AA.)Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 9534-ME

STAFF APPRAISAL REPORT

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT(CONALEP III)

MAY 31, 1991

Human Resources Operations DivisionCountry Department IILatin America and the Caribbean Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir offici'al duties. Its contents may not otherwise be disclosed without World Bank authorization..

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CURRENCY EQUIVALENTS(as of March 31, 1991)

Currency Unit - Peso (Mex$)US$1 M Mex$2,945Mex$1 - US$0.0003395Mex$ million US$339.55

MEASURES

1 square meter (m2) 10.76 sq. ft.1 kilometer (km) - 0.62 miles

Fiscal Year

January 1 to December 31

Academic Year

September 1 - June 30

Acronyms

CAPFCE: Administrative Committee of the Federal Program of SchoolConstructicL(Comite Administrador del Programa Federal de Construccion deEscuelas)

CETs: Centers for Technological Studies(Centro de Estudios Tecnologicos)

CONALEP: National System for Vocational and Technical Education(Colegio Nacional de Educacion Profesional Tecnica)

ICB: International Competitive BiddingINEA: National Institute for Adult EducationINEGI: National Institute of Statistics and Cartography

(Instituto Nacional de Estadisticas, Geografia e Informatica)LCB: Local Competitive BiddingNAFIN: National Finance Co., Inc.

(Nacional Financiera, S.N.C.)NGO: Non-Governmental OrganizationPNME: National Program for Modernization of EducationPND: National Development 'lanPROBECAT: Scholarship Program tor Workers' RetrainingPRONASOL: National Solidarity Program (Self-help program for the poor)SEP: Secretariat of Education

(Secretaria de Educacion Publica)SME: Small and Medium-Sized EnterprisesSPP: Secretariat of Programming and Budgeting

(Secretaria de Programacion y Presupuesto)STPS: Secretariat of Labor and Social Welfare

(Secretaria de Trabajo y Prevision Social)

FOR OFFICIAL USE ONLY

UNITED MEXICAN STATESTHIRD TECHNICAL TRAINING PROJECT

(CONALEP III)

Table of Contents

Page No.

LOAN AND PROJECT SUMMARY . . . . . . . . . . . . . . . . . .iii

1. ECONOMIC DEVELOPMENT AND TRAINING NEEDS . . . . . . . . . . . . 1

A. The Economy . . . .. .. . . . . . . . . . . . . . . . .B. The Labor Force and the Demand

for Skilled Workers and Technicians . . . . . . . . . . . . 2

II. THE MIDDLE-LEVEL EDUCATION AND TRAINING SECTOR . . . . . . . . 7

A. Overview of the Education and Training System . . . . . . . 7B. Training by Enterprises . . . . . . . . . . . . . . 9C. National System for Vocational and Technical Education . 10D. Government Strategy for Technical Training Development . 15E. Previous Bank Experience and Lessons Learned . . . . . . . 17F. Rationale for Bank Involvement . . . . . . . . . . . . . . 20

III. THE PROJECT . . . . . . . . . . . . . . .. . . 21

A. Origin of the Project . . . . . . . . . . . . . . . . . . . 21B. Objectives ............ .... ... .... . 21C. Project Components and Description . . . . . . . . . . . . 22

IV. PROJECT COSTS. FINANCING AND IMPLEMENTATION . . . . . . . . . . 31

A. Cost of the Project . . . . . . . . . . . . . . . . . . . . 31B. Recurrent Cost Implications . . . . . . . . . . . . . . . . 33C. Project Financing and Disbursement Plan . . . . . . . . . 33D. Implementation, Procurement and Auditing . . . . . . . . . 35E. Monitoring and Evaluation ..... . .. . ........ . 38

V. BENEFLTS AND RISKS . . . . . . . . . . . . . . . . . . . . . . 40

VI. AGREEMENTS REACHED AND RECOMMENDATIONS . . . . . . . . . . . . 42This report is based on the findings of an appraisal mission that visited Mexicoin March 1991. The mission was composed of Messrs. Wesley Hobbs (TechnicalEducation Planner, Mission Leader), Jose Dominguez-Urosa (Economist), JorgeQuintero (Implementation Specialist) and Eutiquio Elizondo (Instructor TrainingSpecialist). Messrs. Kye Woo Lee (Division Chief, LA2HR), George Psacharopoulos(Division Chief, LATHR), Gary Fields (Economist) and David Warren (OperationsAssistant) also participated in the mission.

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

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TAPLES

Table 1.1. Labor Force . . . . . . . . . . . . . . ... . 3Table 1.2. Labor Force - Skilled W'orkers and Technicians . . . 4Table 2.1. Middle Level Education 1989/1990 . . . . . . . . 8Table 3.1. Improving Training Cost Recovery/Cost Sharing

During 1991-96 . . . . . . . . . . . . . . . . . . 28Table 4.1. Proje,ct Cost Summary . . . . . . . . . . . . . . .31Table 4.2. Unit .ost and Space Comparisons . . . . . . . . .. . 32Table 4.3. Epected Price Increases During Implementation . . . . . . 33Table 4.4. Implementation Schedule . . . . . . . . . . . . . 36Table 4.5. Procurement Arrangements . . . . . . . . . . . . . . 37Table 5.1. Regional Distribution of CONALEP Training Centers

and Projocted Enrollments . . .. 40Table 5.2. Projected Annual Enrollments and Outputs

by Major Fields of Study and Type of Programs . . . . . . 41

ANNEXES

Annex 1: Structure of Education and Training System (1989-90)Annex 2: The CONALEP Technical Training Program

Attachment A: Employment and EarningsAttachment B: Organization Charts at Central and

Local LevelsAnnex 3: Special Studies and Basic Terms of ReferenceAnnnex 4: CONALEP's Strategy for Improving Cost Recover/Cost Sharing of

Training ProgramsAttachment: CONALEP's Cost Recovery and Cost Reduction

Activities (1984-90)Annex 5: Project CostingAnnex 5.1: P-oject Costs by Components and ActivityAnnex 5.2: Project Cost Estimates by Years and Category of ExpenditureAnnex 5.3: Estimated Schedule of DisbursementAnnex 5.4: Allocation of Loan ProceedsAnnex 6: Project ImplementationAnnex 6.1: Technical Assistance ScheduleAnnex 6.2: Criteria for Targeting Schools and Programs for Assistance

Under the ProjectAnnex 6.3: Civil Works and Mobile Training Units ScheduleAnnex 6.4: Physical Space Factors for Design of Civil WorksAnnex 6.5: Furniture, Equipment and Educational Materials Procurement

ScheduleAnnex 7: Project Monitoring IndicatorsAnnex 8: Related Documents and Data Available in Project File

Key to Ma,

MA: IBRD No. 23052 - MEXICO: Third Technical Training Project

iii

URITED MEXICAN STATESTHIRD TECHNICAL TRAINING PROJECT

LOAN AND PROJECT SUMMARY

Borrowert Nacional Financiera, S.N.C.Guarantor: United Mexican StatesBeneficiary: National System for Vocational and Technical Education

(CONALEP)Amognts US$152.0 million equivalentTrms: 17 years, including 5 years of grace, at the standard variable

interest rate

Proiect The overall objective of the project is to carry out theObjectives: modernization of the system; in particular, to further improve

the quality, efficiency and relevance of the CONALEP system.The specific project obje3tives are to: (a) uniformly upgradethe quality of high level skills training and middle leveltechnician training to contribute to meeting the rapidlychanging needs of the labor market; (b) selectively expand therange of CONALEP's training activities in key sectors,especially in-.service upgrading training on a cost-recoverybasis, and initiate a modular program in the evening toenhance skill levels of experienced and employed workers, inaddition to the current emphasis or. pre-service training; and(c) strengthen the administration of CONALEP, increaseefficiency and improve cost reduction/recovery plans.Systematic improvements, as well as targeting and expansion ofprogrems under the project, will be based on ongoing analysisand planned studies concerning the quality, efficiency andimpacts of CONALEP's programs.

Prolect The proposed project would achieve the above objectivesDescriytiont through the implementation of three components.

(a) Quality Improvements (51% of total costs) would include:(i) review and upgrading of all instructional materials andcourse syllabi to meet current levels of technology in 97careers for pre-service training and 84 careers for in-servicetraining; (ii) decentralization/upgrading of instructortraining programs; and (iii) a technological services program,which would provide support to other CONALEP centers as wellas to micro, small and medium enterprises, and contribute tothe enhancement of teacher training quality, advancedtechnology pre-service training, and high level in-servicetraining in eight selected centers.

(b) Expansion of Trainina Activities (31% of total costs)would support, on the basis of a series of on-going andplanned studies and assistance of specialists and communityleaders: (i) training in response to demands from themaquiladora industry and the tourism sector; (ii) theInitiation of a modular program in the evening and short-term

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upradi"6 courses for employed workers; (iii) mcbile trainingfor marginal populations; and (*v) other minor but strategicactions such as food production and pond fish farming, jointschool and in-plant cooperative technician training programs,and self--help training programs linked to productiveactivities.

(c) Increasing Efficiency (18% of total costs) wouldstrengthen the administration of CONALEP, increase efficiencyand improve cost reduction/recovery plans through thefollowing activities: (i) provision of the equipmentproduction and maintenance services programs to all trainingcenters and establishment of regional maintenance centers oneight existing training center complexes for the repair ofmajor items and advanced technology equipment; (ii)development of a communications network, with computer modemand telefax connections throughout CONALEP's national system;(iii) strengthening CONALEP's cost accounting/recoverysystems; and (iv) carrying out studies on improving theefficiency of student flows and graduate placement, andpreparing an action plan for implementation.

Proiect The project would: (a) produce skilled manpower and smallBenefits: business services required for the restructured economy to

sustain and strengthen growth, with particular emphasis onflexibility in response to the labor market needs in growthsectors, and in disadvantaged areas and populations; when theproject iF fully implemented in 1996-97, the expected annualoutput fr-n all programs combined is projected to be some180,000 rainees; (b) improve the quality of all instructionto meet the rapidly changing levels of technology in theworkplaLe; (c) make CONALEP's training more efficient andensure its operational and financial sustainability throughexpanded cooperative training links with enterprises and morediversified fin-e~ing mechanisms; and (d) contribute to thedevelopment, in the medium term, of a more rational andefficient education and training system in Mexico.

Riskss There are no unusual risks associated with the project, exceptthat, with regard to mobile training for marginal populationsand the food production and pond fish farming trainingprograms; there is a potential risk that the ultimate benefitsto the targeted marginal rural populations could be minimaldue to technical, credit, and marketing risks despiteGovernment assurances that these training programs would besupported by the planned production credit through PRONASOL,marketing and training specialists. As to the risk of reducedfederal financial support for CONALEP in case of new budgetarycrisis, such risk would be minimized through early steps tobroaden CONALEP's resources mobilization base by settingtargets for cost recovery and strengthening CONALEP'srelationship with the industrial and business community. Theproject is unlikely to have significant environmental impacts.

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Estimated Local Foreign Total

Cost: * Categorv (US$ million)-

Quality Improvements 32.7 53.4 86.1

Expansion of Programs 20.0 32.6 52.6

Increasing Efficiency 11.4 18.5 29.9

Project Base Cost 64.1 104.5 168.6

Physical Contingencies 3.2 5.2 8.4

Price Contingencies 10.4 17.1 27.5

TOTAL PROJECT COST 77.7 126.8 204.5

Costs excluded in-kind contributions and identifiable

taxes and duties.

Financing Local Foreign Total

Plan: ------(US$ million)------

Government 52.5 - 52.5

Bank 25.2 126.8 152.0

TOTAL 77.7 126.8 204.5

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Estimated

Diabursements:

Bank FY FY92 FY93 FY94 FY95 FY96 FY97

----------- (USS million) --

Annual 22.3L* 32.3 32.1 29.8 24.6 10.9

Cumulative 22.3 54.6 86.7 116.5 141.1 152.0

> Includes US$10.0 million for the initial deposit to the Special Account to

cover retroactive financing of US$8.0 million equivalent for el4gible

expenditures incurred since January 20, 1991.

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

" ECONOMIC DEVELOP1MENT AND TRAINING NEEDS

A. The E"onomv

1.1. Mexico is making significant progress in emerging from its worsteconomic and financial crisis of the last 50 years. A drop in world oilprices in the early 1980s and again in 1986 had a disastrous impact on aneconomy that was high,, dependent on petroleum exports for foreign exchange.As a consequence, the economy fell into a deep depression and was furtherDurdene4 by a huge foreign debt. Growth stopped, capital investments came toa virtual halt, and inflation spiraled drastically upward reducing purchasingpover and the standard of living. Under those circumstances, the MexicanGovernment ended the decade of the 1980s by taking major initiatives aimed atachieving stabilization and structural transformation of its economy. Theeconomic strategy includes significant actions to reduce the burden of debtobligations and other actions to globalize the economy and introduce greaterefficiencies in public sector spending. While the economic corrections werepainful, the Government prevailed. In December 1987 the anti-inflationefforts were reinforced by the Government coordinated "Economic SolidarityPact", an agreement between the public, private and labor sectors aimed atdramatically reducing the country's inflation rate. The pact included apublic sector commitment to implement orthodox fiscal management measures toeliminate inflationary financing, while the private and labor sectors wouldparticipate in negotiations and arrive at a consensus to curtail demands forwage and price hikes. The three sectors agreed to work together to minimizethe recessionary elements and shortages that often accompany such programs.The result was that inflation dropped from an annual rate of nearly 160X inearly 1988 to 29.92 by the end of 1990. Notwithstanding tight monetary andfiscal policies, output began to improve after 1987. Real GDP grew by 1.41during 1988; 3.12 in 1989; and 3.91 for 1990.1 Industrial production hasrecorded particuiarly strong growth. It rose 72 in real terms during 1989with the country's export-oriented maquiladora industry providing a 23Zemployment increase and a 38.42 increase in value added in Mexico. In realterms consumption grew to 4.72 in 1989, compared to -0.52 in 1987, while in1990 a growth of 3.02 was expected. Programs carried out by the Government ofMexico have also produced increases in fixed investment. Gross fixedinvestment has also increased steadily in recent years. Labor productivityincreased by 8.4% in 1987 and 9.32 in 1988.

1.2. The Government's strategy as outlined in the 1989-1994 NationalDevelopment Plan has three fundamental objectives: (a) stability of domesticconditions to improve quality of life and strengthen the economic base; (b)globalization of co-merce to stimulate market development and competition; and(c) deregulation of private sector initiatives and activity to create anenvironment highly favorable to capital investment and growth. The Plan callsfor continued efforts to increase the annual economic growth rate to about 6Z

X Data sources: Secretariat of Programming and Budgeting (SPP).

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by the end of the period. Also, it is expected to reach an annual inflationrate of 22% for 1994, as well as an investment growth rate of 9.7% in 1994(compared to 7.8Z in 1990).

1.3. Mexico's medlum term prospects for consolidation of economicgrowth are good, provided that economic management continues to be prudent,private sector confidence is restored, and the international environmentremains reasonably favorable. In epite of the progress made thus far, thereare still problems that must be overcome. Industrial development and foreigntrade are impeded by insufficient and inadequate infrastrt?cture. In addition,while trade liberalization has brought production efficiencies in certainsectors, inadequacies in equipment and produc_ive processes still inhibitsignificant improvements in many enterprises. In particular, medium, smelland micro-industries face special problems adversely affecting productionefficiency. Frequently, inappropriate levels of technology and qualifiedlabor result in makeshift pror'esses that reduce their productivity. Ingeneral, these firms suffer trom inadequate organizational and administrativeskills and limited competitive power.

B. The Labor Force and the Demand for Skilled Workers and Technicans

1.4. While the total labor force has grown significantly (from about7.9 million in 1950 to about 31.5 million in 1990), the proportion of workersin the primary sector declined steeply from 62% in 1950 to about 20Z in 1990.At the same time, the shares of workers in manufacturing (secondary sector)and in services (tertiary sector) have increased significantly, reaulting inan eightfold growth in the labor force in those sectors over the last 40 years(Table 1.1).

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Table 1.1 Mexico - Labor Force

Diatribution of Labor Force Labor Force

Total Labor by Economic Sector Participation

Consuu Year Population Force Primary Secondary Tertiary Rate

(in Milliono) (in millions, followed by (S)percentages)

1950 (a) 27.40 7.94 4.95 1. 1.77 28.98(100.00) (62.34) (15.7., (22.29)

1960 (a) 37.10 10.80 6.02 1.87 2.92 29.11(100.00) (55.74) (17.31) (27.04)

1970 (b) 51.20 14.70 6.22 3. 19 5.29 28.71(100.00) (42.31) (21.70) (35.99)

1980 (b) 66.84 20.40 5.61 4.88 9.91 30.52(100.00) (27.50) (23.92) (48.58)

1990 (c) 81.14 31.47 6.46 6.68 18.33 38.78(100.00) (20.53) (21.23) (58.25)

Note: Figures may not add due to rounding(a) From census data, reported by Munoz Izquierdo.(b) Staff adjustments from census data, made in cooperation with INEGI and the Directorate

General of Employment. Labor force follows 1970 census data definitions.(c) Preliminary 1990 census data. Labor force count includes 12-15 years old (about 2.5x),

excluded from previous definitions.

1.5. The labor force growth trend responds to two important factors:(a) the population growth pattern two decades earlier, which also recorded thehighest growth rate (3.3%); and (b) the tendency to increase participation ofwomen in the labor force. There may also he other factors such as a recentopenness leading to resurfacing of the "submerged" economy. The resulting netannual increase in the labor force is about 1.1 million per year, while thegross estimate is more than 1.5 million entrants when retirement, deaths andother attrition rates are included. The relative weight of middle leveltechnicians and skilled workers has continued to increase, as is expected inan economy that is becoming more productive and sophisticated; the ratio of10.5 per hundred workers in 1990 might be understated, in relative terms tothe previous decades, because of the broader base used in the 1990 definitionof the labor force (Table 1.1).

1.6. Table 1.2 shows that between 1970 and 1980 the proportion ofskilled workers and technicians in the primary, secondary and tertiary sectorsincreased with time; the average proportion of skilled workers and techniciansfor the three sectors rose from about 85 per thousand in 1970 to about 101 perthousand in 1980. An average of about 106 was estimated at the end of 1990.Also, an increasingly higher concentration of skills in the occupational

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profile of the secondary and tertiary sectors is observed, and this trend isexpectad to continue.

table 1.2 Mexico - Labor Force

SkilleJ Workers aad Technicians (SW & T)

Distribution of SW & T byOverall Economic Sector

.bor Selected SW & TYear Force SW & T Rate PrimarY Secondary Tertia_

(W.llions) (Millions) (X) (in thousands, followed bypercentages)

1970 14.70 1.25 8.49 96.41 699.89 451.77(100.00) (7.?2) (56.08) (36.20)

1980 20.40 2.06 10.10 88.64 1,092.63 879.02(100.00) (4.30) (53.03) (42.66)

1990 31.47 3.35 10.64 104.01 1,519.03 1,726.69(100.00) (3.11) (45.35) (51.55)

1.7. Mexico has improved the quality of its labor force immensely. Forinstance, the average educational level of the population 15 years and olderin 1970 was only 3.4 years of schooling. Today, it has almost doubled to anaverage of 6.4 years of education. 2 Considering the large numbers involved--total enrollments in education exceed 25 million people annually--this isquite an achievement. Yet, especially in view of continuing growth in thesecondary and tertiary sectors and increasing needs for skilled manpower,important issues remain to be addressed. Although primary level education nowcovers nearly all children in relevant age groups, the quality of primairy aswell as higher levels of education needs to be improved. Furthermore,inadequate levels of productivity in the current labor fores point to needsfor improvements in quality and output of pre-service, in-service andretraining programs.

1.8. Assuming that the profile of school leavers would be similar tothe profile of new entrants to the labor force, an analysis of the 1978-91cohort confirms the above findingd. The average educational level of incomersis 6.6 school-years. However, based on the educational profile of the newentrants, there is a need for accentuation of occapational training programs,both for pre-service and in-service training.

1.9. As many as 58Z of newcomers to the labor force have only primary(11%) or less than primary education (47Z), which, in a modern society likeMexico, hinders the development of an industrial and more productive

2 Salinas de Gortari, Carlos. Segundo Informe de Gobierno. 1990. Anexo.Mex: Poder Ejecutivo Federal, 1990. p. 354.

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economy.3 Workers in this group need to acquire more general education andsome technical skills in order to become more productive; and those withnarrow bases of (often obsolete) skills need to be retrained in a broad rangeof skills.

1.10. About 23Z of tte new entrants (at least 306,000 people) have somelower or upper secorndary general education. This is a group with a soundeducational base but lacking technical skills. Thus, they are naturalcandidates for pre-service and in-service training. Unemployment rates arehigher among these secon.;ary school dropouts and graduates (30X-45x).

1.11. Problems with the third group--middle level technicians andskilled workers--are both quantitative and qualitative. The 1990 Census(Table 1.2), after excluding all professionals and high level technicians,lists more than three miilion workers (about 10.52) in the category of skilledworkers and technicians. Yet only about 3.5S of the 1978 cohort (130,000young adults) were equipped with the education and productive skills requiredto work as middle level technicians and skilled workers. Furthermore, onlyabout 25,000 of these were three-year graduates from terminal technicalsecondary schools like CONALEP (para. 2.10) and thus could be described astruly well prepared. These numbers of middle level technicans and skilledworkers are barely sufficient to meet the needs resulting from attrition ofthe current stock of technicians, let alone compensate for the past deficitsof skilled workers and technicians. Moreover, the quality of skills andlevels of productivity of workers in this category are much lower than thoseof their counterparts in advanced countries: foreign investors in themaquiladora industry have complained that productivity of workers in plants inthe northern border territory is half that of workers in similarly equippedfacilities just north of the border. Output and quality improvements in theexisting training programs and additional upgrading programs are needed toaugment the supply of solid middle level technicians.

1.12. Considering the economic deregulation measures taken during thepresent administration, and the possibility of a Free Trade Agreement with theUnited States of America and Canada, the current shortage of skilled workersand technicians could have serious economic consequences if left unremedied.Under the present circumstances, it would be difficult for industries toattain a sufficiently high level of productivity in order to competesuccessfully in the international markets. Also, productivity in theagricultural sector will need to be increased in the years to come; this willnot be possible unless there is a substantial upgrading of its labor forceand, among other things, appropriate access to production credit. In thehealth, tourism, telecommunications and transportation sectors, where Mexico

3 Further improvements in the quality and efficiency of basic educationwould certainly contribute to an amelioration of this situation. Indeed, otherpoverty problems, including unemployment and underemployment, marginalization,reliance on the informal sector, and the tendency toward early procreation, alsohave roots in the lack of basic education among this large part of thepopulation. In this context, the Bank is in the final stages of preparation forprojects in pre-primary and primary education.

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has some comparative advantages, further development also depends on anadequate supply of well trained workers and skilled technicians in order toimprove tha quality of services they provide. Thus, reducing the shortage ofskilled workers and technicians, and improving their quality, is vital toeconomic growth and development. In this regard it is important to note thatonly a relatively few of the business, industrial and agricultural enterprisescan afford the costs of train.rLg the levels of skilled manpower necessary tobecome competitive in international/local markets, especially when their majorcompetitors are in developed countries where the majority of technician andskilled worker preemployment training is done by the public education system.

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It. THE MIDDLE-LEVEL EDUCATION AND TRAINING SECTOR

A. Overview of the Education and Training System

2.1. she education and training system consists of pre-primary,primary, middle and higher levels. Enrollments at the pre-primary and primarylevels cover about 70% and 98Z of the corresponding school age groups,respectively. Middle level education comprises lower- and upper-middlelevels. At the lower-middle level (grades 7-9), first year entrants in thesct ool year 1989/1990 constituted 83Z of all graduates from the primary levelin 1989. Enrollments at this level were 4.3 million (57% of the age group) in1989, with 70% of them attending federal schools, 22% state schools and 8%nrivate schools.

2't. The upper-middle level (grades 10-12) provides the link betweenlove.--iddle and higher education, as well as with the labor force. Thisleval .omprises four major types of education and training institutions:academic, teacher training, dual purpose technical, and terminal technical.Durl.ng the 1989/1990 school year, the total enrollment at this level was about2.1 million students, with 60% of them attending the traditional generaleducation system, 212 the dual purpose technical education system(Bachillerato Tecnico--graduates can proceed to higher education or enter thelabor force), and 19% the terminal technical education system (without furtherformal education, graduates are not eligible to proceed to higher educationand thus must enter the labor force). Each of the above categories includesseveral streams or types of schools, depending on the sector served (industry,fisheries, agriculture, etc.) and on the administrative jurisdiction (federal,state, private).

2.3. The seemingly high degree of differentiation at the upper-middlelevel of public education and training does not represent a wide choice ofalternatives. Instead, it manifests the historical difficulties of solvingthe problem of training sufficient numbers of high quality skilled workers andmiddle level technicians. For example, the dual purpose technical schoolsconstituted a first attempt to train skilled workers by providing a practicalou'tlet to the labor force. However, they have not been effective in thisrespect, with only about 25% of the 1989-90 output obtaining gainfulemployment (Table 2.1). In fact, this category of education differs onlyslightly from the traditional general secondary education. Since 1969, theSecretariat of Education has attempted to direct sufficient numbers of trainedstudents into the labor force through the Centers for Technological Studies(CETS), one type of terminal technical schools; yet it is estimated that onlyabout 52% of their graduates were employed within three months of graduationin 1990 due mainly to the poor quality of training. With the establishment ofCONALEP in 1978, another type of terminal technical school, the employmentrate for CONALEP trainees improved further (62% in 1990).

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TABLE 2.12 MIDDLE LEVEL EDUCATION 1989/1990

GRADUATESNO. OF TOTAL 1989/1990 EMPLOYED INSCHOOLS ENROLLENMTS GRADUATES THREE MONTHS

(THOUSANDS) (THOUSANDS) (THOUSANDS) (2)

DACHILLERATO TECNICO 784 383.2 82.4 20.6 25

tRgMNAL TECHNICALsCETS8 AND OTHERS (a) 1,401 262.1 72.9 37.9 52

CONALEPSREGULAR PROGRAM (b) 252 155.3 33.2 20.7 62)UPGRADING/RETRAINING M(e)

PROGRAM - 61.3 61.3(c) 50.9(d) 831

TOTAL 2,437 861.9 249.9 130.1

SOURCE: CONALEP COMPARATIVE DATA

(a) CENTERS FOR TECHNOLOGICAL STUDIES (CETS); THE NATIONAL SCHOOL FOR TEACHERS OF AGRICULTURALSUBJECTSg AND THE NATIONAL SCHOOL FOR TEACHERS OF AGRICULTURAL/LIVESTOCK TECHNOLOGY.

(b) CONALEP'S ENROLLMENTS AND OUTPUTS OF THE REGULAR PROGRAMS IN THE 252 SCHOOLS IN SEPTEMBER 1989AND JUNE 1990 RESPECTIVELY.

(c) OF WHICH ABOUT 801 WERE ALREADY IN THE SKILLED WORKPORCE.Sd) NUMBER OF NEW ENTRIES TO SKILLED WORKFORCE.(a) WEIGHTED AVERAGE OF ABOUr 78Z FOR BOTH PROGRAMS.

2.4. In spite of the high level of success achieved in CONALEP's program andits contribution to the improvement of upper-middle level technical training, theterminal technical training subsector as a whole is still unable to satisfy the

annual demand for skilled workers and technicians. If the country's economic andsocial development needs for the 19909 are to be attained, and its growth potentialfully utilized, the Government, with substantial assistance of public and private

enterprises and business-industrial-agricuitural associations, must promptly address

the qualitative and quantitative inadequacies of technical education and training at

the upper-middle level.

2.5. Higher education (grades 13-17) received about 58% of the graduates from

the upper-middle level schools. Higher education includes several private and

public universities of high quality. Enrollments in science and technological

subjects, including medical, account for about 60% of all the students at this

level.

2.6. The Mexican Government has traditionally made a reasonable effort in

financing education. Although the recent crisis affected education more than other

sectors, it also allowed the Government to shift funds toward high priority areas

such as the improvement and expansion of upper-middle terminal training. In 1989,

total expenditures on education and training amounted to about 4.4% of GDP. While

the overall share of GDP allocated for general education has decreased significantly

since 1982, funding for terminal technical training has been increased.

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B. Training by Enterprises

2.7. In Mexico, explicit provisions in the Federal Labor Law make employersresponsible for the training of their employees. All firms are required toestablish training committees and submit training plans for their personnel forapproval by the Secretariat of Labor and Social Welfare (STPS). In practice, onlyabout half of firms actually submit such plans, and most of those who do never carryout much actual training. Private provision of pre-employment training is verylimited in quantity. In qualitative terms, it is generally geared to the levels ofspecialized/semi-skilled/skilled workers rather than to the technician level. Cost-effective basic training of industrial technicians includes much technical/scientific content, and thus requires a high initial investment. This is a barrierto entry for most proprietary traini'g institutions, which prefer therefore toconcentrate on less capital-intensive business and administrative training. Forindividual industries, the risk involved in operating in-house tcaining programs oflong duration (in terms of high costs and delays in producing the neededtechnicians, who may then move to other employers), and the difficulty in most casesof achieving adequate economies of scale in such training (especially among micro,small, and medium-sized industries, which are the main sources of employment inMexico), deter even large firms from mounting their own basic technician trainingprograms. Therefore, as in virtually all other countries including the mostinduetrialized, Mexican firms instead focus their in-house training on firm-specificand specialized topping-up training and rely for basic training on pre-employmenttechnician training provided by public training institutions.

2.8. In the absence in Mexico of a payroll tax and fiscal incentives (e.g.deduction of in-plant training costs from taxable income of enterprises), unlike inmany other countries in Latin America, to finance training, larger firms are insteadprepared to sponsor individual trainees and contribute equipment and materials toshare the costs of such public training institutions. While some sectors and firmsdo provide substantial training (for instance, the construction industry as well assome large industries--Kodak, Volkswagen and a few large maquiladoras--have in-housetraining centers which provide substantial basic training of skilled, semi-skilled,and specialized workers, as well as firm-specific training and upgrading ofpersonnel at all levels including that of technicians), small- and medium-scalefirms, which number about 450,000 and employ a very high percentage of the totallabor force, to the extent that they provide any in-service training at all fortheir employees, rely mostly on contracting for specific training courses withpublic training institutions such as CONALEP, with a few NGOs which operatevocational schools for lower level skills, or with private providers (mainly formanagement training). Only a few associations of SMEs have developed joint trainingprograms; for instance, a car dealer association in Mexico City operates a good butsmall auto repair training center. In all cases described, the in-plant trainingprovided at technician level is only a complement to the basic training provided bypublic training institutions; overall systematic training within enterprises is atan early stage of development.

2.9. The situation in Mexico in this regard is a matter of grave concern tothe Government; it is being systematically addressed for the first time through thein-service training component of the ongoing, Bank-assisted Manpower TrainingProject (Loan 2876-ME). However, Mexico is not the only country to have theseproblems; a recent survey by the Confederation of British Industries showed that

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less than one-third of British firms had any training program whatsoever for theirpersonnel; and less than 10 percent had a comprehensive staff training plan. Suchexperiences demonstrate the difficulty of inducing most enterprises to take anactive role in training and the need for the public sector to devise policies andplans for providing the private sector with incentives for in-plant training. Thisproject supports the Government's initiative to promote training by enterprises.

C. National System for Vocational and Technical Education (CONALEP)

2.10. Background. In late 1978, to reform and rationalize technical secondaryee-ication and train high quality skilled workers and middle level technicians inaa,xquate quantity, the Governnment created CONALEP, a semi-autonomous agency linkedto the Secretariat of Education, with the responsibility of administering newterminal technician training programs at the upper-middle education level. Sincethe creation of CONALEP, the terminal technical training program (grades 10-12)seems to be moving in the right direction and, with the Bank's assistance to CONALEPunder two previous loans (Loans 2042-ME and 2559-ME), it has entered a period ofmoderate development which still continues. With a network of 252 training centersacross the country, CONALEP's regular pre-service training program in 97 careerareas accounts for one third of total enrollments (419,000) of the terminaltechnical training system and more than two thirds of to al output of terminaltechnical secondary schools (105,000) (Table 2.1). In addition, CONALEP trainsadults who are already employed (9000 in 1989 with an increase to 23,000 in 1991) orwho have had work experience but are currently unemployed (59,000 in 1989 or 28% oftotal enrollment, but was reduced to about 10% in 1991). All these upgrading andretraining programs in some 80 career areas are offered under training contractswith private sector enterprises, public corporations, or Government agencies on acost-recovery basis. Its training contracts include the labor retraining programsof the Bank-financed Manpower Training Project of the Secretariat of Labor (Loan2876-ME) and Basic Health Care Project (Loan 3272-ME) of the Secretariat of Health.CONALEP is the major training contractor and the backbone of Mexico's skillstraining structure. For example, CONALEP's training contracts account for about 50%of the labor retraining programs managed by the Secretariat of Labor; the remainderis contracted with some 400 other training centers.

2.11. The CONALEP program differs from other middle level technical training4programs in the following ways:

a) its partial autonomy facilitates responsiveness to the changing needs ofthe productive sectors, and encourages their participation; its Boardof Governors is comprised of seven business and industrial leadersserving staggered terms;

b) its administration is decentralized so that operational decisions,including curriculum adaptation, are delegated to local trainingauthorities, industrial advisory boards are established in each centerto advise on course content matters, and each center and most stateshave a special committee (Comit6 de Vinculaci6n) to advise and assist in

4 Annex 2 presents a detailed description of the CONALEP training system.

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setting priorities for training to be offered by CONALEP and increasingthe role of the private and public productive sector in training;

c) its curriculum has a practical orientation (201 general theory, 20%technical theory, and 60S technical practice) and strong emphasis onevaluation, "hands-on" experience, follow-up and feedback;

d) its training programs, both regular and part-time, are strictly terminal(not for progression to higher education) and are job market oriented;

e) its unique promotional activities successfully enhance the program'spublic image, enabling it to attract qualified students and,increasingly, to obtain significant financial support from theproductive sectors; such support amounted to about US$12.9 million in1990 or about 13.6Z of recurrent costs;

f) its students pay a tuition relatively higher than that of other segmentsof the educational system (about 10% of the training costs); and

g) its technical instructors are seconded from industry with adequateremunerations, teach part-time (typically 12-14 hours/week), and cannotbelong to the Teachers' Union; this tends to prevent management-laborproblems because CONALEP is not the instructors' primary employer.

2.12. Effectiveness of the CONJLEP Training System. An evaluation ofCONALEP's effectiveness comprises the analysis of four aspects: (a) employment andearnings of graduates; (b) capital and recurrrent unit costs; (c) adequacy ofeconomies of scale; and (d) internal efficiency.

a) Emplovment and Earnings

i) According to the results (1990) of the Graduate Tracer Studies(Encuesta de Seguimiento) initiated under the Bank-financed SecondTechnical Training Project (Loan 2559-ME, 1985), about 621 of thegraduates of CONALEP's three-year pre-service training programfound paid employment within three months of completion of thetraining program (Annex 2, Attachment A). Furthermore, about 84Zof them are employed in their area of training specialization.There is room for improvement, but this compares favorably withthe 25% employment rate among the graduates of the dual purposeupper-secondary technical education system (Table 2.1), and withthe record of more advanced countries. CONALEP will have to placemore emphasis on the selection and induction of trainees, theenhancement of training program quality, adjustments in theprogram offering, and counseling and placement of graduates.

ii) Also according to the results (1990) of the Graduate TracerStudies, CONALEP graduates earned an average of about US$2,282(Mex$6.7 million) per year. The four year period for which thereis informatlon (1987-90) has shown a trend of steady growth inreal terms of the entry level wage from the initial 1501 ofminimum wage to the present level of 166% (Annex 2, Attachment A).

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On a national basis, the National Urban Employment Survey(Encuesta Nacional de Empleo Urbano [ENEU], Third Quarter of 1989)further confirmed that "technicians", including CONALEP'sgraduates, have higher average earnings than those with othertypes of upper secondary education (Bachillerato) and lowersecondary education. In addition, according to ENEU, unemploymentamong secondary school dropouts and graduates is 45%.

iii) The Graduate Tracer Studies currently in use do not provideinformation about stability in employment for CONALEP's graduatesbeyond the initial three months following graduation; anassessment of employer satisfaction, though, can serve to acertain extent as a proxy. According to the 1990 survey, about92Z of the employers, representing nine different economicsectors, who have hired CONALEP graduates expressed consistentlyover the four year period that the training of these employees was"good" or "excellent"; dissatisfied employers were less than 1%.Since employers tend not to dismiss workers with whom they aresatisfied, it is very probable that those workers hired areretained beyond the initial three months. Moreover, based on thefact that most employers were satisfied with the training ofCONALEP graduates, it is also quite likely that such employershire additional graduates, beyond the 622 mentioned in (i) above,after the first three months.

iv) The Graduate Tracer Studies provide no information about salarylevels or changes in the employment conditions resulting from thevariety of shorter courses (in-service programs) that CONALEPoffers. However, there are separate studies and estimates ontheir levels of employment and earnings after training. The Mid-Term Review Report and a special Bank follow-up study (1991) ofthe impact of the Bank-financed Manpower Training Project (Loan2876-ME) confirms that some 77% of unemployed workers who had someprior work experience and were retrained under the projectobtained employment within three months of completion oftraining;5 the proportion of those employed graduates whoseearnings became higher than the minimum wage rose from 26% beforetraining to about 40% after 3 months of training, and further to50% after 6 months of training. CONALEP's overall placementperformance, including the retraining of those unemployed beforethe course, is estimated at about 78Z (weighted average for allthe courses) (Annex 2, Attachment A).

5 The employment rate is much smaller (44%) for those trainees who have hadno prior work experience (i.e., who were not the intended target groups of thetraining programs). This group comprises 33% of total trainees.

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b) Unit Costs

i) In 1990, total direct cost per CONALEP trainee was about US$500(Mex$1.3 million in constant pesos of 1988). This figure includesall direct annual operational expenditures, including cashcontributions made by the productive sector. This total unit cost(TUC) also includes capital costs, which were calculated using thestandard (straight line) amortization method (useful life: 10years for equipment and 20 years for buildings; 0 salvage valuefor both). The number of trainees were calculated into a full-time trainee equivalent (of about 1400 hours/year). Total unitcost per physical person, which is lower, was also computed (aboutUS$400/year, or less than Mex$1 million).

ii) The above-mentioned TUCs compare very favorably with those ofgeneral and technical upper secondary education systems (Mex$1.2million and Mex$1.8 million, respectively, on a per student basisin 19886). This economical unit cost is one of the majorstrengths of the CONALEP training oystem; in many other countries,the unit cost of the conventional technical secondary educationsystem is often twice that of general secondary education, orhigher. The major factor for this economical unit cost is thatmost CONALEP instructors have been released by the private sectorfor teaching at CONALEP centers, and CONALEP pays them only feeson an hourly basis.

iii) While graduate income shows a steady increase over the last fouryears, unit costs show a decreasing trend over a 10 year period.Since 1987, total unit costs per full time student equivalent havestabilized at the current level of about Mex$1.3 million inconstant pesos of 1988.

c) Adequacv of Economies of Scale

i) The statistical analysis of unit costs per center showed thatabout 57 of 252 centers had a per-student admiaistrative unit costthat exceeded the average plus one full standard deviation of thesystem. In practical terms, this means that about 9% of the totalenrollment accounts for more than 20% of administrativeexpenditures--i.e., potential inefficiencies exceeding Mex$2million/year per student were disguised within the excellentoverall unit cost of the system.

ii) Further, CONALEP undertook a study of operational expenditures bycenter, on a full-time student equivalent basis, since somecenters may already have reduced their high unit costs byexpanding significantly the training programs. This second roundof analysis reduced the number of high-cost centers from 57 to

6 The World Bank, Basic Education in Mexico, Sector Report No. 8930-ME,August 1990.

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about 43, but with 7 having a per-student unit cost of 2.5 timesthe average. CONALEP will have to focus on these centers toimprove economies of scale, because these centers typically holdenrollments of less than 200 regular trainees.

d) Internal Efficiency

i) The improvement of internal efficiency in the CONALEP system hasproven to be as difficult an issue as for the rest of theeducational system. The cumpletion rate for the student cohortgraduating in 1990 was 52X. This percentage is about the same asthe one for the academic general secondary education system.During 1990, the completion rate (i.e., the percentage of thecohort that completed the programs among those who started theprogram) at the dual purpose technical education system was 57%;and for the other terminal technical schools, 401. While student-flow performance is less than what would be desired, it representsa significant increase over the level ten years ago, which wasestimated at about 31% for middle-level technical education. Amain problem has been clearly located at the end of the firstsemester, when about 40% of the initial enrollment drops out,mostly to switch back to the academic stream.

2.13. In summary, the cost effectiveness of CONALEP programs is satisfactoryas measured by its unit costs, on the input side, and by the placement and earningsof its graduates, on the output side. Hidden within this good record, however, isthe fact that about 20% of CONALEP's centers have excessively high unit costs, asituation requiring corrective measures. While CONALEP's internal efficiency isonly fair, this deficiency is not an exclusive characteristic of the system; it isdeeply rooted in the cultural attitudes of Mexicans, and is similar to levels incomparable Mexican institutions, as well as in other developing countries. CONALEPhas agreed to take robust measures under the current project. A specific timetablefor diagnosis of the problems and policy changes to bring about a significantimprovement would be established under the project.

2.14. Based on the above analysis, CONALEP's performance compares well withother training institutions both internationally and in Mexico; nonetheless, acomplete assessment of its economic efficiency requires comparison of earnings andemployment histories of those with training and those without training after threemonths and again after one year from graduation. Except for the small percentage oftrainees of the retraining programs under the Manpower Training Project, anappropriate control group for CONALEP graduates (pre-service and in-service trainingprograms) is not currently available. Such an analysis would be undertaken in thecontext of this project, and would be available in time for a mid-term review of theproject (para. 4.22).

2.15. Although CONALEP's level of administrative efficiency, cost-recoverymechanisms and training effectiveness has improved markedly in comparison with theother middle level education and training systems in Mexico (para. 2.11) there areparticular aspects that require substantial improvements. First, better managementand faster communication systems are necessary in order to monitor effectively andfaster the outcomes of policy improvements, manage day-to-day administration of over

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250 training centeru across the country, maintain adequate information of theoverall response to cost-recovery initiatives and decentralize maintenance forcomplex equipment and other support programs. In particular, CONALEP needs toestablish a satisfactory cost accounting system to show the effectiveness ofdifferent types of training programs in each center. Currently, budgetary resourcesare not allocated by training program, neither nationally nor at each center; theaccounting system does not present cost data by training program, either. Second, amajor portion of its course syllabi and training materials were developed on thetechnological base of 1978-83 and are becoming outdated. During that period theeconomic atmosphere was greatly different from that of 1990-91, and the levels oftechnology in all sectors are now significantly higher and are rapidly changing.Consequently, CONALEP must proceed promptly in modifying and modernizing its courseofferings, replacing worn-out and obsolete equipment, and planning and implementingalternative methods of training delivery, so as to optimize the utilization ofhuman, physical and financial inputs throughout its system. When completed, theresults of these actions would be made available to the other education and trainingsystems in Mexico and other Latin American countries. Third, CONALEP will have tomeet new challenges, including: (i) insufficient training opportunities andregional imbalances resulting from a rapid growth of the maquiladora industry in thenorthern frontier and other regions of the country, and of the tourism industry inthe Pacific coastal area;> (ii) the observed tendency of increased demand forskilled workers and middle level technicians, resulting in a 40% expansion for thesecondary sector between 1980 and 1990, and a 92% increase in the service sectorover the same period; (iii) an increased demand for evening programs--modular andupgrading--from employed workers, especially women, who want to i.ncreaseproductivity or gain access to new technologies; and (iv) the demand for short-termtraininLg among marginal populations, informal sectors, and those areas where fixedinstallations are not economical.

D. Government Strategy for Techrical Training Development

2.16. Because of the amount of time and complexities involved in the creationand development of this completely new and very large training system, CONALEP wasconceived as a multi-phased effort. The first phase of CONALEP's program (1979-1984) involved creating the program, testing its major components and initiating itsdevelopment. Phase II of the CONALEP program (1985-1990) consisted of an increaseib the capacity of the CONALEP system and adjustments in institutional,administrative and training aspects of the program. As part of the "Edura&ional

7 The maguiladora sector is experiencing rapid growth. Direct sectoremployment increased by 28% or 110,000 in 1988 alone, and another increase of500,000 is expected by 1996. Furthermore, increasingly complex technology inproduction processes is resulting in corresponding increases in the numbers andquality of technicians and skilled workers required. "Direct Foreign Investmentin Mexico, Past Patterns and Future Strategy" (August 1988, World Bank Report No.7146-ME) underscores the need for training in the maquiladora sector. Withregard to the tourism sector, at the end of 1938 this sector directly andindirectly employed about 0.5 million and 1.3 miliion, respectively, and isprojected to employ about 0.8 million and 2.4 million, respectively, by the endof 1.996.

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Modernization Program" (1989-94) of the current administration, the Governmentembarked on a major modernization program in CCNALEP. Hence, Phase III of theCONALEP program (1991-1996) will consist oft consolidation of earlier achievement.;modernization and improvements in the quality and flexibility of program offeringsto meet changing needs; improvements in the articulation with the productive,education, and public sectors; upgrading of the knowledge and skills of employed andunemployed workers; and efforts to cater more to the needs of uarginal populations.

2.17. The Government's strategy as outlined in the 1989-1994 NationalDevelopment strategy has three fundamental objectives: (a) stabilization ofdomestic conditions to improve the quality of life and strengthen the economic baseof the country; (b) globalization of its commerce, stimulation of market developmentand strengthening of its competitive ability; and (c) deregulation of private sectorinitiatives and the creation of an environment highly favorable to capitalinvestment and economic growth. It is realized that attainment of these objectivesrequires an integral strategy that is sensitive to the needs and demands of thepopulation and that will permit making the best use of international advances inproduction and marketing technology.

2.18. The implications of the above objectives on education in general, andupon technical training in particular, are significant. Consequently, theSecretariat of Education (SEP), with major inputs from CONALEP, set forth thespecific education and training objectives to be pursued in this process ofeducation modernization. As a result, the following specific objectives were setout in the National Development Plan for 1989-1994 to guide the process of educationmodernization: (a) improve the quality of the education system to assure congruencewith the national development objectives; (b) elevate the educational level of thepopulation; (c) decentralize educational administration and appropriately distributeeducational opportunity in accordance with the requirements of the modernizationplan and the characteristics of the diverse sectors of society; and (d) strengthenthe participation of social and productive sector groups in the education process.At the same time three major lines of strategy were delineated to carry out sectoralactions: (a) streng.hen those education services which have been shown to be mosteffective; (b) revise and reorient those programs and services which are notappropriately responding to socioeconomic conditions; and (c) initiate educationmodels fully appropriate to the socioeconomic needs of participants, and introducemodern scientific and technological innovatians into the education process.

2.19. With respect to technical education, the SEP's Modernization Planemphasized the need to: (a) orient human resources development programs to meet thetrained manpower requirements of the productive sectors; (b) adapt them to meet therapid changes in science and technology; and (c) initiate flexible modes of trainingto provide a means for employed skilled workers and technicians to keep theirtechnical knowledge and skills up-to-date (upgrading). As the largest and mosteffective technical education and training system in the country, CONALEP has beenassigned the major role in the preparation and upgrading of the manpowerrequirements of the National Development Plan. Like the other sub-systems of thenational education system, CONALEP plans to confront serious challenges for change,among which are: (a) decentralization of selected administrative services; the modeor format for providing technical training in regions and locations of greatersocioeconomic needs, taking full consideration of local/regional trained manpowerneeds and availability of local and regional human, physical and financial

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resources. (b) the need for innovative and flexible modalities for delivering newtraining programs to upgrade employed workers' skill levels and productivity, inaddition to the traditional pre-service training programs; (c) the necessity todiversify the source of financing training costs through technical internships oftrainees, cost sharing, full cost recovery for upgrading and other in-serviceprograms; and (d) increasing the role of the private sector in a broad range ofcooperative training activities. It is the achievement of these ends and otherequally relevant ones that the proposed project addresses.

E. Previous Bank Experience and Lessons Learned

2.20. Priou Exerience. The proposed project would be the third Bankoperation with CONALEP. The Technical Training Project, with financing of US$90.0million equivalent under Loan 2042-HE of July 1981, supported the first phase ofCONALEP's development program (1979-84). This phase comprised: (a) constructing,furnishing and equipping of a central administrative complex and support complexe.as a base for effective management of the system; (b) constructing, furnishing andequipping of 99 (later amended to 122) training centers throughout the country witha capacity of 70,000 trainees (for the original 99 centers; 93,000 for the amended122 center6); and (c) recruiting and training of 4100 instructors. According to theProject Performance Audit Report (No. 7136, March 1, 1988), which includes theProject Completion Report (March 31, 1986), performance for this first phaseprogram, which was fully implemented in only 43 months, was very successful. Thereport states:

In most areas project performance . . . has surpassed appraisalexpectations. This applies to number of beneficiary centers (122 vs.99), number of trainees (93,000 vs. 70,000), instructors trained (almost15,000, not counting 8,900 undergoing upgrading courses, vs. 4,100) andunit cost (US$500--US$875 if donations by enterprises are taken intoaccount--vs. US$1,000). Only the annual output figures are stilllagging behind expectations, pointing to a lower than expected internalefficiency. CONALEP is vigorously addressing this problem with goodinitial results, although part of the difficulties are of an exogenousnature (e.g., difficult economic conditions) and thus outside CONALEP'sinfluence.

One important feature of this first phase program was that many of the trainingcenters were donated by the pr4vate sector or the government agencies, and the Bankloan did not finance any civil works at all; this was repeated in the Bank-financedSecond Technical Training Project.

2.21. The Second Technical Training Project, with financing of US$81.0 millionequivalent under Loan 2559-ME of July 16, 1985, supported the second phasedevelopment program (1985-90). This program provided for: (a) constructing,furnishing and equipping of 97 (later increased to 130) additional training centers;(b) establishing of 24 furniture and equipment production units in 24 trainingcenters by providing for revolving funds for production supplies; and (c) technicalassistance to strengthen CONALEP's administrative capacity, the structure of itstraining programs, and the quality of its instruction. The Project CompletionReport for this project (May 23, 1991), as well as discussions with a wide range of

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employers regarding the implementation of the oecond project, show that it has beensuccessful and that CONALEP's implementation performance was good. The majorresults of this phase were: (a) both quantitative and qualitative goal attainmentwas sign:lficantly greater tban planned; (b) a total of 130 centers, establishing anenrollmert capacity of 239,000 for CONALEP; (c) completion rates of trainingprograms increased from 40% oni the average over the period 1979-86 to 52% and arecontinuing to rise; (d) operational officiency and program effective-asst areimproving as a result of, inter alia, more effective use of advisory committees andbusiness/industrial/social welfare associations; (e) quality of instruction wasimproved through enhancement of instructional capabilities of about 13,000in&tructors, course syllabi improvements by specialists, introduction of pilotproduction training programs in 70 centers, which produced 62,000 items of equipmentand furniture, and which, in addition to enhancing quality of training, had a netsavings of about US$930,000; (f) CONALEP's receipt, during budget year 1990, ofother cash income and donations "in kind" from non-budgetary sources (private andpublic enterprises and associations), amounting to a value of about US$12.9 million,and eqLal to about 14%8 of itc 1990 recurrent costs (Annex 4, Attachment); and(g) the further development of a maintenance system for buildings, furniture andequipment which, in addition to training enhancement, a-so resulted during 1990alone in an estimated value of about US$1.05 million of maintenance activities beingconducted by trainees and instructors.

2.22. Additionally, although not required under the loan, four high prioritypilot training programs were successfully carried out (with government and privatefunding) in support of the Government's 1989-94 development plan. The major thrustof these was directed at assistance to marginal populations, micro-industry, selfemployment and the maquiladora industry. Regarding marginal populations, 70 lowincome groups in the federal district were trained in home maintenance, utilizingmobile training units constructed in CONALEP training centers, and through theactual repair of 212 selected low income homes; and 391 heads of families weretrained in the 12 basic skills required for the repair and maintenance of publicschool furniture and utilities. With respect to self emnployment, through a serieeof supplemental courses offered for the better students in selected career programs,about 9,100 third year trainees received special training, by qualified andexperienced specialists, in the various aspects of self employment developmentincluding planning, initiating, operating and marketing of goods and services forwhich there is an unfulfilled demand, and in the preparation of applicat'ons ofcredit. This program was initiated in 42 training centers in 1987-90, and in 1990alone 103 small businesses have been established, generating employmentopportunities for 326 workero directly, and 1,300 indirectly. National Finance Co.,Inc. (NAFIN) has established a line of credit to assist them. As for themaquiladora industry, about 30 maquiladora enterprises benefited from CONALEP'spilot program in the training of in-plant trainers, who provided training to a totalof 2,536 workers in 834 companies. Nearly all of the direct training costs wererecovered from the participating enterprises. Further development of these andrelated priority activities would comprise significant components in the propobedproject.

8 This figure represents the percentage of total 1990 recurrent costs;improvements in cost accounting under the proposed project (para 3.20) wouldenable refinement of these figures.

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2.23. Lessons Learned. The major lessons learned, as a result of theexperiences during implementation of the above mentioned projects are summarized asfollows:

a) in view of the shortcomings of the design of the Graduate Tracer Studies(such as a short fol) -- up period and a lack of control groups forcomparison of the eff-tiveness of CONALEP training programs), CONALEPshould improve the current tracer study system and apply it to in-service training programs as well;

b) in view of the still acute problem of internal inefficiency (such as lowcompletion rates and high unit costs in some training centers), CONALEPshould investigate the causes of inefficiency and take proper remediala ;tions;

c) in view of the surplus training capacity in a few agricultural programsin some more remote areas of the country, where the demand for trainingis not well defined, qualified personnel from professional organizationsmust participate in the analysis of demand and of development ofprograms;

d) in view of observed delays in project implementation, as a result of thelack of familiarity by new CONALEP Administrators with Bank process andprocedures, a short seminar on project implementation should beconducted by Bank Supervision Missions when such changes occur;

e) in view of relatively rapid developments in technology in Mexico, andtheir iLvlications on space planning criteria and requirements forshops, 4aboratories and other support spaces, consideration must begiven rc only to the expected immediate use of these spaces but theirpossible medium and longer term uses resulting from technologicalchantet;

f) in view rf rapid technological changes, equipment redistribution fromone centt. to another should be considered, based mainly on weekly hoursof use, 6sit and type of program; and

g) due to instal.lation difficulties experienced in a few institutions wherelarge quan'. 1ties and heavy or sophisticated equipment was involved, suchinstallaticen should be contracted to the respective suppliers.

2f24. These lessons have been duly taken into account in the design of theproposed project. In particular, the project would include an improvement in theGraduate Tracer Studies, a study on the identification of the high dropout rate atthe beginning of training programs and high unit costs in some centers,strengthening of the preventive maintenance system, formulation of action plans toovercome the identified problems, and strengthening of industrial committees andadvisory boards in some sectors. }.n addition, the floor plan and the list ofequipment and furniture of new training facilities would take into account rapidtechnological changes. Remedial actions on a few agricultural training programs arealso included in the proposed project. The implementation arrangements have also

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taken into account the periodic changes in CONALEP administration and the bearing ofsuch changes on procurement.

F. Ration le for Bank Involvement

2.25. The Bank's program of support for Mexico's economic restructuring effortincludes substantial assistance in the area of human resources, aiming both toremove constraints to resumed growth such as skill shortages, and to ease the painof restructuring. The Bank's strategy for human resources development emphasizesthe expansion of access to pre-primary education and improvements in the quality andefficiency of basic education (grades 1-9 ), especially in the poorer parts of thecountry, in order to provide flexibly, broadly, and generally educated manpower forthe economy; training in specific skills can be provided later depending on thespecific needs. In this context, the Bank is in the final stages of preparing pre-primary and primary education projects for Bank financing. In the area of non-formal training the earlier Bank support to the CONALEP training system needs to befollowed up to modernize its training programs in accordance with the technology ofthe 1990s, through improvements in instructor training, equipment aud instructionalmaterials, and maintenance systems. The CONALEP training system also needs to befollowed up for: adjustments in its course offering on the basis of the new labormarket studies; the strengthening of its linkages with private enterprises toimprove the relevance of training courses; and the enhancement of the degree offinancial self sufficiency. At the same time, and in synergy with the ManpowerTraining, the Basic Health Care, and the proposed Basic Education Projects, theproposed project would address the training needs of the poor and disadvantaged, andtake another step in rationalizing and improving the efficiency and financing of theentire Mexican training system. The experience gained and the collaborativerelationship developed between the Bank, NAFIN and CONALEP during the implementationof two successful earlier projects would be important assets for projectimplementation. Currently ongoing labor market studies under the Manpower TrainingProject, and investigations by other Mexican economists would provide a better basisfor dimensioning and targeting of Government and Bank interventions with theproject. At present, the Bank is the only external aid agency involved in technicaleducation and training.

2.26. The Bank's strategy for non-formal training in Mexico has been two-pronged.On the one hand, in view of the predominant role played by public institutions innon-formal technical education and training, the Bank has supported the major publictraining institution, CONALEP, through two loans (Loans 2042-ME and 2559-ME). Theproposed Third Technical Training Project will further improve the quality andefficiency of CONALEP's programs, On the other hand, in view of the lack of payrolltaxes and/or fiscal and financial incentives to finance train,Lng by enterprises ingeneral in Mexico, the Bank has supported Government efforts to provide technicalassistance for enterprises either to organize in-plant training or to contract withpublic training institutions on a cost sharing basis (under Loan 2876-ME for theManpower Training Project being implemented by the Secretariat of Labor). This lineof support will be further followed up by strengthening the incentive system for theprivate enterprises to undertake training more actively. The Bank's longer termstrategy for non-formal training is to assist the Government in shifting theemphasis in provision of training from the position of public sector domination toone in which private sector initiative is more actively encouraged. First steps inthis direction are being supported under the proposed project.

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III. THE PROJECT

A. Origin of the Project

3.1. While informal inquiries concerning the possibilities of a thirdtechnical training project have been raised from time to time, a formal request wasnot made until the third quarter of FY 1989. A Bank identification mission wasfielded during March 1990. This was followed by a preparation assistance missionduring June 1990, and another during November 1990. A pre-appraisal mission wasfielded for two weeks during January and February 1991, and was followed by theappraisal mission in March 1991.

B. Obiectives

3.2. The proposed project would assist the Government in the implementationof the policies and attainment of the objectives and goals as set forth in theNational Development Plan for 1989-94 (para. 2.17). These were further elaboratedunder the SEP's Education Modernizatinn Plan of 1989-94 and the Program forModernization of the CONALEP (Technical Education and Training) System for 1989-94(paras. 2.17-2.19). The general objective of the project is to carry out theoverall modernization of the system in such a manner as to consolidate thequantitative and qualitative gains achieved thus far and to further improve thequality, efficiency and relevance of the CONALEP system. The specific projectobjectives are to:

a) uniformly upgrade the quality of high level skills training and middlelevel technician training to contribute to meeting the rapidly changir.gneeds of the labor market;

b) selectively expand the range of CONALEP's training activities in keysectors, especially in-service training and on a cost-recovery basis,and initiate a modular program in the evening to enhance skill levels ofmature, experienced and employed workers; and

c) strengthen the administration of CONALEP, increase efficiency andimprove cost reduction/recovery plans.

3.3. The proposed project differs significantly from the two previousprojects in that they dealt almost entirely with the physical development of thetraining system and its administrative infrastructure. The proposed project dealsalmost entirely with improvements in the quality, efficiency and effectiveness ofthe system, with 69% of total project cost allocated to these components. Only 31Sof total costs are allocated to expansion of training activities, of which only onehalf (15X of total costs) is allocated to expansion of physical spaces. Even herethere is only a 6% increase in total training space. The 67% increase in totalenrollment capacity would result mainly from improvements in the utilization factorof training spaces, which would be made possible by increasing the number of lateafternoon and evening classes. This project would also enhance CONALEP's capacityfor cost recovery/sharing from industry.

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C. Project Components and Description

3.4. The objectives of the proposed project would be attained through threedistinct but mutually supporting project components, each comprising a number ofinterrelated subcomponents. Systematic improvements, as well as targeting of theexpansion of programs under the project, will be based on ongoing analysis as wellas eleven planned studies, concerning CONALEP programs' quality, efficiency andimpacts (Annex 3). In order to ensure the timely availability of the results ofthese studies, they will be prioritized and phased in accordance with the extent towhich their information and recommendations are required in the implementation ofother aspects of the project. At negotiations. the Government presented, andagreement was reached on. draft terms of reference for the eleven studies. TheGovernment also, at negotiations. provided assurances that seven of the elevenstudies would be initiated during the twelve months following loan effectiveness andcompleted by the date specified in the agreed terms of reference, to be available bythe time of the mid-term review of the Project (para 4.22). It was further agreedthat action plans. satisfactory to the Bank. would be prepared within six months ofthe completion of the studies to implement the studies' recommendations.Preparation and submission of final terms of reference for all studies would be acondition of effectiveness.

1. Quality Improvements(Costs: US$104.4 million, including contingencies)

3.5. On the basis of carefully designed new, ongoing and completed studies(Annex 3) at state and local levels, this component would: (i) analyze the needsfor new modes of training, new training options and/or changes in orelimination/transfer of existing options, in accordance with clearly identifiedtrained manpower needs and firm plans for the development of the productive sectors;and (ii) improve the overall quality of CONALEP's training programs (para. 2.15).Specifically, this component would comprise the following subcomponents:

3.6. (a) Instructional Materials Development. All of the course syllabi,daily lesson plans and evaluation materials for the 97 career programs, currentlybased upon the technology of the 1970s, would be reviewed and upgraded as necessaryto reflect the technological levels of the 1990s. This would entail thedevelopment/revision of about 2300 titles and the production of about 14 millioncopies and would require technical assistance for the development of prototypes andthe reproduction of the manuals developed. To this end, special studies in priorityfields of concern have been planned and would be initiated so that the results ofthe studies and recommendations are available for Bank review and comment before themid-term review (para 4.22; Annex 3).

3.7. (b) Instructor Training. This subcomponent would revamp the currentad-hoc instructor training system, and would assist in the improvement of instructorperformance through the enhancement of pedagogical, scientific and technologicalcapability. Under this subcomponent, instructors would receive short intensive pre-service methodology training and in-service training in both methodology andtechnology. To support this activity, an instructor training center, which wouldaccommodate 100 instructors at one time, would be constructed, furnished and fullyequipped with an appropriate reference library. This center and its regionaloutreach facilities located in regular training centers and in the eight

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technological development and production-maintenance centers (paras. 3.8 and 3.19)would provide pro-service training for about 4,700 instructors and in-servicepedagogical and technological training for another 4,000 instructors, includingcompany in-plant trainers, on an annual basis.

3.8. (c) Technological Development and Assistance Centers. Thissubcomponent provides for the development of eight existing centers to serve asregional Technological Development and Assistance Centers (TDACs). The TDACs wouldprovide support to: (a) other CONALEP centers, e.g., in the maintenance of advancedequipment and through the sharing of common facilities; (b) the instructor trainingprogram; and (c) micro, small, and medium sized enterprises, on a cost-reimbursementbasis, in the design/construction of prototypes and sub-assemblies, and in theprovision of other services. The TDACs would also contribute to qualitativeimprovements in CONALEP's training programs. They would provide assistance inupgrading the technological capability of training center instructors (para. 3.7).Through close contact and formal studies with national and regional productivesector enterprises and associations, and via the use of industrially qualifiedsubject-matter specialists, the TDACS would also contribute to keeping regular andupgrading course syllabi concurrent with the evolution of technology in theworkplace. Additionally, designs and production prototypes of specialized items oftraining equipment would be fabricated under this subcomponent by advanced studentsin the equipment production/training program (para. 3.19). The TDACs would alsoprovide specialized advanced technology training through a program of selectiveupgrading of employed skilled workers and technicians (para. 3.12) with full costrecovery. Development of the eight centers would include supplemental construction,furnishing and equipping of existing centers. Complementary utilization of physicaland human resources would be maximized under this subcomponent, because the TDACswould be developed as joint complexes with the regional maintenance centers (para.3.19), located on sites of existing industrial training centers and sharing certaincommon facilities and expensive equipment. At negotiations, the Governmentpresented, and agreement was reached on. draft operational manuals for theTechnological Development and Assistance Centers. As a condition of effectiveness.the Government would provide evidence that the operational manual has been formallyadopted by CONALEP and is ready for use.

2. Expansion of CONALEP's Training Activities(Costs: US$63.8 million, including contingencies)

3.9. In addition to upgrading existing programs, the proposed project wouldalso support the selective expansion of CONALEP's training activities in keysectors, especially through in-service training and on a cost-recovery basis (para.2.15), including: (a) training in response to demands from the maquiladoraindustry; (b) training for the tourism sector; (c) the initiation of a modularprogram in the evening and short-term upgrading courses; (d) training for unemployedworkers and marginal populations; and (e) other minor but strategic actions such astraining for food production and pond fish farming, and programs linked toproductive activities. In accommodating these training programs, utilization ofexisting facilities would be optimized through the construction, furnishing andequipping of 70 additional shops, 50 laboratories, 191 classrooms and other smallauxiliary spaces in 101 of the existing 252 training centers; this would compriseonly a 6% space increase, but would permit a 16% increase in daytime enrollments inpriority programs. This component would also support the reorientation and

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diversification of training program offerings, in accordance with the economic andtechnological needs of those fields of economic activity which have heretofore notbeen adequately addressed, and the development of full curricular materials,teaching-learning aids and equipment for new training programs in conjunction withsuch reorientation and diversification. Specifically, this component comprises thefollowing subcomponents:

3.10. (a) Trainina Assistance for the Maguiladora Sector. This subcomponentwould provide higher quality manpower (through pre-service training) and upgrade theexisting workforce (through in-service training) in the maquiladora sector (para.2.15), with the assistance of maquiladora industry associations and representativeenterprises. This would involve the following activities: (a) promptly carryingout a technical study to identify additional training programs to be implemented inselected training centers within the respective maquiladora zones; (b) preparing andproviding full curricular materials, teaching-learning aids and equipment for thenew training programs, and updating course syllabi for related careers;(c) expanding upgrading course offerings for employed workers and, with majorfinancial participation of respective enterprises, increasing the numbers of in-plant trainers prepared; and (d) preparing, through special training activitiesstaffed by industrially experienced consultants, about 60 qualified instructors toconduct special courses focused on "the planning, developm-rt and management ofmicro-enterprises in the maquiladora sector". As a condition of effectiveness, theGovernment would preRare an action plan to strengthen CONALEP's advisory committeesystem at the state and national levels for the maguiladora sector, and to establishcost recovery/sharing and related accounting policies and criteria, satisfactory tothe Bank.

3.11. (b) Training Assistance for the Tourism Sector. In support of thetourism sector (para. 2.15), this component would: (a) with the cooperation of theSecretariats of Tourism and of Labor, and with specialist assistance, quicklycomplete a study of the characteristics of the sector, its evolution by region andthe occupational profiles for which CONALEP can assist in technical manpowerpreparation; (b) on the basis of the study, update all course syllabi andinstructional materials for existing sectoral training programs; (c) with specialistassistance, develop new technician-level career course syllabi, instructional andeval-ation materials for hotel management, electro-mechanical maintenance forhotels, and food service management, and upgrade a program for tourist guides; (d)upgrade instructor skills; (e) initiate a modular training program, as a pilotprogram in four tourism training centers; (f) simultaneously with initiation ofthese pilot programs, mount a technical study of the demand for such modular tourismtraining programs in four major tourism regions; (g) with specialist assistance,prepare and provide the equipment and instructional aids/materials for new andupgraded careers/programs; and (h) in cooperation with tourism sector enterprises,reach an agreement on the types and content of in-service training programs foremployed workers and offer such training programs on a cost-sharing basis. As acondition of effectiveness, the Government would preRare an action Rlan tostrenathen CONALEP's advisory committee system at the state and national levels forthe tourism sector, and to establish cost recoverv/sharing and related accountingDolicies and criteria, satisfactory to the Bank.

3.12. (c) In-Service Training Programs. Under this subcomponent, the projectwould assist in the provision of training to: (a) about 40,000 employed skilled

25

workers annually, in modular evo-ning class programs, who wish to upgrade theirskills to the technician level; and (b) about 68,000 employed workers annually inshorter courses in order to update their technical skills (Table 5.2). Trainingcosts under this subcomponent would be cooperatively financed under agreements withspecific enterprises and assoc!ations. The project would provide for financing ofsupplementary furniture, equipment and instructional materials development andupgrading by industrially experienced specialists. As a result of the initiation ofmodular technician level programs with classes in the evening for employed workers,the utilization factor of existing training center facilities would be increased by44Z over that of 1990-91.

3.13. (d) Special Training Program for Marginal Areas. This program isdirected at helping to assist urban and rural poor in improving their quality oflife through training, with appropriate emphasis on the needs of women. To thiseffect CONALEP has entered into an agreement with the Government's NationalSolidarity Program (PRONASOL) and with state and municipal governments and will playa major role in providing some basic skills to the poor. Operational training costswould be financed by these entities. A system of non-loan supported student aid orstipends (becas), as in the Manpower Project under Loan 2876-ME, would be used infinancing the training costs. To build upon the "self-help" attitude of communitypeople and leaders, which has been amply demonstrated in the pilot programs whichCONALEP carried out during 1989-90 (para. 2.22), community leaders would participatein program planning and operation. This component would finance the costs of:(a) specialist assistance to develop special courses of varying lengths, traineeselection criteria, training materials for productive and service activities,including courses on the development and operation of micro-enterprises andcooperative activities, designed on the basis of well-defined local and regionalrequirements and conditions and utilizing, wherever feasible, the communityinfrastructure as a supplemental training facility; with well-illustrated trainingmaterials and supported by other audio-visual aids; (b) construction and equippingin CONALEP training centers of a total of 60 mobile training units, 40 small, 15modium and 5 large trailers and 6 traction units for moving them between trainingsites; with an annual total training capacity of about 5,800, for use in delivery oftraining in areas not served by permanent training centers; (c) special orientationcourses for key training center personnel and community leaders in the development,presentation and operation of small and medium community and private investmentprojects; and (d) specialists to plan and carry out special studies on (i) theidentification, economic feasibility and critical characteristics and needs of smallrural investment projects, including the need for and availability of productioncredit through PRONASOL or other official credit sources, and on (ii) maximizing theeffectiveness of CONALEP pre-service trainees, during their year of social service,in community assistance programs in marginal areas. At negotiations. the Governmentpresented, and aareement was reached on. a draft operational manual for the mobiletraining units for use with marginal RoPulations. As a condition of effectiveness,the Government would provide evidence that the operational manual has been formallyadopted by CONALEP and is ready for use.

3.14. (e) Other Strategic TraininR ProRrams. Under this subcomponent, theproject would support other minor but strategic actions such as training forfisheries, food processing, pilot programs linked to productive activities, andself-employment (para. 2.22). Net expenditures on these programs--i.e.,

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expenditures minus the corresponding cost recovery--would not excced 7% of totalproject costs. Programs under this subcomponent are described below.

3.15. (i) Food Production and Pond Fish Farming Program. This is one of theprograms on which PRONASOL places priority emphasis in assistance to the poor anddisadvantaged population. COWALEP's t:aining assistance to the rural poor in foodproduction has been of limited success in the past, primarily due to theunavailability of appropriate production credits that would permit application ofknowledge and skills gained. CONALEP has not been involved in pond fish farming;however evidence from around the world points to the high feasibility and the manybenefits (including protein production, low investment and high return) of suchprograms. To address this issue, CONALEP would, with the assistance ofappropriately qualified agricultural specialists: (a) initiate a study of factorsassociated with unsuccessful food production training centers and recommendcurricular changes and/or transfers of programs to areas of higher demand;(b) implement these curricular changes, including special courses (such as marketingof products, the need for production credit, gaining access to it and risksinvolved) of varying lengths in accordance with local needs and trainees' levels ofcapability; (c) transfer programs with inadequate demand to areas of appropriatedemand; (d) initiate pilot training programs in about 15 centers of about 18trainees each for fresh water fish production in farm ponds; (e) properly equip suchprograms with training equipment and training materials, including actual ponds forfish production under realistic and economically feasible conditions; (f) properlyequip all other food production and processing programs according to the sameprinciples as in (e) above; and (g) initiate upgrading programs for about 1,500established farmers per year during 1992-93, with a goal of up to 5,000 per year by1996-97, with part of this group receiving training via the mobile units (para.3.13). As a condition of effectiveness, the Government would establish an advisorycommittee system for the food 2roduction and pond fish farming training programs.

3.16. (ii) School and In-Plant Cooperative Technician Training Programs. Theprimary objectives of this program are to improve training quality and to increasestudent motivation and retention. Under this program the project would:(a) initiate, jointly with local enterprises and 10 training centers, pilot trainingprograms consisting of three days per week of in-center training in technical theoryand basic knowledge, and three days per week of practical work in industry, with theobjective of reducing both recurrent and capital costs of training, and increasingtraining capacity and relevance; and (b) initiate 10 pilot training programs inwhich the training is provided in a center-based setting with all practical trainingbeing accomplished through the production of goods and/or services.

3.17. (iii) Self-Em2loyment Programs. The objective of this program is topromote individual or small group self-employment opportunities for CONALEPgraduates, by complementing technical training with structured training by qualifiedspecialists, in the various aspects of planning, initiating and operating, includingmarketing of goods and services for which there is an unfilled demand, and in thepreparation and presentation of applications for credit. This series ofsupplemental courses offered to the better students in selected career programs wasinitiated in 42 training centers in 1987 as a pilot program. About 9,100 studentsparticipated in this program during 1987-89; so far, these students have established

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103 micro-enterprises with 336 direct employees and about 1,300 indirect workers.'The project would assist in: (a) preparation of 250 additional instructor-promotersof this specific training program with the assistance of qualified and experiencedmanagers of small enterprises; (b) upgrading of instructional materials; (c) inaddition to six existing agreements, establish others with relevant federal andstate government institutions for program assistance, including access to a line ofcredit to qualified trainees of the program; and (d) initiate special short coursesfor interested employed (and unemployed) workers in the existing training centers.It is expected that during 1991-97 about 30,000 third year trainees in the regularCONALEP training programs would participate, and that about 1,500 new micro-enterprises would be established with up to about 5,000 employed workers.

3. Increasina CONALEP's Efficiency and Effectiveness(Costs: US$36.3 million, including contingencies)

3.18. Through the following activities, the project would strengthen theadministration of CONALEP, increase efficiency and improve cost reduction/recoveryplans.

3.19. (a) Decentralization of Equipment Maintenance Services and Expansion ofProduction Programs. This subcomponent would assist in the fullinstitutionalization of the buildings, furniture and equipment maintenance servicesRrogram (para. 2.21). A maintenance unit would be established or strengthened ineach of the 252 training centers and appropriately equipped to handle generalbuilding and ground maintenance as well as routine furniture and equipment repair atthe local level. These activities would be carried out with the assistance ofinstructors and advanced students, with the primary objective of enhancing learningthrough practical experience. AddItionally, to facilitate the repair of major itemsand more complex equipment, eight regional maintenance centers would requiresupplemental construction and equipment; these centers would be developed inconjunction with the Technological Development and Assistance Centers (para. 3.8),with which they would share complexes. The project would finance such construction,furnishing and equipping of these facilities. At negotiations, the Governmentpresented, and agreement was reached on, a revised draft operational manual for themaintenance services program; formal adoption bv CONALEP of the final manual wouldbe a condition for effectiveness. The project would also expand to all the 252training centers the highly successful equipment production program initiated in 70cent.ers under the CONALEP II project, which produced over a three year period a netincome of about US$930,000 over material costs (para. 2.21). The project wouldallocate about US$11.4 million to finance the cost of materials and supplies toestablish production units for the production of CONALEP's furniture and equipmentfor COhALEP centers as well as other public trai:L.ng centers managed by governmentagencies, and for the provision of selected services. On the basis of experience inCONALEP II, it is projected that over a five year period the net income from theproject would amount to about US$17.0 million or an average of about US$3.4 millionper year. At negotiations, the Government presented, and agreement was reached on.a draft manual for operation of the equiRment production program; formal adoption by

9 The Mid-Term Evaluation Report (March 1991) of the Bank-financed ManpowerTraining Project (Loan 2876-ME) also points out that close to one third of thosetrainees who completed the retraining program were self-employed.

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GONALEP of the final manual would be a condition for effectiveness. Whileimplementation of these two programs is expected to result in financial returns, theunderlying objectives of this subcomponent are to enhance the quality of training,improve student motivation and retention, reduce training costs from the governmentapproprised budget, and reduce CONALEP's capital investment costs for furniture andequipment.

3.20. (b) Improvement of CONALEP's Administrative Capacities. Theimprovement of communications within the system, and the upgrading and increasing ofefficiency and effectiveness of the total administrative process at and between thecentral level and the individual training centers (para. 2.15) would be realizedthrough the development of a communications network, with computer modem and telefaxconnections to each of the 252 training centers--including, notably, the eightregional facilities--and the instructor training facility, and the construction,furnishing and equipping of a main computer and communications facility at thecentral headquarters of CONALEP. This program would be phased in over time, andwould be based on a study and experiences during the phasing-in period. Issues suchas the design of the system, and whether full coverage (to all centers) isnecessary, would be covered in the proposed study.

3.21. (c) Improvement of Cost Recovery/Sharing/Accounting of Training. Inview of the significant successes during the last two years (Annex 4), the receiptsduring the first two months of 1991, and the rapid increases in the numbers ofspecial agreements (convenios) signed with public and private enterprises andassociations, CONALEP has set as its goal an increase from 13.6X of its recurrentexpenditures in 1990/91 to 20.0% in 1996; this represents an average annual increaseof about 15Z in real terms in CONALEP's cost recovery/cost sharing receipts over theperiod of 1991 to 1996. In this context, the Government has developed strategiesand policies by sector/training program, for increasing cost recovery (Annex 4).The estimates for these years are shown in Table 3.1 below.

Table 3.1: IFnroving Training Cost Recovery/Cost Sharing During 1991-96

1990/1 1991 1992 1993 1994 1995 1996-U-S-S-miL-l- - - - - - - - - US$ million in vaTue - - - - - - - - - - -

(In constant 1990 dollars)

Cost Recovery/Sharing(Cash and In-Kind) 12.9 14.8 17.1 19.6 22.6 25.9 29.8

(X of CONALEPRecurrent Expenditures) (13.6%) (14.7%) (15.7%) (16.8%) (17.9%) (18.9%) (20.0%)

(X of MarginaL Recurrent Costs ofProject in 1996-97) (41.0%)

Li Actual.

At negotiations. the Government provided assurances that CONALEP wouldincrease its overall cost recoverv receipts at an annual rate satisfactory tothe Bank so that. by the end of calendar year 1996. such receipts will beesuivalent to 20Z of CONALEP's recurrent costs. The project would also assistCONALEP in the strengthening of its cost accounting procedures. The objective

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would be to allow the management of CONALEP to evaluate the efficiency ofvarious training programs--in particular, the costs of in-service trainingprograms on an individual program or center basis--and compare them with therevenues collected from the clients. To achieve this goal, the project wouldfinance technical assistance. ht negotiations. the Government presented. andagreement was reached on. draft terms of reference for a study on improvingCONALEP's cost accounting system and cost recovery criteria and procedures:provided assurances that by loan effectiveness CONALEP would submit to theBank for anproval final terms of reference, draft contracts for consultantsand a short list of consultants to be hired: and provided assurances that thecost accounting and cost recovery study would be initiated within six monthsof loan effectiveness and would be completed by March 31. 1993. and thataction plans on the basis of the results of the studies would be preparedsatisfactory to the Bank. by June 30. 1993. CONALEP would also look into thecauses of high unit costs for about 50 centers (para. 2.13). At negotiations.the Government also provided assurances that CONALEP would prepare a plan.gatisfactorv to the Bank. to take remedial actions on these high unit costcenters, by June 30, 1992.

3.22. (d) Improving Efficiency in Student Flows and Graduate Placement.The completion rates of trainees in the regular, pre-service training programsrequire improvement (para. 2.12). The attrition rate in the first semester,particularly during the first half, is very high. The reasons for thissituation are not clearly defined, although it has been a secular problem inMexico. Factors seemingly associated with this problem are: (a) inadequatestudent selection and orientation; (b) high academic/training standards;(c) relatively high tuition charges of CONALRP (Mex$70,000 contrasted toMex$1,000 paid by public university students); and (d) the continuing stronglure of academic secondary education as a means of university entrance. Inview of this situation, CONALEP would, with qualified specialist acsistance,initiate a formal study for which preliminary draft TORs have already beenreviewed and approved by the Bank (Annex 3) to fully analyze the problem andtake such additional corrective measures as are found feasible. Whilegraduate placement is satisfactory (62Z of graduates start working withinthree months, and 84Z of those in their field of training specialization), thecurrent CONALEP administration realizes that additional information aboutplacement and earnings, including comparison of earnings and employmenthistories of those with training and those without training after three monthsand again after one year from graduation, would be useful to improve theeffectiveness and efficiency of CONALEP programs. Thus, CONALEP has decidedto introduce significant improvements in the Graduate Tracer System and hasprepared terms of reference for improved tracer studies (Annex 3). Theassistance of qualified consultants and the cooperation of the approximately1,300 enterprises and associations with which CONALEP has signed agreements ofcooperation (convenios) would strengthen CONALEP's placement and follow-upsystems. It is also expected that an alumni association with some guidanceand placement services would be formed in the near future. At negotiations.the Government presented, and agreement was reached on. draft terms ofreference. Government also, at neRotiations. provided assurances that CONALEPwould: submit to the Bank for approval. by loan effectiveness, the finalterms of reference, draft contracts for the consultants required. and a shortlist of consultants to be hired. for the studies on completion rates of the

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Pro-eervice traininft grogram and the improvement of the Graduate TracerSvetem: initiate the studles. includina collection of data, within six monthsof loan effectivenesss comlete the studies by March 1993: and prepare actioAplans on the basis of the results of the studies by June 30. 1993.

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IV. PROJECT COSTS. FINANCING AND IMPLEMENTATION

A. Cost of the Prolect (see Annex 5)

4.1. Costs by Proiect Component. The total cost of CONALEP's Phase IIIdevelopment program is estimated at Mex$602 billion, equivalent to US$204.5million, net of taxes and duties. The total estimated costs and foreignexchange components by main project component are summarized in Table 4.1.

Table 4.1: PROJECT COST SUMMARY

Prolect Costs XLocal Foreign Total Foreign Total

Project Compconents --------- USSmiltion------- Costs Base Costs

Quality InprGvements 32.7 53.4 86.1 51.0Expansion of Training Activities 20.0 32.6 52.6 31.0Increasing Efficiency and Effectiveness 11.4 18.5 29.9 18.0

TOTAL BASE COSTS 64.1 104.5 168.6 62.0 100.0

Physical Contingencies 3.2 5.2 8.4 62.0 5.0Price Contingencies 10.4 17.1 27.5 62.0 16.3

TOTAL PROJECT COSTSL _.7 126.8 204.5 62.0 121.3

La Excluding taxes and duties.Figures may not add due to rounding.

4.2. Basis of Cost Estimates. Base costs are expressed in prices ofApril 1, 1991. Estimated costs of civil works and furniture for the projectare based upon unit prices derived from current contracts in Phase II anddetailed estimates from other Mexican projects of a similar nature. Costs areadjusted to reflect regional variations within the country. Professional feesand site development costs are not calcul&ted separately. Equipment costs arederived from preliminary and final lists, and they reflect a substantialrevision of equipment costs, lists and specifications, based on the experienceof Phase II.

4.3. ComDarison of Unit Costs. The unit area and selected unit capitalcost estimates are shown in Table 4.2. While the unit area estimates aregenerally comparable to those for similar projects supported by the Bank andothers carried out in the Latin America and Caribbean Region, a comparison ofunit cost estimates for construction of the small additions of classrooms,shops and other spaces with the construction of complete schools in otherprojects would have no realistic meaning and therefore is not made. Furnitureand equipment costs are for the provision of supplemental furniture andequipment only.

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TABLE 4.2: UNIT COST AND SPACE COMPARISON

Item CONALEP II CONALEP III

Ivemen Uit Cost ..... USS---...................Construction/n/ S 173 S 180Furniture & Equipment Costs/Trainee Ptace 1,094 235 (Supplemental only)Investment Cost per Student (1990-91) (1996-97)when futly operational 1,474 567 (Supplemental only)

Mobile Training Units (C+F+E+Tractor Share) - 7,812/trainee placeFixed Training Centers (C+F+E) 5,340/trainee place

Pperational Unit CostsFor total enrollments expressed in FTE:

Costs at local training center level 406Plus costs at national acninistration levet - 96Totat Unit Costs/FTE Trainee S 502/trainee

For Mobile training units - average fof1,932 trainees during 1990 in (S 43.00/traineemarginal areas having no other training - (S 0.52/hourfacilities

Space ComparisonsSquare meters/Student 8.2m? 0.44m2

4.4. Contingency Allowances. The program cost includes a physicalcontingency allowance equal to 5% of the estimated baseline costs for allfurniture, equipment and technical assistance, and for civil works afterApril 1, 1991. Physical and price increase estimates for construction andfurniture are based upon the amount of construction to be performed afterApril 1, 1991. Project costs include price and physical contingencies forconstruction, furniture, equipment. production materials and technicalassistance. In view of differences in the rate of price escalation bet't-enlocal and international market prices, price increases for local and foreigncosts for civil works and technical assistance were calculated separately. Itis assumed that price increases for equipment and instructional materialswould follow international price trends as they would be largely procuredthrough ICB (para. 4.14). Anticipated price increases during implementationare shown in Table 4.3. Accordingly, total US$ equivalent value of priceincreases during the implementation period are expected to be about 13.4X forconstruction, 15.8% for furniture and equipment, 17% for production suppliesand 19.3% for technical assistance. Total contingencies (physical and price)are estimated at about 21.3S of baseline costs and 17.5% of total costs (Annex5.1).

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Table 4.3: EXPECTED PRICE INCREASES DURING IMPLEMENTATION ̂

1991 1992 1993 1994 1995 1996Local Forei4n Local Foreig LocaLFeion Local Foreicn Local Foreion Locat Foreion

Construction 7.0 6.2 4.0 4.1 3.1 3.3 2.7 2.8 2.2 2.3 1.9 2.0

EquIpment/ 7.4 6.2 4.2 4.1 3.3 3.3 2.8 2.8 2.3 2.3 2.0 2.0Prod. Suppties

Tech. Assistance 7.7 6.2 4.4 4.1 3.4 3.3 2.9 2.8 2.4 2.3 2.1 2.0

National 7.4 6.2 4.2 4.1 3.3 3.3 2.8 2.8 2.3 2.3 2.0 2.0

Y Local price increases are calculated on the basis of local costs expressed in US dollars and arecalculated on basis of estimates of CIEMEX-WEFA of Septeffber 1990 and adjusted on the basis ofagreed criteria of free trade between Mexico and the USA for the aligrnment of price indices.

4.5. Foreign Exchange Component. The foreign exchange component isestimated at US$126.8 million equivalent or about 62% of total project costs.The calculations of the foreign exchange component are based on assumptionsthat (a) all construction and relat6d professional services would be awardedto local firms, (b) all furniture would be awarded to local suppliers, and (c)75% of equipment would be awarded to foreign suppliers. They are thenadjusted ior the indirect foreign exchange component. The resulting foreigncontent of each catogory of expenditure is calculated at 20% for construction,80% for furniture and equipment, 50% for production supplies and 50% forspecialist assistance and fellowships.

B. Recurrent Cost Implications

4.6. When fully operational in 1996-97, the additional annual recurrentcosts of the project are estimated in constant 1989 pesos at about US$73million. CONALEP's total recurrent expenditures for 1989 were US$87 millionor 1.6% of the federal budget for education and culture.'0 In view of thehigh priority given to the proposed program, and the Government's strongcommitment to expanding and improving output of technically trained manpower,it is expected that those expenditures would be met. For FY91, adequatebudgetary provisions have already been made for the initiation of the proposedproject.

C. Proiect Financing and Disbursement Plan

4.7. Financing. The total project cost of US$204.5 million would befinanced as follows:

'° In 1989, federal expenditures for education and culture amounted toUS$5,406.8 million.

34

(a) the proposed Bank loan of US$152.0 million would finance about 74%of total project cost equivalent to 100% estimated foreignexchange cost and 32% of local costs; and

(b) the Government would finance about 26% of total project cost,equivalent to 68% of the local costs (as well as all incrementalrecurrent costs, which are not included in total project cost).

To provide for early implementation of priority special studies, it isrecommended that US$8.0 million be made available for retroactive financing ofeligible expenditures incurred before loan signature but after January 20,1991. This amount would imply commitments of about US$10.0 million in advancecontracting during the same period. At negotiations, the Government agreedthat USS8.0 million would be made available for retroactive financing foreligible expenditures incurred before loan signature but after January 20.1991.

4.8. Disbursement Plan. The proposed loan is expected to be disbursedover a period of about five and one half years on the basis of:

(a) 100% of eligible foreign expenditures and 85Z of eligible localexpenditures for goods and equipment, excluding taxes and dutiesand including cost of installation where applicable; and

(b) 100% of technical assistance costs (excluding taxes) forspecialists in administration, administrative and instructionalstaff development, development of course syllabi and trainingmaterials, design of production units, and cost reductionmeasures, for internal and external staff study tours, and forseveral special studies.

The estimated schedule of disbursements by calendar and fiscal years ispresented in Annex 5.3. As this would be the third technical educationproject for CONALEP, the expected disbursement profile is based upon actualperformance under the second project (Loan 2559-ME). The project disbursementschedule is a substantial improvement on the average disbursement performanceof previous education projects in other Latin American countries. This isjustified by the advance status of project preparation and the goodimplementation record of the first two projects.

4.9. In order to facilitate the project's implementation, NAFIN wouldopen and maintain a Special Account in US dollars. The Bank would make aninitial deposit of up to US$10 mill.ion equivalent, to cover an average ofabout four months of estimated expenditures. Proceeds of the proposed loanwould be disbursed against: statements of expenditure (SOEs) for contractsvalued below US$250,000 equivalent, for which supporting documentation wouldbe retained by NAFIN and made available for review by Bank supervisionmissions; and full documentation for contracts valued at US$250,000 equivalentor more. The Bank would require a monthly statement of the Special Accountwhich would reflect transactions during the preceding month. At negotiations,NAFIN provided assurances that it would establish a Special Account and submitmonthly statements to the Bank.

35

D. Implementation. Procurement and Auditing

4.10. Management. Project coordination, implementation, supervision andmonitoring would be the responsibility of the administrative directorates ofCONALEP, which performed creditably in implementing Loans 2042-ME and 2559-ME(Annex 2, Attachment B). The Director General would act as project director,with the Director of Administration and Finance serving as project financeofficer. The Director of Buildings and Equipment has defined the spaceplanning criteria and appropriate architectural and space requirements for the101 training centers requiring supplemental facilities; the mission hasreviewed them, and these will be given to the Administrative Committee ofFederal Programs for School Construction (CAPFCE).'1 They would prepare,using standard designs, the building plans, specifications and biddingdocuments, and the bidding and award of construction contracts in consultationwith CONALEP. The Directorate of Buildings and Equipment, in closecoordination with CAPFCE, would supervise the construction of the center;including the installation of furniture and equipment. This Directorate, withspecialist assistance, would also be responsible for tha preparation offurniture and equipment lists, specifications and bidding documents. However,equipment and furniture procurement (i.e., bidding, evaluation and contractpreparation) would be the responsibility of the Directorate of Procurement.The Directorate of Legal Affairs would assist by preparing the procurementcontracts. The Director of Procurement would also be assisted by a CustomsClearance Officer in each of the ports of entry. Education and trainingmatters would be handled by the Director of Instructional Programs and TeacherTraining. No additional staffing would be required except part-time help thatwould be needed during the equipment bid evaluation period. 2 No difficultyis expected in the recruitment of qualified assistants and budgetaryarrangements have been made for this additional staffing.

4.11. Prolect Readiness for Implementation. Project preparation is inan advanced state of readiness for implementation. The preliminary draft TORsfor the eleven special studies to be initiated in mid-1991 have been completedand reviewed and approved by the mission; the detailed TORs are being preparedwith consultants' assistance. A short-list of specialists for implementationof the studies was reviewed by the Bank during negotiations. Civil worksspace factors and prototype designs are based upon CAPFCE standards, and theseworks consist entirely of small additions to 101 existing training centers;those for the 66 small contracts to be let during CY1991 are essentiallycompleted, and tendering is scheduled for June 1991. Equipment and furniturelists and specifications are based largely on those used in the secondproject, and tendering of these needs for 1991 civil works will be ready inSeptember 1991. The designs for the nine mobile units to be constructed in

A semiautonomous government agency responsible for all schoolconstruction and which has extensive operational experience.

12 Based upon the satisfactory perforaance of CONALEP in bid evaluation andcontract review under the second project, and the fact that CONALEP uses anadvanced computerized procurement program, no more than this part-time help isexpected to be required.

36

1991 are the same as those constructed in 1990, and the construction drawingsand specifications will be ready for tendering in late June 1991. Selectedstudy tours abroad and local training courses would be initiated in July 1991.International institutions/agencies would be contracted to assist in therecruitment of foreign specialists and for making the formal arrangements forstudy-tours abroad. At negotiations, the Government presented, and agreementwas reached on. civil works space factors and prototype designs. and equipmentlists and sDecifications for tenders to be made during the first year ofimplementation.

4.12. Implementation Schedule. The construction, furnishing, andequipping of all new facilities is scheduled for completion and to beoperational by December 31, 1996 (Annex 6). This schedule is consideredreasonable, within the capacities of CONALEP and CAPFCE, and would serve asthe basis for monitoring program implementation. Expected completion datesfor the critical activities in program implementation are listed in Table 4.4.To allow sufficient time for submission of final withdrawal applications, theclosing Date for the proposed loan would be June 30, 1997.

Table 4.4: IMPLEMENTATION SCHEDULE

Phases of Implementation

A B C D E F1991 1992 1993 1994 1995 1996

Civil Works (a) 66 21 39 16 11 10Advertising of Tenders 6/91 3/92 3/93 3/94 3/95 2/96Construction Start 8/91 4/92 4/93 4/94 4/95 3/96Construction Finish 12/91 12/92 12/93 12/94 12/95 6/96

Mobile Training Units 9 25 19 7Designs 6/91 3/92 3/93 3/94Construction Start 7/91 4/92 4/93 4/94Construction Finish 12/91 9/92 9/93 9/94

Furniture and Epuioment (b)Comptetion of Lists andSpecifications 5/91 1/92 1/93 1/94 1/95 --0--Advertising of Tenders 9/91 6/92 6/93 6/94 6/95 --0--Awarding of Contracts 11/91 8/92 8/93 8/94 8/95 --0--Instaltation 6/92 3/93 3/94 3/95 3/96 6/96

Technical Assistance Selected study tours abroad and local training courses wouLd be initiated in Juty1991. Refer to Annex for DetailsSpeciat Studies The 11 studies for irptementation during 1991 would be initiated before the end ofDecember 1991. Refer to Annex for Details

(a) Construction contracts programmed for existing training centers.(b) Additional furniture and equipment for the 252 already operating training centers.

4.13. Procurement. Procurement arrangements for the proposed projectare summarized in Table 4.5 below.

4.14. Contracts for the following goods will be grouped in bid packagesestimated to cost the equivalent of US$250,000 or more each and procured usinginternational competitive bidding (ICB) procedures, in accordance with Bankguidelines: equipment, including computers and communications equipment; andinstructional materials and library books. Other contracts, including those

37

Table 4,5: PROCUREMENT ARRANGEMENTS(US$ million)

Category of Expenditure ICB LCB Other N.A. TotalCost

Civil Works - 31.6 31.6

* (0.0) (0.0)

Mobile Training Units

Traction Units 1.0 - - - 1.0

(1.0) - - - (1.0)

Trailor Construction MateriaLs 3.7 - 1.0 4.7

(3.7) (0.0) (3.7)

Furniture - - 0.4 0.4

-- - (0.0) (0.0)

Equipment 54.5 6.6 4.5 - 65.6

(54.5) (6.0) (4.0) (64.5)Instructional Materials and Library Books 25.1 10.8 4.0 2.2 42.1

(25.1) (9.6) (3.8) (0.0) (38.5)Production Suppties - - 14.8 14.8

-- * (0.0) (0.0)

Technical Assistance

Consultents - - 35.9 35.9

- - (35.9) - (35.9)

Study Tours - - 2.8 - 2.8

(2.8) (2.8)

Special StudIes - - 5.6 - 5.6

- - (5.6) - (5.6)

TOTAL COST INCLUDING CONTINGENCIES 84.3 17.4 52.8 50.0 204.5

(84.3) (15.6) (52.1) (0.0) (152.0)

§M£: FIgures in parentheses ( ) are the respective amounts to be disbursed fran loan funds.

for materials for construction of the 60 mobile training units and tractionunits for the mobile training units will also be procured under ICB. For thepurpose of comparing foreign and local bids for equipment during ICBevaluation, domestic manufacturers would be allowed a margin of preferenceequal to the prevailing tariff or 151 of CIF costs of imported goods,whichever is lower.

38

4.15. The Bank has reviewed and found acceptable local procurementprocedures. These LCB procedures would be used for the procurement of:instructional materials and library books in packages valued at less thanUS$250,000, but more than US$35,000, up to an aggregate value of US$10.8million; and equipment in packages valued at less than US$250,000, but morethan US$25,000, up to an aggregate value of US$6.6 million.

4.16. Procurement on the basis of comparison of price quotationssolicited from at least three suppliers eligible under Bank guidelines, inaccordance with procedures satisfactory to the Bank, would be permitted forthe following: instructional materials and library books in bid packagesestimated to cost less than US$35,000, up to an aggregate amount equivalent toUS$4.0 million; and equipment in bid packages estimated to cost less thanUS$25,000, up to an aggregate amount equivalent to US$4.5 million.

4.17. The selection and appointment of consultants for studies andtechnical assistance would be consistent with the August 1981 Bank Guidelinesfor the Use of Consultants by World Bank Borrowers and by the World Bank asExecuting Agencv. Standard contracts, letters of invitation, terms ofreference and contract forms, would be used for consultants for curriculumdevelopment studies. Contracts for technical assistance associated with theSpecial Studies would be reviewed in accordance with paras. 6.1 and 6.2.

4.18. Standard bidding documents for Mexico, agreed upon by the Mexicanauthorities and the Bank in Cuernavaca in April 1990, would be used. All ICBcontracts and the first two LCB contracts would be subject to prior review bythe Bank. All other procurement documentation would be subject to selectiveex-post review; CONALEP would retain documentation for these contracts forperiodic supervision by Bank staff.

4.19. Auditing. All project accounts, including the Special Account,financial statements, and statements of expenditures relevant to the project,would be audited annually by independent auditors acceptable to the Bank. Theauditor's report and the certified copies of all relevant financial statementswould be sent to the Bank not later than 6 months after the end of each fiscalyear. Audit reports required for the recently completed project have beensatisfactory and submitted on time.

E. Monitoring and Evaluation

4.20. Monitorinz. Efficient monitoring and careful supervision ofproject implementation is essential. Monitoring and evaluation of trainingprocesses and implementation progress of the project are described in Annex 7.As civil works would be the responsibility of CAPFCE, its architects wouldsupervise the design and construction of all buildings; CONALEP's architectswould closely monitor progress on both design and construction. Equipment andfurniture procurement would be the immediate responsibility of the Directorateof Procurement, but installation would be the responsibility of theDirectorate of Buildings and Equipment. However, installation of heavy andsophisticated equipment or equipment in large quantities would be included inthe contract for the equipment supply. A well-designed checklist for use in

39

monitoring implementation of the construction and/or furnishing and equippingof each institution has been developed and is in use by CONALEP. Atnegotiations, the Government presented. and agreement was reached on. finalmonitoring and evaluation targets.

4.21. Evaluation. The Directorate of Administration would coordinatethe activitios of the Directorates of Student Evaluation and Certification,Building and Equipment, Procurement, Planning, and Operations and Instructionin the evaluation of project implementation and its impact on the trainingsystem and socioeconomic development. This executive coordinating group wouldbe assisted and advised by the industrial advisory committees. The resultsclearly show that, under the previous projects, CONALEP's National Directorateof Evaluation and Certification developed an effective system for studentevaluation, certification and placement.

4.22. Annual and Mid-Term Reviews. At negotiations, the Governmentprovided assurances that it would, with Bank assistance, conduct annualre-iews of proiect implementation during the preceding year and implementationglans for the next year. on the basis of the agreed monitorinx and evaluationtargets, including capital and recurrent budgets, cost-recovery activities,and special studies and their results. At negotiations, the Government alsoprovided assurances that it would conduct an in-depth mid-term review, withprior Bank approval of terms of reference, of the effectiveness of all CONALEPprograms. The review would focus primarily on progress being made inimplementation of the recommendations and action plans resulting from thepriority studies on improving: cost recovery/sharing of training withindustry and the related cost accounting system; completion rates of pre-service training programs; the graduate tracer system; and the quality andeffectiveness of administrative services activities. It would also review theimplementation and outcomes of such strategic programs as the maintenancesystem, production/training, self-employment training, mobile training inmarginal areas, training programs in the priority sectors of maquiladoras andtourism, food production and pond fish farming training, and the operations ofindustrial committees and advisory boards. The methodologies required incarrying out the mid-term review will be set forth clearly in the abovementioned terms of reference; such methodologies will, where applicable,include comparisons with a satisfactory comparator group. At negotiations.the Government provided assurances that results of CONALEP's mid-term reviewwolld be submitted to the Bank for review and comment by March 31. 1994; andthat action Plans. satisfactory to the Bank. based on the results of this mid-term review, would be prepared, and implementation of such plana begun. byJune 30. 1994. The Government is aware of the possibility that a need forproject modifications may be indicated as a result of the mid-term review andthat the action plans should detail such modifications. The monitoringtargets (Annex 7) would also serve as a basis for the annual and mid-termreviews.

40

V. BENEFITS AND RISKS

A. Benefits

5.1. The project would: (a) produce skilled manpower and smallbusiness services required for the reotructured economy to sustain andstrengthen growth, with particular emphasis on flexibility in response to thelabor market needs in growth sectors, and in disadvantaged areas andpopulations; when the project is fully implemented in 1996-97, the expectedannual output from *ll programs combined is projected to be some 180,000trainees (Table 5.2); (b) improve the quality of all instruction to meet therapidly changing levels of technology in the workplace; (c) make CONALEP'straining more efficient and ensure its operational and financialsustainability through better links with enterprises and more diversifiedfinancing mechanisms; and (d) contribute to the development, in the mediumterm, of a more rational and efficient education and training system inMexico, thus helping to increase the productivity and internationalcompetitiveness of the Mexican labor force.

5.2. Enrollments and Outputs of CONALEP System. When the project isfully implemented in 1996-97 the expected enrollments and outputs of theCONALEP System are projected to be more than doubled. Table 5.1 showsexpected enrollments by geographical region; Table 5.2 shows expectedenrollments and outputs by types of program and field of study.

TABLE S.1 REGIONAL DISTRIBUTION OF ALL CONALEP TRAINING CENTERS AND PROJECTED ENROLLMENTS(when fully operational in 1996-97)

Training CentersRegion States Number Enrollments

1. North-west: Baja California, Baja California 34 40,000Sur, Nayarit, Slnaloa, Sonora.

11. North: Coahulta, Chihuahua, Durango, Nuevo Leon. 25 31,000

III. Gulf of Mexico: Tamaulipas, Veracruz. 19 28,000

[V. Contral-Morth: Aguascalientes, San Lufs Potosf, 10 15,000Zacatecas.

V. Contral-West: Collim, Guanajuato, Jalisco, Nlchoacan. 38 54,000

VI. Contral: Hidalgo, Morelos, Puebla, Tlaxcala 20 26,000Queretaro.

VII. Valley of Mexico: Distrito Federal, Estado de Mexico. 67 154,000

VIII. South and South East: Campeche, Chiapas, Guerrero, Ooxaco, 37 52.000Quintana Roo, Tabasco, Yucatan.

TOTALS 250 400,000

Note: Enrollments include regular, upgrading, and special programs.

41

TABLE 5.2 PROJECTED ANNUAL ENROLLMENTS AND OUTPUTS BY MAJOR FIELDS OF STUDY AND TYPES OF PROGRAMS(When Fully Operational in 1996/97)

Outouts by Type of Proaramlds of Study Enrollments Pre-Service In-Service Re-Training

Reaular(a) Moduler(b) Uograding(c) Probecat(d) Mobite(e)

Agriculture 15,500 500 500 1,800 800Fisheries 16,500 500 500 1,400 800Services 130,000 20,000 15,000 12,000 1,800Industrial 186,000 22,000 19,000 43,000 1,600Health 22,000 3,500 2,500 2,500 800Tourism 30.000 3.500 2.500 6.500 -TOTAL 400,000 50,000 40,000 67,200 17,500 5,800

Increases over1990/91 161,000 9,600 40,000 43,200 0 3,900

(67X) (24%) - (184%) oX -Completion Rate - 80% 80X 90X 90X 90X

a) Technician outputs from full-time day programs.b) Employed workers in evening class technician programs.c) Upgrading programs, day and evening, for employed skilled workers.d) Contract trainees from Kanpower Training Project (Ln. 2876-ME) in short-course semi-skilled worker

training program.e) Re-training of adults in marginal areas, using mobile training units and community provided

infrastructure, where fixed training centers are not availabLe and are not currently feasible.

5.3. Imtrovina the Emplovability of Women. About 40% (160,000) ofCONALEP's projected enrollments, when the proposed CONALEP III project isfully operational in 1996-97, is expected to be made up of women. This isabout the same percentage existing at the end of the 1989-90 academic year.CONALEP's expansion of short, intensive and practical "hands-on" trainingprograms for marginal populations would increase the actual numbers oftraining opportunities for women at lower income levels. This expansion wouldbe largely accomplished through the use of mobile training units, of which 60would be constructed under the project (para. 3.13).

B. Risks

5.4. There are no unusual risks associated with the project, exceptthat, with regard to mobile training for marginal populations and the foodproduction and pond fish farming training programs; there is a potential riskthat the ultimate benefits to the targeted marginal rural populations could beminimal due to technical, credit, and marketing risks despite Governmentassurances that these training programs would be supported by the plannedproduction credit through PRONASOL, marketing and training specialists. As tothe risk of reduced federal financial support for CONALEP in case of newbudgetary crisis, such risk would be minimized through early steps to broadenCONALEP's resources mobilization base by setting targets for cost recovery andstrengthening CONALEP's relationship with the industrial and businesscommunity. The project is unlikely to have significant environmental impacts.

42

VI. AGREEMENTS REACHED AND RECOMMENDATIONS

6.1 During negotiations the Government:

a) presented, and agreement was reached on, draft terms of referencefor studies on improving (i) CONALEP's cost accounting system andcost recovery criteria and procedures, (ii) completion rates ofthe pre-service regular training program and (iii) the graduatetracer system; and provided assurances that these studies,including data )athering, would be initiated within six months ofloan effectiveness, completed by March 31, 1993, and that actionplans on the basis of the results of the studies would beprepared, satisfactory to the Bank, by June 30, 1993 (paras. 3.21and 3.22);

b) presented, and agreement was reached on, draft terms of referencefor all remaining studies to be carried out under the project(para. 3.4);

c) provided assurances that seven of the eleven studies would beinitiated during the twelve months following loan effectivenessand be completed by the date specified in the agreed terms ofreference, to be available by the time of the mid-term reriew ofthe project, and for Bank review and comment; and that actionplans, satisfactory to the Bank, would be prepared within sixmonths of the completion of the studies to implement the studies'recommendations (para. 3.4);

d) provided assurances that CONALEP would prepare, satisfactory tothe Bank, a plan to take remedial actions on about 50 high unitcost training centers by June 30, 1992 (para. 3.21);

e) provided assurances that CONALEP would increase its overall costrecovery receipts at an annual rate satisfactory to the Bank sothat, by the end of calendar year 1996, such rr-eipts will beequivalent to 20% of CONALEP's recurrent costs (para. 3.21);

f) presented, and agreement was reached on, draft operational manualsfor: (a) the Technological Development and Assistance Centers(para. 3.8); (b) the mobile training units (para. 3.13); and (c)the maintenance services and equipment production programs (para.3.19);

g) agreed that US$8.0 million would be made available for retroactivefinancing of eligible expenditures incurred before loan signaturebut after January 20, 1991 (para. 4.7);

h) provided assurances that it would establish a Special Account andsubmit monthly statements to the Bank (para. 4.9);

43

i) presented, and agreement was reached on, civil wor}.s space factorsand prototype designs, and equipment lists and specifications fortenders to be made during the first year of implementation (para.4.11);

J) presented, and agreement was reached on, final monitoring andevaluation targets (para. 4.20);

k) provided assurances that it would, with Bank assistaace, conductannual reviews of project implementation during the preceding yearand implementation plans for the next year on the basis of theagreed monitoring and evaluation targets (para. 4.22); and

1) provided assurances that it would conduct an in-depth mid-termreview, based on the agreed monitoring targets, of the results ofthe studies on effectiveness, efficiency, and cost recovery ofCONALEP's programs, and implementation of strategic programs suchas those mentioned in (f) above, with the mid-term review resultsto be submitted to the Bank for its review and comment by March31, 1994, and action plans satisfactory to the Bank to be preparedand initiated by June 30, 1994 (para. 4.22).

6.2. As conditions of effectiveness, Government would:

a) prepare and submit for Bank approval final terms of reference,draft contracts for the consultants required, and a short list ofconsultants to be hired for the studies on cost accounting andcost recovery systems (para. 3.21), completion rates of the pre-service regular training program and the graduate tracer system(para. 3.22);

b) prepare and submit to the Bank final terms of reference for allremaining studies to be carried out under the project (para. 3.4);

c) provide evidence that the operational manuals for theTechnological Development and Assistance Centers (para. 3.8),mobile training units (para. 3.13), and maintenance service andequipment production programs (para. 3.19) have been formallyadopted by CONALEP and are ready for use;

d) prepare an action plan, satisfactory to the Bank, to strengthenthe advisory committee system at the state and national levels forthe maquiladora and tourism sectors (paras. 3.10 and 3.11);

e) establish cost recovery/sharing and related accounting criteriaand policies for the maquiladora and tourism sectors (paras. 3.10and 3.11); and

f) establish an advisory committee system for the food production andpond fish farming training programs (para. 3.15).

44

6.S. Subject to the above conditions, the proposed project wouldconstitute a suitable basis for a Bank loan of US$152.0 million equivalent tothe United Mexican States, to be repaid over a period of 17 years, including 5years of grace.

KMy 31, 1991

Annex 1

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Annex 2Page 1 of 5

UNITED MEXICAN STATESTHIRD TECHNICAL TRAINING PROJECT

THE CONALEP TECHNICAL TRAINING SYSTEM

Introduction

1. In 1978, the President of the Republic issued a decree creat±ng adecentralized, semi-autonomous public agency, CONALEP. The Governmentrequested and received two World Bank loans (Loan 2042-ME and Loan 2559-ME)for the rapid development of the system. Phase I involved creating theprogram, testing its major components and initiating its development in 130training centers with a 110,000 capacity. Phase II consisted of an increasein the capacity of the CONALEP System to 252 centers with 239,000 totalenrollments and adjustments in institutional, administrative and trainingaspects of the program. Phase I and Phase II have been so successful that thenew Government, inaugurated on December 1988, placed a high priority on thedevelopment of Phase III and targeted CONALEP, in 1996-97, for enrollments of400,000 students and annual outputs of about 50,000 from regular day classprograms and 40,000 from modular evening class programs. It would alsoupgrade the skills of about 90,000 workers annually (Table 1).

PROJECTED ANNUAL ENROLLMENTS AND OUTPUTS BY MAJOR FIELDS OF STUDY AND TYPES OF PROGRAMS(When Fully OperationaL in 1996/97)

Outputs by TWoe of ProgramFields of Study Enrollments Pre-Service In-Service Re-Training

ReguLar(a) Modular(b) Uogradirg(c) Probecat(d) MobiLe(e)

Agriculture 15,500 500 500 1,800 800Fisheries 16,500 500 500 1,400 800Services 130,000 20,000 15,000 12,000 1,800Industrial 186,000 22,000 19,000 43,000 1,600HeaLth 22,000 3,500 2,500 2,500 800Tourism 30.000 3,500 2.500 6.500 -TOTAL 400,000 50,000 40,000 67,200 17,500 5,800

Increases over1990/91 161,000 9,600 40,000 43,200 0 3,900

(67X) (24%) - (184%) 0% -Completion Rate - 80% 80% 90% 90% 90%

a) Technician outputs from fult-time day programs.b) Er- 7yed workers In evening class technician programs.c) Upgrading programs, day and evening, for effployed skilled workers.d) Contract trainees from Manpower Training Project (Ln. 2876-ME) in short-course semi-skilled worker

training program.e) Re-training of adults in marginal areas, using mobile training units and community provided

infrastructure, where fixed training centers are not available and are not currently feasible.

Annex 2Page 2 of 5

2. Administration. (Attachment B). The CONALEP training program isadministrated at both central and local levels. At the central level, theBoard of Governors determines policy criteria. This Board is comprised ofseven business and industrial leaders who are appointed by the Minister ofEducation to serve staggered terms. The President of the Republic appointsthe General Director of CONALEP, who also chairs the Board. The GeneralDirector, who is the chief administrative officer of CONALEP, can serve amaximum of two periods of four years each, and is assisted by eightdepartmental directors who are in charge of planning, academic operations andteacher training, buildings and equipment, evaluation and certification,admiristration and finance, legal affairs, promotion and external relations,and equipment procurement. Each directorate, with minor exceptions, is wellstaffed with qualified and experienced staff and support personnel.

3. At the local level, the director of each training center is the chiefadministrative office. An academic/training committee comprised of local andregional business and industrial personnel and representatives ofinstructional staff and students, advises the director on training matters,and an industrial relations committee comprised of business and industrialmanagers advises on relations and cooperative activities with the private andpublic sector enterprises and associations. Each center's director isassisted by coordinators of training programs and administrative services.

4. The CONALEP program is well publicized through radio, television, andnewspapers at national and local levels, and through high quality brochures.This promotion campaign has been successfully directed towards business,industry, parents, potential students and the general public. It emphasizesthe important role of skilled workers and technicians in economic and socialdevelopment, describes the CONALEP training program (including details ofselected courses), employment opportunities, the job placement system, andwhere and how to go about enrolling. It is estimated that about 80% ofCONALEP's students are recruited as a result of this multimedia campaign. Thesubstantial assistance CONALEP receives from business and industry (about US$12.9 million in 1990) also indicates the success of this innovative procedurefor improving the public image of technical training.

5. Training Programs and Enrollments. CONALEP has developed 97 regulartechnician training programs, primarily for the manufacturing and servicessectors. These programs, which have a duration of three years, are carriedout in centers dispersed throughout the country. The enrollment capacity,programs of study and location of centers were determined on the basis ofnational, regional and local development plans and Bank agreed criteria.Enrollment is open to qualified students who have completed grade 9. Regulartraining programs operate at the centers in two daily shifts of six hours perweek. The hours of 13:00 to 16:00 are normally reserved for upgradingprograms. The evening shift and Saturdays are used for either program whendemand exceeds regular capacity. The upgrading program is open to employed

Annex Page 3 of 5

capacity in regular and upgrading programs, both day and evening shifts, totalsabout 239,000 trainees. Women have made up 37%-40% of total enrollments duringthe past four years (1987-1990).

6. Curricula. Experienced subject-matter specialists, assisted by specialistsfrom business and industry, develop all curricula and course syllabi. Inaddition to the 97 specific training programs for regular students that have beendeveloped in five broad fields with supporting curricula and course materials,there are another 82 training programs, ranging form 40-250 houre each, forupgrading the skills of the existing workforce. Instructors and the advisorymembers from local industry adapt the basic course syllabi to special localconditions. In general, program time is distributed 20% for general theory, 20Zfor technical theory and 601 for technical practice.

7. Instructor Characteristics and PreDaration. Experienced and fullyqualified instructors teach all general subjects. Technicians and practicalengineers, having at least five years of industrial experience, are recruited ona part-time basis (10-14 hours/week) to teach the technical theory and technicalpractice classes. They receive a significantly higher hourly wage than those whoteach in other programs under the Secretariat of Education. Local industry hascooperated by making industrially qualified instructors available. Preparationin instructional methodology of these instructors is carried out by CONALEPthrough its own teacher training unit. Qualified and experienced professionalteacher trainers comprise the training unit and are assisted by qualified part-time trainers.

8. The instructor training program consists of both regularly scheduled shortpre-service methodology courses and ad hoc in-service courses. In specialinstances, programmed learning courses are offered by correspondence. The pre-service courses consist of 54 hours of pedagogical preparation, including 14hours of practice teaching. They are conducted either in CONALEP's centralfacilities or, at the regional level, in local training centers and in localuniversity teacher training centers. The minimum in-service training consistsof 64 hours of human relations, instructional methodology, modular curriculumpreparation, and shop-work organization and management. Additional in-servicecourse work of up to 130 hours is provided for upgrading specialized technicalskills. The curricula and course syllabi for the instructor training courseshave been developed according to modern pedagogical practice, and except foradapting them to special local requirements, are ready for the instructors' use;a fact which aids in the recruitment of qualified instructors. About 12,800instructors were employed during 1990-91 in the 252 training centers.

9. ODerational Performance Evaluation. Student and instructor evaluation andfeedback are joint functions of the local training centers and the NationalDirectorate of Evaluation and Certification. This directorate has well-qualifiedstaff consisting of professionals and an adequate number of support personnel.

Annox 2Page 4 of 5

Ic has developed a series of generally well-designed and executed instruments forevaluating instructor and student performance. However, it is planned that thesewill be further improved under CONALEP III. Evaluation of instructors includesformal self-evaluation, as well as evaluation by both students and supervisors.The National Directorate also assists the local centers in the proper use andevaluation of the various instruments and processes, and in integrating thechanges suggested by feedback into the curricula and the teaching/learningrocess. The results of these assessments are given not only to localinstructors, but also to the subject-matter specialists at the national level,so the curricula, course syllabi, and overall performance may be improved in thecenters. A large proportion of CONALEP applicants have finished their lower-middle level studies. In view of this, all new regular students are tested and,if required, undergo four weeks of remedial studies before the regular termbegins. This has s.gnificantly reduced the high level of dropouts that weretypical during CONALEP's early years of operation. However, this early dropoutrate remains a problem, and will be addressed under the new project.

10. Placement and Follow-up of Graduates. Each training center, with theassistance of its local industrial advisory committee and its industrialrelations committee, has the responsibility of providing job placement and ofassessing the relevance of training as measured by job performance. Jobplacement within three months of graduation of regular students is 622. In afollow-up study of employer satisfaction, 922 of employers rated the quality ofCONALEP graduates as "good or excellent". After a short period of on-the-joborientation and training, graduates are expected to be able to perform as mediumlevel skilled workers or as lower or middle level techniciano. Most of them havebeen able to advance to the level of highly skilled worker and medium leveltechnician. Because recruitment of skilled labor is of critical importance forindustry, local industrial advisory committees diligently assist in thedevelopment of a strong placement and follow-up system at the local level. TheNational Directorate of Evaluation and Certification provides advice and thenecessary instruments for the systematic evaluation of graduate placement andperformance at the local level, and coordinates the national program (AttachmentA).

Financinx.

11. The Federal Government allocation for the recurrent expenditures of CONALEPdurirg 1990 was Mex $243,436 million (US $85.1 million), or about 1.6Z of thetotal budget of the Secretariat of Education and Culture. In addition to federalfunds, CONALEP ie empowered to sign contracts and to receive contributions fromthe productive sector. CONALEP has made very good use of this capability, makingcontractual agreements with state governments, other branches of the federalgovernment, and various industries. Tctal contributions and contracts in 1990amounted to an equivalent of Mex $37,920 million (US $12.9 million). Most ofthese contributions were in kind: i.e., rent free (building and equipment) ordonated buildings and specialized equipment. Finally CONALEP's students also paytuition and may commit themselves to a deferred payment plan upon graduation and

Annex 2Page 5 of 5

branches of the federal government, and various industries. Totalcontributions and contracts in 1990 amounted to an equivalent of Mex $37,920million (US $12.9 million). Most of these contributions were in kind: i.e.,rent free (building and equipment) or donated buildings and specializedequipment. Finally CONALEP's students also pay tuition and may committhemselves to a deferred payment plan upon graduation and employment. Studentrevenues amounted to Mex $12,095 million (about US $4.2 million) in 1990. Inaddition to the financial effect, these payments and commitments seem to havea positive motivational effect on students. In some cases, employers payCONALEP the deferred tuition. The National Directorate of Financing andAdministration is currently reviewing CONALEP's long term policy regardingtuition fees.

Annex 2Attachment A(Page 1 of 5)

Job Placement of CONALEP Graduates(1989/1990)

No. of GraduatesNo. of Graduates Emploved in 3 months %(in thousands) (in thousands)

Pre-service program

3 year program 33.2 20.7 62.3

1 year program 7.2 7.2 100.0

SUB TOTAL 40.4 27.9 69.1

In-service-Program

Retraining of unemployed 52.3 41.9 80.1

Upgrading of employed 9.0 9.0 100.0

SUB TOTAL 61.3 50.9 83.0

TOTAL 101.7 78.8 77.5

CONALEP: Est ios de SeguimientoEgresados Contratados anfes de 3 meses

JOB PICD WITHIN 3 MONTH

- PROCRAMA REGULAR -

REGULAR PROGRAM

35

3 0 -----------

25

c' 20

o5.... ~ ~~~ ~~~ ........ ...... .... _ _...................

n:1X 0 ---- E------1

1990 1989 1988 1987

0 5

|ME Egresados Contratados Inm. V ° 5rpu1sMPLYED IN I MONTHS

CONALEP: Estu os de SeguimientoUP STUDIESEgresados que Trabaian su EspecialidadGRADUAKTES; WORMOGDJIED OF Mo

PROCIRAMA REGULARREGULAR FRORMM

35

30 -

25 -_ _

00-1

c'u 201 990 1 989 1 988 1987 XIt

I IEqrsdos T su especialidad T T fuera espec.XDUTM -RFIEL OF TRAIIN OUrSIE O n

Annex 2Attachment A(Page 4 of 5)

CONALEP: Nivel Ingresos de Egresados

xSM 1987 1988 1989 19900.5 4.7 3.7 4.1 3.61.0 25.7 26.2 24.5 20.71.5 37.5 36.4 35.7 33.52.0 17.6 19.7 20.3 20.92.5 10.8 10.5 12.5 18.6

SampleChek 96.3 96.5 97.1 97.2

Sum Prodct 146.5 148.3 152.0 161.0W Average 1.521 1.537 1.565 1.656

Fuente: CONALEP - Evaluacion y Estudios de Seguirniento.

CONALEP: Nivel Promedio de Ingresos1.81.7-

1.8

1.5-

0. -_

I.7-

1.2-_ _||

0.9 -

60.8

0.4

0.5

0.4

0.3

0.62 =l

0 41987 1988 19891990

Ingresos Comparativos por N. EducativoEARNINGS cQNS BY I 1 EUCATION LEVEIS[mil tfragtadares por nivel]PER THOUSAND WORKERS PER LEVEL OF EDUCATION

350 -

300---

3 0 _-___ _..___._.__.______2 5 0 -<

o

200

0 150--

5 0 ---_ _ _ _ __ _ _ _-- ---- -

No Ing .2 5 SM .5 SM SM up2 SM up3 SM up5 SM up 1 0 SM 1 0 +SMSM = Salario Minimo

OFICIAL MIN1M SALARY UNITS °

0-I- Prim 3K Secund - PreparPrimary Lower Secondary Upper Secondary

x Tecnico - UnivTechnician University

Annex 2UNIT D MEXICAN STATES Attachment B

THIRD TECINICAL TRAINING PROJECT ag 1o 2CONALEP Orgnizaton (Page 1 of 2)

A. noA L Lvs VO0RO|L

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PNOUOTON AN DIRITOAT3 OVP.ATO OPO AIPATNM! OO 1-C op INTERNAOl.

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ORGANIZATION CHART OF CONALEPESTRUCTURA ORGANICA DEL CONALEP

FOR TRAINING CENTERSEN PLANTELES

comuio CO 1DIRECToR OF CENTER|CO"AInvo t D R E ECC Io N.

Adviaory Committee

coun D

Industrial Relations Coimittee

~DPRTAMENTO OE I DOEPARTAMENT DE DEUA ENTO DE DEPARrAUE.T DEIN18TRAC | ~~~SE8MO ESCLRS ACTIVIDADES S ERIIO-Aftiinis ril"zANZAS TECMOI.OGIC^ IACADEROODSAdminis lonl nancae St en eSrv ce s Tech:} noloe Department Aade rec I Affairs

_LUrABos v ECOL^I TRO TALLERES V ARA POa R ESCOLAR~ EAOCUTORIOS | ESIDAaD |

Personnel Registrars Office Supervision: Shops/Labs Dept. Headsf 7F I =E EXTIENSION 11AA TERIM11'O IF|IE |ruuNc"" | | ~~~EDCATIVA JILDE ECowPO Lf ADblult |MAccounting Extension Bducation Equipment Maintenance -Library and

_- Audio Visual Aids_ ES _ EVALUation V UCTS

Materials Supy and FoUow-Up Technical Training

CI;

Annex 3Page 1 of 6

UNITED MEXICAN STATESTHIRD TECHNICAL TRAINING PROJECT

Special Studies

Terms of Reference for Special Studies

1. These Preliminary Terms of Reference are for the eleven Special Studieswhich are to be initiated in CY1991. The final draft Terms of Reference forthe Studies, and for the specialists required, are to be presented to the Bankfor review, discussion and agreement during negotiations.

Plan of Work

2. The first phase of the plan of work consists of the preliminary terms ofreference for the execution of the eleven special studies to be carried out byCONALEP during the first year of implementation of the CONALEP III project.These preliminary TORs are presented herein. The second phase of workconsists of the preparation, by CONALEP's senior staff members and qualifiedspecialists as may be required, of the detailed TOR for each of the studies.As stated above, these final draft TORe would be presented to the Bank forreview, discussion and agreement during negotiations. The third phase wouldbe initiated promptly after the 9--eement of the Bank had been obtained forthe final draft TOR. The third phase would consist of the preparation andpresentation to the Bank, for review and agreement, of the CV's of a short-list of qualified consultants to conduct each of the studies. The fourthphase would consist of the recruitment and contracting of the consultant teamsto conduct each of the studies. The fifth phase would be for the consultantteams, with the coordination of the appropriate directorates of CONALEP'scentral administration, to conduct the studies in accordance with therespective TORs and to prepare the draft reports for discussion with pertinentsenior staff and administrators of CONALEP, and with key economic sectorleaders, and to prepare tne final reports.

3. Within 60 days of the conclusion of each of the studies, CONALEP wouldsend to the Bank for its review a copy of the "conclusions andrecommendations" and a short "sa-mary" of each of the studies.

4. The computerization of data and analysis of each of the studies would bedone in such a manner as to facilitate the ease of updating the studies fromtime to time with the most recent data and information.

5. The sixth and final phase would be the initiation of implementation ofkey recommendations and a follow-up of observed results.

Annex 3Page 2 of 6

Preliminary Terms of Reference (Outline)

A. Labor Market Demand for TechniciansObiective of Study. The central objective of the study is to obtain therequired information to permit a more balanced planning andimplementation of training programs which will more effectively andefficiently meet the skilled worker and middle level technician needs ofpriority sectors of the economy.Implementation Period. June 1991 to November 1991.Plan of Action: (a) Collection, recording and analyzing of data; (b)estimation of employment by occupational areas for skilled workers andmiddle level technicians levels; (c) determining the levels of skillsrequirements of skilled workers and middle level technicians byoccupational areas; and development of the skills profiles of skilledworkers and middle level technicians in the priority sectors.

B. Improve Training Articulation Between CONALEP and the Maquiladora SectorObiective of Study. The central objective of this study is todetermine specific areas of activAty, within the productive system ofmaquiladora sector enterprises, with which CONALEP can assist in jointlyimproving the quality of training "for" and "in" the workplace.Implementation Period. June 1991 to April 1992.Plan of Action: (a) In-depth review of available documentation; (b)design of study, pilot testing and revision; (c) carrying out of fieldwork through visits, interviews and questionnaires; (d) processing offield data and other information obtained from maquiladora enterprisesand associations; (e) preparation of the final report andrecommendations.

C. Improve Training Articulation Between CONALEP and the Tourism SectorObiective of Study. The central objective of this study is, as apriority action, to jointly e:plore with sectoral enterprises andassociations specific areas of activity within the sector with whichCONALEP and the respective enterprises can cooperate in improving thequality of training "for" and "in" thd work place, including developmerntof certain new specializations.Implementation Period. June 1991 to May 1992.Plan of Action. (a) In-depth review of available documentation; (b)design of study, pilot testing and revision; (c) carrying out of fieldwork through visits, interviews and questionnaires; (d) processing offield data and other information obtained from tourism enterprises,associations and both internal and external tour agencies; (e)preparation of the final report and recommendations.

D. Training Needs of Marginal PoRulations and AreasObjective of Study. To define feasible training activities, modes oftraining and priority target groups with which CONALEP can, with

Annex 3Page 3 of 6

significant participation of national and state official agencies andlocal neighborhood groups, jointly plan and deliver training programsfor the re-training of adults of marginal populations. Emphasis wouldbe on areas where fixed training centers are neither available norfeasible.Implementation Period. June 1991 to April 1992.Plan of Action. (a) In-depth review of pertinent documentation ofrelevant experiences of CONALEP and other groups in the use of mobiletraining units and other non-traditional modes of training delivery; (b)field study to determine training needs, feasible modes of trainingdelivery, and including possible usage of various types of local publicand private infrastructure in the "practical" aspects of trainingdelivery, and cost-recovery; (c) processing of field data andinformation; and (d) preparation of final report and recommendations.

a-, Imorovina Student Recruitment in Regular Technical ProgramsObiective of Stuev. To improve the recruitment of appropriatelyqualified and motivated trainees into the first year of the regulartechnical level programs.Implementation Period. December 1991 to March 1993.Plan of Action. (a) Defining the methodology for analyzing thestrengths and weaknesses in the perceived image of CONALEP's trainingprograms as held by students in the last semester of the lower secondaryschools; (bj defining the methodology for determining the profile of thetraining/further study aspirations of last-year students in the lowersecondary school system who are potential candidates for first yearentry into the CONALEP system; (c) carry out the field study todetermine the parameters of the perceived image of CONALEP and analyzethem from the points of cause and effect on the image; (d) carry out thefield study on the profile of aspirations of potential entrants; (e)processing and analyzing of data and information of both sub-studies foractions at the central and local training center administrative levels;and (f) preparation of report findings and recommendations for actionsat the central and training center administrative levels.

F. ImDroving Student RetentionObiective of Study. To identify and define causes for the high level ofstudent dropouts, especially during the first semester of pre-servicetraining, and develop an action plan to reduce the dropout rate andincrease the completion rate of trainees.Implementation Period. December 1991 to March 1993.Focus of Study. (a) trainee selection processes and criteria; (b)process and academic standards of orientation sessions in comparisonwith trainees' backgrounds; (c) trainees' prP'Rrences and commitmentsregarding further studies and entering the labor force; (d) geographicallocations of the centers and training specializations of the trainees;(e) peculiarities of the teaching forces, provision of teachingmaterials in the center.

Annex 3Page 4 of 6

Plan of Action. (a) In-depth review of documentation; (b) design ofstudy, pilot testing and revision; (c) carrying out field work throughappropriate avenues of activity; (d) processing of data and relevantinformation collected from field work; (e) preparation of report andrecommendations for action at both central antd training center levels.

G. Imioroving Graduate Tracer SlstemObiectives of Study. To evaluate the effectiveness of CONALEP trainingprograms on a broader basis and improve the current practice of tracerstudy system in order to feed back to the respective curriculumspecialists, instructors and administrators for improved traineeselection, curricula, program offerings, graduate placement andproductivity, and effectiveness of each training center.Implementation Period. December 1991 to March 1993.Focus of Study. (a) Extend the time horizon of the tracer studies,i.e.,obtain information about employment sustainability of those graduateswho obtained gainful employment within three months of graduation (62%in 1990), i.e., what happened to them after the three months in terms ofemployment and earnings? Also, what happened to the rest of thegraduates; have they gained employment? What are the ckaracteristics ofthose trainees, instructors, administrators, centers, and surroundingindustries, and how did they affect the graduates' placement andearnings? Ideally, six months and 18 months after the graduation, thesame tracer studies should be repeated for the same sample; (b) expandthe coverage of the study to cover those who left the training programwith an entitlement to lower diplomas, such as "tecnico auxiliar," andto cover other types of training program, such as in-service training;(c) include a reference or control group, so that results for theCONALEP graduates are comparable with those of the dropouts or graduatesof other educational systems, such as lower secondary or general uppersecondary, and technical upper secondary; (d) obtain information on thequality of the technical knowledge and skills of CONALEP graduates, asdemonstrated at the work place and evaluated by the supervisors andemployers; (e) acquire information on the status of employment, such asemployed or self-employed, occupation, industry, etc.; considerproviding cash payments, or exempting fees for the diploma, for thosegraduates who participate in the tracer study and provide requestedinformation; (f) get specialist assistance on the sample size,procedures for the study, selection of the control group, and theanalysis of the collected data; (g) ensure coordination between thestudies of trainee selection, retention, and follow-up; and (h) maintaincontinuity of the information already collected in the past.Plan of Action. (a) In-depth review of documentation; (h) design ofstudy, carrying out of a pilot study and revision of study design asrequired; (c) carrying out of field study with the full cooperation ofindustry; (d) processing of data and information; and (e) preparation ofreport and recommendations.

Annex 3Page 5 of 6

H. Technological DevelopmentOblective of Study. The objectives of this study are to: (a) determinethe current levels of the technology in use in the modern Mexicanworkplace for the skilled trades and technician jobs, the changes duringthe 1980s, and the expected changes during the 1990s; and determine theshortfall between these levels and the levels of technology taught inthe current course syllabi and laboratory-shopwork activities of therespective instructional fields of study in CONALEP, so that appropriatechanges can be made and equipment can be acquired; and (b) develop therequired series of technological teaching-learning packages to permit arapid integration into the teaching-learning process of both regulartraining programs and up-grading programs of employed workers, so as tofacilitate the upgrading of the production processes in micro-small-medium enterprises. A secondary but equally important objective is thatthese technological packages would become the basis of the trainingsyllabi and laboratory-shopwork of the technological developmentcenters.Implementation Period. June 1991 to June 1992.Plan of Action. (a) Design of the study procedures, mounting of a pilotstudy and revision as required; (b) field study to determine thosetechnological problems, human and physical, common to micro-small-mediumenterprises; (c) preparation, in an appropriate order of priority, ofthe technological packages required; (d) preparation of the trainingcourse syllabi, on the basis of the respective technological packages,for the technological upgrading of qualified employed workers, trainingcenter and in-plant instructors, and last-year technician level traineesof the regular program; (e) determining, in an appropriate order ofpriority, the human-equipment-materials-financial resourcesrequirements, and (f) preparation of the appropriate report on thefindings and recommendations for priority actions.

I. Technological Assistance to Micro-Small-Medium-EnterprisesObiectives of Study. (a) Identify, partly from information collected bythe study team for the Technological Development Study, the morerestrictive production problem4. encountered by a representative sampleof the enterprises; (b) analyze a representative sample of the morerestrictive ones encountered in the production process of theseenterprises; (c) assist in finding solutions and/or appropriatealternative production processes through industrial data banks andindustrial processes consultant services which enterprise" can obtaindirectly; and (d) as a result, expand and consolidate the impact oftechnical education, with appropriate cost recovery, in thediversification and expansion of industry in Mexico.Implementation Period. July 1991 to August 1992.Plan of Action. (a) Identification and analysis of productionprocesses, levels of technology in use in a selected representativesample of micro, small and medium industries of the priority sectors;(b) identification and analysis of significant problems associated withproduction and marketing procesces; (c) identification of alternativesolutions of a representative sample of the more restrictive problems

Annex 3Page 6 of 6

encountered in the production process and prepare profiles of necessatyexperiences of competencies of industrial processes or marketingconsultants when such services are required; and (d) preparation of theresults of the study and recommendations.

J. Promotion of Micro-Industry DevelopmentOblectives of Study. (a) Refine and upgrade the quality andeffectiveness of the existing micro-enterprise development program inoperation by CONALEP for it's third-year regular students; and (b) makesuch adjustments in the program to adapt it to more mature adultaudiences.Implementation Period. June 1991 to June 1992.Plan of Action. (a) Determine the fiscal and administrativerequirements for the successful creation of micro-enterprises; (b)identify the training fields within CONALEP whose graduates (or skillsareas of out-of-school workers) are technically more prepared toestablish viable enterprises; (c) prepare prototype designs ofrepresentative plans for the development and operation of successfulenterprises for use as "case studies" in training programs; (d) preparespecific materials on the specific strategies in obtaining technical andfinancial assistance for the creation of such enterprises; and (e)prepare the final didactic manual for the creation of such enterprises.

K. Improving the Quality and Effectiveness of CONALEP's AdministrativeServicesObiectives of Study. The central objectives of this study are to: (a)develop a plan for the operation of administrative services that permitsa more rational use of physical, financial and human resources of theCONALEP system; (b) as a result, improve the overall quality ofinstruction and efficiency of the system through a computer andcommunications network; and (c) design an efficient cost accountingsystem, so that CONALEP management can assess and improve the efficiencyand effectiveness of different types of training programs offered byeach center, and facilitate cost recovery from the clients.Implementation Period. June 1991 to'March 1993.Plan of Action. (a) Thorough study of existing documentation; (b)elaborate the methodology of the study; (c) hold regional meetings withtraining center administrators and senior staff; (d) develop the detailsof recommended plan and budgetary requirements; (e) design and specifythe computer and communications network systems needed, along withimplementation arrangements; and (f) prepare final report of findingsand recommendations.

Annex APage 1 of 2

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

CONALEP's Strategy for Imorovina Cost Recovery/Cost Sharingof Training Programs

1. Since its founding in 1978 CONALEP has had an effective policy to permitand actively promote the financial participation of private and public sectorenterprises and commercial/industrial associations in the development andoperation of its training programs. In the early years the financialparticipation was largely in the form of donations of civil works sites and,in several instances, buildings. Over the eleven year period of 1979-89 allof the sites for the 252 training centers and the national administrationheadquarters have been donated. The estimated value of these sites has beenwell in excess of US$50 million. While accurate data on the value of costrecovery/cost sharing participation from non-budgetary sources (other thansites and buildings) prior to 1984 was not available, the total value of allparticipation for the period 1984-90 was about US$32.7 million for sites andUS$28.3 million in cash or "in kind".

2. In the spring of 1989 the new administration of CONALEP updated itsstrategy and accelerated its activities in the improvement of costrecovery/cost sharing of operational costs of training. This is being donethrough a rapid strengthening of its formal links with industry through theexpansion of its industrial relations committees (Comites de Vinculacion),whose membership consists of business people and industrialists, in each ofthe 252 centers. These committees have enabled CONALEP to arrange cooperativeagreements with about 1,300 enterprises. At the same time it has acceleratedits cost recovery through innovative training activities which also,simultaneously, enhance the quality of training, student motivation andretention.

3. CONALEP's cost recovery targets necessarily vary in accordance with:the types of training activity, i.e., in-service and in-plant training, re-training programs for marginal populations of urban and rural poor; andregular technician level training programs which have significantopportunities for recovering part or all of consumable supply costs and at thesame time enhance the quality of training. CONALEP's strategy is necessarilyin a constant state of evolution and is flexible enough to allow for specialsituation6. The rapid increase in the value of cost recovery in cash and inkind (not including land) in 1990, when about US$12.9 million was recovered,as contrasted to US$3.1 million in 1989 and US$2.3 million in 1988, attests tothe effectiveness of the strategy. Nevertheless, CONALEP is mounting aspecial study with consultant assistance, to further improve its costrecovery/cost sharing system.

Annex 4Page 2 of 2

Cost Recovery Targets in Effect in 1990

4. The general target until the afore-mentioned study's findings areavailable, is an increase from 13.6Z of ren-urrent expenditures in 1990/91 to20.02 in 1996; this represents an average annual increase of about 152 in realterms in CONALEP's cost recovery/cost sharing receipts over the period1991-1996.

5. In-Service Program. In 1990 the target for all in-service upgradingcourses was 802 of total recurrent training costs for each course. In actualpractice it ranged from 1002 down to 77Z with an average of 862. The targetfor 1996 is set at 1002. Cost recovery in the modular training programattained a level of 202 in 1990. This level would be increased over thecourse of project implementation.

6. Retraining Program. The target for 1990 was set at 90% of all costs forthe contract training done for the Manpower Training Project with theSecretaria de Trabajo, and the actual cost recovery was about 85%. The targetfor such contract training by 1996 is set at 100%. The retraining programwith marginal populations was targeted at only 152 of the actual cashexpenditures of CONALEP, and the target was met. However, the trainingrecipients furnished a significant amount of "in-kind" materials and services.The same criteria would be followed under the proposed project.

7. Retular Program. Cost recovery in the regular program in 1990 was 132.During the period 1991-1996, this level would be increased, particularly undera student loan system in which graduates are to repay loans over a five yearperiod following graduation.

Annex 4Attachment

UNITED STATES OF MEXICO

THIRD TECHNICAL TRAINING PROJECT

CONALEP's Cost Recovery and Cost Reduction Activities

(1984-1990)

1984 1985 1986 1987 1988 1989 1990-- -US$000's-

Non-Budgeted Income:Sub-Total 2'674.4 2'445.9 1'397.5 1'125.7 2'197.3 2'884.2 6'958.2

Registered Donations-Efectivo 137.9 137.9 54.9 21.4 85.5 69.3 99.5-Mobiliario y

Equipo 1515.7 134.5 153.2 147.9 92.1 108.0 93.5-Terrenos 16'339.7 4'015.6 2'524.8 1'072.7 .- 8'667.2Sub-Total 18'053.3 4'287.6 2'732.9 1'242.0 177.4 8'844.5 192.5

Unregistered Donations-Sub-Total .- - .- -.- - - - - 5'737.0

Total Costs Recoveredor Saved 20'727.7 6'733.5 4'130.4 2'367.7 2'374.7 11'728.7 12'887.7

Source: Recuperaciones y beneficios obtenidos por CONALEP en 1990CONALEP, Marzo 1991. Available in project iile and project worling papers.

Annex 5.1

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

Project Cost By Components And Activity

C0PONENTS Eapension ofQuality In- TrainLg Increase in Total S

Activities provetnt Activities Efficiency Bses Coste

- - - - -- . . --. - - US$ uillion - - - - - - -

Structural Strengthening of System - 13.5 21.5 35.0 20.7Instructor Training 8.8 - - 8.8 5.2Prograa Development 65.3 5.3 . 70.6 41.9Assistance to Maquiladors Sector 1.9 8.8 _ 10.7 6.3Assistance to Tourism Sector 1.5 6.2 . 7.7 4.6Upgrading Employed Workers 8.6 6.2 - 14.8 8.8Equipment Production and - 12.6 8.4 21.0 12.5Maintenance Service

TOTAL BASE COSTS 86.1 52.6 29.9 168.6 100.0

Physical Contingencies 4.3 2.6 1.5 8.4 5.0

Price Contingencies 14.0 8.6 4.9 27.5 16.3

TOTAL PROJECT COSTSJj 104.4 63.8 36.3 204.5 121.3(512) (31%) (18S) (100si

ta- Exeluding taxes and duties.Figures may not add due to rounding.

Annex 5.2

UNITED MEXICA STATES

THIRD --TVCHICAL RININC PROJRCT

Pro1ect Cost Ettimateo Bv Years

(US$'000)

199z Ioqa l-gs io,9 js 1996 S

Civil Works 4'670.0 6'970.0 6'690.0 6'296 4 1'35S.6 --- 0--. 26'0U2.0

£quiptAtet turtzturae6daiural )aterials 5'260.0 21'125.0 21*372.0 17'675.0 16'754.0 11"567.0 93'753.0

Produ4tlou materials 1'224.8 2449.6 2V449.6 2'449.6 2'449.6 1'224.6 t2'248.0

-ecaluoal Assitance aud Studies 2$440. 4*300.0 _'SOO.0 7'900.0 7'920.0 *260.0 36'470.0

Total Bass Cost* 13'794.6 35'044.6 36'011.6 34321.0 28'379.2 21'001.s 168,'s3.0

CouttaBsucissPysual)Ptuce 2'936.0 7463.7 7669.. 73109.5 6044.2 447).1 S'69O.0

TOIM. COSTS "SU732p M206 .a3 = "651 I 0 ; 123 34'423.4 2?4.0 pg

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJfC

Estimated Schedule of Disbursements

(US$ mil'lion)

Pbae. III (Proposed Project)Acculuadt*d

Ptebureu.wts Dlabureeuetc

CT Ls lak n7 Lou AS t X 6- 1991 it 1992 1 9.4 6.3 9.6 6.31992 1 it 12.7 6.* 22.3 14.7

11 1998 1 19.0 12.5 41.3 27.21993 1 I 13.3 8.6 54.6 36.0

11 1994 1 19.9 13.1 74.5 49.11994 1 1U 12.2 8.0 96.7 57.1

IS 1995 1 18.6 12.2 105.3 69.31995 I 1 11.2 7.4 116.5 76.7

it 1996 1 16.7 11.0 133.2 87.71996 1 11 7.9 5.2 141.1 92.9

it 1997 i 10.9 7.2 152.0 100.0TOrAL 152.0 100.0

f9to.~ P4iguree say not ad4 due to rounding.Olebureemets would be bl5her during firat asmeter because of the rate at which the Goverent allocteo the buo get-

Annex 5.4

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

Allocation of Loan Proceeds

Amount of the Loan Allocated S of ExpcndtturesCatenora (in USS Equivalent) to bc Financed

(1) (a) Zquipunt end 92,500,000 100I of foreign expenditures;Education Katerials 852 of local *zp.nditura..

(b) Mobile Training Units 4.500,000 100I of foreign ezpanditurea,852 of local expenditures.

(2C TScbnical Assistance 40,000.000 1002 of specialist assistanceand Studies costg internahips and

sangemet trainings and(5) Unallocated 15.000.000 feacibility studie.

TOTAL 152,000,000

Annex 6.1

UNITED MEXlCAN STATES

THLRD TECHNICAL TRAINING PROJECT

Technical Assistance Schedule

No. OF PERSON KN

.vxIT ND PROOw PERSONS HOarmS YEARS

STUDY COURSES/TOURS

Library Org. & IMngt.

- Local Courses 750 240 20.00

- Foreign Coures. 42 10 0.75

Ilstructor Traininge

- Local Courses 2,750 875 73.00

- Foreign Courses 42 21 1.75

Mobile Training Unitse

- Local Courses 280 112 9.33

- foreign Courses 6 8 0.25

In-Plent Trng. Org. & Oper.s

- Local Courses 240 130 10.83

- Foroign Courses so 40 3.33

Curriculum Developments

- Local Courses 345 114 9.50

- Foroegn Courses 4 36 3.00

Total Local Coursoe 4,365 122.67

Total Foreign Couress 174 9.08

Specialist Assiatance

Library Org. & Ingts

- Local Specialist 30 26 2.17

Inatructor Trainings* Local Specialist 22 e0 7.30

- Foroegn Specialist 18 54 4.50

Mobile Training Unites

- foreign Specialists 20 18 1.50

In-Plant Trng. Org. & Oper.t

- Foreign Spocialists 48 32 2.66

Curriculum Devolopmnts

- Local Specialists 90 270 22.50

Total Local Specialists 162 32.17

Total Forelgn Specialiste 86 8.66

Special Studieos (Refer Annex 3)

- Local Specialists 348 582 48.50

lapl"ntstlon Calendar CY 1991 1992 1993 1994 1995 1996

Zt1plesented/CY 6.7 12.2 15.1 21.6 21.7 22.7

2 Cuzlative 6.7 18.9 34.0 55.6 77.3 100.0

UNIT COSTS OF TECHNICAL ASSISTANCE IN PERSON-NMTEHS

Local Specialists - Rangse from US$950 to US$8.500 (including travel and per diem).

Foreign Specialist. - Rangoe from US$6,000 to US$7,920 (plus *xternal and internal travel costs and per die).

Local Study Courses - Ranges from US$1,500 to US$2,000 for travel and per dim while away frou hoe town only.

Foreig Study Courses - Ranges from US$3,000 to US$4,000 plus atr travel.

Annex 6.2Page 1 of 2

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

Criteria for Targeting Training Centers and Programsfor Assistance Under the Proiect

1. The following criteria, agreed upon between the Bank and CONALEP for thepurposes of targeting training centers and programs for provision ofasistance under the project, are based on those agreed on for use in thesecond project, with certain modifications indicated by the lessons learned inits Implementation.

Trainina ProQrams

(a) Economic Relevance Criteria. Any new training programs and thetraining centers and/or modes of training to be used, orsignificant expansions in numbers to be trained in a given centeror region of the country, would be established on the basis of thefollowing factors:

(i) Economic Demand. Decisions for the establishment of newtraining programs, or for additions or rotation of existingones, should be based on an analysis of the relationshipsbetween national, regional and local trained manpowerrequirements that the program would address and the outputfrom currant training programs; with appropriateconsultations with public and private enterprises andmunicipalities of the region; and in accordance with thepriority of the sector in the National Development Plan.

(ii) Gainful Employment. The establishment of a new trainingprogram in a center location where sustained and relevantemployment opportunities exist should have priority over alocation where adequate local/regional employmentopportunities do not exist, except when very compellingsocial factors are involved. In such cases the advice andcouncil of private sector employers and associations shouldbe sought and appropriately factored into the decisionmaking process.

(b) Feasibility Criteria. A feasibility analysis, with the assistanceof qualified specialists, would carefully analyze the followingsocioeconomic factors:

Annex 6.2Page 2 of 2

(1) Social Demand and Geographical Distribution. Proposals forthe establishment or expansion of a training program in agiven location should include an inventory of the recurringavailability of sufficient numbers of ninth grade graduatesand other interested groups in the center's area ofinfluence, as well as other training opportunities in theproposed area.

(ii) Instructor Availability. The proposal should also determinewhether a sufficient number of potential instructors areavailable locally for the training specialties to beoffered.

(iii) Cooperation of the Productive Sector. The explicit interestof local authorities and leaders of the productive sector isa determining factor in the success of training programs.Thus, willingness to provide financial assistance, donationsof training equipment, practical release of instructors, orlend any other physical or moral assistance would beimportant factors in deciding on the establiahmant of newtraining programs.

(c) Economic Efficiency Criteria. The addition of new trainingprograms in small training centers of less than 600 total traineeswould, where labor market demand and the recurring availability ofadequate numbers of potentially interested trainees justify, havepriority.

Annex 6.3

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

Implementation Schedule for Civil Works

and Mobile Training Units

Civil Work. Implementetion B, Year.

Phases of Iupl.mentationA 0 C D e F

1991 1992 1993 1994 1995 1996

CIVIL WORKS TENDERSt 66 21 39 16 11 10

ADVERTISING OF TENDERS 6/91 4192 4/93 4/94 4/95 2/96

CONSTRUCTION START 7191 3192 3/53 3194 3/95 2/96

COSSTRUCTION FINISH 12/91 12/92 12/93 12/94 12/95 6/96

Mobile Training Unite Conetruction By Years

Phase. of Implementation

1991 1992 1993 1994

MOBILE TRAINING UPITS NO, 9 25 19 7

DESIGNS 6/91 3/92 3/93 3194

CONSTRUCTION START 7/91 4/92 4/93 4/94

CONSTRUCTION FINISH 12/91 9/92 9/93 9/94

Annex 6.4

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

Physical Space Factors for Deeigin of Civil Works

Stxndcrd Phyeical Space Allowances for Tvve of Us.

Type of Spaco Square Meters Dimensions

(meters-net)

Classrooms

Type A - 26 students 51.84 8.00 x 6.48Type B - 26 student. 64.80 8.00 x 8.10

Laboratories

Kultidisciplimn 103.68 8.00 z 12.68Metrology 77.76 8.00 a 9.76Computer Sinloce 103.68 8.00 z 12.96Electrouic. 155.52 8.00 x 19.44

Shove (Includes toolrooms and storage)

Carpentry 216.00 12.00 , 18.00Ind. Electrc_iechanice 288.00 12.00 a 24.00Meat Processing 360.00 12.00 x 30.00Design Drafting 129.00 8.00 x 16.20Typing 129.00 8.00 x 16.20AF.to Mechanics 432.00 24.00 a 18.00

SuprorL Facilities

i-brary 129.60 8.00 z 16.20Audio Visual Rom 129.60 8.00 a 16.20Copy Center Room 25.92 8.00 x 3.24Toachara Cinon Rom 103.68 8.00 a 12.96Adainiststion Room 129.60 8.00 x 16.20sanitary Facilities 51.84 8.00 x 6.48Adainistator Office 25.92 8.00 x 3.24Storage Boom 25.92 P.00 x 3.24Snack Bar 25.92 8.00 x 3.24

Annex 6.5

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

Furniture. Eguipment and Educational Materials

Procuremeni- Schedule

Ipleu.ntatimn PhasesA B C D E F

FURNITURE AND EUIPHENTa

CQIPLETION OF LISTS AND SPECIFICATIONS 5/91 1192 1/93 1/94 1/95 -- O--

ADVERTISING OF TENDERS 9/91 6192 6/93 6/94 6/95 -_O--

A*MAING OF CONTRACTS 11191 8/92 81/3 8/94 8/95 -- O--

INSTALLATION 6/91 3/92 3/93 3/94 3/95 6/96

Annex 7Page 1 of 2

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

Monitoring Indicators For The CONALEP's Programs

OVERALL INDICATORS 91/92 92/93 93/94 94/95 95/96 96/97

(AADE2tIC EARS)

A. STUDENTS AND INSTRUCTORS

1. No. Of Students Ewrollod

Regular Programs 164,000 174,000 188,000 200,000 210,000 220,000

Modular Programs 10,000 20,000 40.000 60,000 70,000 80,000

Upgrading Programs 65,500 70,000 74.000 78.000 92,000 100,000

Totals 239,500 264,000 302,000 338,000 372,000 400,000

2. No. Of Instructor& 19,900 22,000 25,200 28,600 31,000 33,300

(equivalent of 12 bre)

3. No. Of Instructors

Receiving Methodology

Training 6,000 7,000 8,000 9,000 10,000 11,000

S. OUTPUTS AND EFFICIENCIES

1. No. Of Outputs

Regular Programs 41,500 43,000 44,500 46,000 47,500 50,000

Modulasr Programs - 2,500 6,800 20,000 30,000 40,000

Upgrading Progrms 60,000 57,000 65,000 73,000 81,000 90,000

2. Completion Ret.

Regular Programs 52S 551 58S 612 64Z 652

Modular Progrems - 751 75? ,8S 80?

Upgradins Programs 90? 90? 90S 90? 90? 90?

C. COSTS AND PINANCING

(Constant 01/01/91 ue$'ooo)

Mexican FY 1991 1992 1993 1994 1995 1996

Recurrent Coet Of Operation 92'083 102'212 115'364 127'318 135'508 143'698

Adainatration 9'534 10'589 11'342 13'190 14'038 14'887

Regular Progrms 71'114 75'379 78'680 81'666 82'154 85'230

Modular Programs 4'335 8'664 17'328 24'500 31'296 34'866

Upgrading Progrems 7'100 7'50 8'014 7'962 S'020 8'715

Cost Recovery/Savings Goals 14.7? 15.7? 16.8? 17.9? 18.9? 20.0?

tS of Recurrant Fpenditures)

(continued)

Annex 7Page 2 of 2

(continued)

OVERALL INDICATORS 91192 92/93 93194 94/93 95/96 96/97

(ACADDEIC YEARS)

D. CIVIL WORKS

1. Instructor Training 10 40 50 -- O-- -- 0-- -- O--

Center S

2. Computer Center S 10 40 50 ---- 0-- -- 0--

3. Regioal Maintenance 10 40 so -- O-- -- O-- -- 0--

Centers :4. Technological Centers 2 30 31 20 13 -- O-- -- O--

S. 101 exting Centerc

Requiring Supplemental

Construction (No.) 44 14 29 6 4 2

6. 90 Mobile training Uaits (No.) 9 25 19 7 -- O-- -- O--

E. [EQUIKERr AND FURNITURE

1. 250 Centere Re-Equipped/

Average S Completed 16 16 16 16 16 20

2. No. Of Centers Fully

Ra-Kuipped 20 so 50 so 40 40

F. SELF E NPLOYhERT PROGRASS

1. No. Of Training Centere (196) 16 36 36 36 36 36

2. No. Of Training Courses 96 250 250 250 250 250

3. No. Of Instructors

Receiving Training 250 750 750 1,250 1,250 1,250

4. No. Of Students Enrolled 1.000 6,000 12,000 20.000 20,000 20,000

S. No. Of Untte Of Self 50 200 5OG 1,000 1,500 2,000

Employmnt Established

G. TECHNOLOCICAL SERVICES

1. No. of Technicians Upgrsedl' 200 SOO 1,000 1,600 2,500 3,1.30

2. No. of Instructor& Upgraded 100 750 1,000 2,000 3,000 4,000

3. No. Of Micro, Small and 12 50 100 170 250 300

Medium Indu.trier Assisted

F Selected 3rd year tecbnicians of regular progra and employed tchbnicians.

Annex 8Page 1 of 3

UNITED MEXICAN STATES

THIRD TECHNICAL TRAINING PROJECT

Related Documents and Data Available in the Project File

A. Reports and Studies Relating to Education and Traininq

Proarama Nacional de Desarrollo 1989-1994. SPP 1989.

Proarama Para la Modernizacion Educative 1989-1994. PoderEjecutivo Federal, 1989.

Proarama de Modernizacion del Coleaio Nacional de EducationProfesional Tecnica 1989-1994. Secretaria de EducacionPublica, 1989.

Programa Nacional de Solidaridad, SPP 1989.

La Participacion del CONALEP en el Proarama Naciona!. deSolidaridad. CONALEP 1989.

Provecto del Fideicomiso CONALEP - NAFINSA. CONALEP 1990.

Modelo Educativo CONALEP. CONALEP 1988

AntiDroyecto de Solicitud a la Secretaria de Hacienda vCredito Publica Para un Credito del Banco Mundial(CONALEP III ). CONALEP, Junio 1990.

Memoria de Calculo del Costos Para C'ONALEP III. CONALEP 1990.

Provecto de ADovo a las Maguiladoras a Traves de Capacitacion"En" el Tra;oaio. CONALEP 1990.

Informe del Vinculacion Con el Sector Productivo. CONALEP1990.

Resultados del Programa dc CaRacitacion "Para" v "En" elTrabaio en 1990. CONALEP 1990.

Relacion de Materiales Escritos Producidos 1985 - 1990.Centro de Materiales y Prototipos Didacticos,CONALEP 1991.

Proorama Metropolitano de Mantenimiento, Restauracion vProduction de Mobiliario Escolar. CONALEP 1990.

ANNEX 8Page 2 of 3

Proiect Completion Report, Loan 2559-ME. Second TechnicalTraining Proiect (CONALEP II). Marcl' 1991

Recuperaciones v Beneficios Obtenidos por CONALEP in 1990.CONALEP Marzo 1991

Terminos de Referencia Para los Estudios Especiales en elProvecto CONALEP III. Direccion de Planeacion yProgramacion de CONALEP. Marzo 1991.

Propuesto Para la Creacion de los Centros de DesarrolloTecnologico y Asistencia Tecnica (CEDETE).CONALEP Marzo 1991.

Segundo Informe de Gobierno (AnexoL. Poder EjecutivoFederal, 1990

Mecanismos Basicos del Programa de Vinculacion Institucional.CONALEP Marzo 1991.

Informe Vin,culacion Con el Sector Productivo. CONALEPPlantel Merida II. 1990.

Convenios Institutionales Sustantivos 1989 a 1991: Objetivos,Propositos y Acciones. CONALEP Marzo 1991.

Programa de Seguimiento de Earesados. CONALEP Marzo 1991.

Muestreo de Sequimiento de Egreaidos. CONALEP Noviembre 1990.

Muestreo de Sequimiento de Egresados. CONALEP Agosto 1988.

Muestreo de Seguimiento de Egresados. CONALEP Diciembre 1981.

Catalogo de Proaramas Generales v Cursos de Capacitecion.CONALEP 1990.

Sistems de ADO.Yo Para la Integracion de Microempresas.(10 volumens). CONALEP 1987.

Uno Estudio de las Necesidades del Mano de Obra en elSector Maguiladora. J. Carrillo, INF. Enro 1991.

Centros Regionales de Mantenimiento. CONALEP 1990.

Manual del Mantenimiento en al Colegio. CONALEP 1988.

Provecto de Optimizacion del Eguipo. CONALEP 1990.

Resumen Programa de Transferencias de Equipamiento.CONALEP 1990.

Sist-ema Modular de Formacion Profesional Tecnica.

ANNEX 8Page 3 of 3

Direccion Academica-Servicios de Extension Educativa.CQNALEP 1991.

Realamento del Consejo Consultivo. CONALEP.

Proarama de Unidades Moviles de Capacitacion. CONALEP.

trograma de Antoeguipamiento 1991-1996. CONALEP 1991.

KEY TO HAP

(When fully operational in 1996-97)

Number ofRegionalMaintenance/

Number Technologicalof DevelopmentTraining and Assistance

REGION STATES Centers Complexes Enroliments

North West I Baja California, Baja California 34 1 40,000Sur, Nayarit, Sinaloa, Sonora.

North II Coahuila, Chihuahua, Durango, 25 2 31,000Nuevo Leon.

Gulf of Mexico III Tamaulipas, Veracruz. 19 28,000

North Center IV Aguascalientes, San Luis Potosi, 10 1 15,000Zacatecas.

West Center V Colima, Guanajuato, Jatisco, 38 1 54,000Michoacan.

Center VI Hidalgo, Morelos, Puebla, 20 26,000TlaxcaLa, Queretaro.

VaLLey of Mexico VII Distrito Federal, Estado de 67 2 154,000Mexico.

South and South East VIII Campeche, Chiapas, Guerrero, 37 1 52,000Oaxaco, Quintana Roo, Tabasco,Yucatan.

TOTALS 250 8 400,000

Note: Enrollments incLude regular, upgrading, and special programs.

UNITED STATES OF AMERICA MEXICO

\ . '> >t>~.= THIRD TECHNICAL TRAINING PROJECT

AI IfOR,YlA a R ,

North West n IR ( rn-to.II

- REGION BOUNDARIES

NATIONAL CAPITALGnapn~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o~~~~~~~~~~ © ~~~~~~~~~~~~~STATE CAPITALS

BLAIA - 5- I~ Ml ~ C~~Oo, oo 0 PRINCIPAL CITIES OR TOWNSfAJA x -gSo^soRucilo >,dodOLset f , - t If, NJessLofa $? .DIVIDED HIGHWAYS

CAI 5 I- - - SELECTED mAIN ROADS

SUR R S V7> P>ff°i - S < Unl@;t f tt h hAILROADS

RIVERS

4 PRINCIPAL AIRPORTS

W.- STATE B~~~~-- OUNDAPIES

T.- ~~~~~~~~~~~~~~~~~~~~~~~~~~---INTERNATIONAL BOUNDARIES

4 1000.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A1

c 4Si 4'

2S 'V, A 'A

llLoMEr OR 0 o 000 S00 *00D 'C Voilley of Mexico V II A0pk LV/ SNfeo uth ttoG d W5

-20. I. 20 fI ,,

MILES O IT0 200 300 PetEcnIo _ UTML

s.G.W > eyw'"iswhfi rW vd Topochult? HONDURAS~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Too0 5o

110 IDD 00*~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ .

co ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~-

ILOMETn w 17 20D Valley oref Mexco V lM WrllO0 IO' EO z MAY 1991