Nicaragua
Social Protection Public Expenditure Review
Prepared
by
Jose Silverio Marques
for
The World Bank
March 12, 2008
Acronyms
EBI Intercultural Bilingual Education (Educación Bilingue Intercultural)ECDEarly Childhood development
Casas Maternas Maternity Houses
CAP Institutions for Previsional Attention (Health)
CCT Conditional Cash Transfers
CDIKindergarten (Centro de Desarrollo Infantil)
CENAGRO Agriculture Census (Censo Nacional Agropecuario)
CEPAL Economic Commission for Latin America
CICO Community kindergarten (Centro Infantil Comunitario)
CIDA Canadian International Development Agency
CNEPTI National Commission for the Eradication of Child Labor
CONAPAS National Commission for Water and Sanitation
CONPES Economic and Social Planning Council
CPP Council of Citizen Power
DANIDA Danish International Development Agency
DEA Department of Adult Education (MINED)
EBACIT Program of Basic Education and Citizenship for All
ECLA Economic Commission for Latin America
EFA-FTIEducation-For-All Fast Track Initiative
ENDESA Health Survey (Encuesta Nicaragüense de Demográfica y Salud)
EMNV Living Standard Measurement Survey
ENACAL Public Water and Sanitation Company
ENDIS Survey of People with Disabilities (Encuesta Nicaragüense para Personas con Discapacitada)
EU European Union
FISE Emergency Social Investment Fund
FfW Food for Work
FfT Food for Training
GDP Gross Domestic Product
HDI Human Development Indicator (UNDP)
IDA International Development Association (World Bank)
IDB Inter-American Development Bank
IDR Rural Development Institute
INAA Water and Sanitation Regulatory Institute
INATEC National Technologic Institute
INE Nicaragua Electricity Institute
Acronyms (continuation)
INIDE Statistical Institute ( Instituto Nacional de Información de Desarrollo)INITER National Institute of Territorial Studies
INISER Nicaragua Insurance and Reinsurance Institute
INJUVE National Institute of Youth
INSS Nicaraguan Social Security Institute
JICA Japan International Cooperation Agency
KFW Kreditanstalt für Wiederaufbau (Reconstruction Bank)
MAGFOR Ministry of Agriculture and Forestry
MiFAMilia Ministry of the Family
MINED Ministry of Education, Culture, and Sports
MINSA Ministry of Health
MITRA Ministry of Labor
MHCP Ministry of the Finance and Public Credit
MTI Ministry of Transport and Infrastructure
NBI Unsatisfied Basic Needs
PAHO Pan American Health Organization
PAEBANIC Adult Literacy and Basic Education Program
PAINAR Program for the Integral Attention to Children and Adolescents at Social Risk
PAININ Comprehensive Care Program for Nicaraguan Children
PASEN Support to the Structural Transformation of the Education System Program
PEBI Intercultural Bilingual Education Program
PINEComprehensiveSchool Nutrition Program
PMA World Food Program
PND National Development Plan (Plan Nacional de Desarrollo)
PPA Food Productive Program
PREVDARegional Program for the Reduction of Vulnerability and Environmental Degradation
PROCOSAN Health and Nutrition Community Program (Programa Comunitario de
Salud y Nutrición)
RAAN Autonomous Region of Atlantic North
RAAS Autonomous Region of Atlantic South
SA Social assistance
SEAR Regional Autonomous Education System
SETEC Office of the Technical Secretary to the Presidency
SI Social insurance
Acronyms (continuation)
SILAIS Local Health SystemsSINAPRED National System for the Prevention, Mitigation and Attention to
Disasters
SINASID National System to Monitor Development Indicators
SNIP Sistema Nacional de Inversión Pública
SP Social protection
SRM Social Risk Management
SWAp Sector Wide Approach
UNDP United Nations Development Program
UNICEF United Nations Children's Fund
URACCAN University of the Autonomous Regions of the Atlantic (Universidad de las Regiones Autonomous de la Costa del Caribe Nicaraguense)
USAID United States Agency International for Development
VAM Vulnerability Analysis Mapping (WFP)
WFP World Food Program
This report was prepared by Jose Silverio Marques with the support of Miriam Montenegro (social programs) and StanislaoMaldonado (LSMS/EMNV).
Table of Contents
Page No.Executive Summary
- Analytical Framework ………………………………………………………………..
- Source of Risks………………………………………………………………………….
- Risks and Groups-At-Risk……………………………………………………………….
- 0-5 Years Old …………………………………………………………………….
- 6-17 Years Old …………………………………………………………………..
- 18-59 Years Old………………………………………………………………….
- 60 Years Olds and More………………………………………………………….
- Households ……………………………………………………………………….
- Indigenous and Ethnical Groups …………………………………………………
- Public Programs to Address the Risks ………………………………………………….
- 0-5 Years Old …………………………………………………………………….
- 6-17 Years Old …………………………………………………………………..
- 18-59 Years Old………………………………………………………………….
- 60 Years Olds and More …………………………………………………………
- Households ……………………………………………………………………….
- Indigenous and Ethnical Groups ………………………………………………….
- Assessment of the Social Protection System ……………………………………………
- Spending ………………………………………………………………………….
- Relevance and Coverage………………………………………………………….
- Targeting……………………………………………………………….…………
- Equity…………………………………………………………………………….
- Cost-Effectiveness ……………………………………………………………….
- Monitoring and Evaluation ………………………………………………………
- Institutional Arrangements ………………………………………………………
- Conclusions and Recommendations ……………………………………………………
- Strategic approach ………………………………………………………………..
- Program Priorities ………………………………………………………………..
- Targeting and Transparency………………………………………………..…….
- Monitoring and Evaluation and Accountability………………………………….
References………………………………………………………………………………….. / 85
Box 1. Risk and Vulnerability……………………………………………………………… / 1
Box 2. The Cost of Malnutrition……………………………………………………………. / 5
Box 3. The Costs of Health Care……………………………………………………………. / 24
Box 4. The Cost of Domestic Violence……………………………………………………… / 26
Box 5. The Cost of Under-investing in Natural Disaster Management…………………….. / 28
Box 6. Risky Business in the Atlantic Region ……………………………………………... / 30
Box 7. Innovative Approaches in Healthcare ………………………………………………. / 35
Table of Contents (continuation)
Box 8. Food Insecurity and Zero Hunger (Hambre Cero) …………………………………. / 39Box 9. Emergency Aid for the Victims of Hurricane Felix ………………………………… / 54
Box 10. Evaluation of the Poverty Reduction and Local Development Project ……………. / 75
Box 11. How To Build a Results-Based M&E System ……………………………………... / 76
Figure 1. Results of Education Tests, 2002,2006 …………………………………………... / 10
Figure 2. Results of Education Tests, by Region, 2002, 2006 ……………………………... / 10
Figure 3. Average Years of Schooling ……………………………………………………… / 16
Figure 4. Agricultural Credit, by Source …………………………………………………… / 19
Figure 5. Time to Health Post ………………………………………………………………. / 20
Figure 6. Persons with 60 Years and More Receiving a Retirement Pension ……………… / 22
Figure 7. Poverty Incidence in the Indigenous and Ethnical Groups and Total Population ... / 30
Figure 8. Household Participation in Associations …………………………………………. / 32
Figure 9. ENACAL- Actual and LRMC Water Tariffs in Managua ………………………. / 51
Figure 10. Rate of Water Tariff Subsidy, by Type of Consumer in Managua ……………… / 51
Figure 11. Residential Electricity Tariff, Actual and Without Subsidy …………………….. / 52
Figure 12. Rate of Subsidy, by Consumption level (kWh) …………………………………. / 52
Figure 13. Distributional Incidence of Public Education Expenditures ……………………. / 70
Figure 14. Utilization of Public Health Facilities by the Poor and Non-Poor ……………... / 71
Figure 15. Access to Water and Electricity, by Consumption Quintile ……………………. / 72
Table 1. Mortality Rates, 1998, 2001, 2006 ……………………………………………….. / 4
Table 2. Chronic Malnutrition Among Children Under 5 Years, 1998, 2001, 2005 ………. / 6
Table 3. Children 0-3 Years Old Who Attend Kinder ……………………………………... / 6
Table 4. Preprimary Net Enrollment, by Department, 2007 ………………………………... / 7
Table 5. Primary Net Enrollment, by Department, 2007 …………………………………… / 8
Table 6. Reasons Why Children 7-12 Years Old Are Not Enrolled in School……………… / 9
Table 7. Time to Primary School, 2001, 2005……………………………………………… / 9
Table 8. Secondary Net Enrollment, by Department, 2007 ………………………………… / 11
Table 9. Reasons Why 13-18 Years Old Are Not Enrolled in School………………………. / 12
Table 10. Prevalence of Disability, by Age Group …………………………………………. / 13
Table 11. Education Achievement for People with Disabilities……………………………. / 13
Table 12. Children and Teenager Workers, 2005…………………………………………… / 14
Table 13. Early Childbearing ……………………………………………………………….. / 14
Table 14. Employment and Underemployment, 2005, 2007………………………………... / 15
Table 15. Illiteracy, by Age Groups ………………………………………………………… / 16
Table 16. Land Distribution by Number and Area of Farms ……………………………….. / 17
Table 17. Area Under Irrigation ……………………………………………………………. / 17
Table 18. Ownership of Cattle and Pigs ……………………………………………………. / 18
Table of Contents (continuation)
Table 19 . Farms that Request and Obtained Credit ……………………………………….. / 18Table 20. Producers that Received Technical Assistance or Training …………………….. / 19
Table 21. Population with Pensions, 2005-2007 …………………………………………… / 21
Table 22. Place of Consultation for Those that Sought Help ………………………………. / 23
Table 23. Motives for Not Seeking Healthcare …………………………………………… / 23
Table 24. Distance to Health Post or HealthCenter ………………………………………... / 23
Table 25. Health Expenditures and Financing …………………………………………….. / 24
Table 26. Health Spending …………………………………………………………………. / 24
Table 27. Inadequate and Overcrowded Housing ………………………………………….. / 25
Table 28. Access to Basic Services ………………………………………………………… / 25
Table 29. Prevalence of Violence Against Women ……………………………………….. / 26
Table 30. Impact of Major Natural Disaster in Nicaragua, 1926-2007 …………………….. / 28
Table 31. Indigenous and Ethnical Groups ……………………………………………… / 30
Table 32. Social Indicators and Access to Social Services in RAAN and RAAS ………….. / 31
Table 33. Programs for the 0-5 years Old Group …………………………………………… / 34
Table 34. Programs for the 6-17 years Old Group ………………………………………….. / 38
Table 35. Program for the 18-59 Years Old Group …………………………………………. / 42
Table 36. Programs for 60 Years Olds and More ………………………………………….. / 45
Table 37. Programs for Households ……………………………………………………….. / 47
Table 38. ENACAL Tariff Subsidies ……………………………………………………… / 50
Table 39. Government Transfers to ENACAL …………………………………………….. / 51
Table 40. Intercultural Bilingual Education in the Autonomous Regions ………………….. / 56
Table 41. Selected Programs for Indigenous and Ethnical Groups ………………………… / 57
Table 42. Population at Risk, Program Coverage and Program Cost, 2007 ………………. / 59
Table 43. International Comparison of Public Social Spending …………………………… / 58
Table 44. MiFAMILIA, MINED and MINSA Expenditures, 2006-2008 ………………… / 62
Table 45. Distribution of Social Assistance Spending, 2007 ………………………………. / 63
Table 46. Typology of Coverage of Social Protection Programs …………………………... / 64
Table 47. Incidence and Distribution of Extreme Poverty …………………………………. / 66
Table 48. Municipalities with Greatest Incidence of Indigence (5 NBI) ………………….. / 67
Table 49. Characterization of Social Protection Programs Targeting on the Poor …. / 68
Table 50. Benefit-Incidence of Public Spending …………………………………………… / 69
Table 51. Reasons Why Children 7-12 Year Old Are Not Enrolled in School ……………. / 70
Table 52. MINSA’s Five-Year Health Plan, 2005-2009 …………………………………… / 71
Table 53. Utilization of Health Facilities …………………………………………………… / 72
Table 54. Reclassification of “Capital Expenditures”, 2008 ……………………………… / 74
Table 55. Suggested Program Priorities …………………………………………… / 81
- Analytical Framework
This review of public expenditures on Social Protection (SP) in Nicaraguais based on the analytical framework of social risk management (SRM) developed by the World Bank.[1] The concept of managing social risk comes from the notion that certain groups in society are vulnerable to unexpected shocks which threaten their livelihood and/or survival. However, some groups live in a chronic state of impoverishment which places their livelihood in a constant state of risk. Social Protection focuses on the poor since they are more vulnerable to the risks and normally do not have the instruments to handle these risks. This prevents the poor from taking more risky activities that usually yield higher returns and that could help them overcome gradually their poverty situation.
Social risk management involves policies and programs aimed at reducing key risks, breaking inter-generational cycle of poverty and vulnerability (Box 1). Risk management consists in the choice of appropriate risk prevention, mitigation and coping strategies to minimize the adverse impact of social risks. In general, it is less costly to society to prevent risk than to cope with it afterwards; for individuals and households it is often better to self-protect, rather than turn to the government for assistance that may not be forthcoming. However, the great majority of the poor in Nicaraguans do not have the means (assets and income) to be able to self-protect, thus this group should be the focus of public programs.
Box 1. Risk and Vulnerability
The terms risk and vulnerability are sometimes used interchangeably because people or households that are at-risk are usually considered vulnerable, and vice versa. Risk is the probability of a loss or injury. Its potential negative impact may arise from some present process or future event. In the context of poverty analysis,vulnerability is defined by the World Bank as the probability or risk today of being in poverty or of falling into deeper poverty in the future. It is a key dimension of welfare, since a risk of large changes in income may constrain households to lower investments in productive assetsand in human capital. Vulnerability may influence household behavior and coping strategies and is thus an important consideration of poverty reduction policies. The fear of bad weather conditions or the fear of being expelled from the land they cultivate can deter households from investing in more risky but higher productivity crops and affect their capacity to generate income.
Source: Aline Coudouel, Jesko S. Hentschel, and Quentin T. Wodon, PRSP Sourcebook, Chapter 1. Poverty Measurement and Analysis. World Bank. p. 54.
Social Protection under SRM is defined as public interventions to assist individuals, households and communities to better manage risk and provide support to the critically poor.[2] Thus Social Protection should provide:
1)A safety net, particularly for the poor that are likely to fall in the cracks of established programs;
2)A springboard for the poor to bounce out of poverty;
In practice, SP includes social insurance (SI) such as unemployment, old age or pension, disability, sickness,etc.;social assistance(SA), in turn,include: (i)programs that help the extreme poor access basic social services, avoid social exclusion, and resist coping strategies with irreversible negative effects during adverse shocks (safety net); and (ii) programs that help build the assets (human and physical) of the poor througheither transfers in cash or kind, vocational training and technical assistance, or micro finance that together with SIprovide opportunity for the poor to adopt higher risk-return activities, improve theirincome generating opportunities, and avoid inefficient risk management strategies (springboard).
- Source of Risks
The Nicaraguanpoor population faces a series of risks. These risks result from: i) macroeconomic disturbances and consequent variations in employment, income, and consumption; ii) natural disasters; and ii) microeconomic conditions that expose the poorest families to a series of vulnerability situations. The Social Protection (SP) system must contribute to minimize the impact of all these risks through a strategy that involves market insurance, self-insurance, and the self-protection as well as measures in areas such as fiscal policy, sector policies, and natural disaster management.
In order to diminish the risk originating from cyclical variations in economic activity, there is a need to implement an integral strategy.[3] For example, in order to face the impact of terms of trade deterioration, it is possible to resort to market insurance mechanisms such as future contracts in the international markets, self-insurance mechanisms such as commodity price stabilization funds or the diversification of external trade. In order to face the volatility in private capitals, it is possible to resort, for instance, to contingent lines of credit. On the other hand, in order to face the fluctuations of the economic activity it is important to count on an ample tax base, being able to contain fiscal expenditures in time of economic expansion, and count with a portfolio of well structure programs and projects which can be activated or implemented quickly in time of recession. It is fundamental to maintain a solid financial system to ensure that the funds of depositors are preserved and to provide credit and other services to the companies and families, particularly during difficult economic periods.
Nicaragua is very vulnerable to the natural disasters, particularly earthquakes, hurricanes,floods, and droughts. In order to diminish the risk associated with the natural disasters, it is necessary in general to count with a good civil defense organization, to invest in reducing the vulnerability of the national infrastructure, and develop and implement sound land use and natural resources managementpolicies. In order to prevent or mitigate these risks, it is necessary sometimes to resettle the populations that are in zones of high risk or live in inadequate housing and to develop and implement civic education and disaster preparedness programs. And when the disaster strikes, it is necessary to provide emergency relief to the victims and reconstruction assistance.
Microeconomic vulnerability relates to the risks facing the poor households because of the conditions in which they live.[4] These risks are related to poorlack of assets and employment and income generating opportunities, lack of access to basic services, as well as to other conditions that can affect certain groups in society such as exclusion, violence or family disintegration. The existing microeconomic vulnerabilities may magnify the vulnerability resulting from macroeconomic disturbances or natural disaster. For example, if the level of education of a poor worker is low, he may find it difficulty to obtain a job in good times, but it will be even much more difficult in bad times, when there might be many more better qualified job seekers competing for jobs. On the other hand, the strategies that must pursued by individuals and families to face the risks to which they are exposed directly also help to diminish their vulnerability to the risks associated with changes in economic activity or natural disaster. The taking of a non-agricultural job by a member of a family farmer (diversification of production), the constitution of a saving account (diversification of assets), the participation in a training course (investment in human capital) the buying of insurance (begin to contribute to a pension plan or take a crop insurance), are self-insurance, self-protection and market insurance strategies at the individual level which help facing the risks that may affect the communityor the whole country.
This assessment of the Nicaragua public expenditure on SP programs focuses on the microeconomic risks facing the poor families and to lesser extent on risks associated to natural disasters. The microeconomic risks are related mainly to the access of the poor families to food, education, health, housing, otherbasic services and income generating assets, as well as tomedical and old ageinsurance. The analysisof the risks facing the Nicaraguan poor that follows is organized around the risks that face eachage group (life-cycle) and the risks that affect the households in general; for each group, risks are identified, the population-at-risk is quantified, and thepublic programs that are in place to address the specific risk are discussed. On the basisof existing group-at-risk and programs,public expenditure program on SP is then assessed focusing on spending, relevance and coverage of the existing programs,targeting, cost effectiveness,equity of spending, monitoring and evaluation, and institutional arrangements. The paper concludes with recommendations to strengthen the SP system. Several boxes in the text illustrate the cost of doing nothing to prevent of mitigating the risks.
- Risks andGroups-At-Risk
This section discusses the principal risks that face the different age groups and the households in general and estimates of the number of people or households facing each risk. The review of the risks is not comprehensive but focuses on the major risks facing individual and families that can contribute, if not addressed, to perpetuate the intergenerational transmission of poverty.
- 0-5 Years Old
The main risks that poor children 0-5 years of age face are that they are born with low weight, experiencedebilitating and live threatening diseases, have inadequate diet and lack of early stimulation,both of which will impaired their development and may contribute to perpetuate their poverty.
Low birth weight. The health of an infantdepends on the health of the mother. To promote the birth of healthy babies, the Ministry of Health (MINSA) must ensure, first, that reproductive health services are available so that only desired pregnancies are observed and pregnancies are sufficiently spaced. In Nicaragua 20 percent of the pregnancies are undesired (2.26 desired total fertility rate versus 2.69 observed). Secondly, pregnant womenshould receive early and regular pre-natal controls; MINSA has established that all pregnant women should receiveat least four controls and immunization against tetanus but actually only 63 percent of pregnant womenreceive this care. Thirdly, the delivery of babies should be assisted by professional medical staff; this takes place in only 74 percent of the cases in Nicaragua. After the baby is born, MINSA recommends beginning immediately with breastfeeding and maintaining it exclusively during the first 6 months. As it is well known, exclusive breastfeeding prevents disease and build the baby immune system against future diseases; actually only 31 percent of women in Nicaragua breastfeed exclusively during the recommended 6 months.[5]