Document of The World Bank FOR OFFICIAL USE ONLY Report No. 78273-UY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL FINANCE CORPORATION COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT FOR THE ORIENTAL REPUBLIC OF URUGUAY FOR THE PERIOD 2010-2015 June 13, 2013 Argentina, Paraguay and Uruguay Country Management Unit Latin America and the Caribbean Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank's Policy on Access to Information. Uruguay - Government Fiscal Year January 1 - December 31 Currency Equivalents (As of March 01, 2013) Currency Unit = Uruguayan Peso US$1 = 19.1 Uruguay Pesos WEIGHTS AND MEASURES Metric System IBRD IFC RegionalVice President Hasan Tuluy Regional Vice President Jean Philippe Prosper Country Director Penelope Brook Country Manager Salem Rohana Country Representative Peter Siegenthaler Task Manager Pierre Nadji Task Team Leader Peter Siegenthaler ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities ANI National Agency for Innovation BCU Central Bank of Uruguay BPS Banco de Prevision Social CPI Consumer Price Index CPPR Country Portfolio Performance Review CPS Country Partnership Strategy CPSPR Country Partnership Strategy Progress Report DDO Draw-Drown Option DPL Development Policy Loan ESW Economic and Sector Work FSAP Financial Sector Assessment Program FTS Full-time School GDP Gross Domestic Product GEF Global Environmental Facility GEMLOC Global Emerging Markets Local Currency Bond Program HDB Hidrovia do Brasil IBRD International Bank for Reconstruction and Development IBTAL Institutions Building Technical Assistance Loan IDF Institutional Development Fund IFC International Financial Corporation INE National Statistics Institute MEF Ministry of Economy and Finance MGAP Ministry of Livestock, Agriculture and Fishing MSMEs Micro-, Small and Medium Enterprises NCD Non-Communicable Diseases NEP National Equity Plan NLTA Non-Lending Technical Assistance NRM Natural Resource Management OSE Obras Sanitarias del Estado PforR Program for Results PEFA Public Expenditure and Financial Accountability PER Public Expenditure Review PPP Public-Private Partnership PSIA Poverty and Social Impact Analysis SFLAC Spanish Fund for Latin America and the Caribbean SID Sustainable Industrial Development SIIAS Social Areas Integrated Information System SINARE National Firm Registry System SOE State-owned Enterprise TA Technical Assistance TF Trust Fund UTE Administraci6n Nacional de Usinas y Transmisiones Electricas YOY Year-on-Year ACKNOWLEDGEMENTS This Country Partnership Strategy Progress Report (CPSPR) was prepared under the guidance of Penelope Brook, Country Director, by Peter Siegenthaler (TTL), Ricardo Habalian, and Pierre Nadji (IFC). The Bank team greatly appreciates the collaboration and contributions of the Government of Uruguay in the preparation of the Country Partnership Strategy Progress Report. In particular, the team thanks the Minister of Finance, Mr. Fernando Lorenzo, and his team for their insightful suggestions during the preparation of the Progress Report and portfolio reviews. Contributions are gratefully acknowledged from Sylvia Albela Russo, Diego Ambasz, Daniel Benitez, Valeria Bolla, Roland Clarke, Andrew Follmer, Gregoire Gauthier, Michele Gragnolati, Thomas Haven, Julian Lampietti, Anibal Lopez, Holger Kray, Maria Ana Lugo, Zafer Mustafaoglu, Hannah Nielsen, Luis Perez, Luis de la Plaza, Rafael Rofman, Salem Rohana, Eduardo Wallentin, Carmen Yee-Batista, and Maria Pia Zanetti, ORIENTAL REPUBLIC OF URUGUAY COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT TABLE OF CONTENTS I. INTRODUCTION .....................................................1 II. COUNTRY CONTEXT .....................3..........................3 III. PROGRESS TOWARDS CPS OUTCOMES ...................6... ..........6 IV. FUTURE ENGAGEMENT ...................11.... ................11 V. PROGRAM RISKS AND MITIGATION ................................... 13 Tables: Table 1 - Uruguay: Selected Macroeconomic Indicators ............. ...............4 Table 2 - Planned CPS Lending and Actual Delivery......................... 12 Boxes: Box 1 -New Way of Conducting CPSPR Consultations through Social Media....... .....13 Figures: Figure 1 - Moderate and Extreme Poverty Trends................................5 Figure 2 - Shared Prosperity in Uruguay.......................................5 Annexes Annex 1 - Uruguay 2010-2015 CPS Revised Results Matrix................ .........17 Annex 2 - Summary of Changes to CPS Results Matrix Outcome Indicators ... ............23 Annex 3 - Summary of Virtual CPS Progress Report Consultation.......................26 Annex 4 - AAA Program in Uruguay................................ .........28 Annex 5 - Operations Portfolio (IBRD/IDA and Grants)........................29 Annex 6 - IFC Investment Operations Program...........................30 Annex 7 - IFC Committed and Disbursed Outstanding Portfolio.........................31 Annex 8 - Selected Indicators of Bank Portfolio Performance and Management . ..........32 Annex 9 - Uruguay at a Glance............................................33  I. INTRODUCTION 1. This Progress Report assesses the implementation of the 2010-2015 joint Bank-IFC Country Partnership Strategy (CPS) for the Oriental Republic of Uruguay'. The CPS focuses on four pillars: i) reducing macroeconomic vulnerability and strengthening public sector administration; ii) competitiveness and infrastructure; iii) agriculture, climate change and environment; and iv) increasing social inclusion and equity. 2. The CPS was prepared to support the priorities of the Government. Its implementation has been marked by increasing external economic uncertainty. The CPS period largely coincides with the 5-year Government cycle starting in March 2010. The CPS supports the Government's reform program aimed at consolidating progress on economic stability and growth, while making economic expansion more sustainable and equitable. The program was kept flexible based on past experience with unexpected occurrences of economic and other shocks in the country. This flexibility has enabled adaptation of the Bank Group's program to the increasing global and regional economic uncertainty over the past years and support for the Government's proactive strategy of precautionary financing, which aims to protect vulnerable groups from a reversal of their modest welfare improvement in the event of external shocks. 3. The guiding principle established for the CPS - a focus on innovation and results - has been adhered to during implementation. To ensure that Bank Group support adds value to national programs pertaining to the four CPS pillars, it was agreed to select activities that help access global knowledge and expertise and introduce innovative solutions to complex development challenges. This principle has been adhered to in CPS implementation: a considerable amount of new financing was delivered through innovative and results-based instruments, most notably contingent financing through DPL/DDOs 2 and the new Road Maintenance and Rehabilitation Project (P125803), the first Program for Results (PforR) in the Region. The latter leveraged total financing of over US$500 million from the Government budget and from other external financiers with IBRD contribution of US$66 million. This was accompanied by an increasing emphasis on knowledge generation and sharing. 4. Sound macroeconomic policies and a favorable external environment have produced sustained high growth, which has become more broad-based. A remarkably fast rebound from the 2008/2009 global financial crisis was registered, with growth rates averaging 6.2 percent in 2010-2012, continuing a historic trend of 10 years of consecutive economic growth. Growth has become more inclusive as incomes of the bottom 40 percent have grown at a faster rate than mean income. This is a reflection of general income growth of these groups as well as improved coverage and targeting of social programs. 5. There have been advances on structural reforms, albeit at different speeds. Efficiency of public sector management was increased through measures such as the gradual 1 Report No. 55863-UY, discussed by the Board on October 14, 2010. 2 Programmatic Public Sector, Competitiveness and Social Inclusion DPL I & II (P116215 and P123242), and Public Sector and Social Inclusion DPL (P13 1440). 1 introduction of results-based budgeting. Progress was also made on enhancing competitiveness in areas like customs and logistics management, including the introduction of a regulatory framework for Public-Private Partnerships (PPPs) 3. However, this has not been sufficient to fully address the capacity gap between an aging infrastructure and the needs of an expanding economy. Similarly, there remain important challenges in other areas, notably secondary education. 6. Overall, the implementation of the CPS has been effective in helping consolidate gains in poverty reduction and shared prosperity, and there has been significant progress towards meeting CPS outcomes. Important CPS objectives have already been achieved, such as those of reducing macroeconomic vulnerability, improving water and sanitation services, strengthening climate change mitigation capacity, and consolidating social protection reforms. In areas like enhancing transport infrastructure and non-communicable disease prevention, progress has been less pronounced, though core outcomes are on track to be met by the end of the CPS period. Through this Progress Report, the authorities and the Bank have agreed on a revision of the results matrix to adjust it to the current context. 7. IFC support to the private sector has led to job creation, higher Government revenues, and improved economic opportunities for local economic actors. This includes in particular medium- and small-sized enterprises (MSMEs) and farmers. As of end-201 1, IFC operations in Uruguay are supporting close to 3000 jobs, of which 600 are held by women. Close to 8000 farmers and 10,000 MSMEs are reached through IFC clients. IFC investments generated $16 million in government revenues and close to $400 million for domestic suppliers. 8. No significant further modifications to the CPS program are proposed, and the second half of the CPS period offers an opportunity to consolidate progress on its implementation. Bank efforts will focus on implementing the existing portfolio and delivering high quality knowledge, advisory and convening services, effectively responding to Government needs. IFC will continue to serve the four focus areas of financial services, agribusiness, competiveness and education. Together with the Bank, IFC will support the implementation of the PPP legal and regulatory framework, in areas such as transport, waste management, renewable energy and natural gas, and explore a potential engagement at the municipal level. 9. The forthcoming political transition period provides an opportunity to deepen diagnostic work on Uruguay's medium- to long-term challenges. Presidential elections are scheduled for October 2014, and the new Government will start its term in March 2015. Diagnostic work conducted in close collaboration with the Government and other partners would create a solid analytical basis to help the incoming administration formulate its policy priorities. It would also inform the renewal and further strengthening of the Bank Group's program in the forthcoming CPS cycle. 10. An increase in global economic uncertainty is the main source of change in program risk since adoption of the CPS, yet Uruguay's mitigation capacity has also increased. Compared to the outset of the CPS period, Eurozone instability and other global and regional Law No.18.786 dated July 19, 2011. 2 economic developments have raised the probability of a reversal of the currently rather favorable external economic environment of Uruguay. This threatens important gains made in social mobility, in particular income gains of the bottom 40 percent of the distribution, in reducing poverty and in eliminating extreme poverty. However, there have been significant improvements in reducing the country's vulnerability to external economic shocks, as evidenced by Uruguay's return to Investment Grade status in early 20124 II. COUNTRY CONTEXT 11. Three years after taking office in March 2010, the Government has made important progress on most of its policy priorities. The coalition Government under President Mujica has adhered to the principle of consolidating macroeconomic stability and sustaining economic growth while strengthening and expanding social programs in support of vulnerable groups. Among the important reform achievements over the past years, the following stand out: i) strengthening social protection policies aimed at enhancing targeting of benefits to the most vulnerable households; ii) gradual implementation of a health insurance scheme leading to universal coverage with sustainable financing; iii) introduction of results-oriented budgeting that allocates public resources more effectively to priority areas; iv) a thorough customs reform to facilitate trade; and v) an E-government agenda aimed at simplifying administrative processes and improving accessibility through online tools. 12. These structural advances combined with solid macroeconomic policies and favorable external economic conditions have resulted in a strong economic performance. 2012 was the tenth consecutive year of GDP growth, marking one of the longest growth periods in the country's history. Due to the less favorable economic environment in the final months of the year, however, economic activity slowed down in 2012 to a growth rate of real GDP of 3.9 percent, close to its potential growth rate of 4 percent. It is projected that the economy will keep expanding at a rate close to 4 percent over the coming years. 13. Concerted efforts have led to a significant reduction of Uruguay's vulnerability to external shocks, in particular regarding public finances. The Government's pre-cautionary financing strategy has helped build up considerable fiscal reserves to respond in the event that Uruguay loses access to global capital markets. Effective public debt management has resulted in debt sustainability ceasing to constitute a major medium-term concern for Uruguay. Gross public debt declined from 76 percent of GDP in 2009 to 62.2 percent in December 2012. The debt profile has also improved noticeably following a reduction of the share of foreign currency denominated debt and an increase in the share of fixed-rate instruments. 14. The medium term outlook remains solid, but challenges remain for economic policies. There are good prospects for Uruguay meeting these challenges effectively: * A fiscal deterioration observed in 2012 (primary fiscal surplus fell from 2.0 percent of GDP in 2011 to -0.2 percent), to a large degree due to transitory factors such as a large energy deficit due to low rainfall and high financing costs related to the precautionary 4 Standard and Poor's (April 2012), Moody's (July 2012), Fitch (March 2013) and DBRS (May 2013) upgraded Uruguay's credit rating to investment grade, which it had lost in early 2002. 3 financing strategy and market interventions to support to local currency. It is expected that this will revert to a positive fiscal trend from 2013 onwards. * Lower external price competitiveness and a buoyant internal demand that boosted imports, mainly fuel and capital imports for large investments projects, have led to the current account deficit reaching 5.3 percent of GDP at end-2012, up from 1.9 percent in 2010. The current account deficit is likely to increase further in 2013, but should stabilize towards the end of the CPS period. The growth rate of imports is expected to decrease as economic growth stabilizes at lower rates and pulp mill construction comes to an end. Exports should accelerate, largely on account of stronger economic performance of trading partners and significant exports resulting from major foreign investment projects coming on-stream. * Strong domestic demand and high commodity prices led to a rise in CPI annual inflation to 8.1 percent (period average) in 2012 and 2011, compared to 6.7 percent in 2010. In order to curb inflation, the Central Bank increased the monetary policy rate several times and increased marginal reserve requirements. The combination of high CPI inflation and currency appreciation, caused mainly by large capital inflows, has led to a loss of external price competitiveness. Macroeconomic policies face trade-offs between further monetary tightening and avoiding a substantial currency appreciation. This will be facilitated by the expected stabilization of internal demand at lower levels. 15. Maintaining and eventually increasing the growth rate in the medium and long term will require addressing several important growth constraints. After several years of significant expansion, there are signs that future growth rates will depend on increasing productivity and addressing emerging capacity constraints. Enhancing infrastructure investments, most notably in different modes of transport, and human resources, by improving the education system and linking it better to the needs of the economy, are particularly important in this regard. Table 1. Uruguay: Selected Macroeconomic Indicators Actual Projected 2007 2008 2009 2010 2011 2012 2013P 2014P 2015P Real GDP growth (%) 6.5 7.2 2.2 8.9 6.5 3.9 4.0 4.0 4.0 CPI (% change, period average) 8.1 7.9 7.1 6.7 8.1 8.1 7.7 7.1 6.0 Exchange rate (average) 23.5 20.9 22.6 20.1 19.3 20.3 -- -- -- Trade bal. (% of GDP) 0.7 -3.2 1.7 1.6 0.3 -2.5 -2.9 -2.4 -2.4 Current account bal. (% of GDP) -0.9 -5.7 -1.3 -1.9 -2.9 -5.3 -5.4 -5.3 -5.3 Primary bal. (% of GDP) 1/ 2.3 1.8 1.2 1.3 1.9 0.3 0.7 0.8 1.0 Overall fiscal bal. (% ofGDP) 1/ -1.5 -1.1 -1.6 -1.2 -0.6 -2.1 -1.2 -1.1 -0.8 1/ Central Government + BPS; *based on preliminary data for 2012; P projected Source: BCU, INE, MEF and World Bank staff calculations 16. The Government's growth strategy, further refined in the current CPS period, recognizes these challenges. This strategy focuses on: * Turning Uruguay into a sub-regional logistics hub and promoting non-traditional, high value exports in areas such as logistics services, software or agro-related biotechnology. * Further enhancing the resilience of the economy against shocks, including through the pre-cautionary financing strategy and policies rendering the agriculture sector more resilient to climate variability and volatility of commodity prices. 4 * Further strengthening the stability of the financial sector and deepening its reach to small and medium sized enterprises and the poorer segments of the population; * Preparing for the potential exploitation of extractive industries, as a large iron ore project is being explored and on- and offshore oil prospects are under examination. 17. Important gains in reducing poverty and increasing shared prosperity have been consolidated since 2010. After several years of sustained decline, by 2010 moderate and extreme poverty rates had declined to 18.7 and 1.2 percent, respectively . In 2012, these rates fell further to 13.1 percent and 0.6 percent (see figure 1). Increases in labor income of the poor were the main factor behind the fall in poverty, together with the expansion of social programs, in particular the introduction of new family allowances programs. As shown in Figure 2, since the end of the crisis in 2003, income growth of Uruguay's bottom 40 percent income earners has generally been higher than mean income growth, and generally higher than the income growth of Latin America's bottom 40 percent. This important improvement in shared prosperity reflects the high income growth rates in general and a significant fall in inequality since 2007, measured by the Gini Coefficient, reaching 40.1 in 2011, from 42.1 in 2010. 18. Protecting vulnerable groups from economic shocks remains a key challenge. Estimates of income mobility suggest that most households that exited poverty in recent years have experienced only a modest welfare improvement and face high risks of falling back into poverty. The same applies for those that have escaped extreme poverty. Identifying this segment of the population and adequately protecting it against potential negative shocks is a key priority for the Government. Figure 1. Uruguay: Moderate and Extreme Poverty Trends Figure 2. Shared Prosperity in Uruguay: Growth of Urban areas Bottom 40 Percent income Earners (yoy) Total Country 45 20.0% 39.4 39.9 40 035.2 36.6 34.4% 0 35 30.8.0% CO 30- a2. 2.7 ~ 5.0%k 25 21.4 18.7 00% 20 14.3 1. =13.1 -5.0% LAC 15 0 10 -10.0% URY 5 2.3 3. . . . 1.9 1.6 ''11110 - .2 05 0. -1.0% -dr Annual Growth Rate Mean 0. Income 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Moderate Poverty -e-Extreme Poverty 6 5 65 ( 5 Source: National Institute of Statistics (Instituto Nacional de Source: Calculation based on SEDLAC harmonized data Estadistica, INE), 2012 (CEDLAS and World Bank, 2013)'. F Based on data from urban areas oniy (towns with more than 5000 inhabitants). 6 Nt:Preliminary calculations. LAC includes 18 countries: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Rep., Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela Source: National Institute of Statistics, 2012. 5 III. PROGRESS TOWARDS CPS OUTCOMES A. Results to Date 19. Overall progress toward CPS outcomes as defined in the results matrix has been satisfactory. Significant results have already been achieved under all CPS pillars, in particular on reducing macroeconomic vulnerability, public sector modernization, strengthened business climate, improving water and sanitation services and increasing inclusion and equity. Progress in improving quality and coverage of transport infrastructure and implementing a non- communicable disease (NCD) prevention strategy has been slowed by implementation challenges and budgetary constraints, though achievement of core outcomes remains on track. A detailed description on progress towards CPS outcome indicators is presented in the revised Results Matrix (Annex 1). A summary of key results follows. 20. Prudent macroeconomic and fiscal policies have reduced the economy's vulnerability to external shocks. The Bank provided US$ 520 million7 in contingent financing as support to the Government's precautionary financing strategy. Together with contingent financing from other multilateral partners, this provided a robust fiscal buffer for Uruguay to prevent a reversal of poverty reduction and shared prosperity gains achieved in recent years. This financing also played a role in Uruguay's credit risk upgrading to Investment Grade in early 2012. 21. The use of innovative Bank support instruments has contributed to an effective fiscal risk management. Uruguay has taken advantage of IBRD's local currency financing capabilities to support the Government's objective of reducing currency risk in their sovereign debt portfolio and recently converted IBRD loans for a total of US$150 million into Uruguayan pesos through the first local currency financing via the swap market. In addition, the Bank is preparing a weather derivative transaction with Uruguay's power utility (UTE) aimed at hedging its exposure to low rainfall and high oil prices, both of which affect the cost of power generation. Finally, technical assistance through the Global Emerging Markets Local Currency Bond Program (GEMLOC) initiative helped further strengthen Uruguay's issuance and debt market development strategy with a focus on local currency issuance. These efforts have contributed to improving the country's debt profile, further decreasing foreign exchange risks and deepening the financial sector. 22. Several measures to enhance public sector performance have been implemented. DPL support contributed to the introduction of performance-oriented budgeting. The 2010-2014 Budget Law8 is the first in Uruguay to organize the budget in programmatic areas and to link program resources to specific output and outcome indicators, allowing for a better assessment of the impact of fiscal policies. The Institution Building Technical Assistance Loan (IBTAL) supported this objective by strengthening capacity in eight ministries through the creation of planning, evaluation and quality control units. The IBTAL also supported ongoing e-government 7 Programmatic Public Sector, Competitiveness and Social Inclusion DPL I & II (P116215 and P123242), and Public Sector Management and Social Inclusion DPL (P131440). Law No. 18.834 dated October 25, 2011 6 and procurement reforms aimed at enhancing Government efficiency and transparency. As of today, 25 Government processes can now be initiated and completed electronically, and a procurement regulatory agency (Agencia de Compras y Contrataciones) was created in 2012. 23. Reforms supported by the Bank Group have helped improve the country's business environment. Bank support toward this objective was provided mostly through the DPLs, but also through South-South exchanges on reforms such as facilitating business registration. Uruguay's Doing Business ranking has improved from 114 in 2010 to 89 in 2013. Key reforms in this regard were the substantial reduction from 65 (2010) to 7 (2013) days required to start a private company, and the transformation of the customs control system from physical inspections and ex-ante reviews into a more effective and less time-consuming risk-based management system. Progress was also achieved towards promoting financial market development and enhancing investor confidence through the implementation of the Capital Markets Law9, which regulates the minimum requirements for stock offerings, and the computerization of the Stock Exchange Register. In addition, IFC trade finance investment with the Nuevo Banco Comercial (NBC) is currently supporting more than 3,000 MSMEs in the country's export sector. 24. Progress has been made on upgrading infrastructure, yet not across the board. The Bank contributed to increased efficiency, accountability and sustainability of the country's main water services provider, Obras Sanitarias del Estado (OSE) 10 . Results include the implementation of new operational models and improved customer service practices and environmental management, together with the expansion of clean water networks and the connection of 8,500 families to the sewage network. These reforms resulted in a significant increase in customer satisfaction and a reduction in water losses, which had been increasing prior to Bank intervention. In addition, a GEF-financed operation" supported the introduction of energy efficiency as a national priority and leveraged investment projects for more than US$ 20 million that resulted in significant energy savings. 25. While Bank support has contributed to sustain the condition of the national roads network, reforms to upgrade broader transport infrastructure have advanced more slowly than initially envisioned. Road infrastructure upgrading continues to pose challenges due to increased freight traffic and budgetary constraints. Railway system reform and the introduction of PPPs in the roads sector have progressed slower than expected. This being said, the approval of a regulatory framework for PPPs, the creation of the National Logistics Institute, and capacity building efforts in this area provide a sound basis to advance on these reforms going forward. In addition, the recently approved IFC investment operation with Hidrovia do Brasil (HDB), a US$74 million IFC loan plus US$30 million in mobilization, is expected to increase the supply of efficient, low emission transport services on the river system. 26. Improvements in natural resource management and climate change adaptation are an important achievement of the CPS period. The CPS has made a considerable contribution to the improvement of Uruguay's natural resources management (NRM,), through a series of ' Law No. 18.627 dated November 24, 2009 10 OSE Modernization and System Rehabilitation Project (P101432). Energy Efficiency Project (P068124). 7 activities clustered around the Integrated Natural Resource Management and Biodiversity Project (P070653), by supporting on-farm investments throughout the country and promoting technologies that reduce the vulnerability of small producers to the increasing climate variability experienced in recent years in Uruguay. This includes strengthening information systems on production, climate and NRM and at the producer and policy level. As part of a Bank-supported program, more than 9,000 farm-level projects have been implemented leading to improved natural resource, water and biodiversity management, covering an area of more 800,000 hectares and providing direct and indirect support to 6,000 mostly small and medium farmers. 27. Through investments and advisory services, IFC has also contributed to climate change mitigation. Its financing of resource efficiency developments to reduce water and energy consumption by Conaprole, Uruguay's leading dairy processor, and support to developing fuel-efficient and low emission transport modes along the Uruguay River has led to strengthened environmental and social standards in the private sector. 28. Social protection programs have been expanded and consolidated. DPL, IBTAL and analytical support to social protection reformsl2 focused on consolidating the National Equity Plan (NEP), which seeks to expand coverage of non-contributory social protection policies to the poor and vulnerable, and improve their targeting. Since 2010 NEP coverage increased from 80 percent to 83 percent of households in the poorest quintile, contributing to the sustained decline in poverty. Important progress was made on improving targeting of social programs with Bank support. A Social Areas Integrated Information System (SIIAS) was created, a detailed register of beneficiaries of different social programs, and a comprehensive door-to-door review of actual and potential recipients of social transfers was conducted. These improvements are particularly important for poor women, who are over-proportionally suffering from current targeting errors, according to the results of a Poverty and Social Impact Analysis (PSIA) conducted for the 2012 DPL. Finally, the Bank provided an important analytical input on how the fiscal sustainability of the expansion of these programs can be maintained over time through the recently completed Public Expenditure Review (PER). 29. Advances on health reform implementation have led to increased public health insurance coverage and improved NCD prevention. DPL- and AAA-supported reforms in health included the expansion of national health insurance coverage. Coverage is expected to reach 60 percent of the population by the end of the CPS period, up from 43 percent in 2010. The Non-Communicable Disease Prevention Project (P050716) has suffered implementation delays due to the time-intensive effort needed to put implementation arrangements in place. Notwithstanding, activities completed so far have contributed to increasing the share of the population covered and screened for NCD risk factors, and a drop in mortality rates from circulatory system diseases. The focus on reproductive health issues and risk factors specific to women has led to these results being particularly relevant to women. 12 Programmatic Public Sector, Competitiveness and Social Inclusion DPL I&II (P116215 and P123242), Public Sector Management and Social Inclusion DPL (P131440), and Institution Building Technical Assistance Loan (P097604). 8 30. Despite widespread concerns about a reform impasse in the education sector, there have been advances on education coverage and quality in key areas. The current Government considers education as the "priority of priorities". However, efforts to reverse declining trends on education outcomes, in particular at the secondary level, have not led to the desired results. Bank support in the sector has focused on expanding and improving the country's full-time school (FTS) program for primary education by financing the construction and rehabilitation of more than 170 FTSs and delivering capacity-building programs to FTS teachersl3. In addition, DPL and AAA support contributed to the consolidation of the Government's One Laptop per Child Program (Plan Ceibal), which now covers 100 percent of primary school students. Expanding such positive examples of strengthening specific education policies to more broad-based improvements in the sector represents a key challenge going forward. B. Program Implementation and Portfolio Performance 31. A key element of CPS implementation has been an increased emphasis on innovation and results. Responding to the Government's request, the Bank has channeled financial and knowledge resources to innovative interventions with strong expected development impact, providing best practice technical know-how in key sectors and contributing to capacity building in reform program design and implementation. A significant share of new lendinf was provided through innovative instruments such as contingent financing through DPL/DDOs and the Road Maintenance and Rehabilitation Program for Results (PforR) (P125803), the first project in the region delivered under this new modality. The PfoR disburses against achievements in specified indicators, enabling a focus on capacity building and strengthening of country fiduciary and environmental systems. 32. New Bank lending commitments since the start of the CPS period total US$ 827 million, surpassing significantly the originally indicated amount of US$ 700 million. Of the new lending amount, US$ 620 million were delivered in the form of DPLs, US$ 141 million in investment operations and US$ 66 million in a PforR project. In addition, trust funds and AAA programs have been used selectively to support key institutional reforms and project design and implementation, such as: i) TF financing by the Spanish Fund for Latin America and the Caribbean (SFLAC) to support capacity-building on PPPs, development of a low-carbon growth strategy and preparation of the recently approved OSE Sustainable and Efficient Project (P118064); ii) a Public Expenditure Review aimed at identifying challenges and opportunities in fiscal spending and education and health reforms; and iii) GEF-financed operations supporting biodiversity and energy efficiency. 33. IFC has approved 5 new investment projects since August 2010. Three of them relate to trade finance, one to agribusiness (Conaprole), and one in tourist services (Pestana Uruguay), in addition to the HDB barge transport project expected to be approved shortly. If the HDB 13 3 Basic Education Quality Improvement Project (P070937), and Support to Uruguayan Public Schools Project (P 126408). 14 Second Public Sector, Competitiveness and Social Inclusion DPL (P123242) and Public Sector and Social Inclusion DPL (P131440). 15 Energy Efficiency Project (P068124) and GEF blend-financing of Integrated National Resource Management and Biodiversity Project (P077676). 9 project is included ($74 million IFC loan plus $30 million mobilization), IFC new financing during the CPS period will amount to a total of $158 million. 34. Development policy lending under the current CPS increased to US$ 620 million from the US$ 200 million initially envisaged. This was a response to the Government's request for significant levels of contingent financing from the Bank to support its precautionary financing strategy in the context of increasing global economic uncertainties. The Government's strategy aims at mitigating risks resulting from deteriorating conditions in international debt markets, which in small economy like Uruguay can have serious consequences. The increase in the amount for DPL-DDOs was made possible by an increased level of the total CPS lending envelope. This increase has enabled investment lending to continue as described in the CPS. The authorities stated that they would only request disbursement under the DPL-DDO if international financial conditions were to deteriorate significantly. The modification is in line with the agreement between the Government and the Bank reflected in the CPS to keep the strategy flexible and adjust the program in the event of unforeseen domestic or external developments. 35. Portfolio performance remains strong as a result of a robust Bank-Government partnership, ongoing implementation support and bi-annual Country Portfolio Performance Reviews (CPPRs). The disbursement ratio has averaged 41.8 percent during the CPS period and reached 59.9 percent in FY12, the highest in the region during that year. There is one problem project in the portfolio, representing 9.3 percent of the investment portfolio by amount, which currently totals US$ 270.4 million. This project was recently restructured to address implementation challenges and is expected to return to satisfactory levels shortly. 36. Implementation of the Strategy has yielded important lessons that will inform the Bank's engagement in the future. Four lessons stand out in this regard: * First, the Government and the Bank agreed on the importance of establishing clear baselines during project design to enable rigorous impact evaluation, a lesson which was incorporated in recently-approved investment operations in education and water and sanitation6. Similarly, the Bank could provide technical support to strengthening M&E of Government programs, as recently agreed in the context of the planned impact evaluation of a new early childhood program. * Second, there is consensus that the Bank-supported program in Uruguay should gradually move to using existing Government structures to manage projects (as opposed to the usual practice of creating separate project units). This said, experience has shown that adapting Bank programs and procedures to existing structures requires more intense monitoring and support. * Third, a more systematic approach to prioritizing, reviewing and adjusting Bank's supported analytical and advisory activities (AAA) could help ensure that these activities respond to priority demands from the country, strengthen linkages among different tasks, and better disseminate findings. Such an approach was initially envisaged in the CPS, which proposed to institute a formal AAA collaboration agreement. 16 Support to Uruguayan Public Schools Project (P126408), OSE Sustainable and Efficient Project (P118064). 10 * Fourth, the flexibility in the lending program agreed upon in the CPS proved effective as it enabled the Government and the Bank to respond effectively to the increased level of uncertainty that the Uruguayan economy has been facing, through an increase in fast disbursing contingent financing. C. Adjustments to CPS Results Framework 37. Most elements of the 2010-2015 CPS results framework remain relevant, and the achievement of most intended results is on track. Several indicators were adjusted in light of changes in priorities and of implementation experience. Indicators were included or modified to reflect changes in the Bank Group's engagement in the country and incorporate expected results from recently approved operations, most notably the following: i) contribute to sustaining the condition of the national road network and strengthen road sector management and road safety through PforR financing; ii) strengthen water and sanitation sector efficiency by further reducing water losses and increasing the sector's energy efficiency and sustainability, and iii) reduce learning gaps by strengthening FTS education quality. 38. Lending operations in energy transmission strengthening and sustainable industrial development (SID) did not materialize as the authorities and the Bank concluded that they would produce limited added value. Instead, the Bank supported the implementation of a GEF grant on energy efficiency and financial support for the Government's SID agenda is being replaced by IDF-financed technical assistance. Outcome indicators on energy were adjusted accordingly, and SID-related indicators were dropped as results are not expected to materialize until the next CPS period. 39. Several outcomes and milestones were adjusted to better reflect changed realities in the country and the strengthened focus on areas where the Bank Group program could influence results. Indicators on fiscal deficit reduction, credit-to-GDP ratio growth and increased capital market activity were dropped as expected outcomes were not directly influenced by the Bank Group's program. Moreover, the outcome on sustainable industrial development was dropped together with the expected lending operation, given that results from triple AAA and TF support to sustainable industrial development will materialize only in the next CPS period. In addition, indicators related to the implementation of a NCD prevention strategy were adjusted following a recent NCD Prevention Project (P050716) restructuring to accelerate its execution and ensure timely delivery of results. Lastly, education outcomes were modified to more accurately reflect the Bank program's large focus on FTS. IV. FUTURE ENGAGEMENT 40. Implementation of the CPS program has advanced as planned. Most new lending proposed in the CPS has been delivered in the first half of the CPS period (see Table 2). Similarly, an ambitious AAA program on knowledge generation and sharing has been put into practice, with several studies and TA activities providing substantial support to the formulation and implementation of critical reforms in areas such as on social protection, debt management, health, PPP and climate change. Selection of new knowledge, TA and convening services supported by the Bank, and review of progress of these activities has been conducted through a 11 6-monthly joint review of the AAA program. As mentioned above, going forward, AAA collaboration could benefit from being further systematized in the form of a framework agreement on a joint analytical and technical assistance program. 41. The remainder of the CPS period offers the opportunity to consolidate program results and prepare for the coming CPS cycle. The authorities and the Bank have agreed to shift emphasis in the Bank's collaboration with Uruguay as follows: first, to strengthen implementation of the current portfolio, in particular by strengthening M&E frameworks; and second, to prepare for the coming Government (and CPS) cycle by deepening diagnostic work on medium- and long-term development challenges, identifying reform options and helping create broad consensus around them. A first step in this direction was conducted in the form of a virtual consultation in the context of the preparation of the CPSPR (see Box 1). This would culminate in the Policy Notes process starting at end-FY14. The diagnostic work and related policy dialog will have the additional objective of identifying possible areas for new Bank lending or knowledge programs at the end of the current or beginning of the forthcoming cycle. Table 2. Planned CPS Lending Program and Actual Delivery CPS Planned Loans US$m Status US$m Approved: Programmatic Public Sector, Development Policy Loans I & II 200 Competitiveness and Social Inclusion DPL I & II 360 (P116215 and P123242) Improvement of Primary Education 40 Approved: Support to Uruguayan Public Schools 40 Project (P126408) Integrated Agricultural Developm. & 40 Approved: Sustainable Management of Natural 49 Natural Resources Management Resources and Climate Change Project (P124181) Transport Infrastructure Modernization TBD Approved: Road Rehabilitation and Maintenance 66 Program for Results (P125803) Drinking Water Systems 40 Approved - OSE Sustainable and Efficient Project 42 (P118064) Health Sector Support TBD Delayed: Ongoing project has been extended (P050716) Output-based Loan for Social Sectors TBD Dropped: Support provided through DPLs - and Human Opportunities IL Sustainable Industrial Development TBD Dropped: IDF project has been approved instead - Energy Sector Strengthening TBD Dropped - Dropped: Energy Efficiency GEF project successfully completed in 2011 (P068124) Additional CPS Lending Deliveries Public Sector and Social Inclusion DPL (P131440) 260 Institutions Building Technical Assistance Loan 10 Additional Financing (P097604) Total Planned CPS Lending Envelope 700 Actual CPS Deliveries 827 12 Box 1. A New Way of Conducting CPSPR Consultations through Social Media The Bank has put an increasing emphasis on engaging with Uruguayan partners from Government, academia, private sector, think tanks and civil society on key development issues, and on providing a platform for dialogue. In line with this, a virtual consultation was conducted for the preparation of this CPS Progress Report, with the objective of gathering views from a broad array of stakeholders. This was done in addition of several instances of dialog with the authorities. Through this virtual consultation feedback was sought from a broad audience on: (i) the main development challenges currently faced by Uruguay; (ii) ideas on possible solutions and best practices on those areas; and (iii) the role the World Bank could play in the process. The invitation to this consultation was disseminated through traditional and social media. A blog and a Collaboration 4 Development Platform were used for the consultation. The feedback received was thoughtful and valuable. Participants shared ideas on how the government could improve its results and how the Bank Group could add best value. Education, entrepreneurship, and public sector reform were the most popular topics related to what should be Government priorities. Logistics, infrastructure, social policies, health, economic management and security were also mentioned in this regard. A more detailed account of these consultations is reflected in Annex 3. In relation to the role the Bank Group should play to support Uruguay's development, several interesting ideas were put forward. Some commentators advocated for continuation or upgrading of existing areas of Bank Group support: : * Promoting the use all available modes of transport to develop an efficient logistics network and to strengthen Uruguay's potential as a regional hub. * Putting special emphasis on supporting education, Uruguay's main challenge. * Conducting pilot projects on public sector reforms, applying good governance standards, promoting greater efficiency, and enhancing administrative decentralization. * Continuing to support full-time schools as they are seen as effective in deepening social inclusion through education and training. Others suggested new areas of priority for the country, to which the Bank Group could add value: * Strengthening tertiary education in the interior of the country. * Fostering entrepreneurship and reducing informality by implementing a program - jointly with the Government- to subsidize for a period of time the contributions of MSMEs to job creation. * Helping establish community centers where people could meet for cultural activities, sports, and develop a sense of belonging. * Training of youth (young mothers in particular) on values, and on specific tasks that would allow them to upgrade their self-esteem and financially support their families. Still others saw an enhanced role for the Bank beyond traditional supported centered on lending: * Going beyond financial support to Uruguay by providing technical assistance and promoting opportunities for discussion and research. * Acting as a knowledge platform by inviting international experts that could share other countries' experiences in specific areas, such as on program evaluation or vocational training. These inputs inform and confirm the intention of focusing efforts in the remainder of the CPS on consolidating and enhancing results in existing areas of collaboration and on generating and sharing knowledge through the Program. While some new areas of engagement will be considered for this period, the suggestions received in this regard will be particularly useful for the renewal of the Dro2ram in the forthcominE CPS Deriod. 42. The AAA program for the remainder of the CPS period will focus on completing ongoing activities and increasingly integrating activities into programs with clearly defined objectives. While a more detailed definition of the AAA program will be discussed and agreed 13 with the Government in the coming months, the program is taking shape. It will include the completion of ongoing AAA (see Annex 3), and the continuation of programmatic analytical approaches, such as: i) the demand-based analytical collaboration with the MEF on macroeconomic management, ii) follow-up technical support to the PPP reform, or iii) different activities around the green growth agenda. The authorities and the Bank share the ambition of integrating these analytical activities in programs with clearly defined objectives. 43. There has been agreement in principle to embark on a limited number of new analytical tasks in the remainder of the CPS period. These tasks aim at identifying next generation social and economic policies with scope to further enhance shared prosperity and reduce poverty, and lead the country on a green and inclusive growth path that is more resilient against different types of shocks. A priori, new analytical tasks would focus on the following: * Strengthening public sector capacity in managing a modernized railway system. * Seeking better understanding of how to enhance productivity in key productive sectors in view of strengthening competiveness of the economy as a whole. * Developing measures to enhance financial sector deepening, such as mobile factoring. * Supporting impact evaluations in priority public programs, with a focus on how these improve living conditions of vulnerable groups and further reduce gender gaps. * Identifying priorities for strengthening legal, regulatory and administrative capacity on managing extractive industries. 44. The key elements of IFC's strategy for private sector development in Uruguay will continue to be based on its four focus areas in Uruguay. These are: i) financial services, ii) agribusiness, iii) competiveness; and iv) education. Through Conaprole, IFC expects to support 111 new jobs, reach 200 farmers, and make $81.3 million in purchases from domestic suppliers. Through Pestana Uruguay, IFC expects to support 100 new jobs, of which 60 are for women, make $2.2 million in new purchases from domestic suppliers, and generate US$ 600,000 in additional Government revenues. New investments in growth sectors and infrastructure are expected to result in significant improvements in competitiveness and logistics costs. Together with the Bank, IFC intends to support the implementation of the PPP legal and regulatory framework through advisory and investment services. Potential areas for engagement on this are transport (ports, rail, logistics), solid waste management and energy (renewable sources, and natural gas). Bank and IFC will also coordinate their approach to support PPPs at the subnational level (Montevideo Municipality, OSE, and others). V. PROGRAM RISKS AND MITIGATION 45. Risks to the program as identified in the CPS remain low, and efforts to manage risks more proactively have intensified. A potential increase in intensity and volatility in global economic uncertainties and the forthcoming political transition are the main risk factors to reckon with in the remainder of CPS implementation. At the same time, the authorities have taken on a pro-active stance on managing different risks and volatility, with Bank Group support, and have intensified efforts to build resilience against economic and climate shocks. 14 46. The external economic environment has become more volatile and unstable. Since approval of the CPS, the increasing Eurozone instability has raised the probability of a reversal of the favorable external economic environment of Uruguay. Changes in other global parameters, such as an increased volatility in agricultural commodity prices could have significant effects on the Uruguayan economy. In addition, certain developments in Argentina and Brazil have increased concerns about potential regional trade shocks. Slower growth in Uruguay's neighboring countries, and trade restrictions imposed by Argentina, have resulted in a deceleration of export growth to Brazil from 12.6 percent in 2011 to 5.9 percent in 2012, and a 14.6 percent contraction of exports to Argentina, compared to an increase of 17 percent in 2011. 47. Yet Uruguay also managed to further reduce its vulnerability to shocks, and a marked reversal of its currently favorable economic trajectory is considered unlikely over the remainder of the CPS period. There have been significant further improvements on reducing the country's vulnerability to external economic shocks. The country has diversified its export profile and China has replaced Argentina as the second largest trading partner after Brazil. The debt profile has improved markedly, as reported above. Uruguay's return to Investment Grade status in early 2012 is both recognition of this improvement and a stabilizing factor itself. The swift response to the Government's request for increased DPL financing in DDO format and the conversion of US$ 150 million of IBRD debt into local currency were important contributions to the Government's efforts to create a sizeable fiscal cushion against a potential deterioration of access to markets and effective debt management. 48. Greater financial system stability also contributed to reducing vulnerability against external shocks. This is a result of the banking system consolidation process that occurred in the aftermath of the 2002 crisis and proactive Central Bank intervention and supervision. The financial system has managed to navigate the global financial crisis and its aftermath without major difficulties. Prudential requirements have been improved and banking regulation and supervision have been strengthened. The accumulation of foreign reserves by the central bank contributed further to the confidence in Uruguay's currency, which has been floating since 2002. 49. Political and Social Risks remain low, yet the forthcoming political transition period could have an impact on program implementation. There is risk of increased pressure to expand public programs, in particular in social areas and on infrastructure upgrading with the end of the administration's mandate approaching. Together with the deterioration in fiscal results in 2012, this has raised some concerns on the prospects for maintaining a prudent fiscal stance. However this risk is mitigated by the solid track record of the administration on fiscal stability, and the legal limits to spending increases in the last year of the Government's term. In general, political debates are likely to become more polarized as elections near, and this might lead the Government to slow down the pace on more disputed reforms, such as on restructuring the railway sector and the modernization of the state. However this is unlikely to significantly affect implementation of reforms supported by the Bank Group's program, due to the majority of the Frente Amplio Government in Parliament and the consensus orientation of Uruguayan society. 50. Since 2010, the trend of increasing climate variability has continued, with significant implications for livelihoods, production and fiscal results. Variability in rainfall levels has been increasing since 1996, giving rise to a number of severe droughts which have had a major 15 impact on rural income and the fiscal balance, the latter through higher energy imports needs. At the same time, awareness of climate-related risks has increased and so have efforts to strengthen resilience. The new Sustainable Management of Natural Resources and Climate Change Project (P12418 1) will enhance small and medium sized producers' resilience to climate variability. This stands at the center of several other activities aimed at reducing vulnerability to climate risks, including through innovative measures like climate insurance. 16 Annex 1: Uruguay 2010-2015 CPS Revised Results Matrix Country Goals Revised CPS Outcomes Outcome Indicators Progress to Date Bank Group Program Instruments PILLAR 1 - REDUCING MACROECONOMIC VULNERABILITY & STRENGTHENING PUBLIC SECTOR ADMINISTRATION 1. Reduce Macroeconomic Vulnerabilities Consolidating gains on Gradually reduce public sector The net public debt ratio decreases Underway. Net public debt as a share of Programmatic Public Sector, Competitiveness macroeconomic indebtedness and improve from its 2009 baseline of 37 percent GDP decreased to 27.3 percent in 2012. and Social Inclusion DPL I (FY11) stability by reducing public debt profile. of GDP to 23.3 percent in 2015 Programmatic Public Sector, Competitiveness remammiganSoilIcuinDLI/D (FI2 vulnerabilities The foreign currency-denominated Achieved. The share of foreign currency Central Government public debt share denominated debt has declined Public Sector Mgt. and Social Ic. DPL/DDO declines to 55 percent or less of the continuously to 47.9 percent in 2011 and total outstanding debt from its 2009 42.7 percent in 2012. This is a significant baseline of 56.7 percent. improvement which will need to be GEMLOC Uruguay I (closed) & 11 (ongoing) sustained in the next two years. AAA Public Expenditure Review IBTAL (and IBTAL AF) (ongoing) Conversion of outstanding Bank loans into local currency (TRE) 2. Public Sector Modernization Efficient and equitable Introduction of a performance 5-year budget for 2010-2014 is Achieved. 2010-2014 budget was Programmatic Public Sector, Competitiveness management of public oriented budgeting prepared with a programmatic prepared with a programmatic and Social Inclusion DPL I (FY1 1) resources classification (early 2011). classification.PrgamtcubiSeo,Cmpiivns Programmatic Public Sector, Competitiveness Define output and outcome indicators Underway. Output and outcome and Social Inclusion DPL II/DDO (FY12) for at least 9 priority areas (2009 indicators for expenditure programs in 7 baseline: 0). priority areas were defined in the 2010- Public Sector Management and Social 2014 budget law and monitored in the Inclusion DPL/DDO Annual Budget Review 2011 and 2012. IBTAL (including AF) (ongoing) Deepen e-government reforms Rise in number of main Achieved. By April 2013, 25 main PEFA to enhance efficiency and administrative processes star0 ed and administrative processes can be accessed transparency completed electronically to 25 (2009 and completed online. baseline: 20). Public procurement is made A procurement regulatory agency to Underway. Software contract for the more efficient and transparent strengthen procurement systems is Registry of Gov. Suppliers signed. The through a properly functioning created and operational and a procurement regulatory agency (Agencia regulatory agency and the software for the Registry of de Compras y Contrataciones Estatales) upgrading of the public Government Suppliers is developed, was created in 2012 and recently staffed procurement software, implementing an action plan to strengthen procurement systems. 17 Country Goals Revised CPS Outcomes Outcome Indicators Progress to Date Bank Group Program Instruments PILLAR 2 -COMPETITIVENESS & INFRASTRUCTURE 1. Fostering Competitiveness and Financial Sector Development Improve the counitry's Streamline administrative Reduction in the number of days to Achieved. The number of days to start a Programmatic Public Sector, Competitiveness business and investment processes for firm creation, create a firm (Baseline: 65 days business fell significantly to 7 days in and Social Inclusion DPL I (FY11) & DPL climate and increase according to 2010 Doing Business - 2011 (2012 DB) and remained at 7 days in II/DDO (FY12) depth and efficiency of DB). 2012 (2013 DB). Doing Business Reform Memorandum (FY12) financial sector. Public Sector Management and Social Inclusion DPL/DDO Productivity and Wage Negotiations TA Enhance access of low income Increase the share of family Underway: 15 percent of family Financial Sector Assessment Program (FSAP) households to financial allowance beneficiaries that receive allowances beneficiaries requested a debit Financial Capability Survey services. allowances via debit cards to 50 card to receive allowance payments. Government Domestic Debt Market TA percent (from 0 at mid-2012) IFC - Financial and Advisory Services support Number of POS available in the Underway: Number of POS available in Capital Markets Policy Note (2009 - 2010) country increases by 80 percent, from the country increased by 31 percent to 13'000 in mid-2012. 17'000 at end-2012. IFC Trade Finance Investment with NBC Public Sector Management and Social Stock exchange operations are The Stock Exchange Register Achieved. The Registro is computerized Inclusion DPL/DDO rendered more transparent and (Registro del Mercado de Valores) is and 93percent of all public securities are in efficient through computerized. 70 percent of all public electronic format. computerization. securities are in electronic format. 18 Country Goals Revised CPS Outcomes Outcome Indicators Progress to Date Bank Group Program Instruments 2. Infrastructure Strengthening Improve quality and Develop an institutional The National Logistics Institute is Achieved. National Logistics Institute Transport Infrastructure Maintenance and coverage of Uruguay's frework for coordinating created. (INALOG) was created by law No.18.697 Rural Access project (Closed) infrastructure to logistics management across on 11 November 2010 and made Uruguay Road Rehabilitation and strengthen the country's public and private sector. operational in April 2011 by adopting Maintenance Program for Results (FY13) emerging role as structure and providing staffing and logistics hub, in support budget. of medium-term growth Grant and poverty alleviation Sustain the National Road At least 35 percent of National Road Underway. In 2012, 42 percent of Road AAA Infrastructure and Logistics Study objectives. Network in good or very good Network is in good of very good Network was in good/very good condition Development of Financing Options for Public conditions, condition by 2015 as measured by the which is expected to be maintained over Private Partnerships in the Roads Sector TA International Roughness Index (IRI) the coming two years. (PPIAF) (Baseline: 46 percent in 2009ot). Capacity Building Program on PPP (SFLAC) Efficiency improvements in 9224 additional families connected to Underway. 3,285 additional families Road Safety Trust Fund water utility (OSE) the sewerage network, connected to the sewerage network IFC financing for PPP projects management lead to an increase mt access to sewerage services Railway AAA (FY1 3) and reduction in water losses. Energy Efficiency GEF (closed) budget. Globa~IF SPportnesi to OHpD-Bsd i Increase demand and supply of Market share of energy efficient Achieved. Market share of energy AAA Infrtrtu D L energy efficient goods and appliances reaches 10 percent efficient appliances increased to 18 percent Programmatic Public Sector, Competitiveness services and contribute to (residential and commercial) and 60 (residential and commercial) and to 63 and Social Inclusion DPL II/DDO (FY1 2) energy savings percent (municipal percent (municipal lighting) OSE Modernization and Systems lighting). Rehabilitation project (APL2) OSE Sustainable and Efficient (FY13) Preparation of OSE Response to Climate Change Grant Sewerage Access in Uruguay Study (TF) Energy Efficiency GEF (closed) 17 The "Road rehabilitation and maintenance program" with bank support (PforR) is expected to ensure that the condition of the National Road Network remains above a given threshold (35 percent). This is deemed to be the best achievable outcome at network level when compared not only to the past declining trend but also to the counterfactual situation prevailing in the absence of support to the Program. 19 Country StrategyT Goals Revised CPS Outcomes Outcome Indicators Progress to Date Bank Group Program Instruments PILLAR 3 - AGRICULTURE, CLIMATE CHANGE, AND ENVIRONMENT 1. Agriculture and Climate Change Widen successful Develop an integrated and Climate and agricultural information Underway. MGAP has adopted a Natural Resources and Biodiversity Mgmt. agricultural export publicly accessible climate and and decision support system (SNIA) is technical design for climate and Project /GEF Blend (completed) model to an increasing agriculture information and operational. agriculture information and decision number of farmers in decision support system. support system in place. The University of support of Columbia has been contracted to set up the Sustainable Mgmt. of Natural Resources and environmentally system. Climate Change Project (ongoing) sustainable, integrated Montevideo Landfill Gas Recovery TF and inclusive rural Promote environmentally Improved Natural Resources Achieved. 5,300 small and medium-sized (ongoing) development, sustainable and economically Management (NRM) and biodiversity farms have adopted farm-level NRM and viable production systems in conservation practices adopted by at biodiversity conservation practices, Wind Farm at Caracoles Hill TF (ongoing) small and medium-sized farms, least 5,000 small and medium-sized covering 880,000 hectares, representing 24 JFC financing for export-oriented agribus. farms, covering an area of at least percent of total small and medium-sized projects, and support for small- and medium- 800,000 hectares. farms in UY. sized farms. ESW on Low-Carbon Growth Strategies for the Uruguayan Economy (ongoing) AAA on Weather Index Insurance to Cover Grassland Production in Uruguay (ongoing) Adaptation Fund: Building Resilience to Climate Change and Variability in Vulnerable Smallholders Project (blended with Sustainable Mgmt. of Natural Resources and Climate Change Project) (ongoing) TA on Climate-Smart Agricult. Water Management. (FY13) JFC Financial and Advisory Services to Conaprole 20 Country StrategyT Goals Revised CPS Outcomes Outcome Indicators Progress to Date Bank Group Program Instruments PILLAR 4 - INCLUSION AND EQUITY 1. Support National Plan for Social Equity Implement ongoing Rendering social policies more Main social transfer programs Underway: A comprehensive survey of Programmatic Public Sector, Competitiveness reforms in the social effective in promoting (Family allowances and Tar]jeta TUS beneficiaries is underway and, by and Social Inclusion DPL I (FY1 1) protection system, with inclusion by improving Uruguay Social) are based on end-2012, 65,000 household were visited. Programmatic Public Sector, Competitiveness a view to reducing targeting and coordination of regularly updated beneficiary The target is to visit 100,000 households and Social Inclusion DPL II/DDO (FY1 2) poverty and reaching information on beneficiaes of registers. by end-2013. This survey aims at the population that still social programs. correcting focalization problems, mainly Public Sector Mgt. and Social Incl. DPL/DDO lives in extreme Type 11 error (i.e., beneficiaries of the Social Policy Assessment (Ongoing) poverty program that don't fulfill the requirements) IBTAL (ongoing) Public Expenditure Rev, on Pensions The Integrated System of Information Underway. The Integrated System of of the Social Areas (SIAS) is fully Information of the Social Areas (SIAS) is operational, giving at least nine fully operational for five participating IDF grant to Promote Equitable Access of participating institutions full access to institutions. The remaining four Society to the Legal System (ongoing) data on beneficiaries of all groups of institutions are expected to be incorporated IC support for projects enhancing access to social programs managed by these in 2013. finance for low-income groups of farmers institutions. 2. Health Sector Reforms Implement health Strengthen measures aimed at Increase percentage of women aged Underway. The percentage was 8.9 Health Reform Assessment (AAA) insurance reform to preventing non-communicable 50-69 and covered by the public percent as of Dec 2012. (Delivered) achieve universal diseases, provider (ASSE) who had a Non Communicable Diseases Prevention coverage and adapt mamnmogram in a given year to 20 Project (ongoing) health system to percent. (Baseline 2009: 7.8 percent) changing Public Expenditure Review epidemiological profile Significant increase in the proportion Achieved. 75.6 percent newborns with of country of newborns with disabilities being disabilities monitored by early detection monitored by early detection and and treatment units as of December 2011. treatment units. (Baseline 2006: 0). Gradunl increase of coverage of National health insurance covers at Achieved. National Health Insurance the National Health Insurance, least 60 percent of population, from coverage increased to 64 percent in including retired workers, and 43 percent at end-2009. January 2013. spouses and domestic partners of public and private sector workers. 21 Country StrategyT Goals Revised CPS Outcomes Outcome Indicators Progress to Date Bank Group Program Instruments 3. Education Enhance access to and Contribute to the consolidation Reaching an enrolment of 47,000 Achieved. Significant increase in Third Basic Education Quality Improvement quality of education, of the Full-Time school student places in Full Time Schools enrolment levels, reaching 47,561 student Proj ect+ Additional Financing (closed) especially by program by building and (2009 Baseline: 37,600). places by 2012. Enrolment levels expected Support to Uruguayan Public Schools disadvantaged groups. rehabilitating full-time schools to reach 49,800 by 2012. and improving learning outcomes in these schools. Reduction in the gap in repetition Underway. Repetition rates gap between UY One Laptop per Child AAA (Delivered) rates in 1st grade between 1st and FTS and urban schools was 6.8 percent in Promoting Innovation to Enhance 2nd quintiles of Full Time Schools 2012. Competitiveness Project (ongoing) and the 5th quintile of all urban school to 5.7 percent (Baseline 6.8 percent in 2011). Increase in the proportion of students Underway. Proportion of students enrolled in 6th grade in Full Time enrolled in 6th grade in Full Time School School with test scores corresponding with test scores corresponding to or higher to or higher than the National than the National Learing Evaluation's Learning Evaluation's Level Two to Level Two reached 35.4 percent in Math 45 percent in Mathematics and 72 and 65.9 percent in Reading in 2012. percent in Reading. (Baselines: 32 percent in Math and 52 percent in Reading in 2006). 22 Annex 2. Summary of Changes to CPS Results Matrix Outcome Indicators Original CPS Results Matrix Revised CPS Results Matrix Pillar 1.1. Reduce Macroeconomic Vulnerabilities * The fiscal balance of the consolidated public sector remains * Dropped (not directly influenced by Bank Group's above the 2009 baseline of -1.7% of GDP. program). * The gross public debt ratio decreases from its 2009 * The net public debt ratio decreases from its 2009 baseline baseline of 60% of GDP. of 37 percent of GDP to 23.3 percent in 2015. * The foreign currency-denominated public debt share * The foreign currency-denominated Central Government decline to less than its 2009 baseline of 56.7 % of the total public debt share declines to 55 percent or less of the total outstanding debt. outstanding debt from its 2009 baseline of 56.7 percent. Pillar 1.2. Public Sector Modernization * 5-year budget for 2010-2015 is prepared with a e No change programmatic classification (early 2011). * Increase in the number of expenditure programs for which e Define output and outcome indicators for at least 9 priority output and outcome indicators have been identified (2009 areas (2009 baseline: 0). baseline: zero). * Rise in number of GoU processes started and completed e No change electronically to 25 (2009 baseline: 20). * Contract for software upgrading is underway (2011) and A procurement regulatory agency to strengthen user training has begun (2012). procurement systems is created and operational and a software for the Registry of Government Suppliers is developed.. Pillar 2.1. Fostering Competitiveness and Financial Sector Development * Reduction in the number of days to create a firm (Baseline: 0 No change 65 days according to 2010 Doing Business). * The ratio of Credit to GDP increases (2009 baseline: e Dropped (not directly influenced by Bank's program). 22.9% of GDP). * Increase in the number of irregularities detected by the risk - Dropped management system relative to the number of inspections (2009 baseline: 0). * The Registro del Mercado de Valores is computerized and about 70 percent of all public securities are in electronic VaThe s chn gter (Regisro dl Mc e format.Valores) is computerized and 70% of all public securities are in electronic format. * Increase the share of family allowance beneficiaries that receive allowances via debit cards to 50 percent (from 0 at mid-2012). * Number of POS available in the country increases by 80 percent, from 13'000 in mid-2012. 23 Original CPS Results Matrix Revised CPS Results Matrix Pillar 2.3. Infrastructure Strengthening * Implementation of railway sector reform e The National Logistics Institute is created with Bank * Improvement of institutional capacity in the MTOP to support. carry-out multi-modal transport planning. e At least 35 percent of National Road Network is in good of very good condition by 2015 as measured by the International Roughness Index (IRI) (Baseline: 46 percent in 200918). * Access to sewerage services increased; water losses e 9224 additional families connected to the sewerage reduced; and baseline of the impact study on public health network. of access to sewerage services completed. " Key sections of UTE's transmission lines and highly Market share of energy efficient appliances reaches 10 loaded transformer sub-stations are rehabilitated. percent (residential and commercial) and 60 percent (municipal lighting).. Pillar 3. Agriculture and Climate Change " Expanded information and tracking systems, covering other * Climate and agricultural information and decision support livestock species as well as value chain integration system (SNIA) is operational. * Consolidation of different rural development programs * Improved Natural Resources Management (NRM) and l Reduced GHG emissions and water contamination in the biodiversity conservation practices adopted by at least agricultural sector, mainly livestock, dairy, and rice 5,000 small and medium-sized farms, covering an area of (baseline: TBD) at least 800,000 hectares " Development of renewable energy (biogas and e Dropped cogeneration) facilities at the farm and ago-industrial level Pillar 4.1 Support National Plan for Social Equity * Reduction in extreme poverty rate. (2008 baseline: 1.5 Dropped (not clearly attributable to Bank engagement). percent). Family allowances cover increased share of targeted Main social transfer programs (Family allowances and beneficiaries. (2009 baseline: 80% of households in Tarjeta Uruguay Social are based on regularly updated poorest quintile). beneficiary registers. The Integrated System of Information of the Social Areas e The Integrated System of Information of the Social Areas (SIPAS) is fully operational. (SIlAS) is fully operational, giving at least nine participating institutions full access to data on beneficianes of all groups of social programs managed by these institutions. * The "Road rehabilitation and maintenance program" with bank support (PforR) is expected to ensure that the condition of the National Road Network remains above a given threshold (35 percent). This is deemed to be the best achievable outcome at network level when compared not only to the past declining trend but also to the counterfactual situation prevailing in the absence of support to the Program. 24 Original CPS Results Matrix Revised CPS Results Matrix Pillar 4.2 Health Sector Reforms * Substantially increased share of women between 50 and 69 * Increase percentage of women aged 50-69 and covered by years of age have had a mammogram by 2012. (Baseline the public provider (ASSE) who had a mammogram in a 2006: 25%). given year to 20 percent. (Baseline 2009: 7.8 percent) * Significant increase in the proportion of newborns with * No change disabilities being monitored by early detection and treatment units. (Baseline 2006: 0%). * Significant increase in the proportion of population at * National health insurance covers at least 60 percent of NCDs risk being screened in at least three departments population, from 43 percent at end-2009. (Baseline 2006: 0%). Original CPS Results Matrix Revised CPS Results Matrix Pillar 4.3 Education * Reaching an enrolment of 47,000 student places in Full * No change Time Schools (FTS) (2009 Baseline: 37,600). * Decrease in repetition rate in 1st grade of primary from 22 * Reduction in the gap in repetition rates in 1st grade percent in 2006 and decrease in repetition rate in 2nd grade between 1st and 2nd quintiles of FTS and the 5th quintile from 15 percent in 2006. of all urban schools to 5.7%. * Improved academic achievement in language and * Increase in the proportion of students enrolled in 6th grade mathematics in 6th grade from 52 percent and 32 percent of in Full Time School with test scores corresponding to or questions answered correctly in language and math higher than the National Learning Evaluation's Level Two respectively in 2006. to 45 percent in Mathematics and 72 percent in Reading. (Baselines: 32 percent in Math and 52 percent in Reading in 2006). 25 Annex 3: Summary of virtual CPS Progress Report consultation A virtual consultation was conducted for the preparation of this CPS Progress Report, with the objective of gathering views from a broad array of stakeholders. Through this novel approach, feedback was sought from a broad audience, through social media. The themes put forward for discussion were: (i) the main development challenges currently faced by Uruguay; (ii) ideas on possible solutions and best practices on those areas; and (iii) the role the Bank Group could play in the process. The invitation to this consultation was disseminated through traditional and social media. A blog and a Collaboration 4 Development Platform were used for the consultation. The feedback received was thoughtful and valuable. Participants shared what they considered best practices from other countries, or ideas on how the government could improve its results. Education, entrepreneurship, and public sector reform were the most popular topics related to what should be Government priorities. Logistics, infrastructure, social policies, health, economic management and security were also mentioned in this regard. The virtual consultation brought forward specific comments on reforms in key development areas. These are summarized in the following, by area: Public sector reform: comments focused on the necessity of reducing the size of the state, improving quality and impact of public spending, the need of strengthening transparency, and the importance of training public servants to improve their performance. Logistics: increased investments are needed to improve transport efficiency through rehabilitation and maintenance on the railway system and the road system. These improvements would strengthen Uruguay's competitiveness through increased coverage of infrastructure and establishment of a more conducive business environment. Social policies: suggestions included consolidation of social protection transfer programs, as well as better articulation with local governments to assure an equal implementation throughout the country. Participants suggested that social benefits should be better linked to specific conditions. Economy: enhance solid economic policies that lead to macroeconomic stability and help reduce external vulnerabilities. Moreover, stronger efforts are needed to diversify markets and products, and accelerate productivity growth. Also, the tax burden in Uruguay was pointed as heavy, both for its size and its complexity. Education: this topic received most comments. Participants agreed that this was the main development challenge that Uruguay is currently facing. Suggestions to improve education policies included: * Quality control for teachers at entry and adequate salaries to retain the best professionals. * Social benefits to vulnerable families linked to specific conditions such as mandatory school and high school attendance of their children. 26 * Specific school systems that could allow every Uruguayan to access to a decent job. The system should focus on vulnerable groups in order to reduce the existing gap between them and the rest. * Create incentives to simulate knowledge generation on science and technology, both in the public and private sectors * Better quality of public education, by applying modem education programs and techniques (adapting to the changes occurring in the world). * Create awareness on the importance of technical studies, and promote technical education, especially in the interior of the country. * Stimulate work habits among youth (especially those that are neither studying nor working) to prevent dependency or delinquency. Health: feedback on this area centered on the need of faster reforms, more actions on health prevention, and better infrastructure for quality health services. Comments referred to an overwhelmed public health system that responded too slow to patient's needs, and limitations of capable health professionals. Entrepreneurship: several participants agreed on the need for Uruguay to stimulate entrepreneurship. Specific ideas on this included: * Develop an entrepreneurial culture, starting at education and youth, through awareness building, training, direct support to start-ups, etc. * Reduce and simplify administrative requirements, as there were too many initial costs and taxes to start a business. This tended to stop people, especially young and innovative people- from trying to create a business. It was also felt that this was a factor leading to informality. It was suggested to address this by encouraging the creation of companies with cooperative status, simplifying registration formalities, or abolishing or reducing minimum capital requirement. A broader roll-out of E- government was seen as important for this, too. Innovation: create a culture that stimulates new ideas and creativity in general._This could entail dedicating resources for students and researchers to improve development of R & D, establishing a R&D startup pole jointly with the Uruguayan Agency for Innovation and Research (ANII), or creating Uruguayan brand on innovation (such as http://startupchile.org/). Security: this topic was mentioned as a key development challenge. Several suggestions were made to strengthen both prevention of crime and enforcement of the rule of law. 27 Annex 4. AAA Program in Uruguay Delivered to Client Health Insurance Reforms NLTA Health Client Document Review Integration of Public Policies of Risk Institutional Development Management of Water Origin NLTA Plan Local capital market development Financial and Private Client Document Review 2011 NLTA (GEMLOC) Sector Development Doing Business in Uruguay: Reform Financial and Private Memorandum Opportunities Sector Development Opportunities and Informality ESW Poverty Reduction Report Health Sector Study ESW Health Report 2012 Public Expenditure Review ESW Public Sector Governance Report Capacity-building Activities for the Advisory Services 2013 Ministry of Economy and Finance on Transport Document PPPs NLTA Development of Financing Options for Transport Advisory Services PPP in Roads Sector NLTA Document One Laptop per Child ESW Education Report To be Completed 2013 Public Expenditure and Financial Financial Management Report Accountability Review ESW Supporting the Ministry of Finance to Institutional Development Promote Uruguay's Economic Potential Public Sector Governance Plan NLTA Advisory Services Wages and Productivity NLTA Economic Policy document Document Financial Sector Assessment Program Financial Systems Practice Report Social Programs Assessment ESW Social Protection Report Designing the Uruguay Rail Sector Transport Advisory Services Regulator NLTA Document Low Carbon Growth Study Agriculture and Rural Report Development Policy and Regulatory Capacity- Capital Markets Practice Advisory Services building NDVI Insurance NLTA Document Local capital market development I Capital Markets Practice Advisory Services NLTA (GEMLOC II) Document Promoting Sustainable Industrial Advisory Services Development NLTA (BB + TF) Document Climate-smart Agricultural Water Agriculture and Rural Advisory Services Management Development Document 28 Annex 5. Operations Portfolio (IBRD/IDA and Grants) As of 04/24/2013 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a Project ID Project Name Development Implementation Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Objectives Prgrs Rev'd P123242 UY 2nd Prog PubSct, Comp&Soc DPL/DDO S S 2012 260 260 P097604 UY Institutions Building TAL S S 2007 22.1 11.15731 1.157312 1.157312 P050716 UY Non Comm. Disease Prevention MU MS 2008 25.3 12.34728 12.347283 P095520 UY Promoting Innovation to Enhance Compet. MS MS 2007 26 7.637738 7.637738 7.637738 P125803 UY Road Rehabilitation and Maintenance Proj # # 2013 66 66 P126408 UY Support to Public Schools Project S S 2013 40 34.9 -5.099998 P124181 UY Sust.Mgmt Nat Res & Climate Change S MS 2012 49 44.60833 14.741666 P118064 UY-OSE Sustainable and Efficient S S 2013 42 41 .895 P131440 UY-Public Sct Mgt & SocInclusion DPL/DDO S S 2013 260 260 Overall Result 790.4 738.5457 30.679001 8.79505 29 Annex 6. Uruguay: IFC Investment Operations Program 2010 2011 2012 2013* Original Commitments (US$m) IFC and Participants 3.30 15.50 0.04 39.00 IFC's Own Accounts only 3.30 15.50 0.04 39.00 Original Commitments by Sector (%)- IFC Accounts only ACCOMMODATION & TOURISM SERVICES 23.08 FINANCE & INSURANCE 100 100 100 FOOD & BEVERAGES 76.92 Total 100 100 100 100 Original Commitments by Investment Instrument (%) - IFC Accounts only Guarantee 100 3.23 100 Loan 96.77 100 Total 100 100 100 100 * Data as of April 01,2013 30 Annex 7. Statement of IFC's Committed and Outstanding Portfolio Amounts in US Dollar Millions Accounting Date as of: 04/30/2013 Commitment Institution LN ET QL + QE GT RM ALL ALL LN ET QLE+ GT RM ALL ALL Out Fiscl Yer Sort ame Cmtd - Cmtd - Cmtd - Cmtd - Cmtd - Cmtd - Cmtd - Out - Out - Out - Out - Out - Out - FiclYa hr aeIFC IFC IFC IFC IFC IFC Part IFC IFC IFC IFC IFC IFC Pr 2002evideo 0.0 0.0 0.0 0.0 - 2003/ 2007/1 oarl 2013 Cnpoe40.1 40.1 25.1 25.1 - 2009 Milagro 7.5 - 7.5 7.5 7.5 - 2007/ 20081 200912010/ NBC Uruguay 11.3 - 11.3 11.3 11.3 - 2011/ 2012 2013 Surinor 9.0 --- 9.0 - - - ToalPrtolo67.8 0.0 - 67.8 43.8 0.0 43.8 - 31 Annex 8. Selected Indicators of Bank Portfolio Performance and Management As of 04/24/2013 Indicator 2010 2011 2012 2013 Portfolio Assessment Number of Projects Under Implementation a 8 8 8 9 Average Implementation Period (years) b 5.2 6.3 5.7 2.5 Percent of Problem Projects by Number ac 0.0 12.5 0.0 11.1 Percent of Problem Projects by Amount a, c 0.0 8.5 0.0 3.2 Percent of Projects at Risk by Number a,d 0.0 12.5 0.0 11.1 Percent of Projects at Risk by Amount a, d 0.0 8.5 0.0 3.2 Disbursement Ratio (%) e 30.2 35.2 59.9 20.6 Portfolio Management CPPR during the year (yes/no) Yes Yes Yes Yes Supervision Resources (total US$) Average Supervision (US$/project) Since FY Last Five Memorandum Item 80 FYs Proj Eval by OED by Number 45 3 Proj Eval by OED by Amt (US$ millions) 2,525.3 427.3 % of OED Projects Rated U or HU by Number 9.1 0.0 % of OED Projects Rated U or HU by Amt 8.2 0.0 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 32 Uruguay at a glance - Latin Upper- POVERTY and SOCIAL America middle- Uruguay &Carib. income De~eopmedimnd Population, mid-year (milflons) 34 589 2,490 ONI percapita (Atlasmethod, S$) 11,860 8,574 6,563 LIeexpectancy ON| (Atlasmeuhod, Ut$ billens) 40.0 5,050 1,341 A verag e annuna growth, 2005-11 Population(%) 0.3 12 0.7 Labc r fe re (%y) 1.3 2.0 11 GNI Goss per | ,Pi=nr Most recent estimate (latest year available, 2005-11} ceia erlknntt Poverty(%ofpopuationbeownaUtonapovertyline) 14 Urbanpo pulation (%oftotapopuation) 93 79 61 Life expectancyat birth (jears) 76 74 73 nfnt mo rtality (per t000 ve brths) 9 1 1 Childmalnutritio n (%of children under 5) 3 3 Accesste¯inprovedlttero .e Access te an improved ater so urce (%ofpopulatin) 10 94 93 Literacy(%ofpopulationage 5-) 98 91 94 Grossprimaryenrollment (%ofschool-agepopultion) 12 11 111 kuguay M ale 114 118 111 t g~ Female 110 114 111 KEY ECONOMIC RA TIOS and LONG-TERM TRENDS 1 1991 2001 2010 2011 Ecoomicratts GDP (US$ebilrns) 112 209 38.83 467 GrosscapitalformationiGP 151 14.3 186 94 Exportsofgoodsandservices/GDP 20.7 1B8 26.8 27.1 Trade Grosdomesticsavings/GDP1 116 19.4 92 Greoss nationalsavings/GDP 160 114 64 1.5 Currentaccountbalance/GDP 0.4 -24 -22 -31 Interest pyments/GDP 2.3 2.8 19 16 Domensti Capil Totaldebt/GDP 376 445 35.6 307 formt.on Total debtservice/expo ds 33.1 35.2 13.9 111 P resentvalue of debiDP .. 22.9 P resentvalue of debtlexpo ds ... 810 Indebbedniss 1991-01 2001-11 201 2011 2011-15 (avera ge ann growth) GDP 31 48 8.9 57 4D Ukuguay GDP ercapita 2.5 4.6 8.5 53 37 to-~k,. g~ Expo ds of good sand services 4.8 8.8 6.0 5.8 8.6 STRUCTURE of the ECONOMY 1991 2001 2010 1 2011 Grifi myc (III (%ofGDP) Agriculture 8.5 65 95 1. Industry 355 24.5 26.1 247 M anufacturing 28.3 143 13.8 13.0 Services 56.0 69.0 04.4 652 17 Household final consumptionexpenditure 70.1 759 67.7 67.9 General govt final consumption expendiutre 120 12.5 12.9 13.0 GF G mporns ofgoods and services 17.9 95 26.0 273 (sverage amnagrowth) 1991-01 2001-11 2010 r 2011 Agriculture 2.6 22 0.6 4.5 Industry 0.8 4.0 0.0 -10 M anuffacturing -0.8 54 3.6 12 Services 0.7 47 8.6 72 Household final consumptionexpenditure 4.1 4.7 137 82 -1r General govt final consumption expenditure 2.0 2.0 0.8 30 Grosscapitalformation 3.0 8.8 1 7.0 uxims -- iupu 'mportsofgoods and services 7.1 9.6 144 112 Note: 2011dataarepreliminaryestimates. ThistablemasproducedfromtheDevelopmentEconomicsLDBdatabase *Thediamondsshowfourkeyindicatorsinthecountry(inbold)comparedwithitsincome-groupaverage ffdataaremissing,thediamondwill sincompete- 33 Uruguay PRICES and GOVERNMENT FINANCE Domestic prices 1991 2001 2010 2011 Inain %) (%change) 10 Consumer prices 1020 44 78 6.8 0 Implicit GDP deflator 1008 43 55 80 Government finance 2 (%of GDP, includes current grants) 4- 4 - 4 Current revenue 16A 245 275 273 06 07 11 0110 Current budget balance 19 -24 06 09 Overall surplus/deficit 03 -4-O -11 -06 TRADE (US$ mions) 1991 2001 2010 2011 Export and import level (U S$ millJ Total exports (fob) 1,605 2,139 7,735 8i61 00 Meat 376 300 1551 1,653 Vegetables 207 160 439 487 Manufactures 798 1,323 3,719 3,995 .UD Total imports (cif) 1,544 2,915 8,365 9,067 Food 119 279 479 522 Fuelandenergy 232 469 2,355 2,563 2.110 Capital goods 530 824 1299 1,407 o 06 06 07 o1 0I 10 11 Export price index (2000-DO) 120 98 170 164 Inportpriceindex(2000=10) 92 94 184 178 Fpf W- Terms of trade (2000=0) 130 104 92 93 BALANCE of PAYMENTS (US$ millions) 1991 2001 2010 2011 CurrentaccourdbaanetoGDP(%) Exportsofgoodsandservices 2,201 3,262 D,6 08 12,702 1 In ports ofgoods and services 1966 3,722 10,110 12,704 0 , Resource balance 235 -459 498 3 -14 . 05 no L 8 Net income 232 -68 -1,479 -1,565 24 L Net current transfers 40 30 118 126 3 Current account balance 42 -498 -863 -1,442 Financing items (net) 71 775 502 4,006 Changes in net reserves -113 -278 361 -2,564 fermo: Reserves including gold (US$ millions) 976 3,099 7,744 10,302 Conversion rate (DEC,focal/US$) 2.0 133 201 V-3 EXTERNAL DEBT and RESOURCE FLOWS 1991 2001 2010 2011 (US$ millions) 19 2Composilion of 2011 debt(US$mil.) Totaldebtoutstandinganddisbursed 4,217 9,302 14,030 14,350 BRD 407 544 1,055 1,128 1121 IDA 0 0 0 0 45 Total debt service 807 1,441 1,532 1,463 IBRD 70 111 103 100 IDA 0 0 0 0 Composition of net resource flows Official grants 7 6 30 Official creditors 141 103 -196 62 Private creditors -137 491 11 1,281 Foreign direct investment (net inflows) 32 297 2,191 2,177 9690 Portfolio equily(net inflows) 0 35 0 0 Vrld Bank program Commitments 0 52 30 360 Disbursements 81 65 46 158 A - EID E - ildd B - IDA D - (hw mdilderal F - Flivi Pnncipal repayments 42 72 88 85 C-MF G-Shtern Net flows 39 -8 -42 73 Interest payments 28 38 15 14 Net transfers 11 -46 -57 59 -4 Note:This table was produced from the Development Economics LDB database 3/17/13