (iii) the administration of the school breakfast program which provides a glass oftk and bread to each student, using dried milk, flour and ofl donated by Caritas. The Board is

siso responsible for student enrollment and school attendance, a particularly difficult task at thestart of each schoot year because Francisean polity requires a mininum of 20 students or else theschool is closed. This happens frequentlty in the aalIler comamuities. The Board meets weekLy andsubmits a work plan to school authorities once a month.

Box 6.2t A Rural School

6.24 Currently, about 12% of the rural students are enrolled in schoolsmanaged by NGOs (including the church) and a much larger number benefit from avariety of special education programs run by NGOs. Of these providers, onlythe Catholic church competes with public schools on an even ground. Catholicchurches and organizations have agreements in which the government agrees topay for teachers in schools that are not managed by the Government. Under

6 One measure of efficiency is the teacher/student ratio, which is between17 and 18 for the public sector. In three NGOs teacher student ratiosranged from 26.5 in (Accion Un Maestro Mas) to 33.5 (Fe y Alegria).

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pay for teachers in schools that are not managed by the Government. Underthese conditions, the subsidy from the Government is the eame whether theschool is managed by the MEC, a Catholic association or Diocese. At the sametime, however, the Government limits the supply of these schools by withhold-ing approval. For other NGOs, religions and private schools, the Governmentdoes not pay the salaries. These organizations have to finance the entirecost of the school from student tuition, donations, or other sources of funds.In the poorest communities, those in the rural and peri-urban areas, there aremany NGOs (over 120 according to a recent survey) that provide a wide varietyof educational services. However, lack of public financing limits theirability to compete with the public educational system. Althoughthe recent education reform plan proposes a government/NGO partnership ineducation, many of the potential options within such a strategy need to befurther explored.

RECOMMENDATIONS

Expenditures

6.25 Expenditures in education should be shifted toward basic education Inessence, the stated strategies should be reflected in the actions. This wouldrequire some serious rethinking of education management, where highly vocalgroups would feel threatened. The earmarking of five percent Df tax revenuesto universities is a positive net transfer to the middle classes from the restof society. Projections show this system would in the year 2000 result inmore than a third of spending in education going to the richest 1% of thestudent population (the university students). Any issues of fairness orincome redistribution aside, that is a monumental waste of money.7 Withinbasic education more money needs to be set aside for materials and maintenanceof schools. The Social Investment Fund (SIF) should be allowed to play amajor role in this. In the short run, SIP should be charged with allfinancing of school construction and repair, to ensure that local demands aretaken into account. A first step toward greater attention to the poor ineducation expenditures would be to freeze university expenditures at thepresent share of total education expenditures.

Imorovina Teachers' Salaries

6.26 Teacher income must be explicitly linked to the success or failure ofreforms that improve the efficiency of the system. If the system becomes moreefficient, teacher incomes increase, and vice versa. A couple of figuresillustrate this effect. All the examples assume a fixed MEC budget. If the

7 University educations should be reformed as well. Test should beintroduced to avoid students staying in school for ever, today about 10%of students graduate. Curricula needs to streamlined to focus onBolivia's real xleuds such as agricultural and health degrees, publicsewtor management, and business degrees. Private sector participationshould be encouraged to improve the fit between teaching and privatesector needs.

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number of teachers paid were brought into line with the number of teachers onHEC's records that would increase salaries by more than 20%. If thestudent/teacher ratio increased from the current 17.4 to 35, a level stillbelow that of many other countries, and at or below the level of privateschools in Bolivia, then the average salary would rise from Bs.220/month to8s.584/month. If, furthermore, transfers to Universities were eliminatedcompletely, teachers' average incomes would rise to Bs.72'/month. While nogovernment could or would implement such drastic reforms as the latter two, itis still possible to provide many teachers with incomes two to three timeslast year's incomes, approve thousands of requests for new schools in thepoorer areas that are now turned down for lack of funds, and adopt effectiveprograms of teacher training and evaluation. Specifically, there are threepossibilities: through a fixed budget share, efficiency bonuses, and selectionon merit.

6.27 The fixed budget share idea is that Government could dedic&te a fixedpercentage of treasury revenues to salaries of its teachers. If the totalsalaries paid to teachers were less than this target percentage, the teacherswould receive a bonus. Such a policy would give teachers an incentive to bemore efficient because teacher income would be a function of the student/teacher ratio.

6.28 Teachers could be paid bonuses financed by some or all savings due toeducational reform, thereby linking pay to efficiency. The bonus could bepart of an improved reward system in which pay increases the longer theteacher's workweek, the more students the teacher teaches, the less desirablethe conditions under which the teacher works (e.g., many poorer rural areas),and the more efficiently the entire educational system functioned. In thiscontext, the Government should aleo consider treating teacher specializationas luxuries allowed only in the largest schools and reward those teachersalready effectively teaching multiple subjects (e.g., rural teachers). Simul-ations (see paragraph 6.26) have shown that 20,000 positions could be droppedand there would still be enough items left over to start several thousand newschools in poorer regions of Bolivia. MEC should check student enrollmentsagainst the number of items for larger schools in regions of changing popu-lations periodically. Cutting back on the number of teachers is less likelyto provoke community protest than closing a school down completely.

6.29 The third way that efficiency and teacher salaries could be linked wouldbe to select on merit a core of proven. capable teachers to be expected towork full-time (40 hours a week or more). They would have to be flexible,willing to cover different specialties and even handle several grades at once.They would receive training and much higher pay as well. Their higher paywould be financed by their greater productivity. The entire transformation ofthe educational system could take place gradually and voluntarily. There is ashortage of (part-time) teachers at current low salaries. About a third ofthe teacher positions are filled with interinos, usually members of thecomunity who have few qualifications to teach but are willing to fill theposition in the absence of trained teachers. Instead of hiring inter1nos inthe future, NEC could use vacancies to create new positions for full-timeteachers. Interinos and incompetent teachers could be phased out of thesystem and gradually replaced by more productive highly paid teachers. The

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pressure for more full-time positions by existing teachers would offset thetraditional reluctance of teacher groups to see teachers let go for anyreason. The shrinking number of teaching positions also will help the poorercommunities get qualified teachers. Interinos are disproportionally con-centrated in the poorer regions and the more isolated communities. Replacingthem with trained teachers would produce a more equitable system.

Limit Rural/Urban Differences

6.30 As the dual education system has clearly favored the urban system, it ishard not to propose a unification of the systems. However, a unification nowwould totally destroy whatever (little) is working in rural areas. Qualifiedteachers would move to urban schools were the work hours are less andopportunities for private employment are better. The rural schools wouldloose their "identity," as whatever little statistics are collected presentlyare collected separately for the two systems. Instead, short run measuresshould focus on strengthenino the rural system. Such improvements couldinclude:

a) Introduce multi-grade teaching, where several grades are taughtsimultaneously. Teaching in such a system would mean higher payand better benefits in return for teaching full-time and attendingrelevant training courses.

b) Make the school year more flexible to fit the needs for children'slabor around harvest or planting seasons.

c) Introduce bilingual education8 through a national campaign to raiseawareness of the country's cultural and linguistic diversity; ruralteacher training in intercultural and bilingual education; primaryschool curriculum development with input from universities.

d) Imorove rural educational infrastructure using target mechanismsestablished under the Social Investment Fund. Many schools are invery bad disrepair, have no furniture, no materials, often not evena blackboard. Infrastructure such as offices and maybe evenhousing for the teachers should not be forgotten. Here there isgreat scope for community involvement in terms of inputs of labor.

e) Test system of rural boarding schools. For the rural dispersedpopulations boarding schools are often the only solution. Suchboarding schools should be established with plots of land to teachstudents about agricultural techniques and to supply the studentswith food. Such schools also could be among the recipients of foodaid.

6.31 After such improvements, especially in teachers Income and livingstandards, the dual career paths of the two systems should be abolished,

UNICEF has recently developed a proposal for introduction of bilingualeducation which could serve as a basis for future work.

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sllowing the better qualified teachers to move into the higher paid, higherprestige rural jobs. The next step could be to unify curricula, unifying therequirements at each level, i.e., after first grade a child should now how toadd and subtract, after second grade how to multiply with 1 through 5, etc.The actual textbook systems should not be unified, instead a variety of text-books should be developed. There should be a choice of the actual text-booksystem to allow each school district to adopt teaching to local needs within anational standard. Another step would be to unify the administration of thetwo systems, which could save substantial amounts of money. Each school wouldstill be operating under different rules, but would all report to the sameunit in the administrative structure.

Efficient Allocation of Resources

6.32 Internal efficiency in basic education can be improved through:

a) providing educational leadership through trained and effectiveschool administrators and supervisors; and

b) introducing, in phases, a national testing system.

6.33 Effective allocation of teachina resourceg can be achieved through:

a) reducing redundant teachers and urban administrative personnel;

b) reducing the number of teachers' colleges, converting some intoretraining facilities for teachers; and

c) making in-service training on subject matter and methodologyavailable to teachers (e.g., through distance education or mobileunits) and provide incentives (e.g., in the pay scale) that willmotivate teachers to undergo in-service training.

6.34 To improve the Ministry's 2lannincLand budoetina capacity, three areasmust be emphasized:

a) creating a stronger management and information systems for budget-ing, programming, and financial controls in the Ministry and in theregions, including a comprehensive school mapping system to conductan accurate and updated needs assessment;

b) developing the management capability of sector personnel at boththe central and regional levels; and

c) decentralizing decision-making and budget control to the regionaland local levels.

6.35 To establish a more cost-effective use of exibting financial resourcesand to mobilize additional resources, three general objectives should behighlighted:

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a) developing a comprehens4ve education information system, includingdata based on school ma! Lng, to determine teacher and facilitiesneeds and redundancies;

b) gradually shifting financial resources to the lower levels of thesystem, consistent with procedures to improve efficiency andquality;

c) instituting cost-recovery mechanisms at the tertiary level throughfees for students who can pay and grants, or loans, for those whocannot; and

d) providing selected subsidies for private schools willing to servelow-income populations.

6.36 one of the greatest obstacles facing schools in poorer areas is the lackof a minimum amount of educational materials. To make these materials morewidely available, a strategy of competitive bidding for textbook printingwould reduce unit prices. This, combined with the development of a cost-recovery system to sell and/or lend reasonably priced textbooks to those whocan afford it, would allow for special provisions to be made for the neediestfamilies. Such a progrr-m could build on the ongoing "One Student - One Book"program.

DecentrAlizati2n

6.37 The general recommendations presented in Chapter 4 (paras. 4.42-4.44)for impl emntation of decentralization hold true for education. Specificallythe following conditions should be met prior to decentralization orregionalization:

a) determination of which decision-making functions are to be de-centralized,

b) adequate staffing and training of regional offices,

c) development of workable relationships between regions and centraladministrations that will help avoid duplication;

d) development of information, reporting and auditing systems.

The Departmental Education Departments should become autonomous from thecentral level in financial and educational administration. In this context,they would be delegated clear responsibility for administration, control andsupervision of school activities in both rural and urban areas. In matters offinancial administration, they would need the authority to formulate andmanage their budgets based on their respective regional demands and priori-ties. This would allow local authorities the flexibility to distributeexpenditures according to regional necessities. This would avoid the currentcentralized and irrational assignment of teaching positions.

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The Role of NGOs

6.38 Some NGOs have demonstrated that they can provide cheaper and moreeffective types of education for the poor than the usual public monopoly.There are also some large organizations, such as the umbrella organizationrepresenting Bolivia's farmers, that would be willing to manage parts of thepublic system. The following changes should be considered to increasecompetition in Bolivia' educational sector First, the Government couldcontract out the manaaement of schools in especially poor or troubled areas toNGOs with successful track records. Intsrnational financing could provide anincentive to private schools or NGOs to improve the management of publicschools in poor communities. The Government could find willing partners ingroups that had representatives in the communities and a long history ofconcern for the poor. Second, the Government could set up community councilsfor school districts. These councils would have the right to make their owncontracts for the management of the schools within their districts with NGOsaccredited by the Government. These councils already exist in many com-munities, but they have little power. Third, schools run by the CatholicChurch and NGOs could be used as laboratories for government initiatives inpublic education. Many of these organizations have experience with teachertraining, teacher evaluation, bilingual education, non-formal education, etc.The Government should inventory this experience and recommend ways to general-ize the successes.

6.39 Successful NGOo should be rewarded in several ways, such as withfavorable publicity and media attention, prizes for their accomplishments, orthrough managament contracts with the Government. More important, allsuccessful NGO schools should be accredited. If the performance of theseschools is tracked by the Government and publicized to all, competition amongschools will automatically increase. Those who were not accredited couldcontinue to be monitored by the Government and NGOs could appeal for the rightto contract directly with school community councils if they feel they have asuccessful track record.

Community Particination

6.40 Community representatives should be placed on Departmental planningboards. Other efforts to increase the power of local communities over theirschools also should be encouraged. School community councils and the teachersin a given school should be encouraged to form their own NGOs and manage theschool. This would be a form of school-based management, an innovativeapproach that works well in some parts of the U.S.A. The Government couldalso act a check on potential abuse by allowing MEC to retain its responsibi-lity for Bolivian education and track the performance of school-based NGOO,terminating contracts if performance were poor. Special members of thecommunity, such as the alcalde escolar, could be given the responsibility ofverifying the presence of teachers in the classroom. Absenteeism is apparent-ly a widespread problem both in urban and rural schools. Community membersshould be regularly consulted when teachers are evaluated.

6.41 Informal institutions as parent-teacher associations should be recog-nized and strengthened. These organizations have shown in many rural areas

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that they can mobilize community resources for school operation and improve-ment. This has been confirmed through development experience in othercountries in which the greater the degree of parental participation, thegreater flow of local resources for teachers and schools. A greater focus onachieving primary education for all could be facilitated, therefore, through atrilateral partnership of government, the private sector, and parents.

Women's Issues

6.42 Increasing educational opportunities for girls and improving primaryeducation in rural areas are the principal strategies to attack the causes ofpoverty for women. A secondary strategy is tu incre&se literacy among ruralwomen. The benefits of this approach would ba enhanced women's health andfamily well-being, increased productivity of women and better human resourcedevelopment. A girls' scholarship Program could be tried on a pilot basis tokeep rural girls in school for a minimum of five years. The program would bebased on paying a stipend to parents for the loss of their daughters' manuallabor. The community would select scholarship recipients, using criteria toreach those at highest risk.9

6.43 A pilot project establishing girls' boarding schools in rural areasshould be designed and implemented with the objective of providing rural girlswith access to secondary education. Presenrly, the Franc.scans operate 20boarding schools in the Department of Potosi. Some of their schools havemixed student populations, but most students are boys because culturalattitudes favor boys' education. A boarding school exclusively for girlswould take parents' concerns into account while providing girls with anincentive to stay in school.

6.44 A technical school scholarship groaram including room, board andtuition, should be developed so that rural girls can attend technical schoolssuch as CIPCA's training school in agriculture and animal husbandry in theDepartment of La Paz (where most students are young men) and Fe y Alegria'sintegrated production and education boarding school programs in Yungas, Sucre,and Chuquisaca. Such a program would provide girls with an incentive tofinish secondary school, increase the number of technical personnel in ruralagricultural development and redress the imbalan e between male and femaleeducational opportunities. The program could include a component of returncommunity service for participants.

6.45 As women make up 75% of the rural illiterate population, priority shouldbe given to female literacy training and adult education. The Governmentcould allocate resources to SENALEP to upgrade and expand its services inr.aral areas. SENALEP's programs have functioned well in the past. It hasdeveloped well received materials in Quechua, Aymara, and Guarani. Ruralradio education, such as Fe y Alegria radio, should be expanded. All adultliteracy programs should have technical/vocational education and health

9 A program of this type is working in Guatemala, and the reported costper student per year is US$15.00.

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education components. Literacy training for women should be practical (how tobuild solar greenhouses, improve nutrition, production strategies).

Phasing

6.46 The needs for reform in the education system are so many and diversethat serious consideration must be given to issues of phaoing. In the shortterm, institutional development efforts should concentrate on a managementneeds assessment of the sentral ministry functions and regional offices.(Emphasis could be placed on the three most populous geographic departments)Because decentralization appears to be a political priority for the Govern-ment, this assessment should be accompanied by management training of centraland regional ministry employees. The school facilities mapping effortsalready underway should be fully functional as a basis for needs assessment.Also in the short term, a program to strengthen the ruril system should beimplemented, including multi-grade curriculum and teaching accompanied byhigher pay, pilot testing of rural boarding schools among dispersed popula-tions and improvements in materials and facilities in rural areas financedthrough SIP.

6.47 In the medium-term, the focus should be on the increase of quality andequity of basic education. This could be achieved by the following:

a) Rationalizing human resources by linking teachers pay to efficiencyimprovements; reallocating teachers to areas of unmet needs;providing in-service training as appropriate; and strengthening themanagement and supervision of the teacher force.

b) Developing and implementing with the participation of localcommunities low-cost means of school construction, repairs,maintenance and furnishing. New construction should be minimal,undertaken only when clear alternatives do not exist.

c) Financing, publishing, and distributing textbooks and guides tostudents and teachers; distributing educational materials toteachers and classrooms; developing cost-recovery or low-cost meansto finance the stock of books and materials.

d) Reducing the number of teachers' colleges; updating and unifyingthe curricula and admissions practices; providing instructionalmaterials for the students.

e) Continuing support for educational management strengtheningprograms at both central and regional levels; improvement in levelsof financial resources for che Ministry of Education and itsdecentralized agencies.

f) Combining the dual education systems.

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CNAP&ER 7s AGRICULTURE

INTRODUCTION

7.1 Agriculture plays an important role in the Bolivian economy. Theincidence of extreme poverty is particularly high in rural areas where agri-culture is the predominant economic activity. In 1976, 95% of the poorest 20%in Bolivia were smallholder peasants (campesinos) and since then, their pro-duction has fallen.' The vast majority of the campesinos are of Indian origin(Quechua or Aymara). In 1988, the agriculture sector accounted for about 22%of GDP. Another 20% of GDP originated from related economic activities,including processing and distribution of agricultural products. About halfthe population is engaged in agricultural production. Of these, 60% live inthe Highlands, and 20% each, in the Valleys and Lowlands.

7.2 Generally, the causes of low household income are low productivity ofland (especially in the Highlands), small farm size, low ratio of commercialcrops to total output, long distances to markets, low quantity and quality ofinputs, and no access to technical assistance. A close relationship existsbetween rural poverty and regional inequality. In the Highlands, difficultclimatic conditions, including droughts and frost, limit agriculturalpotential and productivity is low. Furthermore, as fertilizer use is minimal,two-thirds of the land has to be kept idle in any given year to allow soils toregenerate. Most of the small farmers produce staples and vegetables (pota-toes, maize, beans, quiroa, etc.). They have poor links to markets and creditinstitutions, and sell (on average) less than 30% of their output. The far-mers in the Valleys produce basic staples but are also engaged in cash cropproduction, including fruits, flowers and timber as well as dairy farming.Despite the low productivity levels, relatively favorable weather and soilconditions allow two-crop farming in the region. A major obstacle to improvedagricultural productivity in the Valleys is poor market access, mainly as aresult of lack of transport. In the Highlands and the Valleys, 61% of thefarmers own less than 5 hectares and no farm is larger than 1,000 hectares.

7.3 The tropical Lowlands is the most dynamic region for agriculture. Majorcrops grown are sugar, rice, cotton, soybeans, and oilseeds which are sold inurban markets in the Highlands as well as locally. The average landholding ofthe Lowlands farmers is much larger than those of other two regions: 83.8% ofthe farmers own more than 5 hectares; and 37.0% own 50 hectares or more (only3.0% of farmers belong to this category in the other two regions). However,the recent migrants in the newly settled areas (the "colonizers") can oftenonly use 1-2 hectares and have no title to their land. They are normally ableto produce sufficient food for their own sustenance but are faced with savereproblems in marketing surplus. The major poverty problems in the Lowlands arefound among these groups and among the indigenous tribes. The problems ofthese people are not adequately reflected in the statistics. Because of their

1 See Chapter 2

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Pedro had difficulty throwing the last spadefut of stones and earth out before clfmbing fromthe well he had dug so deep that he could no longer see out of the top. He sceiewed up his eyesas fIe looked to the sky to see if there were any clouds on the horixon that would bring thelong awaited rain that should have moistened the soil two fult moons before. When he wasyoung the rains were not so irfportatnt as novedays. Long apg he would take his Ccesra llamas,strong beasts of burden with poor wool but good meat, to the South to cut salt and then leadthem eastward over the hills and down to the warm, lush Valleys. There he would barter thesalt for waize, coffee and coca leaves before trekking back to his land and family. There hiswife cared for the children, wove cloth, looked after the few llamas he had left behind andcultivated potatoes, coca and beans in the moist soil fed by the underground springs and thesurnar rain. In bad years wlhen their crops were dvmaged by the dry coot air, withered by theintense cold of a suiirer frost or were destroyed by hail, he could always rely on the maize andsome dried Ccara meat and hope that the next year would bring a bounteous harvest. But now hisfrail body and failing eyesight depended on the few potatoes and broad beans that he wateredwith the bucket he hauled out of the well. At least he only had to feed himself: his wife haddied several years ago and his children had all moved to the valleys in search of a betterlife. His eldest son had suggested thqt he go to tive with him in Cochabamba. He thought tohimself that perhaps that was what he should do: he could not survive another year alone in theharsh, desolate land that he so loved but which offered so little. Then again he thought thatthis was his land and it was all he possessed.

Box 7.1: To Migrate or Not, That is the Question

precarious legal title to their land, and their geographic isolation, they aresimply not recognized in official statistics.

7.4 This chapter follows a similar outline as the two previous one. First,the institutional framework is described. Institutions in agriculture arevery weak, and have a very bad track record in reaching the poor. Second,investment and policies in agriculture are analyzed. Sector policies aregeared towards improving commercial agriculture and the investment portfolioalso pays most attention to the needs of this subsector. Third, sectoralissues and constraints are laid out. These include problems in land use andland titling. The basic thrust of the argument is that the breakdown incommunal structures, the lack of legal recognition of communal landholdings,and the slow and inefficient titling procedure are major constraints onimproving the situation for the campesinos. Then the issue of food donationsis discussed, concluding that it is now clear that the food (especially wheat)donations presently inhibit domestic production. There is no nationallycoordinated agricultural extension taking place in Bolivia and what there isdoes not take into account the problems of women. A further issue for womenis the lack of representation through campesino organizations. Institutionalissues include the politicization of the Ministry, low salaries, lack ofcoordination and planning, and lack of information. Finally, the section onconstraints assesses the need for gr-later beneficiary participation. The lastsection of the chapter contains the recommendations. These include:subsidizing of poor communities through infrastructure with less than fullcost-recovery, reforming the titling system including recognition of communityrights, appropkiate technology development and transfer, linking the poor tothe market economy, migration, women's issues, improving national policy andplanning, and encouraging small-scale operations.

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INSTITUTIONAL FPAMEWORR

7.5 The agricultural sector is confronted with the most difficultinstitutional challenges of all the sectors, the foremost being its principalactor: the Ministry of Campesino and Agricultural Affairs (MACA). While MACAhas undergone more restructurings than any other ministry, it remains extreme-ly inefficient and ineffective at least partially as a result of its diffusemandate. This includes the politically loaded issues of the campesino whichhas served to further complicate matters, making MACA one of the mostpoliticized ministries in Bolivia. Interest groups have taken turns enjoyingthe spoils of political patronage, while those intended to benefit from such afocus are forgotten. Despite these weaknesses, MACA has the responsibilityfor 13 decentralized agencies as well as for coordinating a significant amountof agricultural activities with the nine Regional Development Corporations(RDCs). In sum, although the greatest incidence of poverty exists in ruralareas and among the campesinos, the corresponding institutions are the mostill-prepared and poorly coordinated to address the needs of the poor.

7.6 The principal institutions in the agricultural sector are constitutedwithin four categories:

a) MACA and its "Deconcentrated" Affiliated Aaencies: MACA is the centralagricultural authority in the country with the responsibility forplanning and coordination. Over the years, MACA has set up a series ofdeconcentrated agencies for specific agricultural interventions, whichhave often evolved outside the direct control of MACA. Similarly, donoragencies have favored creating new public entities to execute their ownaid projects. Combined with considerable institutional weaknessesinternal to MACA, this has resulted in a proliferation of implementingbodies with little or no coordination among their respective programs.

Among the "deconcentrated" MACA agencies whose formal mandate it is toreach the small farmers, three stand out:

(i) the Bolivian Agricultural Bank (BAB), the only nationalcredit institution for which the majority of loans aresupposed to be directed towards small farmers. In realityit has provided subsidized credit to powerful friends of(especially) the military Governments, mainly in theDepartment of Santa Cruz;

(ii) the National Service for Community Development (SNDC), whosemandate is to target peasants with productive infrastructureprojects. This institution is plagued by high administra-tive costs (about half of its budget) and poor projectimplementation; and

(iii) the Bolivian Inastitut ) for Agricultural Technology (IBTA),whose research stations are at least nominally targeted toimproving production for both small and large farmers.

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b) RDCu: At the departmental level, the RDCs are beginning to play anincreasingly important role in agricultural planning. Agriculturalprojects have become the principal component of most RDCs' investmentactivity.

c) NGOc and Private Enterprises% An estimated more than 80 NGOs (bothlocal and international) have participated actively in the sector inrecent years, although their impact is uneven and dispersed. Weaknessesin internal organization and lack of interagency coordination havegenerally precluded NGOs from having an impact on a national scale onalleviating rural poverty. However, at the local level they have beenrelatively successful and their potential for expansion should not beoverlooked.

d) SFs The total amount of ESF investment in the sector is modestcompared to MACA and RDCs. ESF did finance a number of small, butimportant projects at the community level by funding physicalinfrastructure and technical assistance projects necessary forincreasing agricultural production.

e) Peasant Development Fund (FDCI: A recently created institution chargedwith providing credit to poor farmers through group credits with crossguarantees.

GOVERNMENT POLICIES AND INVESTMENTS

Sector Strateav

7.7 The agriculture sector has traditionally received low priority in thenational development plans. Agricultural policies lacked focus and theirstated objectives were not well-defined in operational terms. This lack ofstrategy and direction combined with the institutional weaknesses of MACA,meant that public sector involvement in the sector was no more than the resultof uncoordinated initiatives taken by foreign aid agencies and pressures fromdomestic interest groups. With such ad hoc policies, most important changesin Bolivian agriculture over the last thirty-five years have taken placewithout specific policies designed by the Government.

7.8 Most public projects have benefited middle- and large-sized farmersproducing cash crops. For example, in 1982, the sector received less than 7%of total public investment and only 16% of that amount was specificallytargeted to small farmers. Agricultural credit policy has historicallyfavored relatively well-to-do commercial agricultural producers in theDepartment of Santa Cruz. These producers were the main beneficiaries of asubstantial amount of external financing made available through agricultural

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credit usually at subsidized terms.2 By contrast, improving agriculturalproductivity of the campesinos has received low priority.

7.9 At present, Government policies are not directly geared towards povertyalleviation. The strategy encourages a market-oriented economy, promotingdynamism in the private sector, and boosting the production of new agricul-tural exports as the engine of the country's future growth. The threeprincipal objectives of the agriculture sector are to: (a) expand agricul-tural exports; (b) increase food production for domestic consumption, in orderto decrease reliance on foreign food aid; and (c) increase production of highvalue-added products, including fruits, flowers, rubber, and Brazil nuts. Inaddition, the strategy proposes continued efforts to support programs tosubstitute other crops for coca leaf production through creating marketingchannels, providing extension services and infrastructure improvements toincrease the productivity of alternative crops.

Sector Investment

7.10 The 1988 public investment in agriculture was US$52.2 million (US$21.5million was initially programmed3), accounting for 15% of total publicinvestment. Investment in 1989 was much smaller (US$34.7 or 8.4% of thetotal).4 The sector's share of programmed expenditures fluctuates between 8%and 12% of total between 1990 and 1992. A modest increase in MACA'scontribution to total investment is expected in the coming years, from lessthan 30% to about 37%. However, RDCs will remain the largest provider ofagricultural investment in terms of both number and cost of projects.Meanwhile, dependence of public investment in agriculture on external fundswill rise to 74% during 1990-92 compared to 58% in 1988.

7.11 A dozen or so large projects absorbed the lion's share of investmentfunds in 1988. The 13 largest projects, out of a total of 136, accounted for6S% of total public investment in agriculture. While resource concentrationon large projects is likely to continue in the future, the Government hasstated that it will redirect the focus of these large projects toward povertyalleviation. Large-scale projects in the revised plan include ongoingintegrated rural development projects and provision of irrigation facilitiesin poor areas, as well as agricultural extension, technical assistance to thecolonizers and technology transfer in animal and vegetable sanitation. Infact, however, the Government seems to be reverting back to the large projects

2 During the expansion of cotton production in the seventies, cottonproducers failed to repay a considerable portion of the loans they hadcontracted with commercial banks. The Government forced the AgricultureBank to buy these non-performing assets from commercial banks,representing an estimated US$40 million of income transfer to cottonproducers.

3 Most of the RDC investment was not included in the initial program.

4 However, part of the decline is due to under-reporting of the proposedprojects by the Santa Cruz RDC (CORDECRUZ).

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of the seventies which will only benefit the already powerful. One such"white elephant" is the Villamontes project in Tarija, a billion dollarprogram to clear forests, establish agro-industrial enterprises, and financelarge irrigation schemes. This project is promoted by very powerful interestgroups and, as a result, the Government has not been able to pursue its statedgoals of helping the poor.

7.12 The large-scale integrated rural development projects are usuallycomplex and difficult to manage. A typical example of a project with defi-cient design is the ongoing Chuquisaca Norte Project (started in 1983, with atotal cost of US$21 million). Although this project is aimed at the poorestparts of Chuquisaca, it has had limited impact on the targeted population dueto the complicated project administration (consisting of 10 components) andthe lack of interagency coordination (involving 11 government agencies).Based on this experience, a recently started Chuquisaca Sur project tries torectify the situation by reducing the project components to four and settingup a unit specifically charged to coordinate interagency activities as well asto encourage wider participation of farmere in the targeted area. The problemremains, that farmers are only involved in implementation and not in design.

7.13 Apart from these large projects, most projects are small in scale,typically costing less than US$1 million. More than two-thirds of thempurport to promote either production of traditional crops (e.g., maize,potatoes, cereals, etc.) or high value-added production for domestic market(e.g., fruits, flowers, milk, fishery, timber, etc.). While the basic conceptof these small projects appears supportive of poor farmers, the effectivenessis highly questionable. For example, out of 15 small rural developmentprojects implemented by CORDECRUZ in 1988, only three have been judgedsuccessful (by CORDECRUZ) in improving productivity of poor farmers in thetargeted areas.

7.14 The level of investment by departments is ad hoc year by year, andthere has been little consideration in allocating resources according to thepoverty level or the size of rural population of each department. Forexample, the Cochabamba Department received a disproportionate share of totalpublic investment in agriculture in 1988 (34%), but the share of its plannedinvestment shows a drastic decline to 19% in 1989 and less than 13% during1990-92. The per capita allocation6 of the Pando Department has also fluc-tuated greatly between the smallest (1988) and one of the largest (1989 and1990-92). Furthermore, the amount of concern given to poverty alleviation inthe planned projects varies across RDCs. The problem of misplaced emphasis isparticularly serious in Pando.

The accuracy of information on RDCs' projects as reported by the MINPLANis highly questionable. CORDECRUZ has consistently failed to reportmany of its planned investment to the MINPLAN (see above).

6 Per capita allocation here is calculated on the basis of ruralpopulation only.

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7.15 IEE has funded physical infrastructure and technical assistance projectsnecessary for increasing agricultural production. As of mid-1989, ESF haddisbursed US$9.6 million for agricultural projects,7 covering 61 irrigationprojects (US$2.9 million), productive infrastructure, erosion control andforestation (US$4.4 million) and rural credits (US$1.3 million).Geographically, ESF-funded agricultural projects have been concentrated in afew departments. The Cochabamba Department alone received more than a thirdof ESF's investment in 1988, while 1eni and Pando did not receive anyinvestment. This illustrates the dilemma of ESP's demand-driven mechanism.After ESF closes its activities, the Regional Development Fund (FDR) wassupposed to take up the task of funding small agricultural projects. Theproject bank of ESF will be transferred to FDR at the end of 1990.Unfortunately, FDR has not assured any financing for agricultural projects andhas no poverty targeting, so the future of "ESF-type" projects is veryuncertain.

SECTOR CONSTRAINTS AND ISSUES

Land Use

7.16 Many of the traditions of the Inca period still prevail aaxong ruralpopulations, particularly in the assignment and use of communal land. In thepre-Colombian era, land was communally held and the communities (ayllus)provided part of their produce and also labor for the maintenanc, of the Incaempire. The laws of the Inca society were such that people were born into anayllu and were forbidden to migrate to other areas, unless they were chosen bythe Inca officials for some specific task or job. There was no cash economyas such. While part of their produce was turned over to the Inca regime, Incaofficials also stored food and this was made available to the ayllu8 when cropfailure occurred.

7.17 Today in many parts of the Highlands, the land continues to belong tothe ayllu, as opposed to the individual. It is assigned to family unitsaccording to their ability to work the land. Cultivated land use is carefullycontrolled in these communities. Part of the area is left in fallow forgrazing and recuperation of fertility and the rest is cultivated in blocks.Each block is planted to only one crop with each farmer having an area whichhe/she cultivates and harvests. In this manner the rotations are carefullyc:ontrolled. Cooperation is often strong with the formation of work groupswhich work together on such tasks as planting and harvesting. Payment is inthe form of returning services rather than cash payment for the work carriedout. The organization of the community system is based on community servicerather than paid officials. Within the social structure of the community,service is important in determining a persons status: to serve the communitymeans more than to be financially successful. The community leadership isrotated between families of the community with the family of turn electing themost capable member of the family. If a family rejects the responsibility of

7 The average cost of ESF-funded agricultural projects was aboutUS$50,000.

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being the leader it forfeits the right to land and membership of the ayllu.The land that is forfeited cannot be sold, it is returned to the community.Hence a person who leaves his community loses his rights to what may be hisonly capital. This service requirement is a crucial factor in tying people totheir original community.

7.18 Communally grazed areas were carefully controlled in the Inca period,8

but control has disappeared today. Areas in the Highlands more distant fromLake Titicaca and with less rainfall were used as extensive communal pasturesfor cameloids such as llamas, vicunas, and alpacas. Readily domesticated,llamas and alpacas continue to provide transport, meat and fibers today.Vicunas, on the other hand, are difficult to breed in captivity and run wildthroughout the Highlands. In the times of the Inca, hunting of the vicuna wascarefully controlled so as to maintain herd populations. This system hassince broken down and indiscriminate hunting is reducing the vicuna popula-tion, particularly south of lake Titicaca. After the Spanish conquest sheepand cattle were introduced into the area. Today, control of grazing oncommunal land has all but broken down, leading to overgrazing and degradationof pastures.

7.19 With the arrival of the Spaniards, two major structural changes occurredin the Highlands. First, large tracts of communal land where given to the"conquistadores." Second, the opening up of silver mines, particularly inPotosi, led to a large increase in population in inhospitable areas littlesuited to agriculture. Miners had to be fed, however, and agriculture wasdeveloped in a hostile climate, severely limited by frosts, hail, and lack ofwater. Production in these areas was never sufficient to feed the populationthat worked in the mines, and food importation, particularly of wheat, becamea feature of the food balance of the region which exists to this day. Theseforced migrations also created pockets of Quechua Indiana in otherwise Aymaraareas, which eventually led to the breakdown of social structures.

7.20 Although the communal land system still exists in many areas, it isbreaking down in others. The breakdown of the communal systems of providingfamilies with as much land as they can work and control of crop rotations isleading to problems of fragmentation of land, shortening of fallow periods andpoor maintenance of such communal structures as the terraced areas around Lak3Titicaca. In many areas farmers are now cultivating their own lots on apermanent basis. The individual land plots tend to be smaller in the areaaround Lake Titicaca where production potential is greater, often being lessthan one hectare. In the drier and more inhospitable areas, land holdings areoften in the range of two to five hectares, however much of this land cannotbe cultivated on a regular basis and is left in pasture or scrub.

Land Titlina

7.21 The inappropriate nature of laws relating to land titles and lack ofconsistent government policy, have a damaging effect on the poorest

It has been suggested that grazing land without permission was anoffence punishable by death during the rule of the Incas.

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populations. Until the 1952 revolution, the majority of the peasants livedunder feudal systems with no right to vote. In 1953, land reform lawsproposed that "the land belongs to those who cultivate it". To date, it isestimated that the land reform has provided S50,000 campesino families withaccess to 4 million ha of land. However, in many cases, these families haveno official titles to this land and are not able to legally buy, sell or useit as collateral for credit. Furthermore, the land reform law wasspecifically aimed at individual landholdings, and did not resolve theproblems of communally-held land. This contrasts with Peru, which has acultural heritage similar to Bolivia, yet has a specific general law forcommunities. This law recognizes the campealno communities as "democraticinstitutions, autonomous in their organization, with communal labor and use ofthe land, as well as in their economy and administration." In Bolivia,however, campesino communities and indigenous tribes in the Lowlands aresignificantly hampered by inappropriate laws that were designed for otherpurposes.

7.22 In the Hiqhlands, land is typically handed ,own within the family andtitle x supported by wills or testaments. These documents, however, havelittle legal meaning as they are not accompanied by land titles. Neverthe-less, land continues to be bought and sold on this tenuous basis. To furthercomplicate the system of property rights, small landholdings are handed downfrom generation to generation and are often subdivided into lots. Each membeirof the family gets the rights to a number of rows, often in different patchesof the field. Although there has been discussion on laws to regulate the useand title of communally-held lands, no laws have yet been promulgated. Thecommunities that d. facto have access to land do not have persona juridicae ortitle to the lands. In many cases, this limits the potential for both on-farmand more general improvements in rural infrastructure.

7.23 In the Lowlands, very few individuals in recently settled areas havetitle to the land they are using. However, efforts are now being made toobtain titles; normally on a communal basis and sometimes with direct supportfrom NGOs. When given a plot at a colonization scheme the farmer receives acertificate of settlement, which is issued by the National ColonizationInstitute (INC). This is not a document of legal ownership. It is notcertified by the National Council of the Agrarian Reform and thus gives nosecurity against claims to the land presented by others. In areas whichincrease in value because of agricultural potential or strategic location(e.g., where a new road is planned), several claimants often appear for thesame plot of land.

7.24 Lack of well-defined territorial rights is also the most serious problemfacing the lowland indicenoug oeoole. Although they have occupied land andforests for centuries, they normally hold no land titles. Their exclusiverights to use these resources have never been acknowledged and in many casesthey have been forced to abandon the best agricultural lands. With theexpansion of economic activities in the Lowlands, the indigenous groups areincreasingly being pressured by logging companies, cattle raisers and large-and medium-size commercial farmers as well as new smallholder-settlers. Theagrarian reform had little effect in protecting the land rights of theseindigenous people because, for them, land is a generally a communal asset and

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not individual property. Some groups have made claims for land on a communalbasis with little success. One such request was ready for approval before theGovernment took office in August 1989, but no action has been taken sincethen. In the southern Santa Cruz Department area of Chaco the Indians ofGuarani origin are being pushed away from their land by large cattle ranchers(see Box 7.2). This is a problem both in terms of equity and efficiency asthe yield under crop production as practiced by the Guarani is much higherthan the yield of cattle ranching on the same lands. If the indigenous groupsare to maintain their traditional way of life, combining hunting, fishing andgathering with small scale agriculture, they need to control much larger areasthan are normally allotted to smallholder settlers.

The Guarani Indians in the lowland area of the province of Cordilters in the Department of SantaCruz are faced with severe problems of drought (mean anrwal rainfalt is only 450-600 mm), landdisputes and racial discrimination. Only 9X of the land belongs to the Guarani commuities and ofthe cultivable land, they own only arourd 7T. There are about 5,500 Izoceno-Guarani in the loealtftude part of Cordillera. They are forced to tive near the river Parapet(, the only source ofwater supply. For centuries they have dug canals from the river to their farms but in recent yearsserious problems of land dispute have arisen because the cattle ranchers have obtained title to mostof the land along the r-ver which provides water for their herds. Slowly the Guaranis have beenforced off their land.

The Guaranis used to be self-sufficient farmers, growing a wide variety of crops such as maize,beans, yuca, sugar, cotton, melons, fruits and grouridnuts. Today they are almost cospletelydependent on large scale agriculturaL enterprises for employment as they are no Longer abte tosurvive on their small plots far away from the river. Instead, the Guaranis are forced to work assharecroppers on the large farms, as seasonal laborers during the sugar harvest or as day laborerson the cattle ranches. Working conditions are extremely poor: they are not covered by any kind oflabor legislation, receive no medical services and live in insufficient housing. They become woreand more indebted to the enterprise each year as they have to purchase their food in the companystore, use company trucks for transportation, etc.

Box 7.2t The Guaranis: Working for the Company Store

7.25 Recent estimates indicate that less than 100,000 ha (0.3% of areadistributed by the land reform) of the land owned by the agricultural compa-nies is cropped, whereas the campesinos cultivate over one million ha (about25% of the land distributed by the land reform). The 1953 law does recognizethe danger of land not being used and held for speculation. It stipulatesthat land that is not used for two consecutive years should revert to thestate, however, the onus of determining whether the land is used or not is onthe public who denounce to the state those owners who do not use the land.This system has not been effective. Hence the land reform has only beenmarginally effective in giving the land to those who cultivate it.

7.26 Apart frora the inappropriate nature of the laws covering land tenure andrights the campesino has in general a mistrust bordering on feat of theofficial legal sector. This has arisen as a result of centuries of exploita-tion by the ruling classes and exists to this day in spite of the radicalchanges in the structure of society wrought by the 1952 revolution. Thispoint is illustrated by the reaction of the campesinos to the land tax. Apart

from being applied only to the larger land holdings and even then at very low

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levels (the actual rate depends on the area), the campeainos are fearful as tohow it will be applied to their communal lands and many fear that their landwill be taken away from them.

Food Donations

7.27 Food donations are often blamed for depressing local production of food.Table 7.1 provides summary data on food donations programs in Bolivia. TheUSA is the largest donor of foods to Bolivia, regulated by Titles 1, II, andIII of Public Law 480 (P.L. 480). These programs provide funds for Bolivia topurchase US agricultural commodities. Under Title I, the US provides creditat concessional terms for purchasing wheat, which is then resold to domesticmillers at international prices. Title II provides in-kind food contribu-tions, which are used as payment for work on local development projects,commonly referred to as food for work programs. The Title III program alsoprovides a grant for food purchases from the USA, conditioned on the use ofthe counterpart funds for agricultural development activities.

7.28 The European Community and the World Food Program are the othersignificant donors of food to Bolivia. These donors provide in-kind foodcontributions, which are used in a variety of project targeted at poorercommunities, including food for work activities, emergency assistance forareas suffering food deficits, and programs designed to increase health,education, and nutrition levels among the poor. Bolivia received asignificant amount of food aid from other bilateral donors during the 1983drought. Since then the other bilateral programs have either disappeared ordeclined significantly. Presently, France, Canada and Spain provide smallamounts of donations.

7.29 There is no question that donations are important in supporting consump-tion, particularly,although not exclusi-vely, among the poor.Approximately 21% ofBolivia's population

US Tftte I Aeat Ctdlt provided at receives food dona-tions, either free or

.:US titteil fIOUF, grar4,0tt t>d *< w in payment for work onrice, bw*s, powderd itk community development

projects. DonationsUSt~~~~~~~fltt -t iefit were critical in

f drfremdte - staving off widespreadhunger during the 1983

XEuopean Cai. fetotr d ud ; tktlS doti drought, and sincesilk,orl,"s -IS f then have allowed some

orid Food Program ftowt, it, beasw' ' d4 nan poor communities toenred flab, powderd ailk achieve much higher

levels of consumption.'Red Cross powdered msik in-kind dwition

________________________________________________ 7.30 Donations alsoTable 7.1: Food Donation Programs provide financial sup-

port to the Government

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and the economy. About USS20 million per year goes directly to the Governmentto finance administrative expenses. In addition, the Government earns moneyfrom the sale of donated foods which is then used to finance developmentprograms. A portion of these funds does not represent additional resources,as for example the funds used to cover US embassy expenses which would in anyevent be provided. A large proportion, however, is used for general develop-ment programs over which the Bolivian Government has some control.

7.31 An intense debate over food donations has raged in Bolivia since thesharp rise in donations during the 1983 drought. Despite the support toconsumption and to government revenues, it is argued that donations have anumber of undesirable effects on the Bolivian economy and society, largelythrough their impact on incentives. The greater supply of food lowers foodprices and diaccurages domestic production, induces shifts in consumptionpatterns to imported rather than domestic foods and inc._aases dependency.Further, the provision of free food reduces the 3icentive to work and breaksdown the tradition of collective self-help efforts in rural communities.While analysis of price and quantity data can do little to help resolve thelatter argument, the available data do shed some light on the former.

i2 1980 SK I92(thousands of metric tons)

U.S.Titil I 71.2 77.4 -- - --

Titte 11 4.4 18.7 25.4 25.2 30.4 42.9 42.6 139.0Tftte Ifi -- 74.1 173.9 64.5 -- 163.0 180.9 124.5

World FoodPrIorm 1.2 7.8 4.1 11.1 1.6 7.1 14.7 16.4

EuropeanCnmmty t* 7.4 8.6 10.3 .. 22.6

Others 10.5 39.3 1.5 7.0 25.0 10.0

TotaL 5.6 100.6 213.9 218.7 119.5 230.3 263.3 312.5

Source, "Apuntes Sobre Las Donaciones Alimentaries y Su impecto en Bolivia"Jutio Prudmncio Dohrt, 1989

Tablo 7.2: Food Donations Volumes

7.32 Table 7.2 shows the large rise in food donations over the past twodecades. From a mere 5600 metric tons in 1970, donations rose to over 100thousand in 1980, and then doubled by 1983 to meet the demand growing out ofthe severe drought of that year. Despite the recovery in agriculturalproduction since 1983-84, donations have risen further, and are now more than33% higher than during the drought. Data on the relationship between dona-tions of wheat (the largest single category of donations) and domesticproduction and consumption are shown in Table 7.3. Clearly, donations areextremely important sources of wheat, making up 37% of total consumption andequalling 2.5 times domestic production in 1988. The large size of wheatdonations relative to domestic production, combined with the decline in

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domestic wheat production, are often cited as evidence for the negative impacton production incentives discussed above.

Wheat Donations and the Doaestic Market(thousands of metric tons)

1975 1980 1983 1984 1985 1986 1987 1988

Total Stpply 147.2 403.2 371.6 352.3 44T.? 339.2 451.9 362.0

Production 61.8 60.1 40.3 68.5 67.7 69.8 56.6 54.9Comwrcial Imports 65.3 255.3 92.0 194.6 256.4 92.? 191.8 171.8Donatfons 0.1 24.8 239.3 78.9 123.6 176.? 203.5 135.3Change in Stocks -20.0 -63.1 0.0 -10.4 0.0 0.0 0.0 0.0

Neuor.ndum Items

tonations/Prod. 0.0 41.1 593.1 115.3 182.5 253.0 360.8 246.6bonations/Cons. 0.0 6.1 64.4 22.3 27.6 52.1 45.0 37.4Conm. Imp./Cons. 60.9 92.1 24.8 58.7 57.3 27.3 42.4 47.5

Source: Tabte 7.2

Table 7.3: Wheat Donations and the Domastic Market

7.33 Given the great importance of wheat donations, it is likely that theyhave reduced domestic production incentives to some extent. In the case ofwheat sold domestically, a large proportion of this is sold directly tomillers, formerly at subsidized prices. This policy was changed in 1987 tosell wheat at its opportunity cost, and partly as a result acreage planted inwheat increased significantly in 1989. Although the program now is designedso that the millers pay a competitive price, the assured delivery of donationsand centralized distribution system make it difficult for domestic producersto compete effectively. Further, a significant proportion of wheat isprovided as in-kind payments for work on development projects (US Title II andthe World Food Program). The availability of food as payment to under-employed workers may have reduced the demand for domestic food production,particularly as the provision of transportation in areas with poor access tomarkets probably biased consumption towards donations.

7.34 Still, the evidence that wheat donations had a significant impact ondomestic production is not conclusive. Commercial imports, presumably atinternational prices, exceeded donations in most years of the eighties.Despite the availability of substantial donations, commercial imports werenecessary to cover 42% of consumption in 1987 and 47% in 1988. Thus, whiledomestic prices (and thus production incentives) were no doubt lower than theywould have been in the absence of donations, it is not clear whether Boliviais a partizilarly competitive producer of wheat. In any event, the often-madeclaim that donations have been largely responsible for the poor performance ofBolivian agriculture is not credible, at least in the case of wheat. Wheatproduction in Bolivia from 1986-88 averaged 60 thousand metric tons, or aboutthe same as in 1975, when donations were at trivial levels.

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7.35 It is true, that there is substantial potential for increased wheatproduction in Bolivia, particularly in the Lowlands in conjunction withsoybean production. However, it is not necessary to cut donations to realizethis potential, at least in the short term. Improvements in infrastructureand an effective extension service would permit a sig.ificant expansion indomestic production, allowing the country to reduce its dependence on commer-cial imports. As production increases and imports decline, a conflict betweenproducers incentives and donations may arise. It therefore makes eense forthe Government to continue to monitor food donations and to reduce them asdomastic production takes a larger share of consumption. However, it is notnecessary to undertake a sharp curtailment in donations, which would beextremely painful to recipients and deny the Government access to significantfinancial resources.

Lack of Research and Extension

7.36 Although IBTA has the official responsibility for research and extension(except in the Department of Santa Cruz), in reality it does not do anyextension at all. Instead extension is done by a multitude of NGOs (e.g.,CEDEAGRO and CIPCA in Cochabamba, ACLO in Chuquisaca). IBTA has a Btaff ofabout 250, only a few of which are qualified researchers and extensionists.The average salary is US$50 a month and thus staff turnover has been between20 and 30% in each of the past years. IBTA has had some success in researchin the past, even though research efforts have been diluted by a lack of focus(i.e., research has been "focused' on more than 25 crops). A restructuring ofIBTA is necessary and a program is presently being prepared by FAO and IDA.

7.37 In the Lowlands, official colonization policies have by and largo notbeen accompanied by any delivery of services to facilitate the agriculturalproduction of the settlers. Of the RDCs only CORDEBENI has been involved inextension to the poor. A number of NGOo are involved in agriculturaldevelopment in the Lowlands, mainly in the Santa Cruz area, where the oldestcolonozation schemes are located. Although the NGO0 generally work with thepoorer sections of the population, they form an extremely heterogenous groupbecause of considerable differences in resources, origin and ideologies.Consequently, their programs differ widely in approach (in the same generalarea) and the problems they intend to solve. In spite of the several (semi)official and NG0 agricultural extension services to small farmers in theLowlands, the general picture is one of sporadic and insufficient activities,uncoordinated and lacking continuity.

Women's Issues

7.38 Government policies have not addressed the issue of the integration ofwomen in rural development. Development schemes tend to focus on men. Theintroduction to men of new technology (fertilizers, pesticides, artificialinsemination of cattle, new varieties of crops and pasturage) has ignored thetraditional and considerable role of women in agricultural production(especially in animal husbandry). Traditional women's activities such as thecultivation of certain crops and production of crafts (artesanla) have notbenefitted from development because public and private agencies do not viewthese as "marketable." The substantial temporary and permanent migration of

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men are creating special problems for women. The only grolaps representingcampesinos are the unions. Only widowed women can become members of theunion. This means that even though women will be taking care of the familyfarm while the man is away her interests and needs as a producer are nctrecognized.

MACA Institutional Issues

7.39 The magnitude of the problem of rural poverty is so great that it wilirequire massive human, financial and other resources to achieve a measurableimpact. Somewhat paradoxically it is the small proiects with active partici-gation of the poor communities and a consensus approach to decision-makingthat a22ear to be most effective in alleviating Poverty. Successful develop-ment programs should thus imply support to a large number of small, effectiveprojects. Such efforts must be closely coordinated to avoid duplication ofeffort, or even worse conflicting objectives of different projects. Theobvious agency to set overall policies, plan and coordina-q activities isMACA. However, it is so weak that its own internal constr-aints must beovercome. The principal constraints to the effective func-ioning of MACA canbe broken down into four broad categories: (a) politicizat:on; (b) weak humanresources; (c) poor central/regional coordination; and (d) absence ofinformation.

7.40 Foliticization. Over the years, MACA has increasingly become apolitical tool, focussed on political patronage nominally related to concernsfor rural or campesino affairs. Because of its orientation, MACA has been atthe center of a political struggle between campesino unions, polit3calparties, and military governments. Due to the enormity and political sen-sitivity of these issues (e.g., land titling and distribution), technicalagricultural questions have often lost priority, and there continues to be noresolution to those issues most affecting the poor. With every shift in thebalance of power, most personnel also shift, along with policy priorities.While these appointees can be effective in carrying out the wishes of centralauthorities, they often have little credibility with the farm sector and ruralcommunities in the regions. To address these constraints, MACA is attemptingto establish regional development councils to include representatives fromboth the public and private sectors at all levels of agricultural production.Because only a few of the councils are actually functioning at present, it isstill too early to draw conclusions as to their effectiveness.

7.41 Another result of politicization is that national leaders and donorswishing to carry out viable agricultural programs generally have done sothrough parallel institutions outside the real control of MACA. Theseaffiliated, or odeconcentrated" institutions place special emphasis onspecific kinds of services. Most have structures similar to those of MACA,with head offices in La Paz and centralized, vertical systems of managementand administration. The directors of these institutions are appointed by theminister, yet they obtain their budgets directly from the Treasury or outsidesources. Many operate autonomously and do not hold themselvesadministratively responsible to MACA. Donors often deal directly with themfor funding projects in the agricultural sector and basically ignore centralMACA. The affiliated institutions have achieved their independence and

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operational capability as a response to the weakening of MACA. Some, such asIBTA and BAB have larger budgets and number of personnel than the centralministry. The result has been lack of coordination and conflicting sectorpriorities.

7.42 Weak Human Resources. Virtually all of the offices in MACA areoverstaffed with under-qualified personnel, have limited operating funds, andare generally out of touch with the sector at large. Despite the efforts atrestructuring, not only do there remain too many employees in the sector, butthey are also the wrong kinds, in the wrong places and with the wrong types ofbackground for their particular functions. MACA is virtually unable toconduct planning and policy analysis for the sector. In addition to lowsalaries, the approximate 50/50 split between administrative support personneland the technical/managerial staff results in an inordinate amount of salarymonies going to an inflated administrative staff. In total, the amount leftfor travel, office supplies, and other expenses is so limited that the centralMACA becomes practically inoperative.

7.43 Although MACA is nominally responsible for national agriculturalplanning and policy-making, its scope and influence has been rather limited.As a practical matter, the major role of agricultural sector planning inBolivia is one of "programming" the sector. Broader questions of strategy andthe applicability of policy instruments, other than specific projects, tend toreceive relatively little attention. For example, even when the state hasintervened in pricing of agricultural commodities, the responsibility hasrested with the Ministry of Industry, Commerce, and Tourism, not with MACA.At the working level within MACA, the Agricultural Sector Planning Office ischarged with the responsibility for sector planning and policy analysis. Theoffice's analytical capability and stature are generally low. It hascontributed virtually nothing to sector development or strategy and onlymarginally to development, monitoring, and evaluation of sector programs andprojects.

7.44 Poor Central/Regional Coordination. RDC coordination of the planning ofthe range of agricultural institutions in their departments is difficultwithin the existing structure. MACA has regional offices in each departmentwhich report directly to its headquarters in La Paz. In addition, seven MACA-affiliated agencies have independent planning units over which the RDC has noformal control. Thus, while the RDCs are responsible for coordinatingdepartmental planning, they have little authority to do so. In practice,coordination is a function of the goodwill of parties involved. As a rulethere is an inverse relation between the degree of RDC dependence on La Pazfor technical approval or funding and the ease with which a project passesfrom design to execution.

7.45 In sum, although RDCs have become decentralized planning entities,assuming the former role of MACA in both rural and agricultural development,the result has been a plethora of independent regional activities with noclear sense of regional or national direction. Because of this lack ofmandate and coordination, those with the weakest capacity to voice theirconcerns--the poorest--are the first to be overlooked.

ill

7.46 Weak Information. Another constraint is the absence of informationabout the sector, particularly the poorer segments. Basic sectoral statisticson areas planted and harvested, production, and prices are not only weak, butgenerally compiled too late to inform policy decisions. The source of mostsector information is at the regional level, in farmer associations and RDCs.While effective planners and analysts exist in many of the wealthier regions,the poorer regions do not have the same capacity. This only serves toexacerbate the already serious problem of regional disparities. Furthermore,MACA is underdeveloped in manual and mechanized data systems. Personnelrecords are often incomplete, inaccurate, and not computerized. Financialbalances are done manually, the most recent available figures being at leasttwo years old. There is no viable information gathering system that canassist in management decision-making, or even which can provide an accuratedescription of what types of projects are being undertaken in the sector as awhole. This will constrain the restructuring of MACA significantly byforestalling readjustment of human resources and perpetuating inefficient anduninformed sector service delivery.

Lack of Beneficiary Participation

7.47 Programming of the agricultural sector has traditionally been a top-down, La Paz-based exercise. Efforts to strengthen national policy andplanning within MACA have not led to positive action because these have beenlargely divorced from the farm community. With the government's professedshift to heavier reliance on free-market signals and private sector initia-tive, however, this mindset must change towards greater client orientation.The clientele in question--Bolivian farmers--must be furnished opportunitiesto have their concerns heard, to have a say in setting funding priorities, andto contribute as partners in the overall process of agricultural policyformulation. Policy analysis and planning require experienced staff whocannot only evaluate the potential impact of different policy alternatives onthe macro economy, but who can also help leaders in the farm and rural sectorsidentify common goals and define the means to take action.

7.48 Rural people pay few direct taxes, and have little say as to themagnitude and nature of the services provided. Opportunities to supportagricultural production and marketing systems are continually identified inrural areas, but are not acted upon. Participation from the rural andagricultural sector has two weaknesses at the national level. First, the farmcommunity is not organized in a uniform, formal manner across the country.There is no official form of representation or delegation of authority withdefined limits. Second, participation implies considerable travel costs andinvestment of time. This has been a severe constraint to organizing producerassociations at the national level.

7.49 In each region, however, the representation of the farm community hasbeen accommodated in a few committees and boards where the public and privatesectors cooperate. The types of organizations that represent farmers varysignificantly among regions, ranging from cooperatives to chambers topeasants' unions. As farmers become more organized, these varied forms ofrepresentation are becoming more proactive. This is, however, a gradualprocess, which is still in its early stages of development. The creation of

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the Peasant Agricultural Development Corporation (CORACA) is an indication ofchanging attitudes among campesinoa. Yet, despite the apparent effort tocreate a depoliticized, technical campOeiio organization, the increasinglyindependent political postures of peasant unions and parent organizationsmakes the future of CORACA and other such organizations uncertain. Withoutmobilization and generation of their own resources, any institution isunlikely to succeed as an independent and autonomous entity. Some producerassociations are run by small farmers with the assistance of NGOo. Theseoften coexist with unions and other communal institutions, but are maintainedstrictly as technical and economic (as opposed to political) institutions.Farmer cooperatives have been promoted over many years by NGOs and interna-tional donors, although severely limited scope and coverage have generallybeen the result.

7.50 Lately there have been some examples of involvement of campesino unionsand other grass-roots organizations in the design of rural programs. One isthe development plans for the province of Mizque in Cochabamba Department, theother a development scheme for the central part of Chuquisaca. The Chuquisacaplan is interesting because an international agency (the Swiss Developmentcorporation), local and international NGOs and grass-roots organizations wereall involved in the design of the program. In the case of Mizque the initialneeds assessment was done by the unions, and then turned into a developmentplan for the Province by an NGO (PROANDES). In Mizque, coordination at thelocal level has generated large amounts of financing, or at least promises offinancing. This indicates that financing agencies are willing and able tosupport locally developed plans. These experiences and other similar onesshould be evaluated and guidelines established to allow for a true bottom-upplanning process.

RECOMMENDATIONS

Subsidize Poor Communities Throuah Infrastructure

7.51 Government subsidies should be concentrated in the Poorest ruralcommunities. Subsidies should not be in the form of handouts, or credits, butrather in the orovision of infrastructure, extension services, and technoloavtransfers without reauirements of full cost recovery. Experience has showedthat the poorest communities often provide the highest degree of counterpartfinancing in the form of labor. Thus provision of infrastructure does notimply a free gift. Providing subsidies to these groups should not meandisregarding cost-benefit and cost-efficiency concerns. On the contrary, suchtools are necessary in choosing among the many possible interventions in poorrural areas.

7.52 Such a oglicv of subsidized orovision of infrastructure and oroductionrelated services should be based on the exoressed needs of the communities.Recent experiments with micro-regional planning based on proposals fromcampesino unions are showing great promise. It is important that suchsubsidies be transparent. In the post, richer farmers have been able toreceive large subsidies, mainly because they have been hidden, or even labeledas poverty alleviation. Assuming that 30% of investment costs would be

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covered by the communities in the form of labor, a subsidy as large as thatgiven to the few cotton producers in Santa Cruz in the seventies (US$40million) could provide poor communities with almost 800 irrigation systemsincreasing the total area under cultivation by almost 400,000 hectares, anexpansion of more than 30% in total cultivated area.9 All other agriculturalinvestment should only be undertaken under full cost recovery or in theprivate sector.

7.53 This would imply a fundamental redefinition of the role of the state inaariculture. The state should refocus on its efforts in areas where economicanalysis shows the existence of public goods or externalities. Such areasinclude agricultural research and extension for the poor,10 efficient andsecure titling systems, and land use mapping and planning in the Lowlands.

Land Reform and Community Laws

The tottoming docunents sre aSme of the ones required to obtain a title for a recentty settledfanrer In the lowlands:

- A copy of the idontity card.(many people do not even have a birth certificate because of the costs involved)

- 'Settemennt Certificate* issued by National Institute of Cotonization (INC)(in the case of unorganized settlements, the process aborts here)

- A statistical foam with personat data and data an the parcet of lard

* Certificate from the Nationat Council of the Agrarian Reform (NCAR), certifying that nobody elsebaa a title to the tand.

(The NCAR is several years behind in its processing of such forms)

- A report fro INC fottowing a direct inspection on the spot.(The INC has no vehicles and a very amell travet budget)

A gewnral map of the ccoammnty made by en authorized surveyor.

Often the process aborts because of sirple bureaucratic errors such as a misspelling of names ofpe*Ple or places or becnuse atl members of the coammity have to sign and cooplete some forts. ifrw person is teaoyrarily away, that stalls the whole process. The tftle process goes through manypublic offices nd all tftles have to be signed by the President of the Republic.

Box 7.3t Titling: A Bureaucratic Nightmare

7.54 The problems of land titling and the inappropriate nature of lawsrelated to communal land holdings and the structure of traditional communitiesmakes it difficult to consolidate and build upon existing social structure.In the past the traditional structures were obviously successful in maintain-ing an extremely organized society. Even today many of the organizational

9 If ESF's unit costs were applied.

to For other products joint efforts with growers' associations and

universities should be pursued.

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features still exist on an informal basis, but do not provide a sound legalbasis for rational development efforts. Rationalization of the laws relatedto these areas and more effective land titling are prerequisites for ruraldevelopment. A methodologv for land titlino based on a comorehensive studyof the Dresent situation needs to be developed and used as the basis for anational effort to rationalize the laws and the land title situation inBolivia. The Government of Bolivia is not at present in a position to carryout such a project without external support, which appears well-justified.

7.55 Only few of the small peasants in the Lowlands have a legal claim totheir land. Land disputes are common, and there is a general sentiment ofinsecurity, which is not conducive to long term investments. A solution tothis problem has to be found, as the insecurity makes it difficult to en-courage more farsighted behavior by the peasantry. The existing, extremelyslow procedure is not exclusively due to excessive bureaucratic requirements,but is also related to the complexity of the problem and the weak administra-tive system. The right to issue land titles. both preliminarv and final.should be unified in a single entity. Although this action is probably notvery expensive in money terms, it may, nevertheless, be very difficult toimplement due to political constraints.

7.56 The most important claim made by indigenous organizations is the rightto communal land for agriculture, hunting, fishing, and other economic acti-vities such as timber extraction and exploitation of minerals. If thesegroups are marginalized on too small territories, they will have to abandontheir traditional form of life. In spite of the problems with Bolivia's firstexperience with 'debt-for-nature' deals other debt-for-nature swaps could beimplemented both for relieving the heavy pressure of foreign debt, forconserving the environment, and for securing the indigenous peoples' terri-tories. Swift stels should be taken to consider-the indigenous groups' claimsfor land. These cases are probably best treated on a case by case basis. Thefirst step should be to ratify the agreement that was ready to be implementedin August 1989. Since the change in Government no progress nas been made.

Aporooriate Technoloav Development and Transfer

7.57 IBTA must be reorganized"1 to be an effective research institution.Such a reorganization should include:

a) A refocusing of research activities to fewer crops, taking intoaccount the specific needs of the campesino;

b) improvements in salaries and other incentives, financed in part byreassignment of staff, and in part by donor financing, in accordancewith the rules to be set down by the Public Sector Management unitunder MINPLAN;

IDA is presently studying the possibility of financing such arestructuring based on recommendations from FAO.

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c) IBTA should not do extension by itself, but rather contract outextension to NGOs, RDCs, producers' associations or whoever iointerested and has the capacity.

7.58 For poor farmers some promising integrated schemes have been implementedwhere, for example, poor communities higher up in the mountains (where thereis a comparative advantage in seed production) produce seed for the poorcommunities in the Valleys, who produce the potatoes.12 These experiences,however, remain isolated and are not followed up by applied research. For thefarmer with some marketable surplus appropriate technology could help overcomehis/her very low productivity and make him/her more competitive vi8 a viaimported foodstuffs.

Improve Agricultural Credit

7.59 The need for credit exists among the campesinos with some marketableoutput. For the subsistence farmers credit is not feasible. Either it isturned into a grant, creating dependency or it forces the family to sell evenmore of its insufficient production. Public sector involvement in ruralcredit has been a disaster. Thus, the first order of business should be toliquidate BAB. It is a drain on public resources and its clients should beserved by the private sector. Of other public sector institutions the FDCshould be carefully studied"3 and oossiblv be suMo2rted. The FDC, has not yetmade its first loan, but the basic idea is to give credit to rural groups,such as cooperatives or communities based on so-called "solidarity"guarantees, where each member of the groups cross-guarantees every othermember. In the development of FDC it will be essential to assess thesuccesses and failures of a multitude of NGO programs.

7.60 In the medium-term, credit activities in the private sector throughrural credit cooperatives should be helied and strenothened. Such creditcooperatives and savings and loan institutions were relatively successful inhelping small farmers with some marketable surplus prior to the hyperinfla-tion. Credit institutions dealing with small farmers are basically opening upa new market. The necessary training of credit officers and borrowers in theworkings of small-scale rural credit is thus a positive externality. Privatebenefits are smaller than societal benefits as there is no guarantee thatstaff will stay with the institution, once the initial investment is made.Thus, is does appear that a case could -be made for public sector subsidizationof training of credit coonerative stafr.

12 CEDEAGRO (an NGO) is implementing such schemes in the poor, high valleysof Cochabamba.

1i A recent evaluation sponsored jointly by several international financing

agencies, including the bilateral cooperation organizations of theNetherlands, the Federal Republic of Germany and Switzerland, is verypositive about the prospects for FDC.

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Imorove Small-scale Irriaation

7.61 Access to water for irrigation could greatly stabilize food productionand improve welfare especially for the farmers with no marketable surplus.The possibilities for small scale irrigation projects, based on traditionalcommunity organization and active inputs from the communities, should beexplored. The ir,lementation of such a project would require not only thetechnical aspects of irrigation design but also radical changes in the lawsrelating to communal property and land titles. Support for small scaleirrication irojects in the Hiahlands and Valleys, based on traditional socialstructures annears well iustified.

Linking the Poor to the Ma ket Economy

7.62 General development benefits will only "trickle down" if the rural poor,are linked to the modern market economy. This may occur in two ways, firstlythrough the labor market and secondly, in the case of those who have land,through expanded demand for agricultural products. At present in Bolivia theoverall economy is at best growing slowly and the labor market does not appearto be expanding nor is it likely to expand sufficiently rapidly in the nearfuture to have a major impact on rural poverty. Hence attemots to alleviaterural povertv for the maioritv of farmers should concentrate on linking therural poor to the market economy on favorable terms. This basically meansthat efforts have to be directed towards providing the rural poor the means toprofitably produce, process and market saleable products so as to increasetheir incomes.

7.63 The following major constraints should be dealt with to inducedevelopment of agricultural enterprises geared to meeting market demands:

a) The identification of those products that can be produced by the poorand that are in high demand;

b) Evaluation of the feasibility of producing them profitably;

c) Venture capital and technical support for pilot projects inproduction, processing and marketing to test commercial viability ofenterprises;

d) Mechanisms for transfer of technology, credit and know-how to movefrom the pilot phase to the fully fledged expansion phase for theselected product lines;

The existing de facto social organization can provide the basis for thedevelopment of communally managed agricultural enterprises. Communities willrequire assistance in areas such as project management, technical support andcredit.

7.64 The examples of government becoming involved in the management ofagricultural enterprises clearly indicate that this should be left to otheragencies. On the other hand, it is the role of the government agencies toprovide policies and guidelines within which a multitude of private, public,

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non-government and foreign aid agencies can complement each others activities.However, in order to define these policies, government officials need as baseinformation objective analysis of the sector, potential areas for development,appraisal of different possible development strategies and practical examplesof how small- or large-scale agro industries can be effectively promoted.This base information and the develorment of oilot scale new aaro induetriesmay beat be obtained outside the mainstream covernment apparatus, iwossiblv ina autonomous joint private/oublic foundation. In this scenario the governmentagencies would still have a vital role to play. They would be responsible forthe setting of policies and coordination of activities and providing what areconsidered as public goods such as education, research, infrastructure, etc.

Migration

7.65 In the long-term, it seems unlikely that aariculture can form the basisfor maintaining at a reasonable level the oopulation of the Hiahlands. Thepossibilities for profitable agriculture and horticulture are greater in theValleys and hence local agricultural development may well provide for theneeds of the population. The solution then seems to lie in migration of partof the population to the potentially more productive Lowlands. However, thesocial ties, the uncertainty and fear of moving to a new habitat and the lackof viable agricultural opportunities (with the exception of coca) makespontaneous migration unlikely.

7.66 The key to successful migration must be the existence of viable enter-prises in agriculture in the Lowlands. The development of such enterprisescan be established on the lines laid down in the previous section. However,the situation is more complex as in the previous case we assumed availabilityof land. In this case, land would have to be made available. One of theimpediments to migration is the close ties to the community in the Highlands.One possibility would be to allow the whole community to move. The new colonycould maintain its links and privileges of being part of the original ayllu,and provide opportunities for seasonal or permanent migration. In thismanner, the old traditional social structures would not be destroyed and couldform the base units for profitable agricultural enterprises in the Lowlands.Suonort for micration to the Lowlands. based on orofitable aariculturalenterprises. and linked to the traditional social oroanizations of theHiahlands shows promise. Past experiences with divided migration have beendismal in Bolivia. The necessary infrastructure and agricultural extensionwas not provided. The new migrants found themselves in a ecological areatotally foreign to them. The result has been a continuation of poverty andsubstantial environmental degradation. Thus, in the short run the exoerienceof past migrations should be assessed. UNICEF has recently proposed aninteresting study of the results of past migrations from the Central AndeanRegion to the Lowlands.

Women's Issues

7.67 Rural development projects should direct the use of anorooriatetechnoloav eaually to women and men and specificallv take women's aariculturalrole into account. In the Highlands, women have the principal responsibilityfor animal husbandry and should be taught how to improve livestock production

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through improved husbandry and pasture management. Training programs ahouldbe established in order to improve the community's ability to organize andmanage rural development projects and to solve communication problems. Theseprograms should be designed for both community agricultural promoters and thecommunity in general, with a special emphasis on women's participation.14Radio should be used for community education in organization, production,health and nutrition, and appropriate technology, among others. Attentionshould also be given to the women's ability to communicate with formal insti-tutions because of the many problems related to legal rights, inheritance(land titles), and other issues which are difficult to solve without communi-cations skills and knowing how and where to apply them.

Strenathen National Policy and Planninq

7.68 Efforts to strengthen national policy and planning capacity within MACAhave not led to positive action in poverty reduction because they have beenlargely divorced from the farm community. A first step would be suooort ofthe reaional develooment councils in each department and encouraging theparticipation of community organization representatives in such councils. Asecond step would be for MACA to actively pursue coordination of olanninaefforts with RDCs and regresentatives of farmer organizations. This wouldinclude supporting efforts to collect regional data and analyzing the datajointly. To do this, however, farm communit' institutions must bestrengthened, with a system of delegating authority and representation at thenational level in order to voice their needs and concerns at the policy-makinglevel. Third, MACA must increase its own analytical caoacitv at the centrallevel. In addition to exploring means to increase public sector salaries toattract and retain qualified professionals, emphasis should also be placed oncreating a small cadre of highly skilled experts in agricultural policyanalysis and poverty issues in order to attain a degree of influence at theinter-ministerial and international levels.

14 CIPCA/Cochabamba provides a good model for administration, accounting,and marketing programs.

iCBAPTR 8: flNSPORTATIOM

XNTRODUCTION

8.1 Improvements in market access are essential to raising the income andproductivity of the rural poor. Bolivia's economy has historically sufferedfrom insufficient road infrastructure and the resulting burden of hightransport costs. The transport bottlenecks have been particularly serious inrural areas where populations are dispersed and mountains and rivers act asnatural barriers. The outline of this Chapter is as follows. First, theinstitutional framework is described. Second, the analysis focuses onGovernment policies and investments. Third, several specific sectorconstraints to poverty alleviation will be discussed, including poor policysetting and coordination, insufficient maintenance, and low salaries.Finally, a set of recommendations is presented including several relating toshifts in expenditure priorities and to improving the institutional structure.

INSTITUTIONAL FRAMEWORR

8.2 The transport sector incorporates several ministries and agencies.Given that the transportation subsector with the most direct impact on therural poor is road transport, the analysis focuses primarily on institutionsdirectly related to road construction and maintenance. These can be groupedinto three broad categoriest

a) Global Plannina Level: the Ministry of Transport and Communica-tions (MTC).

b) Decentralized Plannina and Execution: The National Road Service(SENAC) is the principal institution responsible for the nationalroad network in Bolivia. Although it is a decentralized agency ofthe MTC, it has both technical and administrative autonomy.Established in 1964 to construct, maintain and administer (andhold title to) the country's road network, it concentratesprimarily on principal roads connecting departmental capitals.Secondary roads providing access to principal roads are managedlargely by the RDCs. The RDCs also help local communities infinancing the construction and maintenance of rural feeder roads.

c) Local Execution: ESP, NGOs, private contractors, and community or-ganizations.

8.3 In this organizational structure, the MTC holds the functions of con-trol, regulation and decision-making, whereas the decentralized agencies aregenerally responsible for execution. The one exception is the RDCs which,although responsible to the MTC, enjoy a certain autonomy in regional planningand project management. Road transport itself is in the hands of manyindividual operators for interprovincial services and interdepartmental truck-ing, and of small companies for international and interdepartmental bus ser-vices. The individual operators are generally organized in unions, althoughmembership has not been mandatory since 1983.

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GOVERNMENT POLICIES AND INVESTMENTS

8.4 Transportation policy and investment have focusad on economic growthpotential. Following the rapid growth of the mining industry, most of theconstruction of the existing Andean rail lines started about 60 years ago.The construction of roads and rail lines in Santa Cruz began in the fiftiesmainly to connect the hydrocarbon industry with the rest of the country.Since 1985 the Government has reemphasized developing the road system in theEastern Lowlands to promote agricultural exports. Rural roads have not beenconsidered, even though they can have higher rates of return than severalother projects, mainly because of the lack of influence of rural communitiesand the prevailing urban bias.1

Sector Strategy

8.5 The stated obiectives of the sector's investment are to: (a) maintainand rehabilitate existing road and rail lines, especially in the Cochabambaand Santa Cruz departments; (b) integrate the three main populated areas bypaving the still unpaved portions of the La Paz-Cochabamba-Santa Cruz Highway;(c) upgrade the two main export corridors to the Atlantic and Pacific Oceans;and (d) construct penetration roads to northern and southern parts of thecountry by connecting the major population centers with the Lowlands andnavigable rivers.

8.6 The strategy does not acknowledge the importance of developing ruralroad infrastructure to facilitate development in poorer areas. This has beenleft up to RDCs and local initiative. From a poverty alleviation point ofview the strategy is flawed in its emphasis on construction of new roadsconnecting all the major cities in Bolivia (point (d) above), whiledisregarding the needs to integrate urban centers with nearby rural areas.Such an integration would allow rural areas to develop as market access wouldbe improved. Some of the roads connecting the cities of the Lowlands showvery low rates of return2 and could be substituted for well designed ruralroads.

Sector Investment

8.7 Xnvestment plans reflect even less of an equity concern than theGovernment's strategy. Public investment in transport totaled US$118.1 mil-lion in 1988 (33.9% of total). Planned investment over the next few yearswill fluctuate between US$100-122 million per year. Although not as dominantas in 1988, future public investment in transport will account for about 26-28% of total public investment. Examining the types of projects, public

I See Chapter 4.

2 See the forthcoming Updating Economic Memorandum (UEM), 1990 (Report No.8623-BO), for a review of the returns of the road projects in theinvestment program.

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investment in the transport sector will not have any major poverty impact. In1988, investment in road infrastructure made up 73% of total transportinvestment followed by air transport (16%). Investment in road infrastructurewas concentrated in large projects. Out of 69 road projects, the threelargest projects accounted for almost 50% of the public investment intransport in 1988. Regarding air transport infrastructure, nearly all (asmuch as US$18.6 million or 96%) of the investment in 1988 went to a singleairport construction project in Cochabamba, which follows neither poverty nornational strategy objectives.

8.8 The plan for future public investment in transport shows improvement inredirecting projects toward the sector's stated objectives but continues todisregard the importance of rural roads. Most resources in road infrastruc-ture will be devoted to the maintenance and rehabilitation of the existingprincipal road network built among the economic and commercial centers of thecountry, construction of major penetration roads, and upgrading of certainsegments of export corridors. Heavy concentration on large projects is likelyto continue over the next years and is broadly warranted according to thestrategy.

8.9 Because investment in rural roads has been mainly undertaken by RDCs,the transport development strategy adopted by RDCs as well as their planning,technical, and financial capabilities significantly affect the poverty focusof these transport projects. For example, the Santa Cruz RDC (CORDECRUZ) hasput the highest priority on transport sector investment, spending 70% of itsinvestment budget and allocating about 80% of its total transport investmentto rural areas. Before the change in administration in August i989, itsengineering department3 had a cadre of qualified engineers and prepared amedium-term plan for road infrastructure development. Especially, a series ofrural road projects (caminos vecinales) have targeted the areas with inade-quate road network, such as the newly colonized areas and the southeasternparts of the department. In contrast, the Chuquisaca RDC (CORDECH), with itspoorly staffed engineering unit, paid limited attention to investing in thetransport sector in the past despite serious transport bottlenecks in Chu-quisaca. only three projects were implemented in 1988, of which one was foraviation (Monteagudo Airport), and less than US$0.09 million was budgeted forroad investment in 1989. With a drastic shift in its development strategy,CORDECH now proposes to devote US$9.3 million for rural road development overthe coming years. Although this change is highly laudable in principle, it isdoubtful that CORDECH can manage and finance all the planned investmentsjudging from its present capability.8.10 ESF has provided funds to various organizations in the public and NGOsectors. As of mid-June 1989, US$14.35 million had been disbursed for 184road projects (out of tnis, US$13.47 million were spent for 160 rural road

However, most of CORDECRUZ's future investment projects in transportare not included in the new public investment program and might changetotally, as everyone who did not belong to any of the political partiesin power was fired. This situation largely paralyzed the Corporationfor a long time.

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projects). ESP funded a number of small projects, focusing on development ofrural roads. In 1988, ESF financed US$9 million for 119 projects mainly forthe construction upgrading and maintenance of rural roads. In 1988, ESFinvestment in road infrastructure was particularly important in Potosi andOruro, where only limited funds were provided by both the SENAC and RDCs. Asis the case in agriculture, it was initially intended that FDR would take overESF type projects. However, this appears unlikely now.

SECTOR CONSTRAINTS

Rural Roads

8.11 Although rural roads are of great importance to che rural poor, con-struction and maintenance of such have traditionally been neglected. A back-ground paper for this study4 looked at 14 rural road projects in the poorestareas of Bolivia. The paper concludes that rural roads are important but alsothat they should be carefully assessed. Simple rules of thumb can be deve-loped to assess whether a road makes sense from a socio-economic '?erspective.Projects often do not have a direct impact in terms of increased productionbut usually in increased sales of barley. Donkeys are sold as a substitutiontowards road transportation takes place and the barley they would have eatenis sold. This increases sales without increasing production. Rural roads areshown to be economically efficient investments, have a high involvement of thecommunity and be generally cost effective. One issue is the lack of aninstitutional home for rural road construction and maintenance. Today, it isthe responsibility of the RDCs but SENAC's local engineer is often the onewith the local expertise. The Regional Development Fund (FDR) couldpotentially play an important role as coordinator and keeper of the technicalexpertise, but plays no such role today.

Weak Planning and Coordination

8.12 The three functions of the planning system--investment planning, projectmanagement, and annual investment budgeting--involve both ministries anddecentralized agencies in the transport sector. Each agency has its ownplanning department that assesses projects and make recommendations.Rivalries among agencies have led to weak coordination of investment projectsand a lack of progress in meeting the needs of rural people. To illustrate,assessments normally originate with the executing agencies (SENAC and RDCB),are passed up to their respective supervising ministries (MTC or MINPLAN),then to the National Committee for Projects, and finally to the Cabinet. TheNational Committee for Projects is run by the MINPLAN, but includesrepresentatives of MOF and the initiating ministry of each project. RDCs areexpected to be largely responsible for departmental transport infrastructure,yet most sector strategy proposals are formulated at the central level by theSENAC Planning Department. Consequently, no appropriate coordination systemexists for incorporating the transport plans of the RDCs into SENAC's sector

4 "La Importancia de 1a Infraestructura Rural en el Alivio de la Pobreza,"Rodrigo Cisneros, La Paz, January 1990.

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strategy. To complicate matters, SENAC's District offices, which have primaryresponsibility for executing basic rural road projects, have virtually no sayin the country's road planning. Although they participate somewhat in thedesign of the annual operational program for road maintenance by providing thecentral maintenance office with regional information, the needs of the ruralpoor are often overlooked because there is -irtually no means by which tocommunicate their priorities. Once the planning proposals have been made, theMinistry reviews and attempts to incorporate them in the National TransportPlan according to the availability of financial resources, a factor that canrarely be taken for granted (see next section).

8.13 SENAC's planning departments and the RDCs produce project concepts, makepre-feasibility and feasibility studies and engage consultants. While theseare important steps in the planning process, the proposals are processed with

little or no study of alternatives (alignment, standards, etc.), except whenrequired by international lending agencies. As in other sectors, this tendsto distort the internal priorities of the respective institutions and oftencreates longer term difficulties at the project implementation stage.Moreover, decisions on project implementation often appear to be determined byregional and institutional pressures, frequently without regard to the systemof project planning. In most cases, the dominance of such pressures over arational assessment of local needs will neglect the needs of the poor.Although some of the wealthier RDCs are very capable of undertaking studies,capacity varies widely among departments. Some RDCs have almost no technicalor human resources to invest in roads at any stage of the project cycle.Departments are also meant to maintain project inventories, but often do notdo so.

Scarcity of Ooerations and Maintenance Resources

8.14 Throughout the eighties, insufficient funding made it impossible forSENAC to meet all its objectives, particularly in relation to maintenance ofexisting roads and construction of rural roads. Although it is relativelywell-organized administratively, SENAC is almost entirely dependent on TGN andexternal donor financing for road construction, improvement and maintenance.Consequently, its planning and execution practices have been distorted.Because the full amount of programmed TGN resources may not reach the sector,executed projects fall far short of what was originally programmed.Dependence on external financing for the remainder of its resources requiresSENAC to follow priorities that are not always in line with internal and/orregional necessities. Consequently, stated objectives in the roads sector arerarely met from a global perspective. While certain regions may be receivingparticularly careful attention and financing, others may be neglectedaltogether. This scarcity of resources has a profound effect on SENAC'sphysical and human resources as well.

Low Salaries

8.15 Although SENAC itself has a history of being staffed with highlyqualified, experienced, and dedicated personnel, this is changing as manywealthier RDCs are attracting some of the best engineers away from centralSENAC to their respective regional offices and the relative salaries of SENAC

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continue to fall. While this is a positive move for those RDCs that canafford it, it exacerbates the existing regional inequities, and leaves theprincipal national agency considerably weaker from a human resource perspec-tive. Without adequate salaries, this resource drain is likely to continue.

RECOMMENDATIONS

Sector Priorities and Expenditures

8.16 The importance of rural roads should be recognized among the sectorpriorities. The basic idea in a poverty oriented transportation policy is tofacilitate the development of local markets. Investments in rural roadsshould pass the same strict cost-benefit criteria as other roads. Among theprincipal roads presently in the investment program some show an internal rateof return of less than 12% while projects for rural roads exist that have areturn much higher than 12%. For example, by substituting these high-returnroads for the low-return principal roads, there is a possibility of improvingboth equity and efficiency of the investment program.

8.17 This can be accomplished, in part, through some of the community par-ticipation and labor-intensive means pursued by ESF. The transfer of ESFmethodology to SENAC and the RDCe would ensure that the same types of poorcommunities would continue benefiting from such projects in the future. Giventhat SENAC is considering proposals for decentralizing all its secondary andtertiary road activities, special attention should be paid to the developmentof capacity to reach poor communities at the regional level. The future roleof the Regional Development Fund (FDR) in promoting ESF style projects shouldbe assessed and possibly promoted.

8.18 The economically efficient rural roads projects have not been undertakenbecause of lack of attention and pro-urban biases in the decision making. Toovercome these obstacles, costs must be kent down, the settina of 2rioritiesimproved, and technical skills strenathened. Costs can be kept down by: (1)focusing on spot improvements to drainage, bridges and other vulnerablesections; (2) using local labor as far as possible; (3) revising theprocurement system for small projects, as the system is relatively moreexpensive for small than for large projects; and (4) ensuring that roads onceimproved are kept maintained. The experience of ESF is important in both theidentification of high-return spot improvements, in the use of local labor,and in using a different procurement system.

8.19 To improve the setting of priorities, community involvement should beenhanced and planning should consider other activities in the project areas.First, the communities should be involved. This could be done by allocating ashare of road investment funds to rural roads projects proposed by communities(see next paragraph). The communities would be required to providecounterpart funds (e.g., 20%) in the form of labor to assure a thoroughselection by the community. The Government agency should contract out theworks to a private contractor under the community's supervision, or to thecommunity itself. This would help ensure the successful completion of the

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projects. Second, ro4d planning should consider proposed and ongoingactivities to improve agricultural production (irrigation, extension, etc.).

Institutional Recommendations

8.20 Chanee budgeting process. To ensure the consideration of rural roads inthe investment plans a certain percentage of the national investment budgetshould be set aside for such projects. These funds would probably have to bedistributed roughly among regions to avoid the more powerful regions using upall the funds. The funds should be used for matching grants to local orregional institutions proposing projects. Communities should be provided withtechnical assistance in the design of projects (see below), and be required toprovide a certain share of the costs in the form of labor or local materials.The selection and financing of such projects would be an important role forSENAC or FDR to play during and after the decentralization process to helpalleviate regional differences.

8.21 Establish clear lines of resDonsibilitv. A system of planning, coor-dination and delegation of responsibility should be established between SENAC,its District Offices, and the RDC Transport Units. The RDCs should be givenboth the responsibility and budget to concentrate on regional priorities. Ifthis option is pursued, however, it would be important to analyze the specificroles that each institution should play, the capacity of the RDC TransportUnits and the potential costs of transition. A preliminary analysis wouldsuggest the importance of maintaining the existence of a national institution.Its principal functions would include: setting national objectives and norms;providing uniform monitoring and evaluation standards; retaining responsibili-ty for maintaining, rehabilitating, and, where necessary, constructing theprincipal national arteries/networks.

8.22 SENAC should provide both consultative and trainino services in regionalroad planning, project design, implementation and evaluation. Particularemphasis should be placed on training in cost-effective methods. To comple-ment these training efforts, it would be useful for the weaker RDCs to takeadvantage of the experience gained in other RDCs by instituting a cross-departmental training program. Where necessary, specific measures could beconsidered by a central institution such as the FDR to provide the necessaryfinancial resources to attract additional professionals to the RDCs where roadexpertise is the weakest. In sum, all relevant road institutions shouldreceive appropriate technical assistance not only to guide the process ofdecentralization, but also to strengthen the functional roles of eachinstitution once decentralization has been achieved.

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CHAPTER 9: EFFICIENCY I88UES

INTRODUCTION

9.1 Since investment resources are scarce, the opportunity costs of aninvestment strategy oriented to poverty alleviation must be assessed. It isoften assumed a priori that investments in poor regions are less cost-effec-tive and have lower benefits. This assumption is based on the fact thatproductivity is low due to isolation from markets and low density of benefi-ciaries. This chapter reviews how investment costs vary between poor and non-poor regions and the degree of efficiency or impact of investments in poorareas. The Chapter concludes that it is possible to make cost-efficientinvestments in poor areas if appropriate technology is used and communitiesare involved in the implementation. Recommendationa are made for improvingthe return on investments, and the possibility of leveraging investmentresources in poor regions is explored.

COSTS OF INVESTMENTS IN POOR AREAS

9.2 The experience of the ESF is used to determine whether the cost of,for example, building a school or maintaining a road varies between regions.Through its financing of three thousand small projects in infrastructure andsocial services, the ESF has amassed a data base on investment costs. Thisinformation falls into two categories: first, expected costs based on marketprices, and second, actual implementation experience.

9.3 To control theircontracting procedure, the Index (La Paz 1)ESF established a data 1.4base of the costs of labor 1.2-and major construction ma- 1

terials around the coun-try. These prices are for 0.urban areas only. In 0.6rural areas prices vary 0.4 Rtoo greatly between speci-fic locales and times oof 0.2the year to be used as awigeneral index. Using nine O' ?oct!flbo c5tAo %, ca 16AP~types of standard pro-jects, the ESF developed Construction Empedrade Enimosodo Road Uclnlenance

estimated costs per unit roject Opes. Sbof output for eight urban toad Oinpus t obsur d rences Cn

areas (excluding the Empedrodo and Enlosela4do are forms of street-areas (excluding the ~paying wtfh stne w cobbIeaon.s. respeditvetyDepartments of Beni and Source, ESFPando because of the wide Ivariation in costs). Figure 9.1: 3SF Standard Costs in major citiesFigure 9.1 shows theseunit costs for eight of the project types. Since these are benchmark pricesbased only on the cost of standardized inputs, they obscure differences In

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topography, access, construction style, and the density of beneficiariesserved by the infrastructure.

9.4 Most of the project types in Figure 9.1 vary by less than ten percentfrom the La Paz base price. Santa Cruz has consistently higher prices,approaching a forty percent differential between road projects carried out inSanta Cruz versus those in Potosi or Oruro. In fact, the poorest cities tendto have the lowest investment costs, as witnessed by the fact that all of theprojects when costed for the cities of Oruro and Potosi are below the La Pazindex price, and those in El Alto are either equal to or below the index.Therefore, looking only at urban areas, costs of focusing infrastructureinvestments on poverty regions should be expected to be lower.

9.5 To judge whether this expectation is fulfilled in implementation, theactual costs of sixteen types of projects were analyzed. The data were brokendown between rural and urban areas by poverty area.I The poorest provinces(Area 5) are characterized by a predominance of dispersed, rural populationsthat live at a subsistence level. The wealthiest provinces (Area 1) includeprovinces that contain department capitals. These projects are not standar-dized and therefore often not fully comparable, but do reflect regionalcontexts. This information aggregates different types of technologies anddoes not consider donated local materials or labor in the cost of the project.

9.6 Table 9.1 provides -

indicators of technical COSTAWIT Ba POVERTY AEMS F ESF PIWCTS

efficiency as measured by Poverty Ares 1 Poverty Area 4 Poverty Area Scost per unit for projects Urban Rural Urban Rural Urban Ruralin water supply, sanita-tion, roads, school con- Water Supplystruction and health faci- Cost/Meter 18.62 14.54 N/A 12.54 7.97 26.41lities. The information Seitationon water supply reveals Cost/Meter 19.45 10.48 18.23 16.60 12.40 20.40wide variations in costs,with the lowest cost per Cost/Km 3,?96 1,965 N/A 4,692 "/A 1,692meter installed in urbancenters in the poorest Schoot Constructionprovinces. Unit costs of Cost/School 40,239 62,559 40,880 18,706 38,065 25,238sanitation projects in ealth Contructicnrural areas increase with Cost/Center 37,813 27,056 25,641 7,669 109,491 12,892the level of poverty,while costs of urban pro- oure. 8SFjects decrease with the W

level of poverty. This is Table 9.1: Cost/Unit Variations by Poverty Areas

probably because sanita-tion technology can be more easily made adequate for local needs, for urbansystems than for rural systems. The urban systems in Area 1 often need toinclude more expensive treatment facilities, whereas such facilities are notnecessary (or at least not used) in the small towns in Area 4 and 5. Roadmaintenance project cost vary widely, though costs are comparable between the

1 See Annex II.

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poorest and wealthiest regions in rural areas. School construction is leastexpensive in poor rural areas, undoubtedly reflecting smaller scale. Healthconstruction follows a similar trend. The lowest costs are in poor ruralre ions, accounted for by a predominance of health posts in rural areas andhospitals in urban areas. The conclusions from Table 9.1 suggest that insimple cost per unit terms, poor rural areas often out-perform other regionswhen technology is adapted to local needs.

9.7 Table 9.2 uses cost . -. -.......

per beneficiary as an C/UMEICJARY VARIATIOS Y POVERTY AMAadditional measure of l U$/8enflcary)efficiency. The dispersed Poverty Are* 1 Poerty Area 4 Poverty Are" 5nature of poor rural areas Urbn Rwal Urban Rural Urban Ruratof Bolivia would beexpected to give these itater Syply 54 U/A N/A 16 43 20regions a decided aoeitan 26 33 88 58 67 55disadvantage in terms ofthis measure. construc- Roo& 7 32 N/A 28 2 6tion of schools and health Sdo lCotr. 3? 96 115 82 9 218facilities, show thehigher costs of providing aeetIh Contr. 3 2 I3 12 68 10a standardized service todispersed populations. SOI:ES?

However, the evidenceshows that for water --showsy, thats forper Table 9.2: Cost/Beneficiary Variations by Povertysupply, costs per uebeneficiary are about Athree times lower in poorrural regions than in the wealthier urban areas. The poorest provinces alsoout-perform the rest of the country in cost per beneficiary of road main-tenance projects. Sanitation projects show higher costs in poor areas, butrural projects are competitive with urban projects on a cost per beneficiarybasis.

9.8 The data presented in Tables 9.1 and 9.2 show that infrastructureinvestments in poor regions, and particularly poor rural regions, can becompetitive on a cost per unit or cost per beneficiary basis. This isparticularly true in types of projects where a technological package can bedeveloped that in appropriate for dispersed rural populations. One example isin water supply where costs per beneficiary can be controlled by switchingfrom the urban model of centralized systems to a decentralized system ofindividual pumps which correspond to the more dispersed population.In more standardized types of investments, especially investments in socialservices like primary education, mechanisms must be sought to reduce theinherent inefficiency of dispersed populations. For instance, the unit costof building schools in poor rural areas is generally lower because of thesmaller size and availability of donated labor or local materials. However,the cost per beneficiary of the investment is much higher in poor areas ingeneral and poor rural areas in particular.

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EFFICIENCY AND IMPACT OF INVESTMENTS IN POOR AREAS

9.9 This section presents a summary of the experience of investments in poorrural areas of Bolivia. As presented in the preceding section, investmentcosts vary greatly between regions and poverty levels. To gauge efficiency,these costs must be matched against output. Unfortunately, little systematicdata exist on economic or social return of projects in poor areas. Table 9.2presented one indicator, cost per beneficiary, for a group of projects carriedout by ESF. This section summarizes the existing information on efficiencyand impact for roads, irrigation, water supply, health facilities and schools.

Roads

9.10 Because of difficult topography and low levels of agriculturalproductivity, it is often assumed that the construction of roads in very poorareas of Bolivia is not economically justified. A study commissioned for thisreport analyzed the economic impact of roads in poor, rural areas of Bolivia.Of seven roads2 identified and analyzed, only 1 generated an economic returnbelow 12%. The positive economic impact of road opening and upgradingincludest (i) the sale of pack animals and excess forage as peasants sub-stitute forms of transportation, (ii) an increase in agricultural productionprimarily in zones with under-utilized capacity, and (iii) an income effectfrom lowered transport costs, reduced prices of goods imported into thecommunity, and expanded opportunities for seasonal migration of labor. Thereport found that the level of economic benefits depends on the structure ofthe local transportation market, the level of community organization, thepresent level of production, and the possibilities for expanding production.

9.11 The structure of the transport market is important in determining howbenefits are distributed. In one case, the benefit to local residents interms of lowered transportation costs was only an absence of an annualincrease, not an actual reduction in transportation costs. Transport wascontrolled by a monopoly trucking firm that absorbed most of the benefits anddid not expand services. One project had no benefit at all due to lack ofcommunity organization. The project was located in an area with 13communities spread over two departments and three provinces. Both Aymaras andQuechuas live in the area and religiously there is a strong division betweencatholics and evangelicals. Thus the communities could not agree on a jointsale of production after harvest that would lower transportation costs, andcould not put any pressure on the trucking company to lower tariffs.

9.12 The study found that roads are beneficial if production is not techni-cally constrained. If other technological and market constraints exist,investments in roads will have little impact. Therefore, new investments inrural roads should: (i) be oriented to regions with under-exploited productivecapacity, and (ii) be complemented by programs to organize collectivetransport of products and provide information and technical inputs forcommercializing local production.

2 The seven roads had benefitted from a total of fourteen individualprojects.

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Irrigation

9.13 Irrigation investments have had a mixed record in Bolivia. Recentassessments have shown the following factors as being important for thesuccess of irrigation projects. First, small scale is essential, no largescale irrigation scheme has succeeded. second, community involvement isessential. Third, follow-up assistance in improved farming methods andmarketing can substantially increase the net returns. Fourth, net benefitsvary negatively with the altitude of the area.

9.14 The National Service for Community Development (SNDC) has implementedthirty-nine small-scale irrigation projects in the Highland and Valleyregions. The costs per hectare range from $18 to $229,407 per hectare andfrom $2 to $376 per beneficiary depending on the system applied. Detailed ex-post evaluations carried out on two of these projects highlight some of thefactors that influence the impact of the investment.

9.15 The first project is located in a community of 250 people on the roadfrom Potosi to Sucre. A $17,000 investment in irrigation increased theirrigated land in production by 152% and the annual yield by 203%. However,family income was only 32% higher in 1989 than when the project was initiatedin 1982, far short of project goals. Increases in transport costs and lowerprices offered by the intermediaries reduced the benefits of the surplusgenerated. In addition, because of the limited size of the local economy,production increases forced down prices fetched in the local markets. Theproject had not considered the potentially negative effects of commercia-lization and market absorption.

9.16 The second project is located in an isolated community in the departmentof Oruro that survives on a very limited base of potatoes and livestock,mostly llamas. Due to weak technical implementation and miscalculation ofavailable water resources, production increased only 26%. Family incomeremains unchanged due to unchanged low productivity, and few market oppor-tunities. No crop diversification resulted since the community did notreceive any technical assistance or training during project execution. Thecommunity could, therefore, not fully utilize the expanded opportunitiesafforded by irrigation.

9.17 A recent evaluation3 of 558 mi-ro-irrigation projects in La Paz, Oruro,and Potosi Departments, on the other hand, reached very positive conclusions.The report stresses the importance of community involvement throughout theproject cycle starting with identification. Communities often identifiedprojects, participated in construction, and organized themselves to maintainthe projects. The technology chosen was problematic in some cases. There isa strong need to balance the limited knowledge of the communities in projectimplementation with the need for hydrologically sound investments. Most of

"In forme de la Kisi6n de Evaluacidn de Proyectos de Desarrol.oAgropecuario y Microriego en los Departamentos de La Paz, Oruro, yPotosi;" MINPLAN, MACA, UNDP, and Swiss and Netherlands' Technicalcooperation; May 1989.

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the irrigation pro4ects did not change farming methods in the affected areas,due to lack of follow up with extension and other services--similar to theindividual experiences of SNDC cited above. Even without changes intechnology the benefits were substantial in reducing the variability of theamount harvested. Some examples show double bxnefits with extension andirrigation, compared to irrigation alone. The cost benefit ratio calculatedat a discount factor of 12% p.a. showed positive net benefits for 93% of theprojects in terms of area irrigated. The net benefits vary inversely with thealtitude of the project area.4

9.18 The lessons from past projects show that to increase the efficiency ofirrigation investments, more attention needs to be placed on the commer-cialization of production and other post-harvest activities, the developmentof integrated packages including agricultural extension and credit informa-tion, and on community involvement. Technical problems in many small-scaleirrigation projects point to the nee. to refine site analysis procedures andtypes of technology selected.

Water Supplv

9.19 To merit investment in dispersed rural populations, water supplytechnology must be carefully chosen. As the figures from the ESF show, costsper beneficiary of water supply projects in rural areas generally out-performthose of more sophisticated urban projects. This conclusion is tempered bythe fact that urban water systems, while expensive to install, often aremanaged by much better institutions that more easily could apply tariffs5 thattheoretically will allow recuperation of the investment over its lifetime.

9.20 Substantial knowledge about rural water systems and appropriate tech-nological packages is available in Bolivia. UNICEF, CARE, bilateral programsand some RDCs have been active in implementing these systems. The World Bankis planning a pilot project for low-income communities in Oruro and Potosibased on several years of testing. From these experiences, some efficiencyguidelines can be established. For instance, UNICEF calculates that in verydispersed populations (under 200 people) hand pumps are most economical at anaverage cost of $200 per unit and US$8.00 per beneficiary. Depending ontopography, spring-fed systems also are attractive at a construction cost of$150 and a cost per beneficiary of about US$7.00. Populations with a sizebetween 200 and 800 people need a more sophisticated system of gravity pumpedwater that costs approximately US$11,900 per unit and US$30 per beneficiary.If we assume that the benefits from access to water are equal, it is moreattractive to invest in more dispersed populations.

9.21 The return on these water investments can be maximized through twosimple strategies. The first is to organize project implementation in such a

4 From gross benefits of US$200/ha at 4,000 m and higher to 3500$/ha inareas below 3,000m.

Such water companies can also often practice cross-subsidization fromricher to poorer customers.

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way as to ensure continuity of maintenance after the initial investment. Thiscan be done by using tariffs to create the cashflow necessary to covermaintenance expenses. or, in extremely low-income communities, trainingcommunity members in routine maintenance during the construction period willhelp to increase the effective lifetime of the investments. The secondstrategy involves education efforts to allow beneficiaries to derive themaximum benefits offered by access to water. Often opportunities for improv-ing both food production and the health status of the family remain unrealizedbecause no training in adapting to the new systems is provided. The costs ofeducation activities in water projects are typically less than 2% of the totalproject costs. This represents a very low-cost method of improving the returnon these investments.

Health Care

9.22 The experience with ESF-financed projects has proven that developingstandard packages for basic equipment, controlling construction costs, andfocusing only on essential infrastructure can bring down costs to anacceptable range for introducing health services to rural populations.However, efficiency depends on the appropriateness of scaie, location, qualityof services and community extension activities.

9.23 Rural hospitals are generally too large and sophisticated, and under-staffed for the population it is intended to serve. Rural Bolivia is litteredwith multi-bed facilities lacking mid-level staff (nurses and auxiliarynurses), operational budget and patients. An optimistic estimate by theMinistry of Health puts the average occupancy rate for rural hospitals in mostdepartments at less than 20%.

9.24 In recent years, more attention has been focused on the need to buildless sophisticated infrastructure to provide preventive health care andlimited medical attention. The ESF has financed requests for over 250 basichealth posts, most located in rural areas. The basic model, developed by theNSF and by UNICEF, includes infrastructure and equipment for a minimum levelof service that costs US$10,000-US$12,000. Even with pared down investmentcosts, the lack of resources to cover recurrent costs of salaries and medicalsupplies limits the possibility of extending this model to increase theprovision of health services to the rural poor.

9.25 While health posts have lowered the cost per beneficiary, theirpotential impact on improving the health status of the population has yet tobe realized. One of the principal problems is low utilization. In a studyof 11 rural health projects executed by non-governmental organizations,patient visits to health posts averaged 20-63 per post per month (para. 5.33).At these levels of utilization, infrastructure alone is obviously not theanswer. Health facilities face significant obstacles to efficient servicedelivery. These obstacles include cultural beliefs and customs amongindigenous groups that reduce demand for modern health services, the strongpresence of traditional medical practitioners, economic constraints on payingfor consultations and medicines, and a lack of rural infrastructure, such asroads, to facilitate use of health services.

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9.26 Large efficiency gains are available from existing infrastructure.Investments should be focused on increasing tht utilization of existinginfrastructure. New facilities should only be built in areas with a suffi-ciently large population that can be integrated into servi ,. networksradiating from existing under-utilized facilities such as hospitals. Gainscan also be made by closing down infrastructure that is duplicative, a problemin several rural areas with a high presence of NGO and government infrastruc-ture. Finally, developing outreach programs, appropriate educational materialand service approaches that attract the confidence and support of theindigenous population is essential.

9.27 Besides increasing efficiency of existing facilities, a poverty-orientedinvestment strategy should seek to expand coverage to the unserved. Improvedefficiency of the present system will free up resources to allow thisexpansion. One promising strategy is to expand the effective coverage ofinfrastructure with investments in mobile teams using a health post as a base.This avoids the cost of additional health posts to serve very dispersed areas.However, calculations must be made carefully to avoid spending more money onexpensive transport modes than would be spent alternatively building basicfixed infrastructure. In the Amazon region of Bolivia, this idea of mobileteams can be translated into a river-based system of health boats to serve thedispersed population living along these rivers.

Education

9.28 Investment costs per primary school do not vary greatly among regions.indeed, rural communities may require less financial outlays because of thepotential for community donations of materials and labor to construct schools.Unit costs of material inputs like textbooks and desks do not tend to varysignificantly among regions either. For instance, based on ESF figures, thecost of transportation of textbooks and desks is a low percentage of the totalcosts of production, reaiulting in fairly uniform costs of provision around thecountry. A standard educational package would have roughly equivalent pricesindependent of region. However, while most rural communities have access to aprimary level school, they usually lack the trained teachers and materials todeliver education.

9.29 To raise the economic efficiency of rural primary education, mechanismsmust be found for raising student-teacher ratios. Two approaches bearsupport.6 UNICEF has been developing a program in multi-grade instruction.Instead of striving for one teacher for each class level, rural teachers wouldbe trained and provided with materials that would allow them to teach multiplegrades within the same classroom. This program requires investments intraining, materials and some redesign of schools, with almost no incrementalrecurrent costs since the teachers are already receiving salaries. Thisapproach will have little budgetary impact since external financing is usuallyavailable for investment but not for recurrent costs.

6 See also Chapter 6.

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9.30 A further strategy for increasing both the efficiency and coverage ofrural primary education is the establishment of rural boarding schools.Boarding facilities would be built onto existing rural primary schools toallow access for children who live in neighboring areas too dispersed tojustify a separate school. The advantage, again, is that no new budgetpositions are needed. In fact, the existing teachers would teach morechildren, raising the efficiency of the system. There are isolated examplesof such schools, usually run by religious organizations. An NG0 in the poorprovince of Cordillera in Santa Cruz plans to adopt this system, covering thecosts of boarding through a combination of food donations and food gardensimplemented by the school.

9.31 Because of their small size and difficult access, there are manyisolated communities for which it is hard to justify investments. Ineducation, experimental programs have been implemented in primary educationand adult literacy using radios coupled with the distribution of writtenmaterial. However, these programs should be viewed as a second-best solutionsince the quality of the primary education received is usually lower than in aschool setting.

LEVERAGING INVESTMENTS

9.32 As has been shown, making essential infrastructure and social serviceinvestmente in poor regions can be justified on efficiency grounds. There isno a priori reason to exclude investments in poor areas. In addition, thereis room to increase the efficiency of these investments through betterselection of technologies and delivery mechanisms. These conclusions supportthe case for shifting a portion of the public investment program to these poorrural regions. However, in Bolivia's very centralized system, resources areslow to trickle to poor rural areas. Resources will need to be generatedwithin these regions themselves to ensure investments, at least to providecounterpart funds for nationally sponsored projects. The issue becomes to

what extent central government or donor money can be leveraged through localcounterpart financing.

Financial Resources

9.33 The availability of counterpart financial resources comi-g from publicand private agencies implementing investments in poor areas ia usuallyconsidered quite limited. Tax bases are weak and the investment budgets ofagencies constrained. To get an idea of the distribution of available comple-mentary financing, Table 9.3 presents figures from the ESF on counterpartfinancing of projects by region and poverty level.

9.34 Urban-based projects provided 11% of total project costs, with ruralareas slightly les at 8%. In terms of poverty levels, as expected, theregion of highest degree of poverty provided the least financial counterpart,averaging only 4.75%. However, $2.3 million in financing was generated inrural areas designated poverty level 4, which is significant.

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9.35 These counterparts[ come from central government CTERPART FIAWCIAL C0NTRITUTI?WS tOagncmesfromuncnpral ESF PRQJECTS SY REGION, AND PVERTY LEVELagencies, municipa- Counterpartlities, NGOs, and others. Comitment Counterpart Total As X of TotatIn the present context of c(s) 80 extremely limited public Poverty Area 1sectoremelyurces, mechanisms Rural 7,405,965 449,777 7,855,742 5.73s eector resources, mechanisms Urbn 59,247.401 9,171,211 68,418,612 13.40for leveraging complementary Total 66,653,366 9,620,988 76,274,354 12.61expenditures by agenciesworking in poor areas must Poverty Area 2

be eploed.Table 9.4 Rural 16.496,123 2,231.105 18,727,228 11.91be explored. 17ble 9.4 Ruran r:,723,618 1,317,173 19,040,791 6.92shows that the highest over- Total 34,219.741 3,548,278 37,768,019 9.39all shares of counterpartfinancing for ESF projects Poverty Area 3have been provided by RUral 18,3854514 547,737 18,933,251 2.89

have ~~~~~ ~ ~~~Urban 3,677,239 178,760 3,855,999 4.64religious organizations, Totat 22,062,753 726,497 22,789,250 3.19cooperatives, grassrootsorganizations, and municipa- Poverty Area 4lities. Central government Rurat 20,249,821 2,351,704 22,601,525 10.41

Urban 1,700,420 40,775 1,741,195 2.34agencies have provided very totat 21,950,241 2,392.479 24,342,720 9.83little in the way of finan-cial support, again reflec- PoWerty Area 5ting severely limited Rurat 5,426,799 308,202 5,735,001 5.37Urban 784,468 1,747 786,215 0.22investment budgets particu- Total 6,211,267 309,949 6,521,216 4.75larly for the type ofdecentralized, small-scale Totat

Rural 67,964,222 5,888,525 73,852,747 7.97projects presented to ESF. Urban 83,133,146 10,709,666 93,842,812 11.41Muricipalities have a Total 151,097,368 16,598,191 167,69s,559 9.90certain ability to generatetheir own resources and NGO tSurce: ESfoften have channels ofexternal financing. The Tale .3: C F Contributfact that cooperatives and Table 9*3: Counterpart Financial Contributionsgrassroots organizationswere able to generate close to $2.4 million to support projects isencouraging.

Communitv Contributions

9.36 The financial costs of carrying out investments in poor areas can ottenbe lowered through the contribution of donated labor and local materials bybeneficiary communities. While this system tends to complicate projectexecution and requires more technical supervision, the benefits in terms ofleveraging scarce investment dollars and increasing community participationare significant.

9.37 There is very little systematic information on the value of communitycontributions in investment projects. The most rounded experience comes fromthe National Service for Community Development (SNDC). The agency requiresthat all unskilled labor and local materials be provided by the community inthe execution of its rural infrastructure projects. Of their projects inflood control (defensive walls), roads, water supply, and small-scale

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irrigation, the imputed value of communitycontributions ranged from 16% to 79% of total COUNTERPART WNTtRIOlNS TO 8SFproject costs, with most communitiee able toprovide between 30 and 40%. In irrigation PUOJECTS BY SOLICITINOAGSAOprojects, the SNDC leveraged S1.3 million in total Comerpt asinvestments with an expenditure of a little over AsnKv ShArss of YLCs$SOO,000. The micro-irrigation study found acommunity contribution of on average one third. RurosiCU 6rgm9zatfon:

tIrban 20.80%Total 17.102

CONCLUSIONS AND RECOMMENDATIONS Cooprative & GressrootsOruriationS:

9.38 Based on the existing evidence, there is no Urba 14.17%reason to suggest a priori that investments in poor Total 15.15%regions, particularly rural areas, can not be 1c1palltlesscompetitive. While differences exist in labor and ural 18.61%Urban 12.97%material costs, they do not systematically Total 14.6S%influence the costs of implementation of specific Socutar WOOs:projects both among regions and areas of different Rural 13.9Mpoverty levels. Of far more importance to the Utalbn 3 112economic viability of a project is the scale and Reional Dveloqpwt Corp.type of technology implemented and the attention Rural 8.67%paid to issues of market structure and commer- Urban P.Mcialization possibilities. TUtet r-A_. , *s~~~~~~~~~~~~~~ohr Governmuc Apmciz

(CMOIS, OPSSP, SENAC ate.)9.39 For roads, construction of rural roads should lural 1.95%take place under the following conditions: A Urban 7.26%sufficiently large pre-project production per km. Total 4.7of road constructed, an expected increase in Source: ISfproduction, or a generated saving independent ofthe increase in production. The level of benefits _ _

depends on the degree of community organization and Table 9.4: Counterpartthe level of agricultural potential in the area. Contributions to ES?The level of benefits to the poor also depends onthe degree of competition in the local truckingindustry. The recommendation is to improve existino rural roads. andconstruct new rural roads in areas with some existino groduction and a ooodcommunity oroanizat_ion.

9.40 Irrigation shows good potential in poor areas. Irrioation oroiectsshould be followed uD with substantial technolooy transfer and assistance lnmarketina. Again community organization is key. In water supply, technologyneeds to be adapted to local needs. Investments in water should follow theouidelines established by UNICEF. Training in maintenance or establishment ofwater cooperatives are key to the sustainability of these projects.

9.41 For projects that offer social services such as health care and educa-tion, dispersed populations are decidedly at an efficiency disadvantage.Health investments, in particular, have been badly planned to take intoaccount the dispersed nature of rural populations in Bolivia. However, largeefficiency gains are possible in both health and education by rethinkingapproaches to service delivery. In health. there is a need to build low cost

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basic fagilities and asneially to Mmroe h use gf isINa aiiisOutreach programs, education, and comunity boad sorvice delivery will all beimportant ln ralisng the effiliency of eristLiug health lntrastructure. Ineducation. focus shoul be gn umnaeina bafclte.atter. reMir ofstrUctursnd constructio of bhOana sghg M r c o ools Therec nd tions pre-sented ln Chapter 6 for reform of the rural system would all belp in uelngexlitlng facilitles more efflicently. Thes rLoanuendatios lncludes (a)introduction of multi-grade teaching; (b) pilot programs ln rural boardingschoolsg (c) improving the provisLon of textbooks and other materLialt and (d)improving community control and partLcLpatLon.

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CHAPTER 10: RECOMM3NDATXISO AND ACTION PLAN

INTOD=UCTXON

10.1 This Chapter presents the recommendations of the previous chapters as anoutline of an action plan. Since the report is focused on sectoral policiesand institutional issues, the action plan is too. First, the chapter reviewsthe causes of poverty d.-scuesed in Chapter 2, summarizing the actionsrecommended to attack each cause. Second, a set of key cross-sectoralcriteria for successful interventions is proposed. These criteria may be usedas a yard-stick against which to judge any proposed action. Finally, anoutline of an action plan is presented. To fill out the outline, a series ofspecific projects and programs must be agreed upon.1

THE CAUSES OF POVERTY REVISITED

10.2 In Chapter 2, the causes of poverty were divided into five broadcategories:

a) general development problems;b) poorly developed human capital;c) poor asset base;d) lack of public goods; ande) discrimination.

The following paragraphs summarize how each of these problem has beenattacked in the outline of the action plan.

10.3 It is almost a tautology to say that general develoument problems aresolved through overall development of the economy. In the context of povertyalleviation, it was found that the most important role for macroeconomicpolicy is to avoid the distortions that lead to a higher return to the alreadyprivileged. That is, the best overall development philosophy is to maintainthe free-market economic policies, combined witn direct interventions, tobenefit the poor through sector policies and specific projects.

10.4 The problem of poorly developed human caoital should be attacked fromseveral fronts. The efficiency of education should be improved thoughimprovements in productivity and salaries of teachers, provision of moreeducation materials and increased involvement of NGOs in management ofschools. Basic education, instead of inequitable university spending, shouldbe supported. The health status of the population should be improved throughmore focus on primary health care, involvement of beneficiary groups,integration of traditional and modern medicine, and increased involvement ofNGOs. Nutrition should be improved through dissemination of improvedproduction techniques for staples and iodation of salt across the country,supplemented by closely focused nutrition interventions for children.

I Annex 1 contains a preliminary list of ideas for projects and studies.

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Especially for women, literacy campaigns using NGO experiences, reproductivehealth services and culturally sensitive reproductive education should bepursued.

10.5 The poor asset base in rural areas is mainly related to secure access togood land. Thus, the action plan recommendss recognition of communal propertyrights in the formal title system and streamlining of the process for obtain-ing titles. Rural credit should be channeled through local private or mixedinstitutions such as credit cooperatives, etc. In the medium-term, thePeasant Development Fund should be strengthened. Technology for subsistencecrop improvement should be developed within the private sector and distributedthrough peasant organizations and other private sector groups. In urbanareas, the main problem is related to lack of cheap credit at appropriatetimes. Ongoing, sustainable ZGO and private sector activities should besupported to this end.

10.6 The provision of public services should be demand driven. In health andeducation, the Social Investment Fund should be supported. In transport, thesuccessful experience of the Emergency Social Fund should be absorbed by theRegional Development Fund and Regional Development Corporations (RDCs). Thepriorities of the transportation sector should be shifted toward maintenanceand enabling market access for rural producers. Rural roads should be builtwhere cohesive community organizations exist, where they will increase accessto markets, and where pre-project production is high enough to justify it.Irrigation should be pursued on a major scale through many small projects.The RDCs should play a key role in coordination and control. Communitiesshould be required to share in the cost of provision of the services throughthe donation of labor. The provision of infrastructure without full costrecovery should be the main form of subsidization of poor rural communities.

10.7 Discrimination is often regarded as a general development problem. Itis true that much discrimination is socially or culturally determined and thusslow to remove. As a minimum, laws should be changed to remove discriminatoryclauses. Such changes should include the Labor Code and the Agrarian ReformLaw. Bolivia is too poor to be able to afford the luxury of limiting theproductivity of large segments of its population through discrimination.

CRITERIA FOR SUCCESSFUL POVERTY ALLEVIATION INTERVENTIONS

10.8 Bncourage a multitude of activities, programs, solutions--do not strivefor centralized, national, global solutions. Large national schemes havegenerally not taken the concerns of the poor into account. They have beenperverted by the interests of the rich and powerful and have in only few casesreached the poor. An exception to this rule is the national vaccinationcampaigns and some other national health campaigns.

10.9 Interventions should be small-scale. Small projects have a much bettertrack record in terms of poverty alleviation and efficient implementation thanlarge multi-billion dollar projects. Such small projects include irrigation,local road projects, and simple water supply schemes.

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10.10 Interventions must take the cultural heritage of conumitis Autoaccount. Community structures can become very efficient partners lndevelopment if projects are developed with beneficiaries. Many projects havefailed when cultural norms were not considered. The indigenous cultures havepracticed sustainable agriculture for centuries, the need is to build on thesetraditions, not to discard them as inferior.

10.11 Projects should be demand driven. One way to lnvolve communities andtake their cultural heritage into consideration is to react to demand forinterventions, and not rely excluaively on a centralized top-down planningprocess. A demand-driven system must be modified to include substantialoutreach activities. Communities without the necessary capacities fordeveloping project proposals must be helped. The modified demand-drivensystem presently in place in the Social Investment Fund could serve as amodel.

10.12 Implement projects with local private organisations. Locally basedNGOs, communities, neighborhood councils, mothers' clubs, etc., could all playan important role. At times community organizers might be needed. This couldbe an NGO expanding its geographical or sectoral scope.

10.13 The "bottom line" in a strategy based on such interventions is to helpthe poor help themselves. Only if this route is followed will interventionsbe effective, efficient and sustainable.

ACTION PLANLont Term ObJectives Medium Term Ob fectlves Shor Term Oblectives

Limlt direct public in- Deepen economic reforms Implement structural re-terference in economlc forms in investment, ml-decisions ning and hydrocarbons

Further limit state in- Streamline licensing andterference registration require-

ments for businesses

Continue free trade and Maintain auction for ex- Continue present system,exchange rate regime change rate strive towards more com-

petitive level

Improve customs collec- Streamline customs ser-tions vice along the lines of

the implementation ofthe tax reform.

Maintain fiscal stabi- Implement fully the tax Improve collections,lity reform targeting large tax-

payers.

Implement land tax for Collect tax from largelarge landholders, in- landholders, exemptcrease rates for large smallholders.landholders

Llmit current Reallocate expendituresexpenditures to levels towards agriculture andof revenues social sectors within

overall flscalconstraint.

Limit defenseexpenditures to 201 ofcentral governmentspending.

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Lon# Term Oblectives Medium Tgm Obeive Short Term Objectlves

Institutional Recommendations

Increase focus on de- Strengthen local insti- Find institutions whomand-driven approach tutions could help set up local

organizations (could in-clude NGOs, neighboringmunicipalities, or suc-cessful grassrootsgroups from other areas)

Support institutional Allow communities a say Streamline system forpluralism in who should run their such approvals

health, education, ex-tension or other system(NGOs, private or pub-lic)

Foster beneficiary par- Send representatives ofticipation public institutions to

local farmers' marketsto listen to localwishes

Implement SIF outreachprogram, assess how Pea-sant Development Fundcould involve beneficia-ries.

Decentralize administra- Use phased approach Begin decentralizationtioii in a few sectors.

Limit regional differen- Establish mechanism toces. redistribute revenues

between regions.

Assess the role the Re-gional Development Fundcould play in such redi-stribution.

Provide technical re- Establish municipal andsources to regions. regional government

training institute.

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Lomt Term Gbfectives Medium Term Obfectives Shrt Tem Gb fe_tive_

Decide degree of localappointment of offi-cials.

Improve policy, planning Strengthen the policy Restructureand coordination role of Sub-secretariat subsecretariat to

for Social Policy. include practicalplanners and policyanalysis

Strengthen policy and Create attractive posi-planning units of mini- tions in policy unitsstries through downsizing of

administrative staff

Focus ministries on pol- Abolish implementingicy and planning, not units of ministriesimplementation

Raise salaries of civil Implement Public Sector Implement uniform salaryservice staff Management (PSM) Scheme scale for counterpart

as planned in Economic financed positions, asManagement Strengthening agreed among donors.Operation

Identify key positionsin poverty alleviationto benefit from scheme

Establish goals of PSMfund

Reduce number of public Set limits on admini-sector employees. strative staff's share

of all positions

Limit political patro- Establish civil service Agree on limited numbernage career path for profes- of political appointees

sional development (e.g., down to the levelof Sub-secretary)

Reach agreement amongpolitical parties.

Increase term for localelected officials

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Lo,ntr Term Ob1 ecelves um Term Oh ect:ves Short Term Gb Lecti e

Donor CoordL=aion

Improve donor coordina- Strengthen monitoring All donors should worktion and planning role of Mi- through HINPLAN.

nistry of Planning

Improve inter-donor con- Establish lead agency insultations each sector

Establish sub-groups foreach sector chaired bylead agency

Continue regular donorcoordination meetings inLa Paz, maintain Consul-tative Group process

Health Policies

Implement existing good Review investment pro- Implement Maternalpolicies gram to make it conform Health and Child Survi-

to policies val Program (MHCSP) andthe Integrated HealthModel in Cochabamba,Santa Cruz, La Paz, andEl Alto

Emphasize primary health Focus on mothers and Implement MHCSPcare children.

Shift expenditures to- Assess financing of newwards primary health hospitals. E.g., scalecars. back planned Bracamonte

hospital in Potosi

Involve communities in Implement Social Invest-planimng and design of ment Fund Programfacilities within uni-form standards

Increase role and coor- Coordinate activities of Review agreements (con-dination of NGOs NGOs venLos) with NGOs to en-

sure better coverage ofcountry

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Ter7 O?blectlves ,Medlum Term Ob fectives ,Short Term Ob lect

Improve local integra- Let NGO networks par-tion of NGO activities ticipate in sectoral De-

partmental TechnicalCouncils.

Integrate traditional Use tested traditional Train doctors and nursesand modern medical sys- procedures in modern me- in the use of herbal me-tems dicine dicines

Integrate traditional Train midwives and com-practitioners into munity leaders in pre-health care system natal care, nutrition

etc.

Improve equity of spend- Focus expenditures in Shift expenditures toIng rural and peri-urban better reflect popula-

areas. tion distributionbetween urban and ruralareas.

Focus on maintenance andrecurrent costs.

Develop budget for main-tenance and recurrentcosts based on existinginfrastructure

Develop database to as- Carry out an inventorysess needs and resources of existingof each area infrastructure and

staff.

Support SIF's mapping ofpoverty areas.

Women's Issues Diminish abortion pro- Implement agreements of(above and beyond those blem recent conference onmentioned above) abortion.

Develop reproductive Assess NGO and churcheducation programs, sen- experience in the fieldsitive to cultural andreligious beliefs

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Lon# Term Oblectives Medlum Term ObJectives Short Term Obectilves

Nutrition Monitor and coordinate Coordinate nationalnutrition interventions nutrition surveillance

system (SVEN) witheffort by NationalInstitute of Nutrition,establish norms in Mini-stry of Health.

Expand iodine program; Include block salt indevelop program to alle- the iodine programviate iron deficiency

Assess community-based Asbess NGO experiencesnutrition programs,agree on standard limitson length of program andsubstitution of localfoods for donated foods

Educatin

Improve equity of spend- Increase share of expen- Limit university spend-

ing ditures for basic educa- ing to current share oftion education spending.

Increase spending on ma- Implement efficient pro-terials and other non- grams in SIF to increasesalary items education sector invest-

ment

Unify rural and urban Improve rural education Implement multi-grade

systems. system teaching accompaniedwith improved teachersalaries in rural areas.

Test pilot projects ofrural boarding schoolsfor dispersed popula-tions.

Introduce pilot schemesfor multi-culturalteaching

Implement regionalizedschool year adapting toagricultural calendar

Improve efficiency of Improve teachers' sala- Remove non-teaching tea-

system ries chers from payroll

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Long Tre OblJectiv Medium Tem Obctlves e ObI

Introduce bonuses formore hours worked, morestudents taught, train-ing received, managerialpositions

Abolish seniority as on-ly base Zor pay increa-ses

Improve quality of tea- Establish training pro-chers grams for teachers.

Implement regular test-Ing of all teachers.

Shift resources towards Introduce bidding formaterials production of text books

to reduce cost. Use NGOexperience with dif-ferent text books.

Improve allocation of Develop national infor-teaching resources mation system indicating

schools, number of stu-dents and number of tea-chers.

Increase community par- Involve parents and tea-ticipation chers in mnJagement of

schools. Create electedcouncil of parents foreach school. Givecouncil supervisorypower.

Allow community to "con- Approve more applica-tract' out its school tions for having schoolsystem to NGOs. districts managed by

NGOs with good track re-cords

hagiculture

Provide poor communities Base investments on ex- Transfer ESF experiencewith infrastructure pressed needs of commu- to regional governments

nity and Regional DevelopmentFund

147

ont Term Oblectlves IaShort Term Obfectlves

Do not require full costrecovery of investments

Improve planning and po- Refocus Ministry toward Make planning departmentlicy setting the need of the farming more powerful

community

Involve local rural or- Implement advisory coun-ganizations in planning cils in rural areas with

private sector partici-pation

Improve titling Recognize communal land- Move to approve alreadyholdings as legitimate developed request forclaims land titles of in-

digenous group in theLowlands.

Assess other claims byindigenous groups on acase by case basis, dev-eloping general methodo-logy in the process

Streamline system of ob- Introduce reform planstaining titles for approval

Improve irrigation Design projects with Develop project bank ofcommunities, taking wo- well functioning projectmen's roles into ac- ideascount.

Implement recommenda-tions of recent donor-supported report onsmall scale irrigation

Improve technology deve- Reorganize IBTA Focus on fewer cropslopment and transfer

Improve incentives forIBTA staff

Contract extension out Assess ongoing extensionto NGOs, RDCs, or produ- programscers' associations

Improve agricultural Assess and improve Pea- Support sustainablecredit sant Development Fund private and NGO

(FDC) including a initiatives

148

ILn Term Obfecives edim Te0rm OblectIveas Short er Ob1ectyes

revision of interestrates

Liquidate or privatizeBolivian AgriculturalBank

Link poor with market- Identify suitable pro-able surplus to market ducts and necessary pro-

cessing

Identify small scaleagro-industrial enter-prises

Establish private/public Study other countries'foundation to identify experience in thisand fund such enter-prises

Endorse community-based, Develop programs allow- Assess existing expe-voluntary migration ing whole communities to riences and recommend

migrate to areas of sus- actions for improve-tainable agriculture in ments.the lowlands

TransDortation

Integrate urban markets Increase emphasis on Develop project bank ofwith nearby rural produ- maintenance of network, rural roads projectscers rural roads, and feeder

roads

Scale down existingairport projects. Stopbuilding subsidizedairports for the next 5years

Decentralize management Let RDCs learn from ESFof roads experience in road

upgrading.Efficiency

Improve efficiency of Develop appropriate For water, use UNICEFinvestments benefitting technological package guidelines;the poor

149

Long Terma Oblectives Sim n Short Term Oblectlyes

For roads, involve com-munity and use ESFguidelines;For health and educa-tion, focus on usingexisting infrastructuremore efficiently;

For irrigation, add ex-tension and technologytransfer to projects.

Involve community in de- Require community tosign and implementation provide labor or local

materials.

150

151

ANNE IPage 1 of 5

Ideas for Poverty-Focused Projects and Studies

1. Multisector

* Institutional development of central ministries--provide MINPLANwith technical assistance to strengthen its capacity inmacroeconomic management, budgeting and monitoring of publicexpenditures, public investment planning, and coordination ofexternal assistance; support should be provided to Subsecretariatfor Social Policy in developing a well-articulated socialdevelopment strategy, translating it into practical actions, andmobilizing donor resources;

* Support to Public Sector Management Program--provide theGovernment with technical assistance to implement a civil servicereform; efforts should be made in rationalizing the existinguneven wage structure to attract qualified personnel to the publicsector;

• Support to decentralization--provide both central ministries andregional authorities with technical assistance to strengthen theiradministrative, financial, and technical capabilities in line withrenewed responsibilities under decentralization; centralministries should be streamlined c.nd reinforced to focus on policyplanning and prioritization, while delegating implementationfunctions to other local agencies; special attention should bepaid to the existing regional disparities in institutionalcapacity;

2. Agriculture

o Institutional development of MACA and related agencies--provideMACA and related agencies with technical assistance to strengthentheir capacity in policy formulation, public investment planning,and project coordination; for the poor regions, the appliedresearch system (i.e., IBTA) should be upgraded to improve thetechnological base for promoting growth;

* A study of land titling--develop a methodology for land titling,based on a comprehensive study of the present land use and tenuresituation; the study should also assess viability of a landconsolidation program in Altiplano and Valleys and a resettlementpolicy to serve as a basis for rationalization of the presentsystem;

* A study of a possibility of development for small farmers in theHighlands--assess natural resources, potential products (crops andlivestock), technologies (irrigation and production systems),supporting services (credit, marketing, and transport), and socio

152

Page 2 of 5

-cultural aspects to determine a development strategy for poorfarmers. Analyze the feasibility of migration to Lowlands;

• Small-scale integrated rural development in the Highlands andValleys--implement well-focused micro-projects, with suchcomponents as agricultural extension, productive infrastructure,rural feeder roads, health and sanitation, education; specialattention should be paid to encourage community participation inplanning and implementation;

* Development of micro-irrigation systems in the Highlands andValleys--support small-scale irrigation projects to help the poorproduce food for home consumption; projects should take intoaccount management of land and water resources and traditionalcommunity structures;

* Support to rural credits--provide technical assistance to ruralcredit cooperatives in the areas of planning and evaluation,promotion activities, development of guarantee mechanisms; PeasantDevelopment Fund should be strengthened;

o Formation of producers' associations--provide technical assistanceto communities to establish/strengthen core organizations toprepare and implement various development programs to benefitsmall farmers; major efforts should be made in increasingadministrative and financial management capabilities of suchassociations;

* Training programs--provide local communities with training ontechnology and environmental problems (i.e., crop diversification,improved seeds, land use and ecology, rural water systems,credits); training should be undertaken in indigenous languages toenhance community participation;

* Training programs for rural women--train rural women inappropriate technology such as handicraft production (i.e.,design, sewing, knitting and marketing) and animal husbandry toincrease their income-generating capacity;

* Development of community-based agricultural enterprises- -providetechnical assistance and infrastructural support to communally.managed agricultural enterprises; a phased approach (starting frompilot schemes) should be taken, and assistance should coveridentification of profitable products, examination of theproduction, processing, marketing mechanisms and commercialviability, provision of infrastructure, and services needed;

153

ANNEX XPage 3 of 5

3. Transport

* Institutional development of SENAC--provide SENAC with technicalassistance to strengthen its capacity in policy formulation,planning, monitoring and evaluation, and project coordination;technical assistance should be provided to streamline itsfunictions and promote delegation of regional planning todecentralized agencies;

* Development of rural roads--improve road infrastructure of ruralcommunities through cost-effective construction of rural feederroads (i.e., use of local materials, participation of locallabor); attention should be paid to make such infrastructuralsupport consistent with regional/sub-regional developmentobjectives;

* Naintenance of existing roads--improve the existing road network(primary, secondary, and rural) to improve communities' links tomarkets;

4. Health

* Institutional development of MPSSP--provide technical assistanceto MPSSP to strengthen its capacity in planning, financialmanagement, budgeting and human resource development to improveeffectiveness of the public health system. Decentralization ofplanning and budget control should be promoted; an inventory ofhealth facilities and personnel should be developed;

* Primary health care programs in rural areas--expand primary healthcare services in rural areas, targeting mothers and infants;services should cover immunization campaigns, oral rehydration,and nutrition programs;

* Child nutrition programs--child nutrition centers should besupported to prepare and distribute meals to children with severemalnutrition; such nutrition programs need to include improvedtargeting of beneficiary groups, increased use of localfoodstuffs, and stimulation of local food production;

* Provision of health infrastructure in rural areas--construct,repair, and expand health posts in rural areas, with provision ofbasic equipments, supplies and iedicines; location of health postsshould be decided based on cou.rehensive assessment of communityneeds in terms of their health status and accessibility of basicservices;

154

Page 4 of 5

* Provision of sanitation facilities--construct basic sewage dispo-posal infrastructure, including small-scale sewerage systems orlatrines in communities in marginal urban and rural areassuffering from high incidence of contagious gastro-intestinaldiseases;

• Training of health professionals--train doctors and nurses inapplication and integration of local medical practices andtraditional medicines into modern health care; auxiliary nursesand traditional midwives should be trained in prenatal care andnutrition.

* Health training programs for community members--under leadershipof health promoters, provide community members with basiceducation in health, hygiene, and nutrition;

5. Education

* Policy dialogue to promote a reform in the primary educationalsystem--assist MEC in embarking on a major educational reform,including: (a) shifting education expenditures toward primaryeducation; (b) improving efficiency of allocation of human andmaterial resources (i.e., increased teachers' salaries, emphasison materials and supplies); and (c) uniting the urban and ruralsystems (i.e., administration, teacher classification system,etc.). Donors would be able to link such reform to lending opera-tions. In the unification of rural and urban systems, a phasedapproach would be recommended, starting from improvement in ruralprimary education to induce teachers' incentive to serve in ruralareas;

* Institutional development of MEC--provide MEC with technicalassistance to strengthen its capacity in policy planning, finan-cial management, information, and manpower planning to realizemore effective allocation of human and financial resource; decen-tralization of planning and budget control should be promoted; acomprehensive inventory system should be established to make anaccurate needs assessment;

* Provision of educational infrastructure in isolated rural areas--construct, expand, or repair primary school buildings in isolatedrural areas, with provision of equipment, furniture, and teachingmaterials;

* Literacy training programs--support training programs for adultswith less than secondary education; special attention should bepaid to improving the female literacy rate; these programs shouldhave technical/vocational and health/nutrition components;

155

ANNIE Page 5 of 5

* Intercultural and bilingual education programs--develop and imple-ment bilingual education for the Quechua, Aymara, and Guaranipopulations in indigenous areas; primary school curriculum shouldbe developed to reflect the country's cultural and linguisticdiversity;

* Nultigrade school programs in rural areas--support multigradeschools in rural areas with low population density; teachersshould be provided in-service training on multigrade methodology,and didactic materials and guides be produced and distributed;

* Girls' scholarship programs--develop pilot project for ascholarship program for rural girls to increase their educationalopportunities; programs could include support to both primary andtechnical schools;

156ANNEX II

VARIOA POVERTY PA" OF SOL'IVIA Page 1 of 5

Title Indicators Nethodology Results

RA. ort., '904MrllO y * 19 eI ciO-economic * For each of the 19 Indicators, the * The 21 poorest provincesPabree an 96elWI," (1091) Indicators (health, MxiaD value of Ott provinces is are concentrated in Pando a

eiction, housirn, used as steranrd. Chuquisaca Cepts.lotomnt, a * The poverty level of each province

duigraphy) are Is calculated based on the deviationselected. from this standard value.* Orifinal source:1976 Natfonal Census.

........... ........... ........... .......... ........... ........... .......... ........... ........... ..........

UNICEF, MExtrm Pdor on * ICGV (irncx for * ICNV is caleulated by taking * The 20 poorest provincesbtivila, 3 (IWS) quslity of tife) difference between maxfns and are concentrated in

Is calculated as minimiun values of indicators. Chuquisaca, Potos1, &major powerty * The poverty level Is determined Coch Depts.Indicea. beased on the deviation from this ICIV.* IOEV fI based on: e On the margin, otherinfant ortality. indicators (housing, migration,ltfe expetancy, & sanitation, etc.) are used.illiteracy rates.* Originat source:1976 National Censs.

5..._.__._._._......................._.___..........._......................................

IP, Uroustas pare U*s - Infant mortality & * To rank the poverty tevel, the * The 10 poorest provincesestraee d _earrele de illiteracy rates In ftolowing critical tines are used: are concentrated in ChuquiswaSes In (191) tord areas are used (a) Infant mortalfty rate--below 150, 6 PotosS De.ts.

a major poverty 150-179, 180 or above; Cb) illtiteracyfndices, rate -501.* Origirna source Is * Percentage of rural populatfon istha 1976 National also used to supplement the analysfs.Census, but dat aremdffled by includingestimated demographichdumnes In 19?6-85.

.__... ..... ............. ...................... _.......................

UDW, 'qgp de to Extr_ * NoIsing conditions * Nousig conditfons are grouped into * The poorest provincesPebezan em tUiv$e.8 (19) (i.e., san1itry four cateorfes, In term of are identiffed for both

facilities) re used vaflbility of water, sanitary urban end rural ares.as the vajor poverty facilities and housing type. * Urban areas: l.Ci.rtf &indietor. * on the mrgin, avaflability of Yaeparaez (CHU), Aberda* Original source: electriefty IS elso used to rank the (ORU), erd Chayanta (PTS).1976 Nationsl Census. poverty level of each province. * Rural areas: G.Romen a

Padre de Dios (PAN),Itene2 (BE), andIturralde (1PZ).

.....................................................................................................................

OAM"O, Mltrsn etbre en * Infant mrtality * National average of each Inrdicator * The 21 poorest provincesSlIvie," (INS rate, mgration, is used as reference value, are concentrated in

illiteracy rate, a * The poverty level is determined Chuquisacs, La Paz,houing conftdlons b the deviatfon from this reference Cochabrbe a Potosi Dapts.(aaltability of value.drinking water A

lectricity) re uedas the major poertyindicators.* Origin source:1976 Natiorat Census.

157 ANNEX II

Page 2 of 3

IBRD 21869

BOLIVIADISTRIBUTION OF THE POOREST PROVINCES

* Poorest Provinces

A E ; I D ~~~~~~Province BoundaiesB 7 88 -RAZIL Intemational Boundaries

PERU BRAZIL25 93)

K i o et r _ _ _ _ _ _ _>__ _

0 71>vv10 294

PARAGUAYIN

0 1CO 200 ar92ta vSPMR8

4~~~~~~~~~~~~~~~~~~ETME 1198

158

ANNEX IIPage 3 of 5

TEM POOREST PROVINCES IN BOLIVIA

Order Number Map) Province DeRartment

1 34 Arque Cochabamba2 39 Tapacari Cochabamba3 59 A. Ibanez Potosi4 58 Nor Chichas Potosi5 62 Sud Lipez Potosi6 07 Nor Cinti Chuquisaca7 41 Mizque Cochabamba6 56 Chayanta Potosi9 31 Ayopaya Cochabamba

10 57 Charcas Potosi11 32 E. Arce Cochabamba12 53 t. Frias Potosi13 01 Oropeza Chuquisaca14 55 C. Saavedra Potosi15 03 Zudanez Chuquisaca16 54 Bustillos Potosi17 09 Sud Cinti Chuquisaca18 65 G. Bilbao Potosi19 72 Mendez Tarija20 08 B. Boeto Chuquisaca21 49 P. Dalence Oruro22 06 Yamparaez Chuquisaca23 04 Tomina Chuquisaca24 02 Azurdy Chuquisaca25 98 Abuna Pando26 99 Gral. F. Roman Pando27 50 L. Cabrera Oruro28 05 H. Siles Chuquisaca29 97 Hadre de Dios Pando30 96 Manuripi Pando

159ANNEX IIPage 4 of 5

IBRD 22289

BOLIVIADISTRIBUTION OF PROVINCES ACCORDING TO LEVEL OF POVERTY

L~LQFPOVFRTY IBY PROpVlNC:ES

L Level 2-, _ Department Boundaries 3

96 - Intermational Boundaries \\ ve 1

PERU = Let2 evel s5

CHILE , V~~~~~BRZI

25 ~~~~~~~~~~~~~~~Areas within Bolivia only.

' 7 ~Area of Msap

oGmtr0 10,0 200 300.;a BLV

Mlles X [ ':f F_X-0 100 200 ;-<

Source: CONAPO (1988) APRIL t990

160CODWICACION GEOGRAFICA DI 9OLSvxA ANNEX II

Page 5 of 5

DEPARTAMENTO DI DEPARTAMENTO Dg DIPARTAMZNTO DI

CHUQUISACA oRsuto SANTA CRUZ

01 OropZas 48 C.ond@ 74 Audrie tIbt:z02 AVa?duV 44 Avuo 70 Wames03 ZudiAo: 45 CazaIU 76 VoIio04 Tomna 4 Sajam, 77 'eo06 Hmando 82.0 47 Utoal 76 Chlqitos06 Yamp&?Aoz 46 PooP6 7T sab07 NoT Cinti 49 Pantak6a Da10nce 60 CordarsOs 36104o Boeto 00 Ladssl.o Cabreoa 61 Vallerande09 S&d Cinti SI Atabuatipa 82 Florida0o Truis Calvo 52 Smear 83 Obiao Saati.otban

84 *Uflo de CbLvo:65 Ansel Sandoval86 Manuel Maria Cab.

Unro

DEPARTAMENTO DE DEPARTAMENTO DR DZPARTAMVNTO DEL

LA PAZ POTOSI BENI

11 Murllo 5I luaF 87 Cbucdo12 Omaauoo 14 Bwtlos 8J Vau Dis18 Pacales 5b Corndlo Saavedra 89 Orel. BamvlS14 Camcho a Chayant 90 Yacua,is MUAOCaa 57 Chawas 91 Mo:.16 LAecala 58 Not Cbieba 92 muAh17 Franz Tamao G9 Alono de IbfiSo 98 MaMoAtis Inavi 60 Sud Cbieba 94 t6aoZ19 Loayxa 61 No, Lip.20 Iquidvi 62 Oud Lives DEPARTAMENTO DZ21 Sud Yg6 QWo PANDO22 Loa Andes Qo23 Asoma 65 Gul. lb.ao24 Not Yunsas 66 DanAel Campo 95 Nicolds suito25 Abel Itumlde 67 Modesto OUnMl 96 manur 26 BSautif Suveda a 97 Mad" de Dios27 Manco iCapo 98 Abum26 Gualberto VWnoel 99 GOl. F. buom

DEPARTAMENTO DI DEPARTAMENTO DE

COCHABAMBA TARIJA

29 Cewcado 68 Ctoedo30 Campero 69 Am 1 CHUQUISACA31 Ayopaya 70 GOn Chao 2 LA PAZ32 Eaoban Arco 71 Avlez 3 COCHABAMBA33 Anni 72 M6nd* 4 ORaUO34 Arque 780 Consc 6 POTOSI35 Capinota S TARUA36 Jodin 7 SANTA CRUZ37 QuWaoflo 8 BENI39 Chbape 9 PANDO39 Tapacat40 Coamo41 MIXQu*42 Punats

161 ANNEX II

BIBLIOGRAPHY

Bank Documents:

Background Papers:

Cisneros, Rodrigo, The Importance of Rural Infrastructure for PovertyAlleviation (in Spanish), January 1990

Cock, J. and Forno, D., Poverty Report: Agriculture, March 19, 1990

Cowi Consult, Poverty in the Lowlands of Bolivia, February 1990

Hedlund, Malene, Annotated Bibliogranhv on Poverty in Bolivia, January1990

McGinnis, Linda, Institutional Asgects of Poverty Alleviation, January1990

Mejia, Christina, Non-Governmental Institutions in Core Poverty Areas ofBolivia (in Spanish), January 1990

Newlon, Dan, Education Reform and Poverty, February 23, 1990

Ohno, Izumi, The Government's Strategy and Investment Program andPoverty Alleviation, October 6, 1989

Ohno, Izumi, Donor Agtivities in Poverty Alleviation, March 1990

Webb, Anna, Women and Rural Poverty in Bolivia, January 24, 1990

Other Bank Documents on Bolivia:

Memorandum on Financing Requirements and Public Investment (BO 86-4),December 1986

Updating Economic Memorandum (Report No. 6455-BO), December 1986

Transport Sector Strategy Paper (Report No. 6882-BO), July 1987

Population, Health and Nutrition Sector Memorandum (Report No. 6965-BO),February 1988

Regional Development Strategy for the Eastern Lowlands (Report No. 7158-BO), April 1988

Updating Economic Memorandum (Report No. 7278-BO), June 1988

A Review of the Public Investment Program and Financing Requirements,1987-90 (Report No. 7248-BO), June 1988

162 AMNNX IIr

Export Corridors (Report No. 7298-BO), February 1989

Staff Appraisal Report, Integrated Health Development Project (ReportNo. 8001-BO), December 20, 1989

Staff Appraisal Report, Social Investment Fund Project (Report No. 8248-BO), March 26, 1990

Country Economic Memorandum (Report No. 7645-BO), September 15, 1989

Public Sector Expenditure Review With A Special Emphasis on the SocialSectors (Report No. 7746-BO), September 15, 1989

Other Bank Reports:

World Development Report 1990, Poverty (Report No. 8509), April 1990

Social Spending in Latin America: The Story of the 1980s (Report No.8450-IAC), March 1989 -- Yellow Cover

Other Documents:

ACLO, Un Sistema de Promocion Liberadora, 1981

Arteaga, Vivian, La Muier Pobre En La Crisis Economica, 1988.

Asamblea Permanente de los Derechos Humanos, Estudio Sobre el ValorAdquisitivo del Salario d,e los Mineros, 1978.

Blanes, Jose, Asnectos Sociales en el Desarrollo Regional de Chuquisaca,1987

Carafa, Carlos, Luz v Sombra de la Vida: Mortalidad y Fecunidad enBolivia, UNFPA, 1983

CEA.C, Estudio de Diamnostico del Estado Nutricional de la Poblacion delProyecto Materno-Infantil, Montero, 1988

CEDLA, Informalidad e Ilegalidad: Una Falsa Identidad, 1989

CEDLA, El Sector InLformal Urbano en Bolivia, 1988

CEDLA, E13';ector Informal en Bolivia

Centro de Estudios del Trabajo (CET), La Relocalizacion, 1988

CET, Sector Informal v Novimiento Obrero, 1987

CET, iMercado de Trabajo, 1987

163 AM= III

Centre de Estudios de la Realidad Economica y Social, Catalogo edicionesCERES

Flores, Gonzalo/C.E.S.Y.M., Los Proyectos de Desarrollo Rural IntegZado:ExDeriencias del Ouinguenio 1984-1989, 1989

Chudy, John Paul; Jones, James; Kraljevic, Ivo; Lubina, Allan, AnEvaluation of the Bolivia PL 480 Title II Food for Work Program, 1988

Daza, Giovanni; Sev the Children: Estudio Nutricional de la ProvinciaInguisivi. con enfasis en la deficiencia de Vitamina A, 1987

de Canedo, Teresa Delfin; de Baizeras, Susana Donoso; Provecto Proandes:Diagnostico Socioeconomico Region Interandina Central: Norte de Potosi XSur de Cochabamba, 1989

de Cordoba, Miguel, Urioste Fernandez, El Estado Anticampesino, 1984

del Prado, Arturo Nur-!z, Economias de Viabilidad Dificil: Una Opcion porExaminar, 1988

Dornbusch, Rudiger, Short-Term Macroeconomic Policies for Stabilizationand Growth, 1989

EMSO-MACA, Incentivos a la Exportacion, 1989

EMSO-MACA, Provectos Agrooecuarios, 1989

E14SO-MACA, Recursos Humanos y CaRacitacion, 1989

ENSO-MACA/Ross M.A./Eduardo Alfaro, Honitoria y Evaluacion, 1989

Estes, Valerie Anne, Factories and Families: Urban Working Women in LaPaz, 1984

Finot, Ivan, Evaluacion Macroeconomica de Politicas de NecesidadesBasicas, 1989

Finot, Ivan, Redistribucion del Ingreso Y Necesidades Basicas, 1989

FSE, Diagnostico de la CoXwntura Economica X Socisl. en Bolivia', 1987

IBRD/IDA/WHO, Bolivia: Water SuaRly and Sewerage Sector Study (Volumes I& II), 1974

INE/UNFPA/DTCD, de Baixares, Susana Donoso, Encuesta Nacional dtePoblacion y Vivienda, 1988

ISNAR, Fortalecimiento del Sistema de Investigacion v Transferencla deTecnologia Agronecuaria en Bolivia, 1989

164 AMEX II

Laure, Joseph, Los Campesinos y La Crisis, 1988

Lazo, Manuel Lajo, SEMINARIO: Necesiades Basicas v Desarrollo, 1989

Lenz, Tomas, Una Imagen Campesina del Extremo Norte de Potosi, 1988

Machicado, Carlos, Estudio Diagnostico Debate,

Mann, Arthur J., The Political Economy of Tax Reform in Bolivia, 1988

Ministerio de Asuntos Campesinos y Agropecuarios, Tipologia de laEconomia en Bolivia, 1988

McFarren, Wendy, Economic Crisis and the Politics of Adaption: SurvivalStrategies of Displaced Bolivian Mining Households, 1989

MINPLAN/MACA/PNUD/FIDA, Estrategia Rural de Desarrollo de BaseCampesina, 1987

Montero, Vivian Arteaga, Recesion Economica. Estrategias de Vida y elRol de la Muier en Bolivia, 1988

Morales, Juan Antonio, Impacto de los Aiustes Estructurales en laProduccion y los Niveles de Vida de los Campesinos de Bolivia, 1989

ODI; Addison, Tony; Demery, Lionel, Macro-Economic Stabilization. IncomeDistribution and Poverty: A Preliminay ]Study

PNUD, Documento Tecnico Y Declaracion Re ional Sobre la Pobreza, 1988

PREALC, EmDleos de Emergencia, 1988

Proandes, Plan de Desarrollo Alternativo 1990-1994. Volumen IIIProvincia Esteban Arze, 1989

Proandes, Plan de Desarrollo Alternativo 1990-1994 Volumen IV ProvinciaMizgue, 1989

Proandes, Plan de Desarrollo Alternativo 1990-1994. Volumen VI ProvinciaBolivar, 1989

Proandes, Plan de Desarrolllo Alternativo 1990-1994. Volumen V ProvinciaTapacari, 1989

Proandes, Plan 0terativo 1990-1994 Propuesta, 1989

Proandes, Plan Operativo 1990-1994 Propuesta. Volumen II. DesarrolloSocial, 1989

Proand&s, Plan Operativo 1990-1994 Propuesta.Volumen III, DesarrolloAgrouecuario, 1989

165 ANNEX III

Proandes, Plan Operativo 1990-1994 Propuesta. Volumen IV. DesarrolloPecuario v de Servicios, 1989

Programa Nacional de Desarrollo Porcino, Resumen Eiecutivo y Consolidadoi ~~~~Naci-onal, 1989

The Resources for Child Health Project, SuDervivencia Infantil enBolivia: Situacion Actual y Prioridades Dara la Accion, 1987

Revista de la Universidad Mayor de San Andres, Contacto 27, 1988

Sandoval, Godofredo Z., Organizaciones no Gubernamentales de Desarrollo,1987

Seminario Taller, Lucha Contra el Aborto, 1989

UNDP, The Impact of Macroeconomic Policies on the Rural Poor, 1989

UNFPA, Salto al Futuro, 1984

UNFPA, Migraciones y Ocupacion del Territorio, 1985

UNICEF, Muier. Clase y discriminacion Social, 1960

UNICEF, Los Barrios PoRulares, 1985

UNICEF, Grupos Postergados de Bolivia, 1986

UNITAS, El Alto Desde El Alto, 1988

Urioste, Miguel, Segunda Reforma Agraria, 1988

Velasco, Antonio Peres; Sainz, Roberto Casanovas; de Pabon, SilviaEscobar; Cordova, Hernando Larrazabal, Informalidad e Ile&alidad: UnaFalsa Identidad, 1989