Document of
                                The World Bank


                                                                         Report No: 55684




                           RESTRUCTURING PAPER

                                      ON A

                  PROPOSED PROJECT RESTRUCTURING
                                OF
              LOCAL GOVERNMENT STRENGTHENING PROJECT
                               LOAN
                            JUNE 1, 2010


                                     TO THE

                         REPUBLIC OF EL SALVADOR


                                  JULY 14, 2010




Central America Country Management Unit
Environmentally and Socially Sustainable Development Sector Management Unit
Latin America and the Caribbean
Regional Vice President:       Pamela Cox
      Country Director:        Laura Frigenti
        Sector Director:       Laura Tuck
       Sector Manager:         Ethel Sennhauser
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Task Team Leader:       Mark Austin




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                            EL SALVADOR
               LOCAL GOVERNMENT STRENGTHENING PROJECT
                               P118026

The only proposed change is a reallocation of the loan's expenditure categories in order
to accommodate the request of the National Legislative Assembly to reallocate US$3.9
million from the Support to Decentralization Policy and Project Management
Components to the Strengthening of Local Governments Component. The request is to
focus more resources from the loan on increasing municipal management capacity.




Attachment: ANNEX 1 Proposed Reallocations




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                                                         ANNEX 1:


                                               Reallocation of Proceeds


                                       Current                                                         Proposed
Current Category of Expenditure       Allocation      %        Proposed Category of Expenditure        Allocation      %
                                        (USD)      Financing                                             (USD)      Financing

(1) Subproject Grants under Part A                             (1) Subproject Grants under Part A of
of the Project                        52,750,000     100%      the Project                             52,750,000     100%
(2) Goods, Non-Consultant                                      (2) Goods, Non-Consultant
Services, consultants' services,      19,720,000     100%      Services, consultants' services,        23,800,019     100%
Operating Costs, and Training under                            Operating Costs, and Training under
Part B of the Project                                          Part B of the Project
(3) Goods, Non-Consultant                                      (3) Goods, Non-Consultant
Services, consultants' services,      1,630,000      100%      Services, consultants' services,         699,200       100%
Operating Costs, and Training under                            Operating Costs, and Training under
Part C of the Project                                          Part C of the Project
(4) Goods, Non-Consultant                                      (4) Goods, Non-Consultant
services, consultants' services,      5,100,000      100%      services, consultants' services,        2,083,414      100%
Operating Costs, and Training under                            Operating Costs, and Training under
Part D of the Project                                          Part D of the Project
(5) Front-end Fee                       200,000      100%      (5) Front-end Fee                        200,000       100%
(6) Unallocated                         600,000                (6) Unallocated                          467,367
TOTAL AMOUNT                          80,000,000               TOTAL AMOUNT                            80,000,000
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