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Document of The World Bank

FOR OFFICIAL USE ONLY

Report No. 94271-CL

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE CORPORATION

AND

MULTILATERAL INVESTMENT GUARANTEE AGENCY

PERFORMANCE AND LEARNING REVIEW

OF THE COUNTRY PARTNERSHIP STRATEGY

FOR

THE REPUBLIC OF CHILE

FOR THE PERIOD FY11-FY16

January 22, 2015

Bolivia, Chile, Ecuador, Peru, and Venezuela Country Management Unit Latin America and the Caribbean Region The International Finance Corporation Latin America and the Caribbean Region The Multilateral Investment Guarantee Agency This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank Group authorization.

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The date of the last Country Partnership Strategy was February 15, 2011

FISCAL YEAR January 1 – December 31

CURRENCY EQUIVALENTS (As of December 9, 2014)

US$1 = 613.8 Chilean Pesos

WEIGHTS AND MEASURES Metric System

World Bank IFC MIGA Vice President: Director: Task Manager:

Jorge Familiar Alberto Rodriguez Emmy Yokoyama Peter Siegenthaler

Karin Finkelston Irene Arias Salem Rohana

Keiko Honda Ravi Vish Dan Biller

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ABBREVIATIONS AND ACRONYMS

AAA Analytic and Advisory Activities M&E Monitoring and Evaluation ATI Access to Information MECESUP Programa de Mejoramiento de la Calidad

y la Equidad de la Educación Superior (Higher Education Equity and Quality Improvement Program)

AGCI Agencia de Cooperación Internacional de Chile (Chilean Agency for International Cooperation)

MIDEPLAN

Ministerio de Planificación (Ministry of Planning)

CASEN Encuesta de Caracterización Socioeconómica Nacional (National Socioeconomic Characterization Survey)

MIGA Multilateral Investment Guarantee Program

CER Carbon Emissions Reduction MINAGRI Ministerio de Agricultura (Ministry of Agriculture)

CO2 Carbon Dioxide MPW Ministerio de Obras Públicas (Ministry of Public Works)

CORFO Corporación de Fomento de la Producción (Chilean Economic Development Agency)

MSMEs Micro, Small and Medium Enterprises

CPI Consumer Price Index MRP Market Readiness Proposal CPS Country Partnership Strategy NCRE Non-Conventional Renewable Energy

CTF Clean Technology Fund OECD Organization for Economic Co-Operation and Development

DIPRES Dirección de Presupuestos (Budget Directorate)

PIRDT Programa de Infraestructura Rural para el Desarrollo Territorial (Rural Infrasctructure Program for Territorial Development)

ESMAP Energy Sector Management Assistance Program

PISA Programme for International Student Assessment

FBS Fee Based Service PLR Performance and Learning Review

FCPF Forest Carbon Partnership Facility PMDT Plan Marco de Desarrollo Territorial (Territorial Development Framework)

FSAP Financial Sector Assessment Program PMR Partnership for Market Readiness

FY Fiscal Year PPP Private Public Partnership

GDP Gross Domestic Product RAS Reimbursable Advisory Service

IBRD International Bank for Reconstruction and Development

RBC Risk-Based Capital

ICR Implementation Completion and Results Report RIS Registro de Información Social (Social Information Registry)

IDF Institutional Development Fund SIIS Sistema Integrado de Información Social (Integrated Social Information System)

IEG Independent Evaluation Group SIGFE Sistema de Información para la Gestión Financiera del Estado (Integrated Financial Management System)

IFC International Finance Corporation SME Small and Medium Enterprise

IMF International Monetary Fund SORT Systematic Operations Risk-Rating Tool

JSP Joint Studies Program TAL Technical Assistance Loan LAC Latin America and the Caribbean WBG World Bank Group

PERFORMANCE AND LEARNING REVIEW

OF THE COUNTRY PARTNERSHIP STRATEGY

OF THE REPUBLIC OF CHILE

TABLE OF CONTENTS

I. INTRODUCTION…………………………………………………………………………………….. 1

II. MAIN CHANGES IN COUNTRY CONTEXT ……………………………………………………... 1

III. SUMMARY OF PROGRAM IMPLEMENTATION ………………………………………………... 5

IV. EMERGING LESSONS …………………………………………………………………………….. 11

V. ADJUSTMENTS TO COUNTRY PARTNERSHIP STRATEGY (CPS) AND FUTURE ENGAGEMENT…………………………………………………………………………………….. 12

VI. RISKS TO CPS PROGRAM ………………………………………………………………………... 16

Tables: Table 1: Chile – Main Macroeconomic Indicators……………………………………………………….. 3 Table 2: Risks to the CPS Program based on SORT ……………………………………………………. 17 Boxes: Box 1. Providing Solutions through the Joint Studies Program …………………………………………. 6 Box 2. Chile’s Tax Reform ……………………………………………………………………………… 14 Annexes: Annex 1: Updated CPS Results Matrix …………………………………………………………………..18 Annex 2: Matrix of changes to original CPS Results Matrix …………………………………………… 21 Annex 3: Matrix summarizing progress towards CPS Objectives………………………………………. 25 Annex 4: The World Bank Group Portfolio in Chile …………………………………………………… 29

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I. INTRODUCTION

1. This Performance and Learning Review assesses the implementation of the FY11-FY16 joint Bank-IFC Chile Country Partnership Strategy (CPS), which was discussed at the Board of Directors in February 2011. The WBG and Chile view their collaboration and engagement as an important two-way investment, in which the WBG supports critical reforms in Chile with expertise and know-how and learn from Chile’s development experiences, which are shared and are highly valued by other partner countries across the world. Chile’s strong institutional framework, its stable economy, and its relatively high level of development, facilitate an engagement in which the World Bank Group’s (WBG) contribution concentrates on the knowledge agenda. The current CPS focuses on three key areas: (i) public sector modernization; (ii) job creation and equity improvement; and (iii) promoting sustainable investment.

2. Chile has a strong record of implementing structural reforms and now strives to build a more equal society, offer better services to its citizens, and increase productivity of its economy. The WBG-supported program has advanced significantly towards the achievement of the CPS outcomes, particularly in higher education and regulation of water use. Given these results and the alignment between the Government’s objective of reducing inequality and expanding opportunities and the WBG’s twin goals, the Government is keen on consolidating and expanding the collaboration.

3. The CPS remains a valid and effective framework for the collaboration and engagement between the country and the WBG. The current administration took power in March 2014, launching early on concrete proposals for far-reaching tax and education reforms. The Government has prioritized these areas of reforms for WBG support, particularly in improving access and quality of tertiary education and assessing the tax reforms’ potential effects on improving equity. In addition, the Government aims at enhancing WBG support in strengthening the efficiency of social protection systems and the institutional and regulatory framework of water resources management, concessions, energy, and environment.

II. MAIN CHANGES IN COUNTRY CONTEXT

4. The second administration of President Michelle Bachelet started its mandate on March 11, 2014. The Bachelet Government took over from a center-right coalition led by President Piñera (2010-2014). This is Ms. Bachelet second mandate as President, as she was in power from 2006 to 2010. President Bachelet heads a center-left coalition (Nueva Mayoría), which enjoys majority control of both Chambers of the National Congress.

5. The incoming administration has proposed an ambitious reform agenda with a view to addressing the persistent high rates of inequality and improving access to and quality of public services, particularly education. The new Government’s reform agenda has three main priorities: i) a tax reform aimed to increase revenue and reducing inequality; ii) an education reform aimed to improve quality of education results and facilitate access to high quality

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education for the poor; and iii) a constitutional reform that would substantially alter Chile’s political system. Collaboration between the executive and Congress will be crucial in order to implement these reforms effectively.

6. Through the tax and education reforms, the Chilean government seeks to introduce deep structural changes in its tax system with the aim of addressing its high levels of inequality. Chile is one the most unequal countries among OECD members and in Latin America, and at 20 percent of GDP, Chile’s tax burden is relatively low by OECD countries standard. The comprehensive reform bill, which was enacted in September 2014, is part of a broader reform effort aimed at fostering social inclusion, notably through improvements in the quality and equity of the education system. The Government laid out its first proposals to reform the education sector in May 2014, and is expected to finalize the reform during 2015.

Recent Economic Developments and Outlook 7. Chile adheres to solid macroeconomic policies that mitigate its vulnerability towards external shocks. Chile withstood well the turbulences caused by the global financial crisis in 2009 and experienced a fast and strong growth recovery, driven by domestic demand and capital investment. This resilience is underpinned by a solid policy framework, comprised of prudent fiscal and monetary policies, a sound banking system. This allows for an effective policy response to shocks, facilitated by the existence of large fiscal buffers. In particular, its monetary policy has successfully contributed to macroeconomic stability by keeping the inflation rate below the target, while the flexible exchange rate policy has been effectively employed as a shock absorber.

8. Nonetheless, economic activity has started to decelerate in 2013 after the strong recovery during 2011 and 2012. Economic growth contracted by 1 percent in 2009 when the economy was hit by the global financial crisis. A strong earthquake in 2010 negatively affected recovery from this crisis. The economy managed to recover from these shocks. GDP Growth accelerated in 2010, reaching 5.8 percent, and remained at similarly high levels in 2011 and 2012. However, growth decelerated to 4.1 percent in 2013 and 2.2 percent in the first half of 2014. This deceleration was driven mainly by a sharp reduction in private investment, which grew by only 0.4 percent in 2013 down from 12.2 percent in 2012. Investment in the mining sector has dropped due to the end of a natural cycle of investment and postponement of new projects as a result of lower than expected copper prices. The low execution of the government budget also contributed to the fall in investment growth in the last quarter of 2013, a deliberate measure to meet the structural fiscal deficit target. The Central Bank projects a growth rate of 1.75 percent in 2014, down from 4.1 percent in 2013.

9. Job creation has been strong over the last years, as the national unemployment rate has continuously been decreasing. The unemployment rate stands at 6.7 percent (August 2014), one of the lowest levels on record. However, several changes may occur in job composition and creation dynamics over the medium term. Given the completion of several important mining investment projects, formal employment creation might slow down in the coming months. This is already reflected in the latest employment survey, where a large share of new jobs is related to self-employment, which has increased steadily during the first semester of 2014.

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10. The Government is committed to closely monitoring of the economy and has adjusted its policies when needed. Inflation remained moderate in 2013 but has picked up in the last months due to the depreciation of the Chilean Peso and increasing fuel prices. In July 2014 inflation reached 4.5 percent, above the Central Bank target range of 2-4 percent. As a result, the Central Bank has increased its 2014 inflation forecast to 4 percent. The Central Bank cut the policy rate from 5 percent in October 2013 to 3 percent in October 2014. The main motivation for this policy change was to respond to the observed reduction in economic activity, notably the demand deceleration, the moderation of nominal wages growth, and the exchange rate depreciation.

11. GDP growth is expected to accelerate in 2015. A gradual change in the private fixed investment dynamics and strong net exports, helped by the depreciation of the Peso and the international economic recovery, could drive a stronger growth in 2015. GDP is forecasted to accelerate to around 2.5-3.5 percent in 2015.

Table 1: Chile – Main Macroeconomic Indicators

Actual Projections

2010 2011 2012 2013 2014 2015 2016 (Percentage of GDP unless otherwise specified)

GDP (billions of dollars) 218 251 266 277 259 252 260 GDP growth rate 5.8 5.8 5.4 4.1 1.7 2.5 3.3 Inflation rate (eop) 3.0 4.4 1.5 3.0 4.8 2.8 3.0 Fiscal GG Revenues 21.5 22.7 22.2 21.0 19.9 21.4 21.5 GG Non-Financial Expenditures 21.5 20.8 21.0 21.0 21.6 22.7 22.0 GG Interest 0.5 0.6 0.6 0.6 0.6 0.6 0.6 GG Balance -0.5 1.3 0.6 -0.6 -2.3 -1.9 -1.1 GG Financing 0.5 -1.3 -0.6 0.6 2.3 1.9 1.1 - Assets accumulation 2.0 3.1 1.0 -0.5 .. .. .. - Foreign financing 0.7 0.5 0.3 -0.3 .. .. .. - Domestic financing 1.8 1.3 0.2 0.5 .. .. .. Public Enterprise Balance 1.4 1.2 1.1 0.7 0.8 0.8 0.8 NFPS Overall Balance 0.9 2.5 1.7 0.1 -1.5 -1.1 -0.3 Public Debt 8.6 11.1 12 12.8 13.2 14 14.4 - Foreign 1.7 2.3 2.3 2.0 .. .. .. - Domestic 6.9 8.8 9.7 10.8 .. .. .. BoP Exports 32.6 32.4 29.3 27.7 29.1 30.0 30.4 Imports 25.4 28.0 28.3 26.9 26.2 26.4 27.8 Current Account 1.6 -1.2 -3.4 -3.4 -1.6 -1.1 -2.0 Financial Account 4.1 -1.4 -3.5 -4.0 -2.2 -1.3 -2.0 Overall Balance 1.4 5.7 -0.1 0.1 -0.6 -0.2 0.0 Memo Broad Money (annual percentage change) 11.2 18.9 6.2 13.9 8.8 8.7 9.3 Credit to Private Sector (annual percentage change) 8.2 16.9 12.4 10.1 9.6 8.3 9.6 Exchange Rate (average) 510 483 487 495 570.0 615.6 634.1 International Reserves (Billions dollars) 27.9 42.0 41.6 41.1 39.5 39.0 39.0 International Reserves (months of imports goods) 6.0 7.2 6.6 6.6 7.0 7.0 6.5 Ex. Rate / Monetary Regime Managed float/ Inflation targeting

Source: Budget Directorate of Chile, Central Bank of Chile, and IMF.

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Poverty and shared prosperity

12. Chile has continued making substantial inroads on reducing poverty and increasing shared prosperity. The poverty rate fell from 40.8 percent in 1990 to 9.9 percent in 2011 (defined as living with less than US$4 per capita per day). Extreme poverty rates have remained below 1 percent (less than US$1.25 per capita per day).1 Chile also gained important ground on shared prosperity over the past decade. From 2003 to 2011, the mean income of the bottom 40 percent expanded by 4.3 percent, considerably higher than overall income growth of 2.5 percent. Inequality has fallen since 2000, as measured by a reduction in the Gini index from 0.55 to 0.52 in 2009, followed by a further slight reduction between 2009 and 2011. However, inequality is still high and remains above LAC’s already high Gini average rate of 0.48 (2012).

13. In its quest to further reducing poverty and increasing shared prosperity, Chile faces challenges and opportunities. The strong recent macroeconomic and fiscal performance provides a solid basis for sustaining and increasing its growth rate in the medium and long term, and render growth more inclusive to address the still high income inequality mentioned above. Embarking on a high growth trajectory is critical as even though Chile has enjoyed high growth over the past 20 years, the country’s per capita income has yet to converge with that of the high income countries.2 The proposed education reform aims at improving access to and quality of services at all levels of education through better standards and accountability of institutions, increased support to those in need, and more options for technical education. The ongoing reform of main social programs also aims at targeting social assistance more effectively to those in need. In addition, alternative poverty measures –such as the introduction of multidimensional poverty measurement as proposed by the Comisión para la Medición de la Pobreza, will allow better targeting of public expenditures and enhancing equality of opportunities by focusing on specific infrastructure development.

14. Further progress on inclusive growth requires addressing a number of important structural challenges to boost productivity. The education reform focused on quality and access is highly relevant as Chilean students do not perform as well as students from countries with similar or lower income per capita, according to the results of the PISA test (2012). Significant gaps in the quality of basic education remain between private and public schools. Despite the low unemployment levels, the Chilean labor market still faces important limitations. Labor force participation rates remain low compared to other countries in the region and most OECD countries, especially with respect to women and youth. Negative attitudes towards women’s work and limited childcare options impede female employment. The low participation of young people in the workplace is a reflection of their limited basic skills and difficulties in transitioning from study to work, partly caused by poor linkages between education and the skills needed in the labor market.

1 Note that official data also shows a similar trend. The latest available official poverty numbers (using 2011 CASEN household survey) indicate that 15 percent of the population was living in poverty, a significant reduction from the 38.3 percent in 1990. The Government is currently assessing the institutional process of poverty measurement to enhance its methodology. 2 Chile’s 2012 per capita income at US$21,990 was still well below the OECD countries’ average of US$30,036 (GDP per capita in PPP, constant 2011 international $).

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15. Overcoming productivity constraints calls for a new business model that would transform the non-mining economy. Chile is still highly dependent on copper exports, which represented over 50 percent of total exports in 2013 and 12 percent of government revenue in 2012. The country has been diversifying its export portfolio, including efforts to reorient agricultural exports from United States and Europe to China in the last two years, but this remains a critical challenge. Except for mining, productivity in Chile remains well below comparable markets in more advanced economies, such as in the USA or some Asian countries.

III. SUMMARY OF PROGRAM IMPLEMENTATION

16. Overall progress towards the achievement of the CPS outcomes has been satisfactory. The Government of Chile regards the WBG as a valued development partner in its efforts to design and implement reforms crucial to increasing shared prosperity in the country. This special relationship has placed a strong emphasis in the Bank’s program on cutting-edge advisory and knowledge services while maintaining investment lending in cases where the bundling of financial and knowledge services was regarded more convenient. Further, the CPS program has enabled the WBG to respond to a dynamic private sector with projects that have strong potential to foster innovation and generate jobs.

Overview of portfolio and progress toward CPS objectives

17. For the Government of Chile, the Joint Studies Program (JSP) has become the main advisory instrument from the WBG (See Box 1). Since FY11, the Bank has delivered 15 JSP studies and 3 studies in the form of Reimbursable Advisory Services (RAS). On the lending program, during FY11-FY14, six projects closed satisfactorily in the portfolio (US$119.7 million).3 The current Bank lending program consists of one operation in higher education (US$40 million, US$13.4 million disbursed) –two lending operations in rural infrastructure and social sectors did not materialize during President Piñera’s administration given the Government’s change in priorities for WBG engagement. There are also 6 trust-funded activities (including GEF) in the portfolio (US$20 million).

18. IFC’s strong and growing portfolio has supported Chile’s dynamic private sector. The high volume of financial support to the private sector has contributed to areas with a potentially strong development impact. In addition, IFC’s programs have triggered investments that have fostered innovation in areas such as renewable energy. Other areas of IFC support included education, micro, small and medium enterprises (MSMEs), and infrastructure. IFC made 25 investments for US$1 billion over FY11-FY14, including US$307 million through mobilization.4 As of September 2014, IFC’s portfolio in Chile was US$1.6 billion, consisting of 3 Tertiary Education Finance for Results Project (P088498), Infrastructure for Territorial Development (P076807), Santiago Urban Transport Project (P086689), Social Protection TAL Additional Financing (P082037), TAL Ministry of Public Works (P102931), and Public Expenditure Management (P103441). 4 IFC’s clients made US$6.4 million in tax payments, distributed power to 700,000 people, provided power to 1.2 million people, and made 200,000 phone connections.

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about US$770 million from IFC’s own account and about US$780 million in mobilizations with a particular focus on renewable energy, MSMEs, agribusiness, and financial sector. MIGA had no investments in Chile during FY11-14. (See Annex 4 for WBG portfolio in Chile).

19. The WBG program has been advancing well and is on track to achieve the CPS objectives by the end of the CPS period. The program implementation has yielded important

Box 1. Providing Solutions through the Joint Studies Program The Government sees the Bank as a trusted, objective party in providing technical advice on challenging and transformational reforms, and the Joint Studies Program (JSP) has been the key instrument in this regard. The JSP was formally launched in 2008 with the signing of the first Framework Agreement for Advisory Services between the Government of Chile and the Bank. The Ministry of Finance is the main counterpart on the Framework Agreement, taking strong ownership of the overall JSP by prioritizing and vetting demand from line ministries, and monitoring JSP results. One of the key features of the JSP is to provide global expertise in a quick turn-around time. The Bank’s capacity to mobilize global expertise to offer solutions to complex reforms is highly appreciated by the Government. Every year, the Ministry of Finance and the Bank exchange views on key reforms for the country and prioritize the advisory services for the pertinent fiscal year. The Independent Evaluation Group (IEG) Report on knowledge-based country programs highlights two main categories for JSP studies:

Studies that fill a knowledge gap in an area where the government needs to take action: relevance, timeliness, and actionable recommendations (“how to” as opposed to “what to do”) are key for results.

Studies that explore issues in an area where the government has not taken a position and where the Bank is used as a “sounding board.” (IEG Knowledge-Based Country Programs, and evaluation of the World Bank Group Experience (July, 2013).

Further, the continued WBG support given through the JSP has provided an opportunity to fine tune reform proposals and institutional designs over extended period of time. For example, the Bank has built on strong analytical work provided during the last years in tertiary education, one of the key areas to improve equity in Chile. During FY11, the Bank contributed to the policy dialogue on increase access to tertiary education. This advice was complemented in following years by technical support to strengthen the quality assurance system. Particularly, the Bank contributed to efforts on changing legislation to improve the accreditation system and the accountability of institutions. Currently, the Government has embarked in an ambitious reform in the sector and the WBG is continuing its collaboration in the areas of affordable access of tertiary education and its quality assurance system, and has expanded its support to increase more options for higher education services through public technical institutions. A new Framework Agreement recently signed with the authorities will ensure that the advisory program will continue to support Chile’s current reforms to reduce inequality and promote shared prosperity. The current Government signed a Framework Agreement for four years (FY15-18), extending the original two-year period of these frameworks. The Bank and the Ministry of Finance have agreed to prioritize on those reforms that the Government is intensively working on this fiscal year. Thus, the FY15 JSP will prioritize technical advice on tertiary education, tax reform, social protection, water resources management, and concessions.

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lessons that have informed the WBG’s engagement in the future. A detailed description on progress towards CPS outcome indicators is presented in the revised Results Matrix (See Annex 3). A summary of key results follows, organized by the CPS results areas.

Results Area I: Public Sector Modernization

20. Implementation of the new integrated financial management system in Chile that aimed to improve budgetary controls and transparency of public expenditure management is expected to be completed by the end of the CPS period. The municipal financial management system is fully operational in all institutions targeted by the reform (100 municipalities); quality and timeliness of municipal information has improved. At the central level, implementation of a new public financial management system (SIGFE II) was delayed by software performance challenges that took time to get resolved. 86 institutions out of the 173 planned had installed the system as of June 2014.5 The Bank supported these efforts with the Public Expenditure Management II lending operation under CPS Objective 1.1. The Government is committed to completing the implementation of SIGFE II after the closing of the project. The Bank also provided support on introducing public performance management instruments, contributing to the Government’s efforts in achieving higher performance standards for human resources management. The support included preparing options to reform the public sector’s complex payment system and strengthen the senior executive system’s performance monitoring and management. Analytical work conducted under the JSP6 informed the design of policy and institutional solutions to be implemented by a new management unit in charge of improving accountability in public institutions.

21. Bank support to facilitate the implementation of measures to improve transparency in public institutions is taking hold. Major progress has been made in implementing the Access to Information Law (ATI). First, the Bank supported the National Council for Transparency’s efforts to enhance its oversight role with respect to application of the ATI (Objective 1.2).7 It also facilitated knowledge exchanges with other ATI oversight bodies, which in turn helped strengthen the Regional Network of ATI. Moreover, the Bank supported the Judicial Branch’s initiatives to enhance its communication strategy, with a view to enhancing transparency and accountability in its activities.8

22. A blueprint for the reform of the insurance market regulation has been prepared. Analytical inputs by the Bank helped in the drafting of norms for an effective risk-based supervision in the insurance sector9, which included a more flexible regime for investments, a risk-sensitive capital regime, an enhanced approach to insurer governance, and other regulatory amendments to support a risk-based supervisory approach (Objective 1.3). This technical advice was extended to deepen the Government’s analysis of the solvency regime in the insurance

5 Chile Road Map for the Modernization of Human Resources Management in the Public Sector (P127135) and Chile: Strengthening Public Senior Executive Service IDF (P131141). 6 Assessment of the Performance Management Incentives (P122527), Chile Decentralization Agenda (P122526), 7 IDF Strengthening Chile’s Council for Transparency (P117937) 8 IDF Strengthening the Transparency and Accountability of the Judiciary (P121813) 9 Insurance Sector—Risk Based Supervision and Amendments to the Current Law (P119023).

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market, based on comparable international experience of capital requirement models. The draft bill is currently under public consultation.10 In the aftermath of the global financial crisis, IFC was ready to support the banking sector with capital injections as well as hybrid debt qualifying as tier 2 capital. Most of these investments ultimately did not prove necessary given lower than anticipated impact of the crisis in Chilean financial institutions.

Results Area II: Job Creation and Equity Improvement 23. The WBG contributed to the introduction of cutting-edge results-based financing in tertiary education. The Bank has supported three successive loans through the MECESUP program (Chilean Higher Education Equity and Quality Improvement Program). The current phase of the program11 places Chile on the cutting-edge in results-based financing to education institutions, helping better understand and implement results-oriented, student-focused performance agreements with institutions aimed at improving the quality and performance of tertiary programs (CPS Objective 2.2). Moreover, studies undertaken as part of the JSP have informed the policy dialogue on how to enforce institutional quality criteria and to support improved governance and transparency measures in the accreditation system. Through the JSP, the Bank has also supported a comprehensive analysis of the student financial-aid system, with the aim of moderating student debt, enhancing equity outcomes, addressing fiscal sustainability, and improving institutional performance. IFC also focused on supporting high-quality, tertiary-level vocational and technical education, particularly in low-income areas. IFC’s US$49 million loan and guarantee investment to Duoc, a non-profit, private institution of higher education, is supporting an education institution with 60 percent of students coming from the lowest three income quintiles (compared to 39 percent across Chile’s tertiary education sector). In 2013, Duoc supported 80,000 students (40 percent female). Another US$7 million financing to Universidad Diego Portales helped refurbish its facilities. Further, through IFC’s US$100 million equity investment in Laurate Education Inc., IFC is helping to expand access to higher education in 30 countries, including Chile. The Government has requested the WBG to continue supporting the policy reforms in the sector (See section V).

24. WBG support to improve the social protection system made some progress, yet not as much as initially expected. The Bank advised the Government on the transformation of MIDEPLAN (Planning Ministry) into the Ministry of Social Development. This Ministry continued to have a leading role in the monitoring, design, and implementation of social policies, but it emphasized its role in policy execution. An additional financing operation for Social Protection TAL12 supported enhancements to the Social Protection Index (Ficha de Proteccion Social) and its data warehousing system and reporting systems. This operation also supported the evaluation studies of Chile Crece Contigo and the design of the psychosocial support and employment counseling for the Ethical Family Income (Ingreso Etico Familiar), which built on the experience of Chile Solidario. The Bank also helped the Government incorporate the Ethical Family Income in the Registry of Social Information. However, an operation envisioned at the

10 Risk Based Capital (RBC) Model for the Insurance Companies FBS (P125810). 11 Tertiary Education Financing for Results III project (P111661). 12 Additional Financing Social Protection Technical Assistance Loan (P082037, IBRD-78030)

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beginning of the CPS did not materialize given President Piñera’s administration strategy on debt management.

25. More recently, the Bank has contributed to improving Chile’s institutional framework for measuring and monitoring poverty and strengthening the public evaluation function. The Bank analyzed international experiences on institutional design for systematic evaluation of public policies, programs, and projects, distilling relevant lessons for the new Government’s declared objective of strengthening the Chilean evaluation system. This provided guidance on how to increase transparency in the use of public resources and used evidence based on results to improve policy design. Similarly, the Bank provided Government counterparts with an analysis drawn on international experiences to help improve their poverty measurement process, which is expected to enhance its overall data transparency and inspire greater confidence in this process among the broader public.

26. The Government adopted a new methodology of territorial planning that allows scaling up successful pilot efforts at empowering rural communities and expanding their access to services. The infrastructure development project 13 applied a new participatory methodology for a multi-sectoral, territorial investment system, which supported the design of more than 45 regional plans (Planes Marco de Desarrollo Territorial-PMDT), financing 250 infrastructure projects (roads, water and sanitation, energy, and ICT), and mobilizing funds to support 27 productive activities. By the end of the project, about 320,000 people benefited from improved infrastructure as a result of the program, which further empowered their participation in decision making on public resource allocation (CPS Objective 2.4). The Ministry of Social Development institutionalized this new methodology by applying it more broadly to territorial planning and implementation of inclusive development programs. In addition, the Bank supported the Government in developing a pilot project for the integration of Disaster Risk Management into the Atacama Regional Territorial Plan.

27. The WBG supported MSMEs development and job creation during the CPS period. In 2013, IFC’s clients in Chile supported the creation of over 32,000 jobs, of which about 44 percent were filled by women. Over 80 percent of these jobs were MSME finance clients, including a US$75 million SME oriented credit line extended to Banco Bci in 2010 to MSMEs affected by the February 2010 earthquake, as well as a US$30 million two-tranche credit line to Banco Internacional to increase access to long term finance for agriculture MSMEs and women-owned MSMEs. IFC has also invested US$165.7 million in MSME-focused clients, including Copeval, Magallanes, and Corpbanca. IFC’s banking sector clients are providing 96,000 MSME loans for about US$15.5 billion. Corpbanca doubled the outstanding deposits in 2013 compared to 2011 (it had 108,000 outstanding deposits valued at US$20 billion by 2013). BC Internacional had 130 agribusiness loans outstanding for US$66 million (compared to 69 loans for US$49 million in 2011). Further, IFC’s clients BC International and Copeval are expanding sustainable farming opportunities for about 20,000 farmers. Through a US$49 million investment in Copeval, IFC is supporting the supply and financing of agricultural inputs, machinery, irrigation systems, and technical services to farmers, half of which are located in frontier areas.

13 Infrastructure for Territorial Development Project (P076807).

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28. Advice to the Ministry of Agriculture (MINAGRI) in its efforts to develop a long-term agricultural innovation strategy contributed to a shared vision for agricultural policy. Based on the results of two earlier studies, the Bank helped develop an action plan towards 2030 to support the Government’s objective to become an important actor in global agro-food markets. This included an assessment of productivity constraints, including in genetic improvement, farm management, harvest and post-harvest technologies, standards and quality, and human resources. This support contributed to the development of a shared vision for Chilean agricultural policy and clear priorities for the sector. These efforts have culminated in the design and creation of MINAGRI’s agricultural innovation unit, which included a participatory approach to agree on its objective, mandate, and structure.

Results Area III: Promoting Sustainable Investment 29. Infrastructure investment management has improved at the Ministry of Public Works (MPW). Through a technical assistance project, a sustainable and integrated approach to infrastructure planning was designed to help the MPW in its investment management process14. This methodology aims to strengthen competitiveness and capacity for productive development of each territory, and equal access to goods and services. In addition, an integrated project management model contributed to improving accountability related to project outcomes and the availability of key information about project cost and contract management and design. The project also supported the incorporation of service standards in concessions and civil contracts. The Bank also made recommendations to improve competition and render public bidding processes more efficient. The approval of the new legal framework for public works (Reglamento de Obras Públicas) is, however, still under discussion.

30. In transport, the Bank advised on different options to improve urban mobility. 15 The Bank offered recommendations on different initiatives for toll roads (urban and interurban) and value capture for infrastructure financing. It has also contributed to addressing urban mobility challenges in the metropolitan area of Concepcion. A competition for technology solutions held in Concepcion became the base for the development of start-up projects, which will be supported by the Regional Government and the Ministry of Transport and Telecommunications.

31. The understanding of the challenges that Chile faces in the management of its water resources has improved considerably. Since 2010, the Bank has been working closely with the Government on strengthening its institutional framework for the sustainable use of water16. First, an overall assessment of water resource management was prepared and identified 14 major challenges in the water sector (including water rights, markets issues, quality, institutional capacity, planning, and conflict management, among others). In a second phase, an institutional

14 Institutional Strengthening of the Ministry of Public Works TAL (P102931). 15 Santiago Urban Transport Project (P086689) and Open Innovation to Improve Municipal Services in Concepcion

(P147956). 16 Institutional Framework of Water Sector in Chile (P143440), Support to the Institutional Reform Plan for Water

Resources Management (P150671), Planning Water Infrastructure (P133289), and Water Resources Management Assessment Study (P123699).

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reform plan and strategy was developed for the General Water Directorate. The Government has requested the Bank to deepen the support in the water reform over the remainder of the CPS period (Objective 3.2).

32. The WBG has promoted competitive renewable energy solutions to help address Chile’s energy needs and support the Government’s efforts to mitigate global climate change. To help respond to growing concerns over climate change, IFC invested US$700 million in eight renewable energy projects in hydro and solar, which are contributing to the diversification of the energy matrix, a high priority for Chile (CPS Objective 3.3). IFC provided US$37.5 million in financing for Chile’s first merchant solar plant, SunEdison that sells all its production in the spot market and US$65 million to support the development of the largest solar photovoltaic merchant plant in Latin America. IFC’s renewable energy investment in FY14 is expected to improve utility services for about 172,000 people and reduce greenhouse emissions by over 1 million tons of CO2/year. IFC’s client CTA represented the first Circulating Fluid Bed coal-fired plant in Chile in 2013 and Hidromaule constructed three run-of-river plants for about 40 MW of total capacity. In addition, the Bank has shared its expertise on carbon markets through technical support to the Ministry of Energy to prepare its Market Readiness Proposal (MRP) in 2013. The Partnership Assembly endorsed Chile’s MRP, awarding US$3 million in grants to help develop its carbon market.17 The Bank is also contributing to Chile’s efforts to mitigating global climate change through certified carbon emission reductions (CERs) linked to hydropower projects.18

IV. EMERGING LESSONS

33. The WBG's partnership with Chile is a good example of knowledge exchange with an advanced country that has achieved OECD membership. Chile has a strong record of implementing structural reforms and now strives to build a more equal society, offer better services to its citizens, and increase productivity of its economy. The WBG has mobilized global experts to help the Government in shaping reforms in different areas, particularly through the Joint Studies Program. The WBG has facilitated productive exchanges between Chilean authorities and their peers in Latin America, Europe and Central Asia, Africa, and Asia on policies aimed at reducing poverty and boosting shared prosperity. Through this exchange, the WBG has benefited from Chile’s experiences as Chile has become one of the top knowledge providers for WBG members. These exchanges have shown that governments across the world value learning from Chile’s experiences in the operationalization of reforms, where Chile seems to have an edge. Areas of collaboration included the design of integrated systems for social assistance delivery to poor and vulnerable households, macro and fiscal management, water management, concessions, pensions, among others. A strengthened collaboration with the Chilean Agency for international Cooperation (AGCI) offers an opportunity to deepen the ability to facilitate such knowledge exchange.

17 Market Instruments for climate change mitigation in Chile (P130378). 18 Chile Quilleco Hydropower Project (P092015), CHILE - Chacabuquito Hydro Power Project (P074619), CHILE Hornitos Project (Chacabuquito II) (P081743).

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34. IEG’s assessment on knowledge-based country programs also highlights these important lessons from the Chile WBG engagement. 19 IEG’s Report highlights the effectiveness of customized development solutions, such as in the case of advice provided on enhancing education quality assurance, and their importance for a country where WBG knowledge services is highly demand driven. The Report also remarks that in Chile the Bank is widely recognized as a credible and neutral partner that can be relied upon for good quality advice. The Report highlights that often the Bank functions as a “sounding board” or connects counterparts to cutting-edge international expertise through its broadly recognized convening power. The client values WBG support to build capacity through training, networking, or access to institutional best practices, such as in the case of the risk-based pension and insurance supervision assessment in Chile.

35. The implementation of the WBG's program in Chile has produced relevant lessons for how the WBG can be effective in countries that mainly demand knowledge services. The Joint Studies Program is an agile instrument that allows for aligning priorities on analytical and technical collaboration between the Budget Directorate at the Ministry of Finance (DIPRES) and the WBG. It offers a framework for jointly reviewing results on a regular basis. Furthermore, it streamlines the processing of contracting services. In addition, stand-alone RAS built on a series of relatively small, timely contracts, to advise the Government at different stages of a reform process. RAS has been integrated to the JSP program to add value to strategic areas of WBG support.

36. The use of the national procurement system (ChileCompra) for most contracts (up to US$300,000 for consulting services and up to US$350,000 for goods and non-consulting services) in Bank-financed projects has contributed significantly to improving portfolio performance and disbursement. This decision was based on the consideration that ChileCompra represented an efficient, modern and transparent system which is largely equivalent to the Bank’s procedures and practices. Chile has also become a good example of successful procurement reforms for other countries (e.g. Peru) on the use of Framework Agreements (Convenios Marcos) and e-procurement. The Bank facilitated this exchange of experiences.

V. ADJUSTMENTS TO CPS AND FUTURE ENGAGEMENT

37. The FY11-FY16 CPS objectives and expected results remain relevant for the Government in the remainder of the CPS period. The main thrust of the WBG collaboration in Chile will not only remain focused on the priority areas identified in the CPS but also deepen and expand these efforts to design and implement reforms identified by the new administration as crucial to reducing inequality and create greater opportunities for the poor. Further, this collaboration will continue to offer opportunities for other WBG partner countries to learn from Chile’s development experiences.

19 IEG Knowledge-Based Country Programs, and evaluation of the World Bank Group Experience (July, 2013).

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38. The Government of Chile has requested to deepen WBG’s collaboration in areas where it is undertaking major reforms. As mentioned in section II, the Government has anchored its reform agenda around tax, education, and constitutional reforms, which are complemented by other policy reforms to improve access and quality of public services and increase productivity. Hence, the WBG will consolidate work in tertiary education, social protection, concession, water resources management, energy, and environment. The emphasis on equity cuts across all sectors. In particular, the Bank expects to collaborate in assessing the distributional impact of the recently approved tax reform, as well as in strengthening social protection policies and poverty measurement. The work on education is linked to equity and productivity reform objectives.

39. The results matrix has been simplified and updated to facilitate monitoring and evaluation of CPS implementation (See Annexes 1, 2, and 3). First, the revised results framework reflects changes introduced to align the program with the priorities of the new administration. Second, the presentation of the results framework in the summary matrix consolidates the program around objectives and measurable indicators; the original presentation had focused on the specific outcomes of the knowledge intensive program and as a result included a long list of indicators. Third, the design has been adjusted to take account of engagements that did not have traction, or that no longer represent priorities in the agenda of the new administration.

40. The Government and the WBG agreed on continuing with a mix of support instruments in order to effectively deliver the expected outcomes, as well as exploring an increased lending program. The emphasis on cutting- edge knowledge in critical areas of reforms will continue to anchor the WBG program in Chile. The JSP framework agreement was renewed for FY15-FY18, which will be complemented by a solid RAS program (See Annex 4). Given the ambitious reform agenda, the current Government has expressed interest in borrowing from the WBG over the remainder of the CPS period. An indicative lending program for the next two years includes an investment operation for a total amount of about US$45 million, which will contribute to enhance the institutional basis for sustainable and efficient management of water resources and concessions. A Development Policy Loan (DPL) series would also be considered to support the Government’s policy reform agenda to address the persistent high rates of inequality in the country through social sector reforms. IFC will continue to support areas with a potentially strong development impact, mainly in infrastructure, renewable energy, financial sector, education, and agribusiness. MIGA is also committed to supporting private sector involvement, particularly foreign direct investments, and to expanding its portfolio of risk insurance products.

41. Improving equity, quality, and accountability of the tertiary education system will be a high priority during the remaining of the CPS. Despite Chile’s important attainments in coverage, infrastructure investment, equipment, and education for the poor, the country still faces an important challenge of improving equity and quality of the education system. To respond to this challenge, the Government has embarked in an ambitious education reform agenda, and has sought WBG support, particularly to access global expertise and to obtain customized solutions. Building upon previous work (See Section III for reference), but adjusting it to the current reform agenda, the WBG contribution will focus on strengthening quality assurance, improving affordable access to higher education, and designing a public network of technical higher

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education institutions. The Bank has been working closely with the Ministry of Education to tailor and implement its technical assistance through the Joint Studies Program, and has initiated discussions on a potential lending operation, which could serve as a framework for the WBG support for the implementation of these reforms. IFC is taking part in the policy dialogue and will contribute to the reform implementation. While some results of this engagement will be reported by the end of the CPS in FY16 (CPS Objective 2.1), main results of this engagement are likely to be attained beyond this CPS period.

42. The Government also intends to deepen collaboration with the WBG on strengthening the social protection system. The Bank is supporting the improvement of the quality, timeliness, and effective use of the Social Information Registry (RIS), which generates key information to target beneficiaries and monitor effective social service delivery (CPS Objective 2.3). The Bank has also engaged in advising the Ministry of Social Development on improving the Integrated Social Information System (SIIS), and on its design and implementation of a new model for allocation of social benefits.

43. At the request of the Government, the Bank is preparing an assessment of the distributional effects of the tax reform, approved in September 2014. The study is expected to contribute to the debate on the effect of the tax reform on the economy and in particular on income inequality by quantifying the potential effects of the reform on the country’s income distribution profile. The analytical findings will also help adjust the reform during its 4-year gradual implementation period (See Box 2).

Box 2. Chile’s Tax Reform Chile’s ambitious tax reform aims at addressing the country’s high level of inequality through two effects: first, by making the tax system per se more equitable; and second, by raising additional revenues for increased public spending in favor of low income groups, notably the financing of the education reform, which envisages universal and free access to higher education, as well as the expansion of elementary education. The overall distributional effect of the reform will depend on direct and indirect effects of the different reform measures, and notably the allocation of the additional resources to specific spending programs. As regards enhancing efficiency and equity in the tax system, the bulk of the reform consists in changes in the income tax, which imply an increase of corporate tax rate while the maximum personal tax rate would be reduced, the removal of the FUT (Fondo de Utilidades Tributarias), a tax incentive instrument that was designed in the early 1990s to stimulate investment through the deferral of non-distributed profits, as well as adjustments to the taxation of capital gains. The reform bill also includes special incentives for investment and saving for medium and small firms, as well as a tax on capital gains obtained from real estate, specific excise taxes and green taxes. Finally, a set of measures to reduce evasion and avoidance will be implemented.

44. Government-WBG collaboration with respect to private sector productivity will be strengthened, notably through the establishment of a new global hub in Santiago. To support President Bachelet’s Agenda for Productivity, Innovation, and Economic Growth last May, the Government and the Bank agreed to establish a Global Indicators and Research Development Center in Santiago, which is expected to be operational by 2015. This hub will

15

create benefits for a large group of WBG members at it will serve as a platform for global knowledge exchange, which will initially be focused on Doing Business research and other business climate indicators. Thereby, WBG members will benefit from learning from Chile’s experiences and from exchanges with other countries. This initiative will further contribute to Chile’s interest to position itself as a global knowledge provider. In addition to this, Bank support was requested to assess SME financing schemes to enhance SME financing and operational efficiency. IFC will continue to support Chile's private sector by fostering entrepreneurship and innovation, with SMEs remaining the main cross-cutting theme of all IFC activities in the country. IFC will also continue to develop partnerships with banks and non-bank financial institutions to provide lines of credit for small companies and low income groups including short-term financing products to overcome working capital constraints. MIGA’s future engagement may encompass the offering to the private sector of traditional political risk insurance –related to transfer and convertibility restrictions, expropriation, breach of contract, and war and civil disturbance –and its most recent credit insurance or non-honoring of a financial obligation of a sovereign, sub-sovereign or state-owned enterprise. MIGA’s primary engagement is expected to be in the infrastructure sector.

45. Collaboration with the WBG to enhance the institutional basis for sustainable and efficient management of natural resources will also be expanded (CPS Objective 3.2). The Government has requested WBG support to enhance the institutional framework for water resources management, and overall infrastructure and water resources planning. This collaboration will include a new investment operation to support the implementation of an institutional reform in the water sector. This reform aims at restructuring the MPW into a Ministry of Public Works and Water Resources, modernizing the national and regional investment planning system for water and infrastructure, as well as strengthening legislation governing integrated water-management systems. The Bank will also support the implementation of a national forestry and climate change strategy through the Forest Carbon Partnership Facility Readiness Preparation Grant (FCPF). This initiative aims to identify and implement alternative financial mechanisms for the country’s forestry sector based on current and projected demand in the carbon markets.20 In addition, through a GEF grant, the Bank will contribute to strengthening Chile’s national framework for sustainable land management with a view of combating land degradation, mainstreaming biodiversity into national policies, and protecting forest carbon assets.21

46. The Government has a renewed interest in Bank’s collaboration on energy policy assessment (CPS Objective 3.3). Last May, the Government launched a long-term energy agenda to ensure reliable and affordable energy supply in the domestic market. An ambitious goal of cutting marginal electricity costs by 30 percent has been set by end of the administration in FY18. The Government has also committed to improve energy reliability by enhancing its regulation to foster investment in non-conventional renewable energy (NCRE). 22 Further, President Bachelet enacted new environmental tax legislation in September 2014, making the country the first in South America to tax carbon dioxide (CO2) emissions. The new tax is meant 20 Chile FCPF Readiness Preparation Grant (P124908). 21 GEF Sustainable Land Management Project (P085621). 22 The Government expects that NCRE will represent 45 percent of the new energy capacity installed over 2014-2025.

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to encourage power producers to use cleaner sources of energy to help reduce greenhouse gas emissions and meet Chile’s voluntary target of cutting these gases 20 percent from 2007 levels by 2020. The WBG will support this ambitious initiative, beginning with technical advice on natural gas regulation, carbon pricing measures (through the Partnership for Market Readiness-PMR project), and the design of an improved governance framework for the development and use of geothermal energy (with support from the Clean Technology Fund (CTF) and the WBG Energy Sector Management Assistance Program (ESMAP). IFC’s extensive work in renewable energy will help bring the private sector perspective into the policy dialogue and will continue financing private sectors initiatives in renewable energies and energy efficiency.

VI. RISKS TO CPS PROGRAM

47. Risks to the program as identified in the CPS remain low. First, there is a low likelihood that political, governance, or institutional capacity factors could adversely impact the attainment of CPS objectives. Chile has built strong democratic institutions based on an efficient civil service and good governance. In addition, overall fiduciary environment is strong. The use of the country’s procurement system has contributed in portfolio performance in Bank-financed projects; and the financial reports are delivered on a timely manner. On the macro side, Chile’s economy stands out in its regional context with very sound macroeconomic fundamentals, reflecting decades of prudent macroeconomic and fiscal management. The country has preserved its hard-earned reputation for fiscal and economic stability, curbed the Peso volatility, and shielded the economy from external shocks or global deceleration. While the Government’s major reform plans on taxation and social spending are ambitious, it is unlikely that it will undertake major shifts in macroeconomic policies.

48. While the overall risk to the program is low, there are certain areas that need close monitoring. In the risk dimension related to sector strategies and policies, the risk is perceived as moderate to the attainment of the CPS objectives going forward. A strong political opposition to the Government's ambitious reform agenda may pose a risk of losing pace in the WBG program implementation, particularly with respect to the education reform. A slower than expected pace of the reforms implementation would delay the delivery of results in the remaining of the CPS. To mitigate this risk, the WBG will closely coordinate with the Government and will foster exchange of views between global experts and different stakeholders to contribute to technically sound and broad based solutions for effective implementation. In addition, exogenous environmental factors might represent a moderate risk that could adversely affect the pace of implementation of the CPS program. Chile is prone to natural disasters, particularly earthquakes and tsunamis, as it is located in a highly seismic area. An extreme event would naturally change the priorities in the Government agenda, and consequently, CPS implementation could be delayed.

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Table 2: Risks to the CPS Program based on SORT23

Risk Categories Rating (H, S, M or L)

1. Political and governance Low

2. Macroeconomic Low

3. Sector strategies and policies Moderate

4. Technical design of project or program Low

5. Institutional capacity for implementation and sustainability

Low

6. Fiduciary Low

7. Environment and social Moderate

8. Stakeholders Moderate

9. Other (Not applicable)

Overall Low

23 Risk assessment is based on the proposed program for the remainder of the CPS period, using the Systematic Operations Risk-Rating Tool (SORT). Since SORT was introduced in FY15, this PLR includes this risk-rating assessment for the first time.

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ANNEX 1: Updated CPS Results Matrix

RESULTS AREA I – PUBLIC SECTOR MODERNIZATION

CPS Objectives and Indicators Instruments and Partners

1.1 Improve availability of timely information on budgetary outcomes:

i) Financial and expenditure information at subnational level is available through the municipal financial management system: Baseline (2009): 0 Target (2014): 100 municipalities

ii) Central Government Entities use an upgraded SIGFE: Baseline (2009): 0; Target (2014): 90%

Public Expenditure Management II (SIL, FY08-FY14) Assessment of the Performance Management Incentives (JSP, FY11) Chile Road Map for the Modernization of Human Resource Management

in the Public Sector (JSP, FY12) Strengthening Chile's Public Senior Executive Service System IDF Chile's Decentralization Agenda (JSP, FY11) Chile Public Policies Evaluation System JIT (FY14)

1.2 Improve access of information for citizens regarding legislation, national budget, and overall public sector information:

i) Raise information requests responses through the Municipal information management system: Baseline (2009): Information requests not processed through an information management system. Target (2012): 100 information requests regarding legislation, national budget, and overall public sector processed through the Municipal information management system

Strengthening Chile’s Council for Transparency (IDF, FY10-FY13) Strengthening the Transparency and Accountability of the Judiciary (IDF,

FY11-FY14)

1.3 Strengthen the insurance market regulation: i) Bring regulatory practices in line with the international standards in the

insurance sector: Baseline (2011): No regulation for risk-based supervision. Target (2014): Draft bill for risk-based supervision submitted for public consultation.

Insurance Sector Review (JSP, FY11) Risk Based Capital (RBC) model for insurance companies (JSP, FY12) Financial Sector Assessment Program -FSAP (joint assessment with IMF,

FY11) Advisory on fuel price volatility (JSP, FY13).

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RESULTS AREA II – JOB CREATION AND EQUITY IMPROVEMENT

CPS Objectives and Indicators Instruments and Partners 2.1 Improve the availability of quality options for higher education services:

i) Number of new public technical higher education institutions in operation: Baseline (2014): 0 Target (2016): 5

ii) Higher education institutions apply new teaching and research cost methodology: Baseline (2014): 0 Target (2016): 5 institutions

iii) New quality assurance standards applied successfully in tertiary education programs: Baseline (2014): 0 Target (2016): 5 programs

Public Financing of HE Institutions (JSP, FY15) HE Quality Assurance Design (RAS, FY15) HE Public Technical Education Network (RAS, FY15) Tertiary Education: Quality Assurance and Tuition Reference Rate (JSP,

FY13) Tertiary Education Student Financial Aid System (JSP, FY12) State-Guaranteed Student Loan Program (CAE) (JSP, FY11)

2.2 Enhance accountability of tertiary education system by broadening performance-based funding: i) Number of signed performance agreements between the Government and

tertiary education institutions: Baseline (2010): N.A. Target (2016): Performance agreements on Teacher training: 18; Academic Innovation: 19; Technical and Professional: 15; and, small projects: 38

ii) Retention Rate: first-year undergraduate students that remain at the institution in the second year. Baseline (2010): 68.4% Target (2016): 72%

Tertiary Education Financing for Results Project III (APL, FY13 – FY17) IFC projects summary: Duoc, Laureate in education

2.3 Increase access to social services for the poor: i) Consolidated existing programs into an integrated social protection

information system. Baseline (2014): N.A. Target (2016): new social protection information system implemented.

Social Protection (TAL additional Financing, FY11 – FY12) CL Poverty JIT (FY14) CL Social Information System JIT (FY15) Social Information System Redesign (JSP, FY15) Chile Tax Reform (JSP, FY15)

2.4 Improve access of rural population to basic public services and markets:

i) Increased use of quality and sustainable water and sanitation services in selected territories: Baseline (2005): 0 Target (2012): 90% of population benefiting from project PMDTs

ii) Increased use of quality and sustainable electricity services in selected territories: Baseline (2005): 0

Infrastructure for Territorial Development (SIL, FY05-FY12)

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Target (2012): 90% of population benefiting from project PMDTs

2.5 Increase access for MSMEs innovative, short-term financing products to overcome working capital limitations. i) Total jobs (% o/w female) supported by IFC projects:

Baseline (2011): 19,127 (43%) Target (2016): 33,000 (45%)

ii) MSMEs reached by IFC projects: Baseline (2011): 87,000 loans, US$10.7 billion Target (2016): 150,000 loans, US$33 billion

IFC projects: Bci Chile, BC Internacional, Copeval, Corpbanca, Duoc, La Higuera, VMLA—Chile

CORFO SME Finance (JSP, FY15) Developing a vision for agricultural innovation (RAS FY11) Design of Agricultural Innovation Unit (FY14) Potential DPL on improving competitiveness

RESULTS AREA III – PROMOTING SUSTAINABLE INVESTMENT

Outcomes of the CPS program Instruments and Partners

3.1 Improve the institutional design for engaging the private sector in public infrastructure development:

i) Enhanced concession’s regulatory framework to increase incentives for further infrastructure investments: Baseline (2014): N/A. Target (2016): concession agency implemented

Ministry of Public Works Institutional Strengthening (TAL, FY08-FY14) Infrastructure development and IWRM (IPF, FY16) Concession Study (JSP, FY13) CH-Institutional Strengthening PPP unit (JSP, FY15) Santiago Urban Transport (TAL, FY06-FY12) Chilean Remote Damage Assessment for le Mw. 8.8 Earthquake (TF, FY10) Incorporation of Disaster Risk Management into Territorial Planning of

Chile, (TF, FY11)

3.2 Enhance the institutional basis for sustainable and efficient management of natural resources (soil, water, and forests): i) Comprehensive water regulatory framework:

Baseline (2011): N.A. Target (2016): Comprehensive Water Code submitted to Congress for approval.

Chile: Strengthening the legal framework IWRM (JSP, FY15) CL Infrastructure development and IWRM (IPF, FY15) Institutional Reform Plan for Water Resources Management (JSP, FY14) Institutional Framework of Water Sector in Chile (JSP, FY13) Water Resources Assessment (JSP, FY11) Chile FCPF Readiness Preparation Grant (FCPF, FY10-FY12) Sustainable Land Management (GEF, FY14-FY20)

3.3 Diversify the energy resources matrix to allow for electricity cost reduction:

i) New capacity of renewable energy: Baseline (2011): 0; Target (2016): 460 GwH

ii) Development of carbon market mechanisms and market registry and verification system in the energy sector: Baseline (2011): N.A. Target (2016): Purchase mechanism of carbon emission reductions in place.

Conventional renewable power: Alto Maipo, La Higuera. Solar PV power: La Huayca II, Sun Edison CAP, Sun Edison MER, Small Hydro and other NCRE: Credit line to banc BICE (Emilia)

Market Instruments for Climate Change Mitigation in Chile (PMR) Quilleco Hydroelectric Project (PCF, FY11-FY13) Chile Securitization and Carbon Sinks Project (BioCarbon Fund, FY11-

FY13) Potential DPL on improving competitiveness

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ANNEX 2: Matrix of changes to original CPS Results Matrix

RESULT AREA I – PUBLIC SECTOR MODERNIZATION Original CPS Results Matrix Revised CPS Results Matrix

Improving performance and public financial management Inform policy debate on a new model of performance management incentives,

including an assessment of management tools to improve institutional performance accountability mechanisms to align incentives to staff at all levels.

Upgraded Financial Administration System (SIGFE) used by most (90 percent) of the Central Government Entities (CGE) that currently use SIGFE.

Financial and public expenditures information from CGE updated online and consolidated in SIGFE on a timely manner.

Aggregated municipal financial and public expenditures information available at the central level within 30 days.

Financial and expenditure information of 100 municipalities available through the system.

Inform policy debate on proposals to improve management and accountability mechanisms in education and health sectors.

Strengthen the design and implementation of health, education, and social protection policies and programs.



ii) Central Government Entities use an upgraded SIGFE: Baseline (2009): 0; Target (2014): 90%

Increasing transparency Implementation of the Access to Information legislation. Strengthened oversight role of the Council for Transparency. Improved record management practices in the public administration. Strengthened capacity of the Supreme Court to design and implement a change

management and communications program built on transparency and integrity.


i) Raise information requests responses through the Municipal information management system: Baseline (2009): Information requests not processed through an information management system.

Target (2012): 100 information requests regarding legislation, national budget, and overall public sector processed through the Municipal information management system

Strengthening monitoring and evaluation systems Design of scorecard methodology and pilot test of scorecard methodology for

selected social programs. Methodologies for evaluation of social programs developed.

Dropped. Two outputs were dropped. RAS on monitoring and evaluation system for social programs did not materialize with MIDEPLAN. However, more work on social protection information systems is expected in the remainder of the CPS period and is reported in result 2.2.

Strengthening financial system and capital markets regulation Assessment of the draft bill to enhance the regulatory framework and

supervision of the insurance sector. Inform policy debate on legislative reform to advance effective risk based

supervision in the insurance sector in Chile. Assessment of the financial sector and regulatory development since 2004. Inform policy discussions on pension funds incentive structure, SME

1.3 Strengthen the insurance market regulation:

i) Bring regulatory practices in line with the international standards in the insurance sector: Baseline (2011): No regulation for risk-based supervision. Target (2014): Draft bill for risk-based supervision submitted for public consultation.

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financing, and bank and insurance regulation and supervision. Potential hybrid financing and innovative financial instruments by IFC.

Boosting the efficiency of resources in the public sector Inform policy debate on individual and institutional incentives scheme in the

provision of health services and review of procurement management and information systems in the health sector.

Dropped. The Government changed priorities on health sector financing.

RESULT AREA II – JOB CREATION AND EQUITY IMPROVEMENT Original CPS Results Matrix Revised CPS Results Matrix

Improving quality, financing, and equitable access to tertiary education services Increased accountability for quality through broadening of performance-based

funding model linked to targeted indicators. Extension of Performance Contracts to all subcategories of tertiary education

institutions (both public and private universities, professional institutes, and centers for technical education).

Enhanced equity and improved access through more options for students from low-income backgrounds and through improved remediation of skills in tertiary education.

Impact assessment of the state-guaranteed student loan program on improved tertiary education’s coverage and equity.

Inform policy debate on the future public financial obligation and potential cost-effectiveness of the intervention, and provide recommendations for improvements going forward.

2.1 Improve the availability of quality options for higher education services:




2.2 Enhance accountability of tertiary education system by broadening

performance-based funding: i) Number of signed performance agreements between the Government

and tertiary education institutions: Baseline (2010): N.A.

Target (2016): Performance agreements on Teacher training: 18; Academic Innovation: 19; Technical and Professional: 15; and, small projects: 38

ii) Retention Rate: first-year undergraduate students that remain at the institution in the second year.

Baseline (2010): 68.4% Target (2016): 72%

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Improving the social protection system for the poor Implementation of the new minimum income proposal (Ingreso Etico Familiar). Improved targeting system for social programs and enhanced monitoring and

evaluation capacities at MIDEPLAN. Assessment of Chile Solidario and Chile Crece Contigo programs’ results. Strengthen the design and implementation of social protection policies and

programs.

2.3 Increase access to social services for the poor: i) Consolidated existing programs into an integrated social protection

information system. Baseline (2014): N.A. Target (2016): new social protection information system implemented.

Increasing the access of rural population to basic public services and markets Increase the effective and productive use of sustainable infrastructure services by

poor rural communities as evidence in: Rural infrastructure projects approved through the new integrated economic

evaluation of MIDEPLAN Increased use of transportation services along rehabilitated road

infrastructure in the area of influence of the Bank financed project Increased use of electricity and sustained access and effective use of water

and sanitation services for economic activities in the area of influence of the Bank financed project

Economic activities promoted through the use of the financed infrastructure and pre-investment for productive activities.



ii) Increased use of quality and sustainable electricity services in selected territories: Baseline (2005): 0 Target (2012): 90% of population benefiting from project PMDTs

2.5 Increase access for MSMEs to innovative short-term financing

products to overcome working capital limitations: i) Total jobs (% o/w female) supported by IFC projects: Baseline (2011): 19,127 (43%) Target (2016): 33,000 (45%) ii) MSMEs reached by IFC projects:

Baseline (2011): 87,000 loans, US$10.7 billion Target (2016): 150,000 loans, US$33 billion

RESULT AREA III – PROMOTING SUSTAINABLE INVESTMENT Original CPS Results Matrix Revised CPS Results Matrix

Strengthening regulations and further development of productive infrastructure Increased share of projects administered with an integrated project management

approach. Enhanced competition in bidding processes for concession contracts. Inform policy decisions on the best strategy for sustainable and integrated approach

to infrastructure planning. Improvement measures for the public transport system for Metropolitan Santiago

implemented. Information on payment obligation to public transport operators available in real

time. Assessment of a model city (Talca) for the reconstruction of urban transport

systems of other cities in the area hit by the earthquake. Inform policy debate on recommendations on public transport service organization,



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transport infrastructure, technological solutions, and management of transport operations in Talca.

Inform policy debate on feasible options of financial instruments for the Chilean urban transport projects.

Improve regulatory and institutional framework for concessions. Strengthen public investment planning to facilitate foreign trade. Improve foreign trade logistics and competitiveness. Remote damage assessment contributes to the Government’s reconstruction plan

for the areas affected by the earthquake and tsunami of February 27th, 2010. Assessment of long-term challenges and responses of the agri-food and forestry

innovation sub-systems (AFFIS). Inform policy debate on building a vision for Chile’s rural, agri-food and forestry

sectors towards 2030. Sustainable use of natural resources Analytical review of property rights administration and water market structure. Impact assessment of economic incentives and subsidies on water resources

sustainability. Inform policy debate on best strategy to address short-term and medium-term

challenges on water resources management. Strengthened dialogue mechanisms between the private sector and the indigenous

communities on sustainable mining investment. Strengthened capacity of the Ministry of Mining’s staff on managing consultations. Technical assistance to develop Chile’s Readiness Preparation Proposal (R-PP),

including preparing the national REDD strategy. Development of a national incentive program for mainstreaming sustainable land

management planning and practices in order to combat land degradation, conserve biodiversity of global importance and protect vital carbon assets.

Purchase of carbon emission reductions linked to renewable energy-based electricity production and afforestation and reforestation of degraded land.

3.2 Enhance the institutional basis for sustainable and efficient management of natural resources (soil, water, and forests):

i) Comprehensive water regulatory framework: Baseline (2011): N.A. Target (2016): Comprehensive Water Code submitted to Congress for approval.

Support to private sector investment Increased innovative renewable energy investment and energy efficiency projects. Support to Chilean companies, particularly those operating in advanced fields or

developing innovative business models.

3.3 Diversify the energy resources matrix to allow for electricity cost reduction and lower environmental impact:

i) New capacity of renewable energy: Baseline (2011): 0; Target (2016): 460 GwH

ii) Development of carbon market mechanisms and market registry and verification system in the energy sector: Baseline (2011): N.A. Target (2016): Purchase mechanism of carbon emission reductions in place.

25

Annex 3: Matrix summarizing progress towards CPS Objectives

RESULT AREA I – PUBLIC SECTOR MODERNIZATION

CPS Objectives and Indicators Progress to Date (As of September 2014)

Instruments and Partners



ii) Central Government Entities use an upgraded SIGFE:

Baseline (2009): 0; Target (2014): 90%

Ongoing. The system is fully operational in target institutions at subnational level in 100 municipalities, which has improved the quality and timeliness of municipal information. At the central level, however, software performance challenges have delayed implementation. 86 institutions out of the 173 planned had installed the system as of June 2014 (49%). The Government is committed to continue working in the implementation of the system during FY15-FY16 to complete the implementation of the system at the central level.

Public Expenditure Management II (SIL, FY08-FY14)

Assessment of the Performance Management Incentives (JSP, FY11)

Chile Road Map for the Modernization of Human Resource Management in the Public Sector (JSP, FY12)

Strengthening Chile's Public Senior Executive Service System IDF

Chile's Decentralization Agenda (JSP, FY11) Chile Public Policies Evaluation System JIT

(FY14)


i) Raise information requests responses through the Municipal information management system: Baseline (2009): Information requests not processed through an information management system. Target (2012): 100 information requests regarding legislation, national budget, and overall public sector processed through the Municipal information management system

Achieved. Through IDF activities the Bank supported the implementation of the Access to Information legislation. 4,300 requests were received at the municipal level per year by 2012. A Presidential Instruction was issued in 2012 providing guidelines for the implementation of records management for agencies implementing the Access to Information Law. The Bank also supported the Judicial Branch endeavors to enhance its communication strategy, particularly with respect to its changing attitudes toward transparency and accountability.

Strengthening Chile’s Council for Transparency (IDF, FY10-FY13)

Strengthening the Transparency and Accountability of the Judiciary (IDF, FY11-FY14)

1.3 Strengthen the insurance market regulation:

i) Bring regulatory practices in line with the international standards in the insurance sector: Baseline (2011): No regulation for risk-based supervision. Target (2014): Draft bill for risk-based supervision submitted for public consultation.

Achieved. The Bank advised the Government in the design of the risk-based capital methodology to enhance the approach to insurer governance and solvency regime. The draft bill for Risk-based supervision is still under public consultation. In addition, a FSAP assessed financial risks and vulnerabilities, identified key developmental challenges, and examined the regulatory framework, including compliance with international standards. FSAP results will be assessed by the time of next evaluation in FY16.

Insurance Sector Review (JSP, FY11) Risk Based Capital (RBC) model for insurance

companies (JSP, FY12) Financial Sector Assessment Program -FSAP

(joint assessment with IMF, FY11) Advisory on fuel price volatility (JSP, FY13).

26

RESULT AREA II – JOB CREATION AND EQUITY IMPROVEMENT

CPS Objectives and Indicators Progress to Date (As of September 2014)


2.1 Improve the availability of quality options for higher education services:




Ongoing. The WBG is currently supporting the tertiary education reform and has been working closely with the Ministry on new studies financed through RAS: (i) comparative analysis of international models of Quality Assurance Systems and provide a proposed set of quality assurance; (ii) comparative analysis of international good practices to contribute to the design of a public network of higher education technical institutions; and (iii) development of costing methodology for financing higher education. The WBG has initiated discussions on a potential lending operation. The current program builds on a series of JSP studies delivered in FY11-FY13. The Bank provided advice on designing a new loan system, tuition reference rate system to encourage higher education institutions to enroll more students from low income backgrounds. The Bank also recommended reforming the SINAC-ES to be able to ensure quality minima in higher education system.

Public Financing of HE Institutions (JSP, FY15) HE Quality Assurance Design (RAS, FY15) HE Public Technical Education Network (RAS,

FY15) Tertiary Education: Quality Assurance and Tuition

Reference Rate (JSP, FY13) Tertiary Education Student Financial Aid System

(JSP, FY12) State-Guaranteed Student Loan Program (CAE)

(JSP, FY11)

2.2 Enhance accountability of tertiary education system by broadening performance-based funding: i) Number of signed performance agreements

between the Government and tertiary education institutions: Baseline (2010): N.A. Target (2016): Performance agreements on Teacher training: 18; Academic Innovation: 19; Technical and Professional: 15; and, small projects: 38

ii) Retention Rate: first-year undergraduate students that remain at the institution in the second year. Baseline (2010): 68.4% Target (2016): 72%

Underway. Tertiary Education Financing for Results Project III (FY13-17) is ongoing. Project is on track to achieve results. As of June 2014, a total of 84 performance agreements were signed:

- Teacher training: 11 - Academic innovation: 17 - Technical and professional: 9 - Small projects: 47

Tertiary Education Financing for Results Project III (APL, FY13 – FY17)

IFC projects: Duoc and Universidad Diego Portales.

2.3 Increase access to social services for the poor: i) Consolidated existing programs into an integrated

social protection information system. Baseline (2014): N.A. Target (2016): new social protection information system implemented:

Underway. A series of JSP for FY15-FY16 is expected to contribute to the redesign of the Government’s integrated social information system to account for new criteria for the selection of social protection beneficiaries and a territorial approach to the social protection system. Previously, the Bank through the Social Protection AF supported the design of the psychosocial support and employment counseling for the Ethical Family Income (Ingreso Etico Familiar-IEF) and the FPS (Ficha de Proteccion Social),

Social Protection (TAL additional Financing, FY11 – FY12) – Partially canceled

CL Poverty JIT (FY14) CL Social Information System JIT (FY15) Social Information System Redesign (JSP, FY15) Chile Tax Reform (JSP, FY15)

27

instruments of the social protection system.



ii) Increased use of quality and sustainable electricity services in selected territories: Baseline (2005): 0 Target (2012): 90% of population benefiting from project PMDTs

Achieved. A new participatory methodology for a multi-sectoral, territorial investment helped increase the effective and productive use of infrastructure services by poor rural communities in selected territories of the regions of Coquimbo, Maule, Bio-Bio, Araucanía, and Los Lagos. 31 PMDT were approved by Regional Councils. Social considerations were fully embedded in project design, including both indigenous and gender issues. By 2012, 100% of population benefited from project PMDTs with sustained access and effective use of water and sanitation and electricity services provided by the project. The project benefitted 320,000 inhabitants in poor dispersed rural communities.

Infrastructure for Territorial Development (SIL, FY05-FY12)

2.5 Increase access for MSMEs to innovative short-term financing products to overcome working capital limitations: i) Total jobs (% o/w female) supported by IFC

projects: Baseline (2011): 19,127 (43%) Target (2016): 33,000 (45%) ii) MSMEs reached by IFC projects:

Baseline (2011): 87,000 loans, US$10.7 billion Target (2016): 150,000 loans, US$33 billion

Underway. WBG through IFC implemented specific credit lines targeted to MSMEs, women SMEs, agri SMEs and SMEs affected by the 2010 earthquake. IFC also provided working capital financing to a supplier of key agricultural inputs. US$75million SME-oriented credit line extended to Banco Bci in 2010 to MSMEs and SMEs affected by the February 2010 earthquake. US$30 million two-tranche credit line to Banco Internacional to increase access to long-term finance for agriculture SMEs and women-owned SMEs. US$165.7 million of investments in SME-focused clients, including Copeval, Magallanes, and Corpbanca.

IFC projects: Bci Chile, BC Internacional, Copeval, Corpbanca, Duoc, La Higuera, VMLA—Chile

Chile Corfo SME finance (JSP, FY15) Developing a vision for agricultural innovation

(RAS FY11) Design of Agricultural Innovation Unit (FY14) Potential DPL on improving competitiveness

RESULT AREA III – PROMOTING SUSTAINABLE INVESTMENT

Outcomes of the CPS program Progress to Date (As of September 2014)




Ongoing. Through JSP studies, the Bank advises the Government to reinforce its concession sector’s normative, functional, and organizational framework. This work builds on the contributions of the TAL to the MPW and the JSP program in concessions. The TAL project supported the incorporation of standard of services in concessions and civil work contracts, which changed the conceptual and methodological model to implement a service- oriented approach to public works, and proposed some recommendations to improve competition and make more efficient the bidding processes of public works. The TAL also helped to introduce a new

Ministry of Public Works Institutional Strengthening (TAL, FY08-FY14)

Infrastructure development and IWRM (IPF, FY16) Concession Study (JSP, FY13) CH-Institutional Strengthening PPP unit (JSP,

FY15) Santiago Urban Transport (TAL, FY06-FY12) Chilean Remote Damage Assessment for le Mw.

8.8 Earthquake (TF, FY10) Incorporation of Disaster Risk Management into

28

methodology that integrates regional needs and captures the synergies of different projects within a development program (93% of projects approved based on this methodology).

Territorial Planning of Chile, (TF, FY11)

3.2 Enhance the institutional basis for sustainable and efficient management of natural resources (soil, water, and forests): i) Comprehensive water regulatory framework:

Baseline (2011): N.A. Target (2016): Comprehensive Water Code submitted to Congress for approval.

Underway. The Bank has been providing advice to the Government through a series of studies under JSP between FY11-FY14. Currently, the Bank is advising on the implementation of reforms to restructure the institutional framework for water resources management and the Water Code, to improve water rights regulation and the quality of and access to water services. The Bank has presented before the Senate the main recommendations of the studies. The Bill aimed at transforming the institutional framework for the water sector has been submitted to the Congress, and the Water Code is under review by the Government.

Chile: Strengthening the legal framework IWRM (JSP, FY15)

CL Infrastructure development and IWRM (IPF, FY15)

Institutional Reform Plan for Water Resources Management (JSP, FY14)

Institutional Framework of Water Sector in Chile (JSP, FY13)

Water Resources Assessment (JSP, FY11) Chile FCPF Readiness Preparation Grant (FCPF,

FY10-FY12) Sustainable Land Management (GEF, FY14-FY20)

3.3 Diversify the energy resources matrix to allow for electricity cost reduction and lower environmental impact: i) New capacity of renewable energy:

Baseline (2011): 0; Target (2016): 460 GwH

ii) Development of carbon market mechanisms and

market registry and verification system in the energy sector: Baseline (2011): N.A. Target (2016): Purchase mechanism of carbon emission reductions in place.

Underway. IFC provided over US$700 million new financing to private sector renewable energy projects including some of the more relevant and innovative projects in each field. As part of the energy policy agenda, the Bank is advising the Government on natural gas distribution regulation to foster competition in the market. In addition, the Market Readiness Proposal (MRP) was finalized in March 2013. Chile was awarded US$3 million in grant funding to design one or more carbon pricing instruments for the energy sector.

Conventional renewable power: Alto Maipo, La

Higuera. Solar PV power: La Huayca II, Sun Edison CAP, Sun Edison MER, Small Hydro and other NCRE: Credit line to banc BICE (Emilia)

Market Instruments for Climate Change Mitigation in Chile (PMR)

Quilleco Hydroelectric Project (PCF, FY11-FY13) Chile Securitization and Carbon Sinks Project

(BioCarbon Fund, FY11-FY13) Potential DPL on improving competitiveness

29

ANNEX 4: The World Bank Group Portfolio in Chile

World Bank Active Portfolio

Analytic and Advisory Activities to be delivered in FY15-FY16

Project # Project NameDate, Board

ApprovalEffectiveness Closing

Net Commitment (US$ million)

Total Disbursement (US$ million)

Total Undisbursed Balance

(US$ million)

% Disbursed

P111661 CL Tertiary Education Finance for Results III 03/13/2012 06/20/2013 10/31/2016 40.0 13.4 26.6 33.4%40.0 13.4 26.6 33.4%

As of December 3, 2014.

Product Line

Project Definition

FY15JSP P151824 Chile Tax ReformJSP P151686 Strenghtening the legal framework for water resources management JSP P151964 Corfo SME financeJSP P152393 Institutional strengthening of the PPP UnitTA P152065 Improving the natural gas distribution in ChileTA P152295 Chile social information system

JSP P152095 Determining the cost of public financing of higher educationJSP P152352 Higher education public technical education network in ChileRAS P152353 Higher education quality assuranceRAS P152289 Redesigning the integrated social information system RAS P154266 Chile National System for Social Care TA P147956 Open innovation to improve municipal services in ConcepcionAs of December 3, 2014

FY16

30

Recipient Executed Trust Fund Portfolio

Project #

Trust Fund NameNet Grant Amount (US$000)

Funds Disbursed (US$000)

% Disbursed

Program Source

Effective Date

Closing Date

P085621 CL GEF Sustainable Land Management 6,145 281 5% GEF 9/2/2005 8/15/2019P131141 Strengthening Chile's Public Senior Executive Service 451 109 24% IDF 7/10/2013 2/28/2016P074619 PCF - Chile Chacabuquito Hydro 6,477 5,296 82% CARBON 2/4/2002 12/31/2022P111918 Securitization and Carbon Sink 2,002 1,878 94% CARBON 7/7/2010 12/31/2018P092015 Chile Quilleco Hydroelectric Project 1,237 - 0% CARBON 5/14/2014 12/31/2016P124908 Forest Carbon Partnership Facility 3,800 - 0% FCPFR 1/29/2014 3/15/2016Total 20,112 7,565 38%As of December 3, 2014

31

Commitment Institution LN LN ET QL + QE GT RM ALL ALL LN ET QL + QE GT RM ALL ALLFiscal Year Short Name Cmtd - IFC Repayment - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - IFC Cmtd - Mob Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC Out - IFC Out - Mob

145.00 0 0 0 0 0 145.00 0 2.82 0 0 0 0 2.82 0.00

65.00 0 0 0 0 0 65.00 0 65.00 0 0 0 0 65.00 0.00

0 0 0 0 8.55 0 8.55 0 0 0 0 8.55 0 8.55 0.00

75.00 0 0 0 0 0 75.00 0 75.00 0 0 0 0 75.00 0.00

15.00 5.00 0 0 8.00 0 23.00 0 15.00 0 0 8.00 0 23.00 0.00

89.48 7.84 0 0 0 0 89.48 201.32 89.48 0 0 0 0 89.48 201.32

0 0 0 0 0 0.04 0.04 0 0 0 0 0 0 0 0.00

41.11 0 0 0 0 0 41.11 0 41.11 0 0 0 0 41.11 0.00

0 0 18.46 0 0 0 92.5 110.00 0 18.46 0 0 0 92.50 110.00

14.68 0 5.00 0 0 0 19.68 22.02 2.35 0.89 0 0 0 3.23 3.52

14.25 4.75 0 0 15.99 0 30.24 0 14.25 0 0 3.51 0 17.76 0.00

0 0 5.90 0 0 0 5.90 0 0 0.00 0 0 0 0.00 0.00

3.10 3.10 0 3.50 0 0 6.60 4.50 3.10 0 3.50 0 0 6.60 4.50

0 0 8.44 0 0 0 8.44 0 0 8.44 0 0 0 8.44 0.00

27.29 7.71 0 10.00 0 0 37.29 225.73 27.29 0 10.00 0 0 37.29 225.73

73.59 9.41 0 0 0 0 73.59 99.24 73.59 0 0 0 0 73.59 99.24

9.25 0 0 5.05 0 0 14.30 0 9.25 0 5.05 0 0 14.30 0.00

0 0 0.00 0 0 0 0.00 0 0 0.00 0 0 0 0.00 0.00

60.00 0 0 0 0 0 60.00 0 15.95 0 0 0 0 15.95 0.00

37.50 0 0 0 0 0 37.50 0 37.50 0 0 0 0 37.50 0.00

0 0 1.55 0 0 0 1.55 0 0 1.55 0 0 0 1.55 0.00

0 0 0 9.43 0 0.45 9.88 0 0 0 9.43 0 0 9.43 0.00

Total Portfolio 670.24 37.81 39.36 27.98 32.53 0.49 844.64 662.81 471.68 29.35 27.98 20.06 0 623.10 644.31

2014 San Andres SpA

TFSA

2013 VMC

2006 Lignum

2015 Luz del Norte

2006/ 2011 La Higuera

2008 La Confluencia

2014 La Huayca

2011 Geopark UJV

2007/ 2009 Hidromaule

2012/ 2013 Inv. Magallanes

2013 Corpbanca

2014 DARP SPV Chile

2007/ 2010 Duoc

2009/ 2010 CTA

2004/ 2007/ 2009 Cartones America

Copeval-SPV

2012/ 2013 BBVA Chile

2013 BCI - Chile

2010/ 2011/ 2012/ 2013/ 2014 Bc Internacional

2014 Alto Maipo

2014 Amanecer

Region(s):Latin America and the CaribbeanCountry(s) : Chile

Accounting Date as of : 09/30/2014Amounts in US Dollar Millions

Statement of IFC's Committed and Outstanding PortfolioInternational Finance Corporation

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