98796
Central America Social Expenditures and
Institutional Review
EL SALVADOR
June 29, 2015
Education Global Practice
Health, Nutrition and Population Global Practice
Social Protection and Labor Global Practice
Latin America and the Caribbean Region
Document of the World Bank
El Salvador Social Expenditure and Institutional Review
Table of Contents
Figures ............................................................................................................................................................... 3
Tables and Boxes ............................................................................................................................................. 4
Acronyms .......................................................................................................................................................... 5
Acknowledgements.......................................................................................................................................... 7
Executive Summary ......................................................................................................................................... 8
I. Context.................................................................................................................................................... 14
II. Recent Trends in Social Spending in El Salvador............................................................................. 17
III. Performance and Challenges in Education ....................................................................................... 24
III.1 Recent Evolution of Public Spending on Education ................................................................... 24
III.2 Results and Outcomes ...................................................................................................................... 28
III.3 Institutional reforms and challenges ............................................................................................... 34
IV. Performance and Challenges in Health .............................................................................................. 37
IV.1 Recent Evolution of Public Spending on Health ......................................................................... 37
IV.2 Results and Outcomes ...................................................................................................................... 43
IV.3 Institutional Reforms and Challenges ............................................................................................ 47
V. Performance and Challenges in Social Protection and Labor ........................................................ 50
V.1 Recent Evolution of Public Spending on Social Protection and Labor .................................... 50
V.2 Results and Outcomes ...................................................................................................................... 54
V.3 Institutional Reforms and Challenges ............................................................................................ 69
VI. Conclusion and Policy Recommendations ........................................................................................ 71
VI.1 Education............................................................................................................................................ 71
VI.2 Health .................................................................................................................................................. 74
VI.3 Social Protection and Labor ............................................................................................................ 75
Annex............................................................................................................................................................... 79
Bibliography .................................................................................................................................................... 83
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El Salvador Social Expenditure and Institutional Review
Figures
Figure 1: GDP growth in El Salvador and Central America, 2001-2013 ................................................14
Figure 2: Poverty rates in El Salvador, 2005-2013 ......................................................................................15
Figure 3: Gini coefficient in El Salvador and other Central American countries ..................................15
Figure 4: Social sector spending in El Salvador, 2007-2013 ......................................................................17
Figure 5: Social spending per capita in El Salvador, 2007-2013 ...............................................................18
Figure 6: Social sector spending in El Salvador and other Central American countries, 2013 ...........18
Figure 7: General government overall balance, 2007-2013 .......................................................................19
Figure 8: Revenues of the non-financial public sector, by source (2008-2012, percent of GDP) .......19
Figure 9: Budget execution of social spending, 2007-2013 .......................................................................20
Figure 10: Public Sector Performance and Efficiency in El Salvador and LAC, 2010. .........................22
Figure 11: Production Possibility Frontier (Data Envelope Analysis) for Social Public Spending, El
Salvador and LAC, 2010. ................................................................................................................................23
Figure 12: Public spending on education versus GDP per capita (circa 2012).......................................24
Figure 13: Public spending on education as % of social spending (%) ...................................................24
Figure 14: Per student public spending on pre-primary and basic education .........................................26
Figure 15: Per student public spending on upper secondary education (PPP, US$ 2007) ..................26
Figure 16: Wage bill as a % of public education spending by countries (%) ..........................................27
Figure 17: Wage bill as a % of public education spending 2007 and 2013 (%) ......................................27
Figure 18: Student/teacher ratio and number of teachers .........................................................................28
Figure 19: Student/teachers ratio per level of GDP ..................................................................................28
Figure 20: Gross enrollment ratio, upper secondary education vs. GDP per capita (circa 2011) .......29
Figure 21: Attendance rates by location and by age, 2013 .........................................................................30
Figure 22: Proportion of 15-19 years old that completed each grade by area, 2013 ..............................30
Figure 23: Attendance rates by gender and by age, 2013 ...........................................................................30
Figure 24: Proportion of 15-19 years olds that completed each grade by gender, 2013 .......................30
Figure 25: TIMSS 2007 Mathematics 4th grade versus GDP per capita .................................................31
Figure 26: Public spending in education per student in primary (US$ 2007) .........................................32
Figure 27: Test Results (average scores) .......................................................................................................32
Figure 28: Upper secondary learning outcomes vs per-student spending ...............................................32
Figure 29: Public/private enrollment by socio-economic quintile, 2013 ................................................33
Figure 30: Proportion of 7 year old who can read by quintile, 2013 ........................................................34
Figure 31: Organizational Structure of the FTS Model..............................................................................36
Figure 32: Public Spending on Health as a % of GDP by countries .......................................................37
Figure 33: Per capita public spending on Health by countries (real, US$ 2007) ....................................37
Figure 34: Public, Private, and Out of Pocket expenditure as % of Total Health Expenditure: 2000
to 2011 ...............................................................................................................................................................38
Figure 35: Household Health Expenditure Shares by Health Expenditure Category and by HH
Income Quintile, 2013.....................................................................................................................................39
Figure 36: Out-of-pocket spending by expenditure quintile, 2008-2013 .................................................39
Figure 37: Public expenditure in health by Institution. El Salvador, 2007- 2013 ...................................40
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El Salvador Social Expenditure and Institutional Review
Figure 38: Per capita spending on health by Institution in El Salvador: 2007-2013 ..............................41
Figure 39: Health Care visits by level of Care. El Salvador, 2008-2012...................................................43
Figure 40: Utilization of health facilities by quintile, 2008.........................................................................44
Figure 41: Utilization of health facilities by quintiles, 2013 .......................................................................44
Figure 42: Place of hospitalization by quintile, 2008 ..................................................................................45
Figure 43: Place of hospitalization by quintile, 2013 ..................................................................................45
Figure 44: Maternal and child mortality trends, El Salvador 1990-2015 .................................................46
Figure 45: Social protection and security as a % of GDP (%) ..................................................................51
Figure 46: Social protection and security as a % of Total Public Spending (%) ....................................51
Figure 47: Social protection and security Per-capita Public Spending (US$2007) .................................51
Figure 48: Social protection and security as a % of GDP by country 2012 (%) ....................................52
Figure 49: Social Assistance and Labor spending in El Salvador, 2007-2013 .........................................53
Figure 50: Coverage of social security 2007-2013 .......................................................................................55
Figure 51: Coverage and Budget of CCT Programs in Latin America ....................................................57
Figure 52: Impact of PATI on labor force participation and incomes. ...................................................57
Figure 53: Coverage of Paquetes Escolares, 2013. ......................................................................................59
Figure 54: Spending in Electricity and gas (LPG) subsidies, El Salvador, 2007-2013. ..........................60
Figure 55: Beneficiary incidence of major social protection programs in El Salvador, 2013 ...............61
Figure 56: Coverage of CCT and energy subsidies by income quintile, El Salvador 2013 ...................61
Figure 57: Distribution of Benefits of Major Social Assistance Programs (% of GDP) .......................62
Figure 58: Type of Employment by Age Group, El Salvador 2013. ........................................................63
Figure 59: Unemployment rates by age group, El Salvador 2007-2013...................................................64
Figure 60: Unemployment rates by area of residence, El Salvador 2007-2013 ......................................64
Figure 61: Unemployment rate, by education, El Salvador 2007-2013....................................................64
Figure 62: Change in Labor Incomes by Educational Level, 2007-2013 .................................................65
Figure 63: Firms that Signals “Lack of Appropriate Skills” as the Major Constraint to Growth ........66
Figure 64: Spending of Public Training Institutions in Central America as a % of GDP, 2013 .........68
Figure 65: Beneficiaries of INSAFORP Training Courses, 2009-2013 ...................................................69
Tables and Boxes
Table 1: Selected Human Development Indicators, El Salvador, LAC, Central America, and Closest
Income/Population Country Comparators, 2000-2011 .............................................................................16
Table 2: Ministry of Health Expenditures by selected expenditure categories: ......................................42
Table 3: Ten most frequent causes of mortality at the MOH Hospitals. ................................................47
Table 4: Main Social Protection Programs in El Salvador .........................................................................54
Box 1: Removal of User Fees in El Salvador...............................................................................................48
Box 2: Integration of the National Health System in El Salvador: A Future Goal ................................49
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El Salvador Social Expenditure and Institutional Review
Acronyms
ACE Asociación Comunal para la Educación (Community-Based Association for
Education)
ADePT World Bank’s Software Platform for Automated Economic Analysis
ALMP Active Labor Market Program
CA Central America
CCT Conditional Cash Transfer
CEPAL Comisión Económica para América Latina (Economic Commission for Latin
America)
COFOG Classification of the Functions of Government
COSAM Comando de Sanidad Militar (Military Health Unit)
CSSP Consejo Superior de la Salud Pública (Higher Council for Public Health)
DEA Data Envelope Analysis
DNM Dirección Nacional de Medicamentos (National Directorate of Medicines)
ECAP Evaluación de las Competencias Académicas y Pedagógicas (Assessment of Academic
and Pedagogical Competencies)
ECD Early Childhood Development
ECLAC Economic Commission for Latin America
ECOS Equipo Comunitario de Salud (Health Community Team)
EDUCO Educación con Participación de la Comunidad (Education with Community
Participation)
EHPM Encuesta de Hogares de Propósitos Múltiples (Multiple Purpose Household Survey)
FISDL Fondo de Inversión Social y Desarrollo Local (Fund for Social Investment and
Local Development)
FOSALUD Fondo Solidario para la Salud (Solidarity Fund for Health)
FTS Full-Time School
GDP Gross Domestic Product
GER Gross Enrollment Ratio
GoES Government of El Salvador
ICEFI Instituto Centroamericano de Estudios Fiscales (Central American Institute for
Fiscal Studies)
IMF International Monetary Fund
INSAFORP Instituto Salvadoreño de Formación Profesional (Salvadoran Institute for
Professional Training)
ISBM Instituto Salvadoreño de Bienestar Magisterial (Salvadoran Institute for Teachers’
Well-being)
ISRI Instituto Salvadoreño de Rehabilitación de Inválidos (Salvadoran Institute for the
Rehabilitation of the Handicapped)
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El Salvador Social Expenditure and Institutional Review
ISSS Instituto Salvadoreño de Seguridad Social (Salvadoran Institute for Social Security)
LAC Latin American and the Caribbean
MAF MDGs Accelerating Framework
MDG Millennium Development Goal
MINED Ministerio de Educación (Ministry of Education)
MINSAL Ministerio de Salud (Ministry of Health)
MTPS Ministerio de Trabajo y Previsión Social (Ministry of Labor and Social Security)
NCD Non-communicable disease
ODEI Organismo Directivo de la Escuela Inclusiva (Inclusive School Executive Board)
OECD Organisation for Economic Co-operation and Development
ONML Observatorio Nacional del Mercado Laboral (National Labor Market Observatory)
PAES Prueba de Aprendizajes y Aptitudes para Egresados de Educación Media (National
Assessment of Learning Competencies for Secondary School Graduates)
PAESITA Prueba de Aprendizajes y Aptitudes para Egresados de Educación Básica (National
Assessment of Learning Competencies for Basis Education Graduates)
PATI Programa de Apoyo Temporal al Ingreso (Temporary Income Support Program)
PHC Primary Health Care
PPP Purchasing Power Parity
PSE Public Sector Efficiency
PSP Public Sector Performance
RENACEMPLEO Red Nacional de Oportunidades de Empleo (National Network for Work
Opportunities)
RIIS Red Integral e Integrada de Servicios de Salud (Comprehensive and Integrated
Health Services Network)
RUP Registro Único de Participantes (Consolidated Database of Program Participants)
SAP Sistema de Ahorro para Pensiones (Pension Fund System)
SBM School-Based Management
SNFP Sistema Nacional de Formación Profesional (National System for Professional
Training)
SPL Social Protection and Labor
SPP Sistema Público de Pensiones (Public Pension System)
SPSU Sistema de Protección Social Universal (Universal Social Protection System)
STP Secretaría Técnica de la Presidencia (Technical Secretariat of the Presidency)
TIMSS Trends in Mathematics and Science Study
VAT Value-Added Tax
WB The World Bank Group
WDI World Development Indicators
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El Salvador Social Expenditure and Institutional Review
Acknowledgements
This country note was prepared by a team led by Pablo Acosta, Rita Almeida, Christine Lao Peña and
Juan Diego Alonso. It also comprised Pablo Alfaro Palominos, Ciro Avitabile, Nancy Banegas
Raudales, Eleonora Cavagnero, Amparo Gordillo-Tobar, Emma Monsalve Montiel, Christopher
Wahoff and Evan Sloane Seeley, under the overall coordination of Kathy Lindert, as part of the
Central America Social Sector Expenditure and Institutional Review. We would like to thank
Mansoora Rashid, Reema Nayar, Joana Godinho, Margaret Grosh, and Fabrizio Zarcone for their
guidance, comments, and support in the elaboration of this note.
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El Salvador Social Expenditure and Institutional Review
Executive Summary
Social Spending: In the quest for improving social indicators in a fiscally
constrained environment for social spending
El Salvador’s development over the past decade has been dichotomous. On the one hand, economic
growth has remained persistently low, employment and labor force participation have barely increased,
and progress on poverty reduction has slowed. On the other hand, inequality has fallen, and shared
prosperity improved together with advances in many social indicators, such as pre-primary enrollment
rates, access to prenatal care, immunizations, and water and sanitation. The increase in the use of
social spending, which now accounts for 12.4 percent of GDP, together with an improvement in the
quality of social spending, explain at least part of this dichotomy of redistributive and social gains
despite low growth, a tight fiscal situation and generally low government revenues and spending.
Looking forward, the key challenges El Salvador faces are related to continuing improving the quality
and efficiency in the social sectors, while maintaining the overall level of social spending within an
increasingly constrained fiscal environment, where fiscal constraints, low revenues, and the need to cut
the deficit by 3 percent of GDP are significant elements, as well. Priority would have to be given to
reallocations and improvements within the spending envelope for the social sectors to maximize
impact. This document analyzes social spending for El Salvador for the education, health and social
protection and labor sectors in depth and explores a series of policy options for El Salvador to
reallocate social spending for more effective impacts, to enhance and reform social policies and social
service delivery, and to improve the management of public spending and budget execution in the
social sectors.
Education: Low education spending good enough for ensuring universal
access to primary education, but large gaps still remain both in access (to all
other levels) and in the quality of learning
Public spending on education in El Salvador has been steadily growing but remains low relative to
other countries in the region and by international standards. In 2013, El Salvador’s public spending on
education accounted for 3.6 percent of the Gross Domestic Product (GDP), which is lower than the
average for the Latin America and the Caribbean (LAC) (4.9 percent) and pales in comparison to the
average for the Organisation for Economic Co-operation and Development (OECD) (5.6 percent). A
disproportionally high share of public spending in education (68 percent) still goes to basic education.
El Salvador has achieved the Millennium Development Goal (MDG) of universal primary education,
but the enrollment rates for other levels of education and the quality of the learning across the board
are still low. The gross enrollment rate in upper secondary education in 2012 was 48 percent, the
lowest in the Central America (CA) region. Similarly, international comparisons show that the quality
of learning is lower than countries with similar levels of GDP. The increase in public spending on
education has improved access both in primary and secondary education, but it has not translated into
improvements in learning outcomes. Within-country inequalities –across income levels, geographic
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El Salvador Social Expenditure and Institutional Review
locations, and types of schools – also reveal important disparities across different groups both in
access and learning, contributing to the persistency of inequality for future generations in the country.
Looking forward, policy would have to focus on improving access and reducing inequalities to pre-
primary and secondary education. On the one hand, El Salvador should ensure continuity within the
new full-time school model currently being rolled out. On the other hand, more efforts should be
placed in assessing why children are dropping out from secondary education, along with issues related
to crime and violence that affect that age group. Although high opportunity costs of attending a
secondary school are likely to play a role, a more thorough diagnostic is needed, especially for the
most vulnerable groups. Linking upper secondary school attendance to the conditionalities of the CCT
program could also be piloted and evaluated. This intervention might be piloted in urban areas, where
school supply is less problematic, and it might be funded either by reducing the transfer component
for primary school attendance or through better targeted consumption subsidies.
Given disparities in school readiness, a comprehensive Early Childhood Development (ECD) strategy
is a necessary condition to improve learning outcomes in the medium/long run, whereas an increase in
the number and quality of teachers at primary and secondary education is likely to have a positive
impact in the shorter term. In spite of the recent improvements, the student-teacher ratio is still too
high and more teachers are needed in traditional and new subjects (such as music/art that are
emphasized in the full-time schools model). The need to hire new teachers, due to the implementation
of the full-time school model, provides El Salvador with a unique opportunity to improve the average
quality of its teacher corps through an improvement in the selection and recruiting methods. Despite
the relatively competitive level of teacher wages, creating special financial incentives to attract top
students to the teaching profession and raising accreditation standards for university-based programs
are promising and viable strategies to complement the wage bill efforts. In addition, policies
improving parental ability to provide feedback to teachers and bonus payments for teachers would
likely produce substantial effects on overall teacher motivation and, therefore, could be further studied
and supported.
Finally, the monitoring and evaluation of education policies require a stronger focus, producing “real
time” information that ideally feeds directly into government design and implementation. Even
though El Salvador has rich data sets, serious gaps remain in the monitoring and evaluation system
utilized within the Ministry of Education (MINED). There is room to ensure that the policy
implementation and decision making in the education system is better informed. For instance, a more
efficient and timely use of the existing information could yield significant insights and results to guide
decision-making at different policy levels. Given the lack of relevant training and a policy of
information dissemination, principals and teachers are unable to effectively use the data obtained
through the standardized test scores. Those gaps highlighted present an important and necessary
opportunity for the modernization of MINED’s information systems, specifically related to
monitoring and evaluation.
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El Salvador Social Expenditure and Institutional Review
Health: Increase in public spending on health along with the free-access-to-
health-care policy increased the use of health care and contributed to
improving coverage and results, but access and quality disparities remain
Public spending on health in El Salvador has increased over time and is more or less in line with most
CA countries. Despite the economic crisis, the Government of El Salvador (GoES) protected public
health spending, and real per capita public expenditures on health even slightly increased between
2007 and 2013.
The increase in public spending on health together with the Government’s free health care policy
services resulted in a decrease in private out-of-pocket spending and an increase in the use of health
care services. By 2013, out-of-pocket expenses by households were mainly focused on medicines and
other health spending such as glasses rather than the cost of health services. Although, the free health
care policy implemented in El Salvador positively influenced the use of public health services for
consultations and hospitalizations among households at all quintile levels, approximately 46 percent of
people in the poorest income quintile who reported being sick still did not seek health care in 2013.
As a result of the Government’s efforts to protect and increase public spending on health and
improve coverage, health outcomes have improved since the 1990s. In particular, child and maternal
mortality rates have decreased. El Salvador is the only CA country that has achieved its MDG 4
(under-five mortality) target before 2015.
However, challenges remain in improving results and addressing disparities in the quality of health
care. The relatively high neonatal mortality and maternal mortality rates (MDG 5) suggest that
although institutional birth deliveries have increased (now at 85 percent of all births), the quality of
care still needs to be improved. The average mortality and infant mortality rates also hide significant
disparities within the country, which in turn, reflect disparities in the distribution of resources,
coverage and the quality of health care provided between urban and rural areas. Chronic non-
communicable diseases (NCDs) have also increased, requiring a more comprehensive and multi-
sectoral strategy aside from the country’s Maternal and Child Health-focused strategy.
In terms of institutional aspects, the Government has strengthened the health sector with a new
national strategy and a commitment to meet MDG 5. The Government has developed a National
Health Strategy which has been partially implemented over the past four years. This strategy seeks to
strengthen the provision of free health care, emphasizing comprehensive primary health care (PHC)
and human rights under the Comprehensive and Integrated Health Services Network (RIIS). The
Government has also committed to achieving MDG5 by signing on to the MDGs Accelerating
Framework (MAF) supported by the United Nation Agencies and the World Bank. While the Health
Community Teams (ECOS) program is an innovative program that provides PHC to vulnerable areas
via mobile teams, it raises some question of sustainability since it is currently funded from
international donors. Moreover despite the Government’s intentions to unify the public provision of
health services, health care continues to be provided by several institutions with different packages of
services and different per capita health expenditures.
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El Salvador Social Expenditure and Institutional Review
Looking forward, in addition to the implementation of the MAF program to accelerate progress on
the MDGs, the Government could consider short-term measures such as: (a) revising its planning and
budgetary processes in order to make them more results-oriented and efficient; (b) revising the RIIS
strategy and the sustainability of the ECOS; (c) improving targeting strategies, including
epidemiological and geographical targeting, to reach the poorest households and encourage them to
seek health care in a timely manner; (d) developing a strategy to effectively incorporate NCDs in its
PHC program; and (e) review and assess the potential for reducing the differential per-capita
expenditures in the national public system, taking into account political economy and socio-economic
factors. In the medium term, the Government could: (a) move from historical budgeting to a result-
based allocation mechanism, (b) redefine aspects of the RIIS-ECOS programs and strengthen their
implementation; (c) implement an approved NCD strategy at the PHC level; and (d) based on the
review, develop a strategy to promote and move toward reducing disparities in health packages and
per capita spending across institutions and integrating the National Health System.
Social Protection: Expanded safety net but through inefficient and poorly
targeted subsidies, which need to be reformed to guarantee sustainability
El Salvador has made commendable efforts in expanding social protection and labor (SPL) coverage
and spending since 2009, from a low base to levels more in the range of regional standards. Overall
SPL spending has increased in recent years, from 3.5 to 5 percent of GDP between 2007 and 2013.
Taken as a whole, SPL spending is still on the lower range in regional terms. However, today El
Salvador allocates the highest share of GDP to social assistance – primarily via subsidies-- in the CA
region.
El Salvador’s rural CCT program (Comunidades Solidarias Rurales), launched in 2005, is well-targeted to
the poor and has a proven track record of impact in poverty and social indicators. However, the
coverage of the program remains low and has even declined in recent years – alongside the expansion
in outlays on untargeted subsidies. Reforms of the CCT could revise the menu of benefits, and expand
the program to urban areas where many of the poor live. During the previous administration, efforts
to incentivize school attendance were concentrated on the provision of school uniforms rather than
on cash transfers, but no evaluation on whether this CCT mechanism was effective was undertaken. In
urban areas, the main intervention is a “workfare” program - known as the Temporary Income
Support Program (PATI) - that combines income support with training, and that it is proving an
effective way to increase employability prospects of vulnerable population. Due to the positive results
from impact evaluations, it would be expected for this program to be maintained as it provides
opportunities for income and human capital development for the poor, while at the same time
stimulates economic activity at the local level.
Reallocation of scarce resources to maximize coverage and impact on poverty reduction is essential.
Current fiscal constraints make it imperative to improve targeting and efficiency of SPL spending.
High leakages to non-poor beneficiaries within and across social assistance and subsidies, coupled with
insufficient coverage among the extreme poor, diminish the impact of social assistance programs: at
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El Salvador Social Expenditure and Institutional Review
least 0.6-0.7 percent of GDP ($160 million) is spent on benefits from social assistance and subsidies
that go to families in the highest quintiles. While the well-targeted CCT program covers barely 11.6
percent of extreme poor families, nearly 70 percent of the richest families receive Government
electricity and gas subsidies. A simple reform that excludes from subsidies those consuming between
100 and 200 kilowatts/hour of electricity would save 0.45 percent of GDP that could be reallocated to
expand pro-poor programs.
Social security reforms are pending, since coverage has been stuck at around 30 percent for the past
decade, and the system creates unsustainable deficits. Attempts to increase coverage among the poor
have not succeeded, and the building blocks for a social pension are still at a piloting stage given
insufficient funding. More worrisome, the previous reform to the contributory system introduced
important “transition costs”, which are now in the order of 2 percent of GDP. The new
administration should tackle social security reform as a high priority on fiscal and equity grounds.
A large majority of the population has persistent employability challenges, with difficulties in retaining
a formal job. However, coverage of active labor market programs (ALMPs) is low, and it is not
necessarily benefiting priority groups. Experiences like PATI are promising, but would need to be
complemented with appropriate interventions to improve human capital, productivity, and better skills
match with local employment opportunities to ensure sustained income generation of the vulnerable
population. In general, ALMPs operate on a very small scale in El Salvador (for example, there is no
national youth employment program, as in many other LAC countries), and resources in strengthening
employment offices for labor intermediation and orientation are insufficient. Nevertheless, there are
important resources allocated to training, but the majority of courses benefits high-skilled employed
population. The current institutional setting for the occupational training system provides little
information on the quality and adequacy of existing training programs, limiting the efforts of better
matching existing skills and those needed in the market.
The past Government administration made substantial efforts to build a Universal Social Protection
System (SPSU) as part of its National Development Plan. The mandate of the SPSU implies an
integral reform concerning the way in which the social development policies of the Government are
coordinated, administered and implemented starting with the ruling entities of the Executive power.
However, the lack of a single “champion ministry” in charge of defining policy and implementing
interventions (a so-called “Ministry of Social Development”) makes this coordination a complex task,
impacting in the effective achievement of goals.
Legislation could help to protect gains in expanding SPL, but it needs to be flexible enough to adapt
to changing needs, reflect fiscal realities, and generate consensus. The Salvadoran Congress recently
approved a new Law of Social Development and Social Protection (April, 2014), aiming to provide a
minimum social protection floor for all the population and protect rights, as stated in the SPSU
strategy. However, the new Law does not address the fiscal angle or the institutionality needed for its
implementation; and a consultation process with all relevant stakeholders has not yet taken place. The
new Law misses the need for continuous monitoring and evaluation of programs, with a focus on
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El Salvador Social Expenditure and Institutional Review
improving impact within the fiscal space already gained. Enhanced implementation requires deep
reflection on the fragmentation of programs and their financing.
The Government is also creating a registry of beneficiaries of social program (RUP) that will help to
avoid duplication of beneficiaries and improve targeting of social programs. However, this effort
would require additional resources to finalize the data collection and technology platform, as well as a
mandated commitment on its coordinated use by different agencies executing programs (an
opportunity to include in the new social protection legislation). The past administration has also
advanced the development of a system to track indicators in the social sector that can guide in the
future the planning and budgeting process. It also emphasized the need to evaluate its interventions,
and has done that with PATI, ECOS community health, School Uniforms program, and the social
pension, to make corrections as needed. These efforts would need to be continued and expanded in
the current administration.
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El Salvador Social Expenditure and Institutional Review
I. Context
Over the last decade, El Salvador experienced a persistently low economic growth, which
led to an even lower growth in per capita income levels. In the 2001-2013 period, El Salvador’s
economy grew on average 2 percent per year, which was less than half the average for the remaining
countries in the CA region (Figure 1). In addition, since 2003, El Salvador has been consistently the
lowest performer in the region in terms of growth.1 Growth rates remained stable between 2001 and
2004, oscillating between 1.7 and 2.3 percent, and later between 2005 and 2007, between 3.6 percent
and 3.9 percent. However, in 2009, a combination of the global financial crisis and other factors led
to an important decline in GDP of -3.1 percent. Recovery did not place growth at pre-crisis levels,
reaching between 1.4 and 2.2 percent from 2010 to 2013. As a consequence, GDP per-capita grew
only 1.4 percent on average between 2000 and 2013, placing El Salvador again as the lowest
performer of the CA region. Although El Salvador continues to be the third country, behind
Panama and Costa Rica, in terms of GDP per capita, the aforementioned countries have widened
the gap with El Salvador since 2000.
Figure 1: GDP growth in El Salvador and Central America, 2001-2013
Source: IMF, World Economic Outlook Database, October 2014
Despite the low rates of economic growth, El Salvador achieved a significant reduction in
both poverty and inequality rates. The number of people below the poverty line reached a
historical low in 2013 when, for the first time ever, less than 30 percent of Salvadorans were below
the poverty line. Concomitantly, the percentage of the population considered extreme poor also
1 Except for 2005, when El Salvador outpaced Guatemala.
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El Salvador Social Expenditure and Institutional Review
reached a historical low of 7.1 percent (Figure 2). In the same vein, inequality rates showed
continuous progress: the Gini coefficient fell from 0.51 (2000-05) to 0.45 in 2013. This level of
inequality in the distribution of income places El Salvador as the country with the lowest inequality
level in Central America, followed by Nicaragua with 0.46 (2009), Costa Rica and Panama both with
0.53 (2013), Guatemala with 0.54 (2011) and Honduras with 0.54 (2013) (Figure 3).
Figure 2: Poverty rates in El Salvador, 2005-2013
Source: Digestyc
Figure 3: Gini coefficient in El Salvador and other Central American countries
Source: World Bank team’s analysis of household surveys and calculations using standardized ADePT software (Social
Protection).
In addition to the significant reduction in poverty and inequality rates, El Salvador has made
important progress in several human development indicators over the past decade. Table 1
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El Salvador Social Expenditure and Institutional Review
compares El Salvador’s evolution of selected indicators in the areas of education, health and nutrition,
and social protection and poverty with three groups of comparators: i) the top 7 economies in the
LAC region; ii) the remaining countries in the CA region; and iii) a set of 8 countries around the world
that can be considered “comparator countries” when judged after a series of criteria (see Table note).
In order to show progress, the 12-year period (2000-2011) was split in two 6-year intervals (2000-2005
and 2006-2011). El Salvador shows a consistent trend of improvement in social indicators across the
board, anywhere from pre-primary enrollment rates, to access to prenatal care, immunizations, and
water and sanitation. However, on average, progress occurred at a slower pace compared to any of
the three comparator groups. Analyzing the within-sector indicators, differential rates of progress are
also observable. In education, pre-primary enrollment rates increased significantly, but secondary and
tertiary enrollment rates have advanced at a much slower pace. Health indicators related to prenatal
care, immunizations, and access to water and sanitation have all improved, though under-nutrition
rates increased slightly. Finally, in terms of social protection and poverty, it is noticeable that although
both poverty and inequality made significant progress, this did not translate into similar-sized
improvements in labor market indicators.
Table 1: Selected Human Development Indicators, El Salvador, LAC, Central America, and
Closest Income/Population Country Comparators, 2000-2011
El Salvador LAC 7* Avg. Rest of CA Closest Comparators**
Indicator Name
2000-2005 2006-2011 2000-2005 2006-2011 2000-2005 2006-2011 2000-2005 2006-2011
Education
School enrollment, preprimary (% gross) 49.8 60.2 66.1 82.2 46.6 59.2 38.3 44.2
School enrollment, primary (% gross) 109.1 114.4 113.2 113.2 110.1 113.9 106.2 105.4
School enrollment, secondary (% gross) 58.6 63.5 79.1 86.5 61.4 71.9 79.5 89.0
School enrollment, tertiary (% gross) 20.8 22.5 30.7 45.3 22.7 31.3 24.8 33.0
Primary completion rate, total (%) 82.9 92.3 99.1 103.7 81.1 89.1 97.1 94.4
Pupil-teacher ratio, primary 45.0 34.7 24.8 23.0 29.4 26.8 21.1 18.1
Health
Pregnant women with prenatal care (%) 86.0 94.0 92.2 96.0 86.0 92.3 96.0 98.1
Undernourishment (% of pop) 9.9 11.8 11.7 9.6 20.3 15.9 9.6 8.6
Immunization, measles (% 12-23 m) 94.5 94.7 94.9 94.9 92.9 94.1 91.4 95.5
Improved sanitation facilities (% of pop) 84.0 86.6 80.4 83.5 70.4 73.6 87.1 89.5
Improved water source (% of pop) 84.0 87.0 91.4 93.4 88.1 90.4 91.3 92.2
Hospital beds (per 1,000 people) 0.9 0.9 2.0 2.1 1.3 1.1 3.2 2.9
Social Protection and Poverty
Employment to population ratio, 15+, (%) 55.8 57.1 58.3 60.6 58.3 60.8 46.4 46.5
Labor force participation rate, female (%) 47.6 49.6 52.8 56.1 44.8 48.3 44.7 44.6
Unemployment, total (%) 6.8 6.5 9.8 7.8 6.8 4.5 20.0 18.4
GINI index 51.4 47.1 54.5 51.5 52.1 54.1 38.6 35.8
Poverty headcount ratio, rural (%) 47.8 35.8 55.3 47.6 63.6 58.0 32.5 26.3
Poverty headcount ratio, urban (%) 30.2 27.7 37.6 26.0 33.3 31.2 24.7 15.7
*Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru
**In terms of GDP, GDP per capita, population, population density, and percentage of rural population: Albania, Armenia, Bosnia and
Herzegovina, Cape Verde, Georgia, Jordan, Tunisia and Turkmenistan
Source: World Bank World Development Indicators (2013)
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El Salvador Social Expenditure and Institutional Review
II. Recent Trends in Social Spending in El Salvador
Social spending has been increasing in El Salvador, and is likely an important contributor to
the redistributive and social gains noted above, despite fiscal constraints and low growth.
Between 2007 and 2013, social spending increased from 9.7 percent to 12.8 percent of GDP (Figure
4). This significant increase in the proportion of public expenditure devoted to social programs was
driven by an average growth rate of 5 percent per year. Most notably, even during the economic
crisis of 2009, when El Salvador’s GDP decreased 3.1 percent, social spending increased both in real
terms and as a percentage of GDP. Moreover, social spending as a percentage of total spending
increased from 35.3 percent in 2007 to 40.1 percent in 2013.
Figure 4: Social sector spending in El Salvador, 2007-2013
Source: World Bank’s calculations from ICEFI social spending database
Interestingly, although public spending as a proportion of the GDP increased significantly
in the last years, the allocation across the three main social sectors (education, health &
nutrition, and SPL) remained fairly stable. In 2013, SPL (including social security and subsidies)
accounted for the largest portion of social spending, 5 percent of GDP, followed by health (4.3
percent), and education (3.6 percent) (Figure 4). Looking at the shares of social spending,
proportions among sectors remained very stable between 2007 and 2013, with education remaining
at 29 percent, and SPL (36 percent in 2007 versus 39 percent in 2013) gaining a little space over
health, (35 percent in 2007 versus 33 percent in 2013).
In real terms, social spending per capita increased significantly between 2007 and 2013.
Overall social spending per capita increased from US$674 to US$846 in real terms, representing an
annual average increase of 3.9 percent (Figure 5). Health increased only 2.9 percent, below the
overall growth rate, while education increased 3.3 percent and SPL 5.2 percent annually.
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El Salvador Social Expenditure and Institutional Review
Figure 5: Social spending per capita in El Salvador, 2007-2013
Source: World Bank’s calculations from ICEFI social spending database
Despite the significant progress made in terms of social spending, El Salvador is still among
the countries in the CA region with lower public spending on the social sectors. Despite the
recent increase in social spending, El Salvador still falls behind Costa Rica, Honduras and Panama,
only higher than Nicaragua and Guatemala (Figure 6). Looking at spending levels by sector, El
Salvador stands out for its relatively low spending on education and social security.
Figure 6: Social sector spending in El Salvador and other Central American countries,
2013
Source: World Bank’s calculations from ICEFI social spending database
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El Salvador Social Expenditure and Institutional Review
Further expansion of social spending may not be fiscally sustainable, nevertheless, given the
current level of revenues. During the last decade, both revenues and expenditures as percentage
of GDP increased in El Salvador (Figure 7). However, expenditures have grown much faster than
revenues, deteriorating the government’s overall balance. Between 2007 and 2013, tax revenues
increased 2 percentage points of the GDP, from 16.7 percent to 18.5 percent of GDP, while
expenditures increased 4 percentage points of the GDP, from 18 percent to 22.1 percent of GDP.
The fiscal deficit has persisted, despite some minor improvements in the last three years (2010-
2013). In spite of measures that broadened the tax base and improved tax administration and
enforcement since the 2000s (World Bank, 2004), a regressive value-added tax (VAT) system still
shows a high incidence (Figure 8), and revenues are limited due to high levels of tax evasion.
Figure 7: General government overall balance, 2007-2013
Source: IMF, World Economic Outlook Database, October 2014
Figure 8: Revenues of the non-financial public sector, by source (2008-2012, percent of GDP)
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El Salvador Social Expenditure and Institutional Review
Source: World Bank’s calculations from ICEFI social spending database.
Not only is the sustainability of increasing social spending a challenge for El Salvador, so is
the persisting low budget execution across social sectors. Between 2007 and 2013, the
percentage of social spending budget that could not be executed within the fiscal year was around 5
to 8 percent of the budget (Figure 9). Both the education and health sectors were the social sectors
with the highest levels of budget execution, reaching at least 93 percent five out of these six years.
Social protection has been lagging behind, dropping below 93 percent two times throughout the
same period. More recently, in 2012 and 2013, education and health reached 95 to 98 percent, while
social protection stayed around 94 percent.
Figure 9: Budget execution of social spending, 2007-2013
Note: Execution = Executed / Modified Budget
Source: World Bank’s calculations from ICEFI social spending database
Improvements in planning and monitoring of social spending are also needed to improve El
Salvador’s budget management. The Technical Secretariat of the Presidency (STP) has
traditionally led the macro strategic planning process. The STP developed the Five-Year
Development Plan 2010-2014, which includes broad spending guidelines, defined strategic
objectives, as well as revenues, spending and debt policies. However, there is no legal framework
regulating this planning process. In addition, the process remains heavily centralized: the Legislative
Assembly and the civil society are not consulted to draft this document. Recent progress in
improving the access to fiscal information to the civil society was evident, though. This has
happened through the use of technology, including the development of websites like the Fiscal
Transparency Portal (Portal de Transparencia Fiscal) and the Active Transparency Portal (Portal de
Transparencia Activa). These information systems and their statistics are considered reliable, but they
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El Salvador Social Expenditure and Institutional Review
have room for improvement. In addition, the STP has undertaken a major effort to measure and
track spending in social sectors, a significant challenge insofar as budget is not reported at program
level but at institutional level. The series of social public spending for 2004-2012 has already been
published on the web. Still, measurement of public spending effectiveness and efficiency remains a
challenge, as is the monitoring of results from social spending.
Given fiscal constraints, El Salvador needs to take further steps to improve both the
efficiency and the effectiveness of its public social spending. In spite of the public sector
modernization, which has been under implementation since 1994, an analysis of spending efficiency
and effectiveness of the social sector shows that El Salvador has significant room for improvement
on both fronts, as evidenced by the relationship between social outcomes and public spending.
Figure 10 shows a comparison between the levels of Public Sector Performance (PSP) and
Public Sector Efficiency (PSE) in El Salvador and in other LAC countries2. The PSP is a
composite indicator based on socioeconomic variables3 that are assumed to be the output of public
policies4. This indicator summarizes the effectiveness of public spending in improving social
outcomes. The PSE indicator then relates PSP scores to the total public spending in these sectors5. It
represents the “public value” per public dollar spent. The overall social public spending in El
Salvador is considered less effective and less efficient than most of the other LAC countries. This
means that, on average, other LAC countries get a higher return (improvement in social indicators)
per dollar of social public spending. Interestingly, there are differences across sectors. Whereas the
education sector tends to be as a less effective, but efficient sector - probably due to the low public
spending level – both the health and social protection sectors are classified as less efficient, but effective
sectors. In other words, when compared to other LAC countries, El Salvador’s education sector
appears to achieve good outcomes per dollar spent; on the contrary, El Salvador’s health and SPL
2 We follow the methodology by Afonso, Schuknecht, and Tanzi (2005, 2010) for OECD countries and that of Afonso,
Romero, and Monsalve (2013) for LAC.
3 For education, we take gross secondary enrollment and literacy rate; for health, infant mortality rate and immunization
measles; and for social protection and labor, inequality (measured by the Gini coefficient) and extreme poverty
headcount (percentage of population earning less than $1.25 a day)
4 To obtain PSP indicators we assign equal weights to each sub-indicator, computed as the average of the corresponding
outcome indicators, each one of them normalized by its sample mean. The PSP indicator for each country is then
obtained by averaging the values of all sub-indicators. Resulting PSP scores are then related to the average value of one
of the normalized output indicators. Hence, countries with PSP scores in excess of one are seen as good performers, as
opposed to countries with PSP values below the mean.
5 PSE weights public sector performance in each area by the amount of relevant public expenditure that is used to
achieve such performance. To compute PSE scores, public spending is normalized across countries, taking the average
value of one for each of the aforementioned expenditure categories.
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El Salvador Social Expenditure and Institutional Review
sectors do achieve better outcomes, on average, than the remaining LAC countries, but a much
higher cost (less efficiently) than they do.
Figure 10: Public Sector Performance and Efficiency in El Salvador and LAC, 2010.
Overall social public spending Education public spending
Health public spending Social protection & labor public spending
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El Salvador Social Expenditure and Institutional Review
Source: World Bank’s calculations using CEPAL and WDI databases
A LAC “production possibility frontier” analysis shows that El Salvador could increase its
social performance by as much as 15 percent with the same level of public social spending.
Figure 11 shows the production possibility frontier for total social public spending for LAC,
applying the data envelope analysis (DEA6) using the PSP scores as an output and social-public
spending-to-GDP ratios as an input. According with the DEA analysis, El Salvador is far away from
the LAC “production possibility frontier”. This means that El Salvador could increase its social
performance by 9 percent, with the current level of public social spending.
Figure 11: Production Possibility Frontier (Data Envelope Analysis) for Social Public
Spending, El Salvador and LAC, 2010.
Source: World Bank’s calculations using CEPAL and WDI databases.
6 The DEA methodology developed by Farrell (1957) assumes the existence of a convex production frontier which
envelops the set of observations. Countries located in the production frontier are considered efficient while countries
inside the frontier exhibit inefficiency (for the observed social public spending level, the actual output is smaller than the
best attainable one). See Coelli et al. (1998) and Thanassoulis (2001).
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El Salvador Social Expenditure and Institutional Review
III. Performance and Challenges in Education
III.1 Recent Evolution of Public Spending on Education
Public spending on education has increased in El Salvador, but remains low according to
international standards. Public spending on education represented 3.6 percent of its GDP in 2013,
as compared with 2.8 percent in 2007. Nevertheless, public expenditure on education is still low
both when compared to OECD standards, neighboring countries in CA, and “comparator
countries” (Figure 12). Education spending makes up for 29 percent of social spending in El
Salvador and it has been constant over time in the last few years (Figure 13). Basic education takes
up the bulk of public spending on education (69 percent in 2013), as compared with 9 percent
devoted to upper secondary education and 10 percent allocated to tertiary education. Countries with
a higher level of economic development tend to show more balanced spending across levels, with
their spending on primary education ranging between 20 percent and 35 percent.
Figure 12: Public spending on education versus GDP per capita (circa 2012)
Source: World Bank’s calculations based on ICEFI social spending database for CA; EdStats for the rest of the countries.
Figure 13: Public spending on education as % of social spending (%)
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El Salvador Social Expenditure and Institutional Review
Source: World Bank’s calculations based on ICEFI social spending database
Average per student spending has also increased in the last few years, although with
differences across levels. In fact, per student expenditure on pre-primary and basic education has
increased annually faster than on upper secondary education (Figure 14 and Figure 15). Between
2007 and 2012, per student spending in pre-primary and primary education increased 7 percent
annually, whereas the increase in per student spending on upper secondary level slightly increased
0.2 percent annually. As a result, for example, the average public expenditure for each student in
upper-secondary education in 2012 is US$811, as opposed to US$802 in 2007. While the increase in
per student public expenditures on basic education can be partly explained by the reduction (2%
annually, on average) of students enrolled in the period between 2007 and 2012, the increase in
spending per student in upper-secondary education was accompanied by an average annual increase
in enrollment of 3 percent over the same time period. There was no variation in the number of
students enrolled in pre-primary during the same time period.
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El Salvador Social Expenditure and Institutional Review
Figure 14: Per student public spending on Figure 15: Per student public spending on
pre-primary and basic education upper secondary education
(PPP, US$ 2007) (PPP, US$ 2007)
Source: World Bank’s calculations based on ICEFI social Source: World Bank’s calculations based on ICEFI social
spending database spending database
The share of salaries to total public spending on education (wage bill) in El Salvador
increased in the last few years; still, at 63 percent, the wage bill is lower than most countries
in the CA region. For instance, the wage bill in Honduras accounts for about 90 percent of the
total public education expenditure and the share in Nicaragua is 79 percent. Lower spending in wage
bills is usually associated with higher expenditure in capital investment, which is considered a better
predictor of education quality. For instance, in Finland and Korea—commonly considered among
the top education performers—the wage bill accounts for 50 percent of the total public education
expenditure (Figure 16). Therefore, El Salvador with a relatively low wage bill (73 percent of the
total education spending) and low learning outcomes represents an exception to this stylized fact.
The wage bill in El Salvador’s education sector has been increasing over time, with an average
increase of 2 percent per year over the period between 2007 and 2013 (Figure 17). This was driven
by both an increase in the number of teachers and in teacher salaries. The number of teachers rose
from 58,734 in 2007 to 60,221 in 2011. This increase led to a reduction of the student-teacher ratio
from 30.3 in 2007 to 28.7 in 2011 (Figure 18). Nevertheless, the student-teacher ratio remains
among the highest in the region and much higher than those in comparator countries with similar
level of GDP, such as Armenia and Georgia (Figure 19). Evidence from the household surveys also
suggests that average teacher salaries have increased significantly, compared to average salaries
earned by tertiary education graduates employed in other occupations. While in 2007, monthly
salaries for teachers were 17 percent lower on average than those of other tertiary education
graduates; in 2011 they were in line with those of tertiary education graduates employed in other
occupations.
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El Salvador Social Expenditure and Institutional Review
Figure 16: Wage bill as a % of public Figure 17: Wage bill as a % of public
education spending by countries (%) education spending 2007 and 2013 (%)
Source: World Bank estimation based on official data for El Source: World Bank SSEIR / ICEFI social spending database,
Salvador (2011). EdStats for the rest of the countries. MINED Salvador
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El Salvador Social Expenditure and Institutional Review
Figure 18: Student/teacher ratio and Figure 19: Student/teachers ratio per level
number of teachers of GDP
Source: EdStats
Source: Own calculations based on MINED spending data
and School Census data on the number of teachers.
Teachers in El Salvador work fewer hours and earn more than other similarly educated
professionals, and remunerations have no linkage with performance. On average, monthly
salaries for teachers with a completed tertiary-level education are not different from those employed
in other occupations, but hourly wages are 12 percent (in 2011) higher overall due to fewer working
hours of teachers compared to other professionals. Results in Bruns et al. (2013) find that teachers
in El Salvador, together with those in Mexico, earn more per hour than teachers elsewhere in the
LAC region. Moreover, the fact that salaries are not linked at all to performance reduces the scope
that monetary incentives can have in boosting learning outcomes.
III.2 Results and Outcomes
Even though enrollments for all school levels rose, the gross enrollment ratio in upper-
secondary education is still dramatically low. Between 2000 and 2012, the gross enrollment
ratios rose across all the education levels. For instance, ratios rose from 104 percent in 2000 to 113
percent in 2012 at the primary level. In addition, more students are now completing primary
education. While in 2005, only 85 percent of the children enrolled completed in 2011 this number
rose to 101 percent. Enrollment in upper secondary also rose. However, in 2012 gross enrollment
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El Salvador Social Expenditure and Institutional Review
level at the upper secondary was still 48 percent, well below other countries in the region, such as
Nicaragua and Guatemala (Figure 20). Moreover, comparator countries with similar levels of GDP,
such as Jordan and Albania, display much higher ratios.
Figure 20: Gross enrollment ratio, upper secondary education vs. GDP per capita (circa
2011)
Source: EdStats. Upper secondary education corresponds to the last three grades of school.
Furthermore, there are large inequalities within the country in access to secondary education. The differences in
education. The differences in enrollment between urban and rural areas increase dramatically with age, once children have
age, once children have completed the lower cycle of basic education. Children start to drop out of school at about age 12
school at about age 12 in rural areas, and age 14-15 in urban areas (Figure 21 and Figure 22). However, there are no
disparities by gender (Figure 23 and
Figure 24). Among children age 18, the probability of being in school for those in urban areas is 50
percent, as opposed to 30 percent for those living in rural areas. The large differences in enrollment
associated to the socio-economic status and geographic area can be explained mostly by financial
constraints and lack of interest - with the latter likely due to the lack of available information about
returns on education. According to the information collected in the 2013 household survey, 70
percent of the children in rural areas, and in the secondary age rage, who are not attending school
report the following three as the main reasons: 1) lack of interest, 2) the need to work and 3) the
inability to afford education.
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El Salvador Social Expenditure and Institutional Review
Figure 21: Attendance rates by location Figure 23: Attendance rates by gender and
and by age, 2013 by age, 2013
Source: World Bank SSEIR team’s analysis of household Source: World Bank SSEIR team’s analysis of household
surveys, authors’ calculations using standardized ADePT surveys, authors’ calculations using standardized ADePT
software (Education Module) software (Education Module)
Figure 22: Proportion of 15-19 years old Figure 24: Proportion of 15-19 years olds
that completed each grade by area, 2013 that completed each grade by gender, 2013
Source: World Bank SSEIR team’s analysis of household
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT
surveys, authors’ calculations using standardized ADePT software (Education Module)
software (Education Module)
Learning achievements lag behind comparator countries and are lower for public school
students than private. In 2007, the average score of the Salvadoran 4th graders who took the
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El Salvador Social Expenditure and Institutional Review
TIMSS test in Mathematics was below 350 points. In comparison, Armenia, whose level of GDP is
comparable to El Salvador (Figure 25), achieved an average of 500 for the students who took part in
the same test. Not only are the levels of learning low, but when comparing the results for the gross
enrollment rates there are large differences within El Salvador. According to results from the 2012
PAES, a national standardized test for secondary school students, 6th graders in top performing
private schools do much better than 6th graders in top public schools. There are no significant
differences for students who attend schools at the bottom of the quality distribution, irrespective of
whether the school is public or private.
Figure 25: TIMSS 2007 Mathematics 4th grade versus GDP per capita
Source: TIMMS, 2007
Increases in per-student spending did not translate into improvements in learning
outcomes. So far, we have seen that increases in public spending on education were
with higher enrollment and better access to schooling, but not with improvements in
spite of the improvements in the “quantity” of the educational inputs, as proxied by the
teacher ratio, learning outcomes have not improved. Between 2007 and 2012, the public
on education per student in primary education increased on average by 42 percent, from
US$779 (Figure 26). Nevertheless, a comparison of test score results in Language and
Mathematics for 3rd graders, as measured by the country own national test score
(PAESITA), shows no change over the period between 2005 and 2012 (Figure 27Figure 27:
Test Results (average scores)
). Moreover, while the average expenditure per student in upper-secondary rose from US$802 in
2007 to US$811 in 2012, the average result in Math (as measured by the PAES) dropped from 5.3 to
4.2 (Figure 28Figure 28: Upper secondary learning outcomes vs per-student spending). This result
might be partly explained by a “selection effect” of the entry cohort: as more students enter upper -
secondary education it is likely that the average quality of the students drops, thus leading to a
reduction in the level of learning. Therefore, an improvement in the “quality” of the educational
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El Salvador Social Expenditure and Institutional Review
inputs, primarily teachers, seems to be a necessary condition to improve learning outcomes (see
Bruns, et. al., 2013). As we will discuss ahead, further reforms are needed to improve impacts and
ensure the next generations are educated and productive.
Figure 26: Public spending in education Figure 27: Test Results (average scores)
per student in primary (US$ 2007)
Mathematics 3rd grade1
8
5.28 5.69 5.66
6
4
2
0
2005 2008 2012
Language 3rd grade1
8
5.55 5.71 5.72
6
4
2
0
Source: World Bank SSEIR / ICEFI social spending
database Source: PAESITA.
Figure 28: Upper secondary learning outcomes vs per-student spending
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El Salvador Social Expenditure and Institutional Review
Source: World Bank SSEIR / ICEFI social spending database, EdStats, official data in Aspectos Institucionales del Sector de
Educación de El Salvador
The lack of quality in the El Salvador public education induces families to flee the public
system and attend the private schools of good quality, when they can afford it. While
objective measures of quality of public education are not available, subjective measures like
perceptions on quality, as elicited in the Latinobarómetro (2011), show that less than 30 percent of
the Salvadorans perceived improvements in the quality of the public education system in the 10
years prior to the survey, as opposed almost 60 percent among the Costa Ricans. As a result, a large
fraction of children belonging to the wealthiest families tend to send their children to private
schools: according to the 2013 Household Survey, 54 percent of those belonging to the 5th income
quintile attended private schools (Figure 29Error! Reference source not found.). Only 4 percent
of those in the first quintile of the income distribution attend a private school. The private schools
attended by the wealthiest are those with better quality standards, thus suggesting that the gap in
students’ learning achievement between public and private schools increases with income.
Figure 29: Public/private enrollment by socio-economic quintile, 2013
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Education Module)
Insufficient school readiness and poor teacher quality are some of the main constraints to
achieve a higher quality public education. Patrinos et al. (2013) propose a framework to
understand the factors that can increase education quality. Improvements in learning outcomes
require a systematic approach where both elements of structural quality and institutional factors are
considered. Among the former, school readiness, teacher quality and attention to local culture within
the curriculum are key determinants of students’ achievements.7 Among the latter, quality of the
7 Recent evidence both for the LAC region (Bruns et al., 2013) and for the US (Chetty et al., 2013) also provide evidence
that teacher quality is an important driver of success both during the school career and in the labor market.
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El Salvador Social Expenditure and Institutional Review
assessments, stakeholders’ autonomy and a system of accountability in place have been proven to
have a positive effect on learning. Both in terms of structural quality and institutional factors, the
education system in El Salvador suffers from significant gaps. First, the country does not collect data
on child development, but the existing information does suggest that children, especially those from
the lowest socioeconomic background, enter in school with already large gaps. According to the
information collected in the 2013 household survey, only 45 percent of the children age 7 in the first
consumption quintile are able to read, as opposed to the 83 percent among children in the highest
quintile (Figure 30). Second, the improvement of teacher quality is one of the main challenges for
the education system in the country. In 2000, the Government of El Salvador established a
mandatory exam for teachers exiting teacher training programs, called the Evaluación de las
Competencias Académicas y Pedagógicas (ECAP). Although the fraction of teachers passing the ECAP has
dramatically increased over time—passing from roughly 40 percent in 2001 to almost 80 percent in
2012—the teachers attending training programs represent a minority of the entire teaching corps so
far. Third, the curriculum has not been traditionally linked to the local culture and the need of the
local labor markets, thus creating a gap between the demand and the supply of relevant skills.
Figure 30: Proportion of 7 year old who can read by quintile, 2013
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Education Module)
III.3 Institutional reforms and challenges
The School-Based Management (SBM) system has been disproportionally focused on
monitoring financial resources, and very little on quality standards. As a result of the
implementation of the EDUCO system back in 1991, which only recently has been phased out, El
Salvador has been long regarded as a laboratory of the SBM in the region. In EDUCO schools, the
Asociación Comunal para la Educación (ACE), or Community Education Association, whose members
are elected from among the parents of the students, has a central role in school administration and
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El Salvador Social Expenditure and Institutional Review
management. The EDUCO system achieved significant results in extending school coverage in rural
areas and reducing school drop-out rates (Jimenez, 2014). However, the accountability system was
focused almost exclusively on financial resources. While this feature contributed to the reduction of
teachers’ absenteeism, it left very little space for quality standards. The creation of parents and
community organizations favored the involvement of these two actors in school management.
Nevertheless, the system was unable to achieve an effective empowerment of the actors. For
instance, the role of school principals as pedagogical leaders was never fully defined. Teachers were
not adequately trained for content or pedagogical learning styles. Parents and community
associations were not provided with the skills to monitor and provide feedback on teachers’ quality.
All these elements combined can explain why the EDUCO system did not lead to improvements in
the quality of learning. The assessment model might potentially rely on already very rich
administrative sources of data, such as the results from the standardized tests (PAES and PAESITA)
and annual school census data; unfortunately, there are still gaps in the data collected. The data is
also rarely provided in a timely matter to policymakers/teachers/principals so that it can actually
support the decision making process.
Today, the new full-time school (FTS) model builds on a strong territorial strategy to
promote quality. Started by the previous administration as a pilot in primary schools in selected
municipalities, the scale-up of the FTS model became the main education policy of the previous
government and has continued to be a priority in the current administration (Figure 31). As part of
the territorial strategy, schools within a given municipality are reorganized to form clusters, within
which they share and are governed by a unique governance and administration system.8 Each cluster
of schools aims to provide a full set of school services, ranging from preschool to upper secondary
levels. Besides the improved supply of school services, the FTS model promotes greater
collaboration across schools, leveraging equipment, resources, teachers, and expertise within
clusters. More than the mere extension of the school day, the FTS reform focuses on new
pedagogical approaches in the classroom to increase student learning, provide for the
professionalization of the teaching career path, and install a more robust monitoring and evaluation
information system. More time is allocated to learning, as the instructional time increases from 25 to
40 hours per week. The additional time is devoted to traditional subjects as well as to new ones, such
as music, art & crafts, etc. The inclusion of additional subjects is part of a new and broader
education model, valuing an extended set of competencies and values (e.g. citizenship). The contents
and the pedagogical practice, unlike the previous model, are expected to be more in line with the
characteristics of the surrounding community.
8 The ODEI, the Organismo Directivo de la Escuela Inclusiva, is the most important governing body.
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El Salvador Social Expenditure and Institutional Review
Figure 31: Organizational Structure of the FTS Model
The full-time school model emphasizes the training of different actors, but sustainability is
the main challenge. The training aims at providing teachers with the ability to align didactic plans,
teaching practices and pedagogical plans to the grade/subject they teach. The training program for
school principals will aim at improving their ability to be both effective managers and pedagogical
leaders. The weakest area of the training model is the focus on the parents and community. For
them, training is meant to give them only information about the full-time model (the induction
phase, in Spanish referred to as “las fases de inducción”) and will therefore not train them to become
more active and engaged advocates in their children’s education. Looking ahead, with the expansion
in access and eventually lower student-teacher ratios, there will be further pressures on the teacher
wage bill (see Bruns et al., 2013). These pressures will be reinforced further by the additional
teaching hours required by the expansion of full-time school model. In the medium term, the dual
areas of quality and financing of this model will require particular attention and analysis.
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El Salvador Social Expenditure and Institutional Review
IV. Performance and Challenges in Health
IV.1 Recent Evolution of Public Spending on Health
El Salvador’s public spending on health has increased over time and is in line with most
Central American countries. While its share of government health spending relative to GDP
between 2007 and 2013 increased (3.4 percent – 4.3 percent), it remains in line with other Central
American countries except Costa Rica (Figure 32). Same situation arises in terms of per capita public
spending, at higher levels than Guatemala, Honduras and Nicaragua but well below Costa Rica and
Panama (Figure 33).
Figure 32: Public Spending on Health as a Figure 33: Per capita public spending on
% of GDP by countries Health by countries (real, US$ 2007)
Source: World Bank SSEIR/ICEFI social spending database Source: World Bank SSEIR/ICEFI social spending database
During the same period, public expenditures on health steadily increased while private
expenditures on health decreased. Increased public spending on health was accompanied over
time by lower private spending on health, a significant share of which was comprised by reductions
in out of pocket spending (Figure 34). This trend most likely reflects the increased budget allocation
to health and the impact of the public policy that abolished fees for health services9 in the country.
9Free access to health services applies to all levels of care, with an emphasis on primary health services. Policy
implementation started in 2010.
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El Salvador Social Expenditure and Institutional Review
Figure 34: Public, Private, and Out of Pocket expenditure as % of Total Health
Expenditure: 2000 to 2011
Source: MOH National Health Accounts 2012
Household expenditures decreased from 2007 to 2013 with most spending allocated to
medicines and other health items/services. Household survey data show that the share of health
out of pocket expenditures as a share of total household expenditures decreased from 2.8 percent
from 2008 to 2 percent in 2013, with most spending allocated to medicines and other health
expenditures (glasses, dentists). Households’ out of pocket spending went mostly to drugs and other
health expenses (lenses, dentists, etc.) for all expenditure quintiles (Figure 35). While the poorest
quintile allocated the largest share of its expenditures to drugs, the highest quintile allocated the
largest share of their spending on other health services/items such as lenses and dentists. In
addition, out of pocket spending in private hospitals also decreased for almost all expenditure
quintiles (Figure 36). With the exception of households in the fourth expenditure quintile which only
experienced a very small increase, the rest of the households ‘ out of pocket costs in private
hospitals declined, in particular for those at the highest expenditure quintile.
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El Salvador Social Expenditure and Institutional Review
Figure 35: Household Health Expenditure Shares by Health Expenditure Category and by
HH Income Quintile, 2013
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Health Module)
Figure 36: Out-of-pocket spending by expenditure quintile, 2008-2013
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Health Module)
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El Salvador Social Expenditure and Institutional Review
Among public sector institutions, the Ministry of Health (MOH) accounted for majority of
public spending on health. As the main public sector institution responsible for providing health
care in the country, the Ministry of Health had the largest share of total public spending on health
(slightly over 50 percent), followed by the ISSS (41 percent) (Figure 37). The Salvadorian Institute of
Teachers’ Wellbeing (ISBM), Solidarity Fund for Health (FOSALUD), Military (COSAM), Superior
Council of Public Health (CSSP), Salvadorian Institute of Handicap Rehabilitation (ISRI), Red Cross
and National Directorate of Medicines (DNM) accounted for the remaining 9 percent of public
spending on health. But while MOH has the largest nominal coverage rate of the Salvadorian
population (75 percent), its increase in spending from 2007 to 2013 was lower than the spending
increase of four other public health institutions that have significantly lower coverage rates.
Although the Ministry of Health’s spending increased by 9 percent, this spending increase was less
than the spending increases (each greater than 45 percent) of ISBM, FOSALUD, COSAM and
DNM.
Figure 37: Public expenditure in health by Institution. El Salvador, 2007- 2013
Source: World Bank SSEIR / ICEFI social spending database
Despite efforts improve service delivery and better target the poor, public provision of health
care remains fragmented, with inequities in spending by different providers. This is reflected
in the significant differences in per capita expenditures among different public providers (
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El Salvador Social Expenditure and Institutional Review
Figure 38). In 2013, per capita expenditures ranged from US$137 by the Ministry of Health,
US$236 by ISSS, US$349 by COSAM, up to US$508 by ISBM. Similar disparities existed since 2007.
Figure 38: Per capita spending on health by Institution in El Salvador: 2007-2013
Source: World Bank SSEIR / ICEFI social spending database
Salaries represent the largest share of MOH expenditures while average spending on
supplies remained low. From 2007 to 2013, MOH spending on salaries ranged from 58.2 to 59.4
percent, averaging 57.7 percent while spending on medicines decreased and spending on supplies
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El Salvador Social Expenditure and Institutional Review
marginally increased (Table 2). The MOH’s salary expenditure share is higher than the average share
of wages out of total health spending in middle income countries (52 percent).10 In terms of CA
countries, it is lower than the share allocated by the MOH to salaries in Honduras (60.5 percent) but
higher than Guatemala’s MOH salary share (48 percent).11 The relatively low average share of
expenditures on supplies (5.3 percent) explains the lack of medical supplies in health facilities, as
well as the slow replacement of equipment. The assessment of the delays in achieving MDG5
(reducing maternal mortality) identified the lack of supplies as having a direct impact on the services
provided to pregnant women during institutional delivery.12
Table 2: Ministry of Health Expenditures by selected expenditure categories:
El Salvador, 2007-2013
2007 2008 2009 2010 2011 2012 2013p
Total Budget (million US$) 371.4 399.3 458.9 486.4 553.9 561 625.5
Percentages
Salaries 58.2 58.9 55.2 56 55.9 60.4 59.4
Medicines 10.4 7.2 10.8 11.8 6.8 7.2 6.8
Vaccines 1.2 2.1 1.8 1.8 3.4 2.6 2.3
Medical and Laboratory supplies 5.1 4.4 6.6 5.1 5.6 6.1 5.3
Other Recurrent expenditure 11.6 13.9 14.6 15 15 14.4 12.4
Capital 13.4 13.6 11.1 10.3 13.3 9.2 13.8
Total Budget 100 100 100 100 100 100 100.0
Source: Ministerio de Salud Publica. Informe de Labores.
The largest share of public expenditures in health went to hospital services, in line with the
average CA share of spending on hospitals. From 2007 to 2013, the average pending on hospital
services represented approximately 48 percent of public health expenditures which is close to the
average of 49 percent for five CA countries, followed by outpatient services with an average share of
35 percent and then non-specified expenditures which averaged approximately 14 percent.13 Both
expenditure shares for hospitals and outpatient remained constant from 2007 to 2013 (from 47
percent to 46 percent in the case of hospitals and from 35.2 percent to 34.7 percent in the case of
outpatient services). On the other hand, non-specified expenditures increased from 15 percent to 17
percent in 2013. Spending on research and development was less than 1 percent.14
10 Clements et al (2010).
11 MOH in Guatemala (2012)
12 Ministerio de Salud and Sistema de Naciones Unidas de El Salvador (2012)
13 The CA average for 5 countries was 48 percent; disaggregated spending by facility level was not available for Costa
Rica.
14 ICEFI and COFOG
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El Salvador Social Expenditure and Institutional Review
IV.2 Results and Outcomes
Higher public spending on health and the elimination of fees-for-service has had a positive
impact on health care use in El Salvador. Consultations increased, particularly at the primary
level of care, after the policy was introduced (Figure 39).
Figure 39: Health Care visits by level of Care. El Salvador, 2008-2012
Source: Ministerio de Salud Publica. Informe de Labores.
Moreover, a larger share of people seek health care when they are sick than in previous
years, but 40 percent still do not do so even when ill. Household survey data confirm that the
percentage of those with reported illness who did not seek care decreased across all expenditure
quintiles from 2008 to 2013 (Error! Reference source not found. and Error! Reference source
not found.). Despite the increase in health seeking behavior, around 39 percent of those who
declared themselves sick did not seek care in 2013, with 46 percent of the households in the lowest
expenditure quintile not seeking care compared with 31 percent in the highest expenditure quintile
(Error! Reference source not found.). From 2008 to 2013, households in the lower two
expenditure quintiles that sought care at public health facilities increased by approximately 8
percentage points while households in the highest expenditure quintile that sought care at public
health care facilities increased by more than 10 percentage points.
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El Salvador Social Expenditure and Institutional Review
Figure 40: Utilization of health facilities by Figure 41: Utilization of health facilities by
quintile, 2008 quintiles, 2013
Source: World Bank SSEIR team’s analysis of household Source: World Bank SSEIR team’s analysis of household
surveys, authors’ calculations using standardized ADePT surveys, authors’ calculations using standardized ADePT
software (Health Module) software (Health Module)
From 2008 to 2013, use of public hospitals has remained high for all expenditure quintiles.
While all households in the lowest expenditure quintile continued to only use public hospitals, even
households in fifth quintile increased their utilization of public hospitals from 64 percent in 2008 to
71 percent in 2013 (Figure 42 and Figure 43).
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El Salvador Social Expenditure and Institutional Review
Figure 42: Place of hospitalization by Figure 43: Place of hospitalization by
expenditure quintile, 2008 expenditure quintile, 2013
Source: World Bank SSEIR team’s analysis of household Source: World Bank SSEIR team’s analysis of household
surveys, authors’ calculations using standardized ADePT surveys, authors’ calculations using standardized ADePT
software (Health Module) software (Health Module
Importantly, increased public spending on health and health care utilization have
contributed to improvements in health outcomes. From 1990 to 2013, El Salvador significantly
reduced its under-5 mortality rate, achieving its MDG 4 Goal (Figure 44Error! Reference source
not found.). However, despite progress in reducing deaths in young children, neonatal mortality
(the number of children dying before reaching 28 days of age per 1,000 live births) comprises 66
percent of the deaths in children under one year of age. To reduce mortality in this age group, El
Salvador would need to invest in technology and preventive care for women with high risk of having
complications during delivery and/or having low birth weight infants.
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El Salvador Social Expenditure and Institutional Review
Figure 44: Maternal and child mortality trends, El Salvador 1990-2015
Source: WDI 2013
Despite progress in reducing maternal mortality, El Salvador does not seem to be on track
to achieve its MDG 5 goal. Maternal mortality decreased from 110 deaths in 1990 to 69 deaths per
100,000 live births in 201315 (Figure 44). In 2013, adolescents accounted for 31 percent of maternal
mortality. Most maternal deaths (60 percent to 97.5 percent) are considered preventable. Skilled
specialized assistance during deliveries has been reported for 83.7 percent of births yet maternal
mortality remains relatively high indicating that, although coverage has improved, quality of care has
not kept pace. Moreover, the average mortality and infant mortality rates hide significant disparities
within the country which, in turn, reflect disparities in the distribution of resources, coverage and
the quality of health care provided in urban relative to rural areas. Neonatal and maternal mortality
rates are higher in municipalities with a low Human Development Index (HDI); half of neonatal
deaths and two thirds of maternal deaths are in rural areas.
Despite improvements in key indicators, efforts are still needed to address maternal and
child health issues. In an effort to meet the MDGs targets, the Government subscribed to
implementing the MDG Accelerated Framework (MAF) with a focus on maternal mortality. The
effort, supported by UN agencies and the WB expects to focus on the most disadvantaged groups
and achieve defined targets during the time left before December 2015. The objective of the MAF in
El Salvador is to strengthen MOH capacity to deliver integrated maternal, neonatal and reproductive
health including risk management for women in pregnancy, puerperal and neonatal stages, that lives
in 3 pre identified health regions, during the period February 2014 to December 2015. The plan
components include: Food safety and Nutrition, accessibility to services, increased access to
15Maternal Mortality Data taken from the World Development Indicators (WDI). These estimates differ slightly from
those in “Trends in Maternal Mortality 1990 to 2013” published in 2014 by WHO, UNICEF, UNFPA and The World
Bank (http://whqlibdoc.who.int/publications/2012/9789241503631_eng.pdf). However the trend and conclusions are
the same, independently of the source of data used.
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El Salvador Social Expenditure and Institutional Review
education and supplies for sexual and reproductive health (SRH) including the hospital level, ensure
quality of care, promote research and strengthen surveillance.
Additional interventions are also required to respond to El Salvador’s changing
epidemiological profile. Chronic diseases and trauma/accidents (including violence) have emerged
as among the main reasons for outpatient consultation, as well as among the top ten causes of death
in the country (Table 3). This information is in line with the reports of the rising number of
outpatient visits for diabetes and hypertension. Health resources are being used to treat these
illnesses although resources could be better allocated to their prevention. Multi-sectoral actions are
needed. For example, violence which impacts directly and indirectly on the national health system,
for example, from pregnant women experiencing difficulties to reach the health facilities up to
emergency health facilities filled with cases of domestic and street violence, would require a set of
coordinated interventions from different national institutions beyond the regulatory/legal
framework.
Table 3: Ten most frequent causes of mortality at the MOH Hospitals.
El Salvador, January- December 2012
Mortality causes- CIE-10 Number Percentage
1 Diseases of the Genito-Urinary System16 876 8.74
2 Cerebrovascular Diseases 618 6.17
3 Cardiovascular Diseases 578 5.77
4 Pneumonia 560 5.59
5 Diabetes Mellitus 488 4.87
6 Diseases of the Digestive System 483 4.82
7 Perinatal Infections 461 4.60
8 Cranel trauma 456 4.55
9 Other cardiac disease 436 4.35
10 Liver Diseases 436 4.35
Other causes 4601 45.90
Total 10024 100.00
Source: MOH, 2012
IV.3 Institutional Reforms and Challenges
The Government developed a National Health Strategy in 2009, with eight areas of defined
interventions that have been partially implemented. In particular, two main policies related to
access are being implemented in the public health system. First, the Government implemented the
policy of free access to health care at the public health facilities network all over the county in 2010
16These conditions relate to the genital and urinary organs or functions. Some common diseases that fall in the Genito-
urinary category are Gonorrhea, HPV, Urinary tract infections, kidney failure, Chlamydia, and E. coli.
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El Salvador Social Expenditure and Institutional Review
(Box 1). Second, it has been prioritizing actions to reduce child and maternal mortality rates,
addressing the challenges of populations at risk, especially adolescents, youth, and other highly social
excluded population groups through the strengthening the coordination of the levels of care
provision in the public system. This strategy, known as the Integral and Integrated Health Network
(RIIS), supports the strengthening of coverage of health services through the implementation of
Family Community Teams (ECOS). ECOS are health teams that visit the rural areas to provide
health care at the household level with general as well as specialized care. It is considered innovative
because it harmonized the way primary health care was delivered, especially in poor rural areas.
Previously these health services were provided by NGOs, which were more costly and less
harmonized especially with the rest of the health system.
Box 1: Removal of User Fees in El Salvador
On June 1st, 2009, a new Government with a different political orientation,
assumed office after 20 years of the same party governing the country. During the
second half of 2009, this new Government outlined the social policy and strategic
lines of its development plan centered around the development of an Universal
Social Protection System which covers: urban and rural solidarity-communities,
temporary income support program, universal basic pension and elder-adult integral
program; actions directed to the vulnerable populations, increasing social security
coverage and the establishment of a single beneficiary registry. In this context, the
Ministry of Health (MOH) formulated its Health Policy and strategies for its
implementation, which included the elimination of user fees in all MOH managed
health care facilities. This policy was complemented by the creation of the Network
of Integrated Health Care Services (RIIS), expanding and promoting the integration of
health coverage to the population.
Source: WHO/PAHO. Country Cooperation Strategy at Glance. 2010; Ministerio de Salud Publica.
Informe de Labores 2012-2013.
By 2013, 517 ECOS have been deployed in 62 percent (164) of the country’s municipalities. The
ECOS mobile health teams have increased service coverage and helped to solve overcrowding in
hospitals in some regions. However, the sustainability of this model is at stake because it has not
been considered in the budget planning or budget projections and it is partially funded by
international partners. In addition the ECOS mobile health teams are relatively larger (eight to
twelve persons) than the usual two to four health professionals of other traditional mobile
community teams.
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El Salvador Social Expenditure and Institutional Review
However, other areas of the Government’s health strategy, such as the establishment of an
integrated health care system that supports coordinated health care services in the country,
have not been implemented. Although an agreement was drawn up between the ISSS and the
MOH in order to establish the mechanisms in which the MOH and the ISSS could work together to
address the needs of the insured and uninsured population, more work needs to be done to improve
sectoral coordination. To date, the National Health System remains highly fragmented (Box 2),
comprised by overlapping networks of health care facilities providing health care services to
different groups of the population according to their affiliation, capacity to pay and insertion in the
formal labor market. Duplication of services also seems to coexist in the case of FOSALUD, ISSS,
ISBM and COSAM.17 In addition, FOSALUD acts more as a parallel system to the MOH instead
of an entity to complement it, resulting in budget inefficiencies in the public sector.
Box 2: Integration of the National Health System in El Salvador: A Future Goal
El Salvador’s National Health System is highly fragmented and segmented,
constituted by parallel health systems based on capacity to pay and involvement in
the formal labor market. The Ministry of Health, via the Network of Integrated
Health Care Services (RIIS), covers 75 percent of the population; Social Security
Institute (ISSS) 21 percent; Teacher’s Welfare (ISBM) and Military Health
(COSAM): about 2 percent each of the population. These institutions do not form
a national integrated health service network and do not share responsibilities for the
population’s health. Per capita expenditures across these entities vary significantly, as
well as the earnings of their respective target populations. These disparities are
reflected in the types and quality of services available to the population and the
inefficiencies in the Public System.
The country's goal of integrating the above public sector health institutions has not
yet been addressed as a result of political-economy pressures to maintain the status
quo. As a result, a discussion about how to address this issue remains pending in the
political agenda.
Over time, the Government has developed its stewardship role and improved the regulatory
environment in El Salvador. For example, the Government introduced several regulatory
measures to improve sexual and reproductive health rights which led to the creation of the Unit for
Stigma and Discrimination Claims, and continues to support a Pharmaceutical Law which was
17 Pineda, 2012
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El Salvador Social Expenditure and Institutional Review
approved in 2012. To further strengthen its stewardship role, the Government created a National
Health Institute to support health surveillance, research and knowledge generation, and the National
Directorate of Medicines (Dirección Nacional de Medicamentos).
However, the health sector should improve allocation and efficiency of budgeting and
planning processes. To date, budgets and plans are still based on historical trends and not linked
with results and evidence based decision making. In addition, a review of the increase in budgetary
commitments and budgetary allocation in health should also confirm the sustainability of the newly
implemented model of expanded primary health care.
V. Performance and Challenges in Social Protection and Labor
V.1 Recent Evolution of Public Spending on Social Protection and Labor
Overall social protection and labor (SPL) spending has increased in recent years, especially
in social assistance and subsidies. The SPL system is composed of both contributory programs
(e.g. pensions) and non-contributory benefits (social assistance, labor, subsidies). Overall SPL
spending rose from 3.5 to 5 percent of GDP between 2007 and 2013 (Figure 45). Fiscal support for
SPL also increased as a share of total public spending (15.6 percent in 2013, vs. 12.7 percent in 2007)
(Figure 46), and benefits per capita grew in real terms during that same time period ($328 in 2013,
vs. $243 in 2007) (Figure 47). Notwithstanding these increased allocations, total SPL spending is on
the lower range in regional terms, below Costa Rica, Honduras, and Panama in Central America,
though higher than Nicaragua and Guatemala (Figure 48). The primary driver of the increase in SPL
spending comes from expansion of non-contributory benefits, which rose from 1.6 percent of GDP
(and $110 per capita) in 2007 to 2.6 percent of GDP (and $173 per capita by 2013). Utility subsidies
claim the largest and fastest growing share of non-contributory benefits. In contrast, public spending
on pensions has held steady over the past few years, with 2.4 percent of GDP allocated to
complement private contributions for these benefits.
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El Salvador Social Expenditure and Institutional Review
Figure 45: Social protection and security Figure 46: Social protection and security
as a % of GDP (%) as a % of Total Public Spending (%)
Source: World Bank SSEIR / ICEFI social spending Source: World Bank SSEIR / ICEFI social spending
database database
Figure 47: Social protection and security
Per-capita Public Spending (US$2007)
Source: World Bank SSEIR/ ICEFI social spending
database
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El Salvador Social Expenditure and Institutional Review
Figure 48: Social protection and security
as a % of GDP by country 2012 (%)
Source: World Bank SSEIR / ICEFI social spending
database
Social security payments exacerbate the national fiscal deficit. In 1998, El Salvador shifted
from a pay-as-you-go (PAYGO) pension system to a private funded “second pillar” scheme (Sistema
de Ahorro para Pensiones, SAP) as follows: (i) women 50 and older men 55 and older remained in the
old system (Sistema Público de Pensiones, SPP); (ii) individuals younger than 36 (and new entrants) were
moved to the new system, (iii) while the group between both ages could choose which system to
join. This shift in the pension system generated important “transition costs”, given that most
contributions moved over to the new private account system, but the Government had to continue
paying its pension obligations for the PAYGO scheme: by the end 2011, 98.7 percent of
contributors where contributing through the second-pillar SAP scheme.18 Moreover, due to low
returns to investments of SAP, the Government has had to transfer resources to guarantee the
minimum pension by law. In 2012, social security expenses from central government accounted for
2.4 percent of GDP. These public contributions to social security are projected to remain at high
level for the near future, falling only to 1.8 percent of GDP by 2030 as transition costs diminish.19
Total unfunded fiscal liabilities of the pension system (comprising the public and private
component) range from 65 to 75 percent of GDP in 2013.20
18 (Rofman, Apella, & Vezza, 2015)”
19 World Bank (2010b), “El Salvador Public Expenditure Review.”
20 IMF (2013), “El Salvador Article IV 2013.”
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El Salvador Social Expenditure and Institutional Review
Spending on non-contributory social assistance rose significantly in recent years, mainly
due to an expansion of untargeted utility subsidies. The non-contributory components of El
Salvador’s SPL system include a wide range of social assistance benefits, labor market programs, and
subsidies. Spending on non-contributory programs has increased sharply in recent years, rising by a
full percentage point of GDP since 2007 (Figure 49), putting El Salvador among the higher spenders
on non-contributory benefits in Central America. Untargeted utility subsidies absorb half of these
outlays, now claiming 1.3 percent of GDP, the highest in Central America, and have been the
primary driver of increases in outlays on overall SPL in recent years (Table 4). Besides subsidies,
some 0.2 percent of GDP is absorbed by cash transfers, mainly the rural conditional cash transfer,
(CCT, currently named “Comunidades Solidarias Rurales”) and the Temporary Income Support
program (“Programa de Apoyo Temporal al Ingreso”, PATI) which operates in urban areas. The
social pension and other programs for the elderly and the disabled account for an additional 0.4
percent of GDP. A range of other social assistance programs absorb another 065 percent of GDP,
the most important being (a) Paquetes Escolares, which delivers free uniforms to primary students
since 2009 and costs 0.3 percent of GDP; (b) Paquetes Agricolas, which distributes agricultural
inputs (0.17 percent); and (c) school feeding (0.08 percent). Spending on active labor market
programs is negligible (though donors operate on their own a wide number of pilots of low resource
and coverage), the majority of them training courses managed by the public training agency, the
Salvadoran National Institute for Professional Training (INSAFORP).
Figure 49: Social Assistance and Labor spending in El Salvador, 2007-2013
Source: World Bank SSEIR / ICEFI social spending database
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El Salvador Social Expenditure and Institutional Review
Table 4: Main Social Protection Programs in El Salvador
Program Program
Coverage budget budget %
Target
Name of Program Description per year Coverage of
Population ($ million (% of
(persons) Q1 (%)
per year) GDP)
Subsidio Electricity
Universal 4,390,000 175 0.73 61.3
Electricidad subsidy
Subsidio Gas
Gas subsidy Universal 4,250,000 133 0.56 60.2
Licuado
School Children in
Paquetes Escolares textbooks and basic 1,386,767 70 0.29 73.1
uniforms education
Paquetes Agrícolas Food security Rural areas 536,137 40 0.17 N/A
Comunidades Conditional cash
Rural families 415,000 25 0.10 12.7
Solidarias Rurales transfers
Children in
Alimentación
School feeding basic 1,453,118 20 0.08 72.6
Escolar
education
Income support Urban
PATI 23,456 12 0.05 1
for unemployed unemployed
Pensión Básica Elderly rural
Social Pension 28,200 11 0.05 2
Universal areas
Integral care for
Ciudad Mujer Adult women 315,000 10 0.04 N/A
women
Source: Administrative data from LAC SP database based on Technical Secretariat of the Presidency. Coverage %Q1 from
World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software (Social
Protection Module)
V.2 Results and Outcomes
Overall, the performance of El Salvador’s Social Protection and Labor programs is mixed,
and spending allocations do not favor the better performing programs. Indeed, pension
coverage has not improved much despite system reforms and the introduction of the Social Pension.
And programs such as the rural CCT and the Urban PATI programs demonstrate positive impacts,
but remain relatively small due to low funding. In contrast, utility subsidies receive a high share of
SPL outlays, despite the fact that they are quite regressive.
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El Salvador Social Expenditure and Institutional Review
Despite the reforms, contributory pension coverage has not improved much: barely 20
percent of the elderly accrue a pension, just above Honduras and Nicaragua in coverage in the
region (Figure 50). Contributions to the pension system (mostly SAP) are made by only 30.2 percent
of the labor force, compared with 61 percent in Panama and 49 percent in Costa Rica. To increase
coverage among the poor, the Government has recently launched a non-contributory Social Pension
program called Pension Basica Universal, targeted to poor elderly (more than 70 years old) as a
complement of the rural CCT program (Comunidades Solidarias Rurales). The social pension now
reaches 30,000 individuals living in the 75 poorest rural municipalities, and its budget represents 0.05
percent of GDP. Participants receive a pension transfer of US$50 per month, provided they do not
get any other pensions. The Government plan is to reach 50,000 individuals in 100 rural
municipalities in 2014, as well as expand in urban areas as well provided resources are available.
Population estimates suggest that 130.000 poor elderly would qualify for this pension if coverage is
extended nationally, which will require at current benefit levels a budget several times its current
size, to reach approximately 0.33 percent of GDP.21
Figure 50: Coverage of social security 2007-2013
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Social Protection Module)
The Rural CCT program is well targeted with important impacts, despite low coverage and
declining funding. In face of high income poverty in rural areas, the Government of El Salvador
introduced a conditional cash transfer (CCT) program named Red Solidaria in 2006, which was later
renamed Comunidades Solidarias Rurales in 2009. This program provides income grants of $30 a month
21 (Rofman, Apella, & Vezza, 2015).
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El Salvador Social Expenditure and Institutional Review
to rural mothers if their children comply with school attendance (at primary level) and regular health
visits in 100 rural municipalities (out of a total of 262 in the country).22 El Salvador’s CCT has been
relatively well targeted, as compared with other CCT programs in the region. However, the amount
spent as a share of GDP is the lowest in the CA region (Figure 51).23 A recent impact evaluation in
targeted municipalities has shown important impacts, including: (a) increasing primary school
enrollment by eight percentage points to reach 98 percent in 2009; (b) reducing repetition rates by
eight percentage points; and (c) reducing the prevalence of diarrhea by 4 percentage points.24
However, the budget and coverage of the CCT program have declined in recent years, from about
$40 million per year and 106,000 households in 2010 (6.7 percent of all households in the country,
19.3 percent among those in the lower quintile) to $25 million and 90,000 households by 2013 (4.9
percent of total households, 12.7 percent among those in the poorest quintile). This decline in
coverage has occurred because families that exit the program because of program rules have not
been replaced by new eligible families, and the program did not expand to new areas (despite plans
to expand to urban areas, currently at just 5 municipalities). As a result, El Salvador’s CCT has the
lowest coverage among CCTs in the CA region, 4.9 percent of total households (2013) compared to
Guatemala 30 percent (2011), Costa Rica 12.7 (2013), Honduras 10 percent (2013) and Panama 10
percent (2013)25 .
22 The Rural CCT also has a component to improve supply of basic services (water and sanitation, electrification,
housing), as well as income generation and productive development (microcredit, food security, labor-intensive
community projects), though the latter has not operated effectively.
23 FUSADES and IFPRI (2010). “Evaluacion Externa del Programa Red Solidaria: Informe de Impactos a los Dos Años
de Implementacion.”
24 FUSADES and IFPRI (2010).
25World Bank SSEIR team’s analysis of household surveys, authors’ calcula tions using standardized ADePT software
(Social Protection Module)
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El Salvador Social Expenditure and Institutional Review
Figure 51: Coverage and Budget of CCT Programs in Latin America
Source: For beneficiaries: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized
ADePT software (Social Protection Module). For spending: LAC SP database
In urban areas, the main intervention is a workfare program that combines income support
with training, with important impacts. Within Comunidades Solidarias strategy, PATI is the core
social protection intervention in urban areas, having benefiting up to date about 63,000 participants
in urban poor settlements in 36 municipalities, with demonstrated impact. The PATI program
initially started as response to the economic crisis affecting the country in 2009. It is aimed at
mitigating poverty and improving productive capacities and enhanced opportunities for employment
of women heads of household and youngsters. To achieve these goals, PATI provides a cash
benefit of $100 per month for a maximum of six months, conditional on participation in community
projects, occupational training, and labor market orientation courses. The expectation is that by end
of the six month period, the beneficiaries can enter the labor market and/or create their own
productive income generation activities to avoid being stuck in the vicious circle of poverty. The
lead implementing institution is FISDL, in coordination with municipalities that formulate and
monitor projects, the Ministry of Labor (MTPS) which provides labor market orientation, and
INSAFORP, the national training institute, in charge of providing occupational training in areas
selected according with local labor demand and participant profiles. The PATI program has already
demonstrated impact per a rigorous evaluation including: reducing extreme poverty among
beneficiaries, increasing labor force participation and labor incomes (in particular among the youth),
and improving readiness to start a new job (Figure 52).26
Figure 52: Impact of PATI on labor force participation and incomes.
26 Beneke de Sanfeliu and Acosta (2014), “Programa de Apoyo Temporal al Ingreso (PATI): Evaluación de Impacto.”
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El Salvador Social Expenditure and Institutional Review
Source: Beneke de Sanfeliu and Acosta (2014).Note: Impact corresponds to one year after program participation.
Nationally, the Government of El Salvador also operates an untargeted “school inputs”
program to incentivize school attendance: without an impact evaluation, the results of this
program are still unknown. In contrast to the cuts in coverage and funding for the targeted rural
CCT program, the Government (last administration) has been prioritizing the Paquetes Escolares
Program, which combines provision of free school uniforms to all students attending public
education, with the goal of incentivizing school attendance and retention. Uniforms are produced
locally, and thus attending a second objective which is the creation of employment opportunities.
This program started in 2009 and has expanded rapidly in subsequent years, currently covering
about 1.36 million students. The Paquetes Escolares Program is much larger than the CCT or PATI,
with good coverage of the poor 73 percent of families in the poorest quintile receiving the Paquete
Escolar benefit (
Figure 53), as compared with 12.7 percent for the Rural CCT and only 1 percent for PATI (Table 4).
Given that the Paquetes Escolares Program also adopts a universal approach as opposed to the
targeted CCT and PATI programs, it is not surprising that some well-off families also receive the
Paquetes Escolares benefits (23.7 percent of families in the richest quintile receive the Paquetes
benefits). As rigorous impact evaluations have not been carried out, there is no evidence as to
whether this program is indeed helping to retain children at school as expected, and whether is cost-
effective.
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El Salvador Social Expenditure and Institutional Review
Figure 53: Coverage of Paquetes Escolares, 2013.
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Social Protection Module)
Electricity and gas subsidies account for half of non-contributory spending, twice as much
any other Central America country, and have grown over time despite attempted failed
reforms. Electricity and gas subsidies accounted in 2013 for 0.7 and 0.6 percent of GDP
respectively (Figure 54). In this sense, El Salvador is an outlier in the region, since the second
country that spends the most on subsidies in Central America is Panama, at 0.7 percent of GDP.
Particularly worrisome is the case of electricity subsidies, more than doubling from a relatively low
base of 0.3 percent of GDP in 2007. For the case of gas (liquefied petroleum gas, LPG), while still at
high levels, it has remained relatively stable across the years at 0.5-0.6 percent of GDP. The increase
in electricity subsidy obeys to the fact that in 2010 of the consumption range between 100 and 200
kWh also started to become subsidized. For the case of LPG, a reform took place in April 2011
aimed at containing subsidies, through the removal of the price subsidy resulting in a price increase
for consumers per bottle, the most common fuel used for cooking by Salvadorans at home.27, In
place of the price subsidy the authorities introduced a monthly transfer of $8.50 to households with
an electricity consumption of less than 200 Kwh per month, provided through the monthly
electricity bill. This was a relatively high cut-off as around 94 percent of households with access to
electricity consumed less than the eligibility threshold, which explains why the LPG subsidy bill did
not decline thereafter. Moreover, households without access to electricity were also entitled to a
government-issued card that would allow them to collect the monthly LPG $8.50 subsidy, which
marginally helped to improve its targeting.
27 Calvo-Gonzalez, Cunha, Trezzi (2014), “When winners feel like losers”.
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El Salvador Social Expenditure and Institutional Review
Figure 54: Spending in Electricity and gas (LPG) subsidies, El Salvador, 2007-2013.
Source: World Bank SSEIR / ICEFI social spending database
Across programs, a large share of overall social assistance spending goes to “leakages” to
non-poor families, to the detriment of targeted programs. Looking across programs, the cost
effectiveness and impact of social assistance on poverty are compromised by biases in spending on
untargeted benefits, with relatively little funding for the targeted programs. As expected, most
beneficiaries of the CCT, Social Pension and PATI are poor (Figure 55). “Leakages” to the non-
poor of these interventions are very small, in line with most mature transfer programs in the region.
However, this is not the case for other social assistance programs that have universal focus, such as
school feeding, Paquetes Escolares, and the gas, electricity and water subsidies. In terms of coverage of
main social programs, the inequities are sticking: while the well-targeted CCT program covers barely
12.7 percent of extreme poor families, nearly 68.3 percent of the richest families receive
Government subsidies (Figure 56). This is not surprising given that, for instance for the case of
LPG, two-third of families in the lowest income decile do not cook using LGP.28
28 Artana and Navajas (2008), “Analisis y rediseno de los subsidios en El Salvador”.
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El Salvador Social Expenditure and Institutional Review
Figure 55: Beneficiary incidence of major social protection programs in El Salvador, 2013
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Social Protection Module)
Note: Beneficiary incidence is defined as the number of individuals in the group who live in a
household where at least one member receives the transfer, in proportion of the total number of
direct and indirect beneficiaries.
Figure 56: Coverage of CCT and energy subsidies by income quintile, El Salvador 2013
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Social Protection Module)
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El Salvador Social Expenditure and Institutional Review
El Salvador could save at least 0.66 percent of GDP ($160 million) in subsidies that accrue to
the top two quintiles. The fact that a significant portion of resources in social assistance and
subsidies are not reaching the poor could be an explanation of why poverty has not declined much
in El Salvador despite the expansion in fiscal resources devoted to social protection. Taking into
account current levels of spending on the various programs, and the distribution of beneficiaries per
income quintile, El Salvador could save at least 0.66 percent of GDP in subsidies and other social
assistance program benefits to the top two richest quintiles (Figure 57). Moreover, subsidy amounts
tend to be higher for the rich than for the poor. Recent analyses provide evidence that subsidy
reform could start with a sequenced and gradual approach.29 For instance, excluding households
with consumption between 100 and 200 kWh of electricity from both the electricity and LGP
subsidy system would reduce the average amount received per month by richer households (top two
quintiles) by both concepts from $16.5 to $9.7. Annual savings from this measure would be
approximately $122 million or 0.45 percent of GDP. These potential savings could be reallocate to
better targeted programs, or to other sectors (such as Education, which remains under-funded) – or
they could be used to help plug the fiscal deficit.
Figure 57: Distribution of Benefits of Major Social Assistance Programs (% of GDP)
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Social Protection Module)
Income vulnerabilities are also reflected in persistent employability challenges for a large
majority of the population, with difficulties in retaining a formal job. Half of the Salvadoran
population is less than 30 years old. Every year, about 30,000 young Salvadorans enter the labor
market for the first time and encounter scarce opportunities. Around 55 percent of these new labor
market entrants have less than secondary education, and 15 percent of them cannot find a job at all,
29 World Bank (2014), “El Salvador: Fiscal Policy Options.”
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El Salvador Social Expenditure and Institutional Review
while 80 percent of those who manage to work end up in informal low-productivity activities.30 As
stated before, just one in five workers contribute to the social security system or are employed in a
medium-large firm. In fact, many youngsters enter into salaried jobs but as they age most are not
able (or not willing, depending on the interpretation) to retain this status and transition into self-
employment activities by adulthood (Figure 58).
Figure 58: Type of Employment by Age Group, El Salvador 2013.
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calcu lations using standardized ADePT software
(Labor Module)
In recent years, unemployment has become a worrying reality for youngsters living in urban
areas, even more for those with some secondary or tertiary education. In general,
unemployment is in single digits in El Salvador, a similar fact than in many other Central American
countries. However, in El Salvador the international financial crisis that took place in 2009 severely
hit the country, especially in terms of employment. Unemployment rates almost doubled that year
compared with levels up to date, and though it has later declined, it is still at much higher levels than
pre-crisis period. In particular, the crisis hit harder in urban areas, and also among the youth, which
still are almost three times more likely to fall into unemployment than adults (Figure 59 and Figure
60). Worryingly, most of the recent increase in unemployment affects the most those with relatively
high levels of education, such as those with secondary education complete or incomplete tertiary
education (Figure 61).
30 World Bank (2010a), “Mas y Mejores Empleos en El Salvador.”
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El Salvador Social Expenditure and Institutional Review
Figure 59: Unemployment rates by age Figure 60: Unemployment rates by area of
group, El Salvador 2007-2013 residence, El Salvador 2007-2013
Source: World Bank SSEIR team’s analysis of household Source: World Bank SSEIR team’s analysis of household
surveys, authors’ calculations using standardized ADePT surveys, authors’ calculations using standardized ADePT
software (Labor Module) software (Labor Module)
Figure 61: Unemployment rate, by education, El Salvador 2007-2013
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Labor Module)
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El Salvador Social Expenditure and Institutional Review
While El Salvador has successfully reduced inequality in recent years, this is mainly due to
patterns of labor earnings rather than redistribution via SPL transfers. As mentioned in the
introduction, while poverty has not declined significantly in the last decade, inequality has fallen,
with the Gini coefficient dropping from 0.485 in 2007 to 0.452 in 2013. Given that social protection
spending expanded but not as progressive at it could have been, benefiting still many better off
families, the main candidate for explaining the fall in income inequality is the labor market. Indeed,
the evidence shows that in this period, there has been an increase in labor incomes for the poorest
and less educated workers, by about 15-20 percent in the last six years, while it has declined for
workers with higher education (Figure 62). This evidence is also consistent with previous research,
which signaled that labor market returns to education have declined in the 2000s, as opposed to the
1990s when they increased.31 If this is true, the positive news of the decline in inequality could be
less so if it reduces the incentive to invest in education, with consequences for future growth
prospects and competitiveness.
Figure 62: Change in Labor Incomes by Educational Level, 2007-2013
Source: World Bank SSEIR team’s analysis of household surveys, authors’ calculations using standardized ADePT software
(Labor Module)
Evidence points out that the skills provided by the formal education sector may not be those
necessarily demanded by the productive sector, and also a reflection of low educational
quality. As described before, low educational quality is a concern in El Salvador, and can as such
explain the recent trends in unemployment and remunerations for higher educated workers. But also
could reflect a situation of “skills mismatch”, if workers are trained in degrees that are not the most
demanded in the labor market. Evidence shows that as in many other countries in the region, many
Salvadoran firms are not satisfied with the skills the workers bring to the labor market: 37 percent of
31 (Gasparini, Galiani, Cruces, & Acosta, 2011).
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El Salvador Social Expenditure and Institutional Review
them signals “lack of appropriate skills” as a major constraint to firm growth, a ratio that increas es
to 57 percent for firms in technology (IT) sectors (Figure 63).
Figure 63: Firms that Signals “Lack of Appropriate Skills” as the Major Constraint to
Growth
Source: World Bank Enterprise Surveys
Despite challenges in job creation, coverage of active labor market programs in El Salvador
is low and not well targeted to priority groups. As noted above, spending on active labor market
programs (ALMPs) in El Salvador accounts for just 0.1 percent of GDP (excluding PATI, which is
classified as “income support social assistance”). The majority of these resources are managed by
INSAFORP, which provides training to employed and unemployed population. While El Salvador
does have some other programs that focus on facilitating employment creation, most of them are
quite recent, with low coverage, and financed by donors as pilots outside Government budget. Still,
the experience in the design and implementation of some of these interventions constitute a starting
point to develop full scale actions reoriented mostly to the vulnerable segments of the Salvadoran
population.
On labor intermediation, El Salvador currently has a system of employment services (which
provides information on job vacancies. The rationale for job search and intermediation programs
is that labor markets show incomplete information about existing job opportunities and the specific
skills demanded in the market. Less educated individuals usually face serious information constraints
when looking for a job, and they do not generally access to counseling and job search assistance
programs. In El Salvador, the Government has implemented the Red Nacional de Empleo
(RENACEMPLEO), a labor intermediation strategy administered by the Ministry of Labor (MTPS)
in coordination with municipalities and NGOs. The system is implemented across the country in
eight MTPS regional offices, and 35 additional employment offices. Each regional and employment
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El Salvador Social Expenditure and Institutional Review
offices collect information on job openings and posts job opportunities online for job seekers to
apply, matching labor demand needs from the private sector with a registry of unemployed
population. The RNE constitutes the entry point for interested unemployed participants who want
to seek labor intermediation services from MTPS. Some regional offices also offer participants short
motivational and advisory talks to help them in their job search process, more recently also to
beneficiaries of PATI and participants in Ciudad Mujer, an integrated platform to connect services for
women. The regular interventions in the job matching process are complemented by several
employment fairs organized each year by MTPS. About 37,000 individuals each year are registered in
RENACEMPLEO (the majority women and those with less than secondary education), as well as
700 employers, and up to 2009 (latest information available), about 30 percent of registered
individuals found a job, most of them with a bachelor or other tertiary degree, and in manufacturing,
public administration, hotels, restaurants, or other retail jobs.32
The labor intermediation system is seriously unfunded, and needs strengthening to meet its
goals. The Government aims to expand the geographical coverage of RENACEMPLEO to reach a
total of 66 municipalities, as well as improve the quality of the program by: a) training personnel to
increase their adequacy and effectiveness in delivering services to the population from vulnerable
settlements; b) establishing coordination mechanisms with municipalities through local social
promoters that would help identify employment opportunities through a more effective interaction
with the labor needs of local enterprises and municipalities; c) supporting a coordination mechanism
with training institutions; and d) strengthening the monitoring system, analysis, and evaluation of the
RENACEMPLEO, through a set of indicators that would systematically assess the results and
impact. The current institutional arrangements of the RNE also appear to have impaired its
performance since some employment offices are funded from municipal resources and do not
regularly report to the MTPS. These efforts are expected to be the first step in a long-term strategy
where employment offices provide a range of other services such as specialized training programs,
counseling to micro entrepreneurs, and other services. But to reach these goals it needs significant
resources: MTPS budget in 2012 amounted for just $11 million, 0.05 percent of GDP, among the
lowest in the Salvadoran central administration.
Improved monitoring of labor market outcomes is also essential to guide labor market
policy interventions. The MTPS aims to create a National Labor Market Observatory (ONML) to
strengthen its capacity to analyze and monitor labor market indicators that serve as critical inputs in
the formulation of labor market policies. The envisaged ONML would compile and systematize
statistical information from MTPS, other government agencies, and the private sector, to enrich the
policymaking process of MTPS. These activities would require investment in technological inputs,
training of human resources, and improving the coordination channels with the institutions that are
responsible for collecting, monitoring, analyzing and producing labor market statistics in a timely
and reliable way.
32 World Bank (2010).
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El Salvador Social Expenditure and Institutional Review
Despite expanding coverage of vulnerable groups, labor training interventions mostly
targets the private sector employed population. INSAFORP administers since 1994 the National
Professional Training System (Sistema Nacional de Formacion Profesional, SNFP), which is financed
through a 1 percent payroll tax and is managed by a board that has representatives of employers,
employees, and the Government. In 2013 its budget reached $28 million, equivalent to 0.11 percent
of GDP, which is not high in comparison with other Central American countries (Figure 64). The
training provision managed by INSAFORP is subcontracted to institutional providers for the actual
service delivery. INSAFORP, following its mandate, provides most of its training services through
Programa de Formacion Continua, which mostly benefit formal workers in medium-to-large firms. This
program consists of training courses (8 to 120 hours) to employees working in firms that contribute
to INSAFORP funding, and follows specific training contents proposed by the employer. This
program benefits the employed population in the formal sector, which represented 63 percent of
total participants in INSAFORP training in 2012-2013.33 Around a quarter of Salvadoran firms claim
to have used INSAFORP funds at least once to train their labor force.34
Figure 64: Spending of Public Training Institutions in Central America as a % of GDP, 2013
Source: World Bank SSEIR / ICEFI social spending database
Though more recently, INSAFORP has designed training packages targeted to the
vulnerable and unemployed population and increase the coverage of this population.
Originally, it was not a central objective of INSAFORP to train unemployed or first-time job seekers
with low levels of formal education. However, the institution has progressively undertaken reforms
to better respond to the needs of the economy and to train these segments of the population. One
33 (INSAFORP, 2013).
34
See Vega and Carranza (2005).
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El Salvador Social Expenditure and Institutional Review
of the recent programs under SNFP is Habilitacion para el Trabajo, which offers short job training
courses (between 40 and 260 hours) in 26 different occupations for the unemployed, underemployed
and self-employed population (aged 16 or older). There is also a youth modality of Habilitacion para el
Trabajo, called Programa Inicial de Modalidad Empresa-Centro, which targets unemployed youngsters
between 16 and 25 years old and offer longer courses (between 6 months and 2 years) both in
specialized institutions and on the firms. And INSAFORP is also in charge of providing the training
package in PATI. In total, in 2012-2013, 37 percent of all beneficiaries in INSAFORP were
vulnerable unemployed population (about 83,000 people), up from 25 percent in 2010 (Figure 65).
Unfortunately, none of these interventions has been evaluated yet, in terms of quality or
employability impact of the training.
Figure 65: Beneficiaries of INSAFORP Training Courses, 2009-2013
Source: INSAFORP.
V.3 Institutional Reforms and Challenges
The past Government administration made substantial efforts to build a Universal Social
Protection System (SPSU) as part of its National Development Plan. The SPSU is a social
policy strategy which the Government has defined in order to achieve the articulation and
integration of the social development interventions focusing on a human rights-based approach and
the increased participation of local government. It seeks to guarantee the population of El Salvador,
especially the poor and extremely poor, a ‘basic social level’ of well-being through the definition of
general and focused policies and programs. The core of the initiative is Comunidades Solidarias, with
four areas of intervention: (i) human capital development; (ii) provision of basic public services; (iii)
income generation and productive development; and (iv) local governance. Comunidades Solidarias is
respectively divided into rural and urban areas, and comprises all major programs (CCT, PATI,
Pension Basica Universal, Paquetes Escolares, Paquetes Agricolas, and Alimentacion Ecolar).
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El Salvador Social Expenditure and Institutional Review
However, the institutional coordination of the SPSU is overly complex. The mandate of the
SPSU implies an integral reform concerning the way in which the social development policies of the
Government are coordinated, administered and implemented starting with the ruling entities of the
Executive Power. However, as of today, the SPSU is implemented through various public
institutions under overall coordination of the STP. The lack of champion ministry in charge of
defining policy and implement interventions as it happens in other countries (“Ministry of Social
Development”), makes this coordination a complex task, impacting in the effective achievement of
goals.
Many interventions are implemented in close coordination with subnational entities and
active community participation. For the past two decades, the Government has also gradually
implemented programs oriented to involve the communities. Community development efforts are
supported through the Fund for Social Investment and Local Development (FISDL), which has set
the policy for community involvement in development initiatives. Comunidades Solidarias programs
also operate through community committees to ensure adequate communication between
beneficiary families, their communities and the programs, including the channeling of requests
and/or grievances and facilitation of the social audit process.
The Government has recently enacted legislation to protect fiscal space for social sectors
and guarantee the permanence of major interventions; however, it needs revisions to
become effectively approved and implemented. Congress has recently approved a Law of Social
Development, aiming to provide a minimum social protection floor for all the population and
protect rights, as stated in the SPSU strategy. However, the new Law does address neither the fiscal
angle nor the institutionality needed for its implementation; and a consultation process with all
relevant stakeholders has not taken place. The Law also misses the need for continuous monitoring
and evaluation of programs, with a focus on improving impact within the fiscal space already gained.
The Government is also creating a registry of beneficiaries of social program that will help
to avoid duplication of beneficiaries and target better social interventions. Also, in an attempt
to avoid duplication and improve program targeting, in 2009 STP started the development of a
national beneficiary registry (Registro Unico de Participantes, RUP). The RUP database will be composed
of beneficiaries of most social programs, but the need to develop a comprehensive platform
technology, and financial constraints to complete the census database of beneficiary non-beneficiary
households through a single registry instrument, has delayed its implementation. The Inter-Sectoral
Social Committee has already approved the proxy-means instrument to target social programs
through the RUP, and STP has already collected information for 34,000 households in 5
municipalities.
El Salvador is also improving its monitoring and evaluation mechanisms of SPL. The latest
administration has not only put effort in creating the RUP, but also in the identification and
geographical mapping of interventions, a sustained effort to measure budget allocation of programs
(in the absence of program level budgeting at central level), as well as a system to track and follow
key management and performance indicators of interventions. Moreover, it has made the evaluation
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El Salvador Social Expenditure and Institutional Review
of the impact of key interventions a top priority for management, starting with Comunidades Solidarias
Rurales, PATI, Paquetes Escolares, and Pension Basica Universal (the last two still pending).
VI. Conclusion and Policy Recommendations
El Salvador’s development over the past decade has been dichotomous. On the one hand,
economic growth has remained persistently low, employment and labor force participation have
barely increased, and progress on poverty reduction has slowed. On the other hand, inequality has
fallen , and shared prosperity improved together with advances – with El Salvador becoming the
country with the lowest income inequality in Central America – and in many social indicators have
increased, such as pre-primary enrollment rates, access to prenatal care, immunizations, and water
and sanitation. Increases and improvements in the use of social spending, which now accounts for
12.4 percent of GDP, explain at least part of this dichotomy of redistributive and social gains despite
low growth, a tight fiscal situation and generally low government revenues and spending.
Looking forward, the key challenges facing El Salvador will be to enhance improvements in the
quality and efficiency in the social sectors, while holding steady on the overall level of social
spending within an increasingly constrained fiscal environment. Although social spending remains
relatively low by international standards, further expansions in social spending would not be
advisable given fiscal constraints, low revenues, and the need to cut the deficit by 3 percent of GDP.
Priority should thus be given to reallocations and improvements within the spending envelope for
the social sectors to maximize impact. This review suggests a number of ways El Salvador could
reallocate social spending for more effective impacts, enhance and reforms social policies and social
service delivery, and improve the management of public spending and budget execution in the social
sectors.
VI.1 Education
Increases in public education spending in El Salvador have improved outcomes for access (higher
enrollment) both at the primary and at the secondary level. For instance, El Salvador has reached
universal completion in primary education. However, overall spending on education is still low by
international standards. In 2012, El Salvador public spending on education accounted for 3.6
percent of the GDP, which is lower than the LAC average (4.9 percent), let alone the OECD
average (5.6 percent). In addition, this chapter has discussed that more spending is needed to
implement the FTS model nationwide. Furthermore, increases in per-student spending—driven by
increases in the number of teachers and teacher salaries—have not yet improved enrollments at
upper secondary levels and learning outcomes across the whole system. The key policy question for
policymakers in the years ahead is how can the country and its education system increase its low
level of spending in the sector in a sustainable manner, while ensuring that the higher levels of
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El Salvador Social Expenditure and Institutional Review
education receive a greater share of public funds and overall spending increases across all education
levels?
Increasing the number and quality of teachers is critical to promote better learning
achievements. As analyzed above, learning outcomes are still quite low in El Salvador. Actions are
needed both to increase the number of teachers and the quality of instruction. First, and in spite of
recent achievements, the student-teacher ratio is still too high compared to good practices. More
teachers are needed in order to reduce the student-teacher ratio in traditional subjects but also for
new subjects (such as music/art that are part of the FTS model). The speed of the adjustment and
the type of teachers required will crucially depend on the forecasts of the demographic trends (as
well as available fiscal resources).35 Furthermore, to improve teacher quality, teacher recruitment and
professional development policies are key. Three areas of intervention have been identified as key
for the improvements in teacher quality (Bruns, 2013), and El Salvador should to increase its efforts
in at least two of them. First, the need to hire new teachers under the full-time school model
provides El Salvador with the unique opportunity to improve teacher quality in the short run
through improved recruiting/selection methods. Creating special financial incentives to attract top
students into teacher education might have both a direct effect on the quality of the participants and
an indirect effect on the social prestige of the profession. Improving the selectivity at entry of the
teaching career is another important area of policy intervention, where little efforts have been made
so far. Second, better training of the teachers can also have large effects on teacher quality. In this
area, the recent efforts made to improve teacher training under the full-time school model suggests
that the country is on the right track, as long as the new training model is adequately implemented
and brought to scale. Third, motivating teachers with results-based incentives has proven to be an
effective way to improve student learning. In El Salvador, teachers’ remunerations are currently
linked only to their respective tenure in service. Bonus pays would likely produce substantial effects
on quality and should thus be further studied and supported.
To reduce dropout rates at the secondary level, there should be a focus both on supply and
demand-side measures such as the evaluation/expansion of FTS model and to linking
Comunidades Solidarias (CCT) to upper secondary school attendance in urban areas. Over
the next decade, the main focus of the sector must be in promoting greater access to secondary
education and improved completion rates. On the supply side, priority should be given to the
evaluation and expansion of the full-time school model, currently being evaluated both for
education outcomes as well as crime and violence in municipalities. The model’s sustainability will be
critical and the government has already contacted the Bank for support to conduct a financial
sustainability exercise. In addition, more efforts should be placed in assessing why children are not
completing secondary education. Although high opportunity costs of attending likely play a role, a
more thorough diagnostic is needed especially for the most vulnerable groups. On the demand side,
35While reduction in fertility and migration will likely reduce the inflow of student in basic education, the increase in
enrollment in upper secondary might boost the demand for that education level.
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El Salvador Social Expenditure and Institutional Review
the Government could consider incorporating secondary-school attendance conditionalities for the
CCT. This would make sense since primary school attendance is already very high (near 100
percent), and students start to drop out around age 12 in rural areas and age 14 in urban areas. Since
the supply of schools is less of constraint in urban areas (than in rural areas), this conditionality
could be piloted and evaluated there first and eventually scaled up once the FTS has reached
universal coverage. As it stands, the CCT program currently operates only in rural areas, so the
feasibility of both attaching the conditionality of secondary school attendance and expansion to
urban areas must be considered. A complementary intervention might be the provision of
information about the labor market returns of an upper secondary education.
Improving School Readiness is a key priority in the education sector in El Salvador, yielding
improvements in the educational outcomes in the medium and longer term. It is well known
that Early Child Development (ECD) is among the most cost-effective policies to foster learning
and productivity later in life. Hence, public education spending in El Salvador will only achieve its
full potential when placing children’s school readiness as a central focus. This can only be done by
developing a comprehensive ECD strategy and policy framework. Quality in ECD policies must be
a critical concern of policymakers ensuring high quality and motivated teachers, and low student-
teacher ratios. In addition, this strategy must be supported by a solid M&E system and ensure the
availability of well-trained home/center-based educators. Also, the country should engage in a
gradual introduction of interventions targeted at children in the age group 0-3 as costs of these
policies are potentially very high. The rollout of such a project must be backed by small scale pilots
evaluated through rigorous impact evaluation design to allow for testing the cost-effectiveness of
alternative strategies (e.g., testing a home-based visits model versus a more hybrid community/home
model).
A stronger focus should be placed on the monitoring and evaluation of education policies,
producing “real time” information which feeds directly into their design and
implementation. El Salvador can rely on rich data but its monitoring and evaluation system still
presents gaps. In the short run, it is important to ensure all new policy pilots are tested and evaluated
with rigorous empirical strategies (program evaluation). There is also room to strengthen and
systematize data collection efforts, including detailed socio-economic characteristics of
students/families in the PAES and PAESITA. In particular, a low hanging fruit seems to be
ensuring that the school census (“census escolar”) and the data sets on learning achievement (PAES
and PAESITA) can be uniquely matched in an efficient way. In the medium term, the country
should strengthen their systemic approach to monitoring and evaluation in the education system and
push for an “open data” approach to better inform beneficiaries of progress. In addition, there is
room to ensure that the implementation/decision-making in the Education sector is better informed
through data/information collected by a unified M&E system. Currently, both the lack of relevant
training, slow data input lags, disparate M&E databases, and the system through which the
information is provided can help to explain why principals and teachers do not currently use the
information obtained through the standardized test scores.
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El Salvador Social Expenditure and Institutional Review
VI.2 Health
Despite the financial crisis, public spending on health increased and together with the free health
services policy, contributed to improving health coverage, utilization, and outcomes. However
challenges remain regarding (1) disparities in access, particularly among the poor and (2) outcomes,
particularly in reducing maternal mortality and addressing the increasing threat of non-
communicable diseases. Recent health reforms introduced by the Government such as the Family
Community Teams (ECOS) are welcome initiatives to improve access to rural areas although they
need to be reviewed to improve their efficiency and sustainability.
In order to address the main challenges identified in the sector, the Government,
particularly the Ministry of Health as the steward of the health sector could consider
implementing the following recommended short term actions:
Implement the MDG Acceleration Framework (MAF) program. The participation of both
public and private institutions providing health care in the country would be essential to the success
of the MAP program implementation. The MAF budgetary gap should be estimated based on a
complete analysis of the national and donor participation in the targeted areas, and then a strategy to
close this budget gap should be prepared and implemented.
Improve budgeting and planning processes. Review existing budgeting and planning process to
determine how best to move progressively away from historical planning and budgetary processes to
make them more results oriented and efficient
Review the two major health extension programs. The Government should undertake an in-
depth review of the Integral and Integrated Service Network (RIIS) strategy and the mobile health
teams (ECOS) implementation strategy (for example, team size) and allocated budgets to identify
concrete ways to improve their efficiency and sustainability
Improve targeting strategies to ensure that public expenditure allocation is well aligned with
sector goals. Socioeconomic, Epidemiological analysis and geographical targeting should be taken
into account in the allocation of public expenditures on health in the country, taking into
consideration the challenges ahead to: reduce neonatal mortality, teen pregnancy and its
consequences, control violence and slow the onset of chronic diseases.
Adapt a more preventive approach toward reducing chronic conditions. Formulate a strategy
to include chronic conditions in the PHC strategy, particularly on how to incorporate cost effective
prevention and health promotion measures.
Initiate steps to address disparities in access to health services based on institutional
affiliation. The Ministry of Health could lead the review of the different per capita health
expenditures across public institutions and the factors behind these differences and assess the
potential for reducing these disparities and moving toward integrating the different institutions
providing health care, taking into account institutional and socio-economic constraints.
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El Salvador Social Expenditure and Institutional Review
In terms of Medium term recommendations (3 to 5 years):
Progressively adopt a results-based budgeting mechanism. Based on its review of the planning
and budgeting processes, the sector could move toward a result based allocation mechanism which
provides incentives for quality of care. Budgets should be defined based on a complete resource
analysis (available and required) to attain realistic outcome targets.
Strengthen implementation of the RISS and ECOS programs. Based on the findings of the
review of these two major health expansion programs, the Government should redefine the RIIS
and ECOS in order to strengthen their implementation and improve their efficiency and
sustainability.
Implement the strategy of incorporating chronic conditions as part of the primary care
strategy. Based on the strategy developed, the Government should play an active role in
implementing the prevention and management of chronic conditions as part of the primary health
care strategy, especially in promoting multi-sectorial interventions that also promote accountability.
Promote a national discussion toward integrating the National Health System. Based on the
review (step f above), the Government could play an active role in promoting a national discussion
toward integrating the National Health System, in order to minimize disparities in per capita health
expenditures and packages across public sector institutions, as well as to improve coordination of
health services and minimize duplication of efforts.
Continue to prioritize MDG-oriented investments especially in priority areas. The
Government should continue its efforts to maintain the attention and investment in MDGs,
especially in in the MAF targeted municipalities to ensure the availability of the required resources
for their development
Develop a multi-sector, multi institution strategy to address violence and its impact on
health.
VI.3 Social Protection and Labor
El Salvador has made important advancements in extending safety nets and increasing SPL
spending. The current administration has set the bases for the creation of a universal social
protection system (SPSU). This effort has been matched by an expansion of social protection
coverage, as well as significant fiscal effort. Today, the country has a range of social assistance, non-
contributory pensions, and active labor market programs, meaning that all elements of an integrated
social protection system are in place. El Salvador has the largest amount of resources as a share of its
economy (GDP) allocated to social assistance and subsidies in the Central American region. A
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El Salvador Social Expenditure and Institutional Review
question mark given the tight fiscal situation in the country is its sustainability; therefore it is
important to focus on making the best use possible of the space gained so far.
One pending reform is on social security, since coverage has not increased much in the last
decade, and since the system creates serious deficits that make it unsustainable over the
short and medium term. Access to pensions and contributions to its financing is low, at around 20
percent. An attempt to increase coverage among the poor has not succeeded, and the building
blocks for a social pension are still at a piloting stage given insufficient funding. More worrisome,
the last reform to the contributory system has created important “transition costs” that are now in
the order of 2 percent of GDP. The next administration should tackle social security reform as a
high priority on fiscal and equity grounds.
Current fiscal constraints make it imperative to reform utility subsidies to reduce leakages
to richer families. A universal focus with gradual implementation should be the guiding principle
to sustain public social investment, by first reaching out those most in need. Preliminary calculations
show that at least 0.66 percent of GDP in social assistance and subsidies benefits the upper quintiles
of the income distribution. Most of this spending in concentrated in untargeted and ineffective
electricity and gas subsidies, and as such could be reallocated to other priority areas and groups. A
simple reform that excludes from subsidies those consuming between 100 and 200 kWh of
electricity would save 0.45 percent of GDP. It is thus crucial to determine which programs deserve
broader coverage and identify resources that could be reallocated from programs with limited
impact.
It is thus important to focus efforts on expanding social assistance programs that reach
most needed population and with demonstrated impact on human development outcomes.
The rural CCT that has proven a successful mechanism to tackle poverty and has helped close gaps
in education and health outcomes should be reformed and revamped. In the last few years, due to
insufficient funding, its coverage (already low per international standards) has declined. A new
reform would revise benefits, conditionalities (with a focus on completion of lower and upper
secondary school), and an expansion to urban areas where many of the poor live. The PATI
program is another candidate for expansion. It is important to continue this intervention that
provides opportunities for income and human capital development for the poor, while at the same
time stimulates economic activity at the local level. Nevertheless, to improve its performance and
respond to new emerging needs, it could consider: a) a longer-term horizon of support to
beneficiaries to improve labor market insertion, through complementary technical training or credit
support to stimulate new businesses; b) mentoring or provision of life-skills training to reduce
violence in neighborhoods; and c) emphasizing targeting on the youth..
Coverage of ALMPs is low, and more efforts are needed to reach the most vulnerable
population. Despite the last few years the income for the low skilled population increased, these
gains may be short lived and vulnerable to shocks. There are still few mechanisms to protect the
most vulnerable against the loss of labor income. Experiences like PATI are promising, but need to
be complemented with appropriate interventions to improve human capital, productivity, and better
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El Salvador Social Expenditure and Institutional Review
skills match with local employment opportunities to ensure sustained income generation of the
vulnerable population. In general, ALMP operate on a very small scale (there is no national youth
employment program, as in other countries), and resources in strengthening employment offices for
labor intermediation and orientation are insufficient. It is critical to revise and refocus the
employment service mechanism offered by RNE to better serve the poor and low-skilled
unemployed in search of work opportunities, including self-employment promotion and mentoring
activities.
The current institutional setting for the occupational training system provides little
information on the quality and adequacy of existing training programs, limiting the efforts
of better matching existing skills and those needed in the market. There are important
resources allocated to training (INSAFORP), but the majority of courses benefits high skilled
employed population. The role of INSAFORP and other training institutions should be reassessed
and independently evaluated. Among other things, it is necessary to: a) review of the legal,
regulatory, and normative rules governing the professional training system, including the
accreditation of service providers and the quality of service provision; b) review of the financing
framework, including an analysis of costs by type of service provider, courses and sources of
funding; and c) assess the modalities to help graduates enter the labor market, including partnerships
between training institutions and the private sector (e.g., apprenticeship: school-based, and work-
based learning), and the information available to training institutions on labor market needs; d)
develop programs that address training needs of those who intend to be self-employed; and e)
improve the coordination within the occupational training system and with upper secondary
education.
It is also critical to continue the efforts in monitoring and evaluation of programs, as well as
in investing in information systems to better target beneficiaries. The current administration
has set as a high priority the development of a system to track indicators in the social sector that can
guide in the future the planning and budgeting process. It has also emphasized the need of
periodical evaluations of programs, to make corrections as needed. These efforts should be
continued in the next administration. Another high priority is the finalization of the RUP that would
help eliminate unnecessary duplications of benefits and improving targeting towards the poor. This
would require additional resources to finalize the data collection and technology platform, as well as
a mandated commitment on its use by different agencies executing programs.
Improvement in implementation and coordination among institutions is also essential to
maximize the impact of interventions. Successful implementation of SPL systems depends not
only on the design of individual programs, but creating institutional mechanisms for policy
formulation. Interventions to similar targeted population groups should be delivered in “service
packages”, to exploit complementarities, synergies and economies of scale in service delivery. This
represents a challenge in terms of inter-institutional dialogue across the different ministries and
implementing units. The ultimate goal is to integrate these policies into a common social protection
strategy. The next Government administration could focus on institutional reform and legislation to
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El Salvador Social Expenditure and Institutional Review
guide spending priorities and enhance coordination. Enhanced implementation requires deep
reflection on the fragmentation of programs and their financing.
Legislation can help to protect gains in expanding SPL, but it needs to be flexible enough to
adapt to changing needs, reflect fiscal realities, and generate consensus. A new Law of Social
Development has been approved by Congress. This piece of legislation is a high pay-off investment
needed to ensure sound implementation of medium-term reforms of the social sector spending. But
while the current version of the Law aims at protecting investments in the sector, it does not give
room for evidence-based periodical adjustments of interventions and implementation performance
(e.g., by mandating the use of RUP). It is also important to generate a broader consensus from all
political parties in the country, to guarantee continuity.
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El Salvador Social Expenditure and Institutional Review
Annex
Options for Short term (1-2 years) Medium term (3-5 years)
Policy Reform
Education
ECD policy Prepare an ECD strategy Identify service gaps and pilot
for the next years using as alternative interventions aimed
background studies a at supporting child developed 0-
comprehensive 6 years old (for instance home
assessment/mapping of vs. community based programs)
institutions and policies; Gradual scale-up of the most
Conduct training on ECD cost effective interventions
evaluation and Development and enforcement
Develop/Adapt ECD of quality standards
instruments to measure
child development.
Ensure the institutional
multi-sector coordination
of ECD policies both a
conceptual and
implementation phase.
Increase in the Conduct a rigorous Support the development of
enrollment in diagnostic of the main comprehensive policies
upper-secondary failures preventing addressing drop-out rates
school students from dropping especially for at risk groups.
out/not completing Eventual redesign of the FTS
secondary education (both model based on the findings
on the supply or demand from the evaluation studies.
side); Including attendance to upper
Support the collection and secondary education as a
wide dissemination of conditionality in Comunidades
information about the Solidarias
returns to different
schooling levels to a wide
audience.
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El Salvador Social Expenditure and Institutional Review
Increase the Develop a realistic and fiscally Sustainably increase the number
number and sustainable hiring plan to of teachers in upper secondary
quality of address teacher shortages (given education in order to meet
teachers the FTS model + targets for international reference for
enrolment rates + student- student-teacher ratios
teacher ratios)
Raising accreditation standards
To improve the recruitment and for university based programs to
motivation of teachers, establish increase the quality of teacher
financial incentives for top training.
performing students to become
teachers, contributing to Introduce well-defined career
increase the social prestige of progression and financial
the profession rewards linking career
progression with performance
and training.
Strengthen and Ensure all new policy pilots are Develop a systemic approach to
Institutionalize tested and evaluated with monitoring and evaluation in the
a Monitoring rigorous empirical strategies education system through a
and evaluation (program evaluation); unified system of data;
system in the
Education Strengthen and systematize data Provide a platform for greater
Sector collection efforts, including data transparency or “open data”
detailed socio-economic as well as responsive, just-in-
characteristics of time data to inform stakeholders
students/families in the PAES and decision-makers;
and PAESITA;
Ensure the
Ensure the census escolar and implementation/decision
the PAES and PAESITA can be making on the Education sector
uniquely matched in an efficient is well informed regarding
way. data/information collected by
the M&E system.
Health
Better targeting Invest in the High Risk MDG5 Maintain the attention and
of interventions MAF municipalities investment in the targeted
implementing a coherent municipalities beyond the MAF
investment plan for the next 18 –MDG time line ensuring the
months commitment for their
development
Ensure that the free health care
policy benefits lower quintiles of Implement better targeted
income policies/strategies
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El Salvador Social Expenditure and Institutional Review
Prioritize cost Evaluate RIIS and ECOS Redefine the RIIS-ECOS
effective performance and its elements and strengthen their
preventive sustainability implementation
interventions Develop a strategy to Implement the NCD strategy
incorporate non-communicable within the PHC program
disease in the PHC program.
Review MOH-ISSS Agreement
Evaluate the overlapping of implementation
services of the major
institutions health providing Propose a way forward on the
health care. integration of the National
Health System.
Improve Review budget allocation Gradually move away from
efficiency of process. historical budgeting toward
sector Take the lead in reviewing implementing a results-based
expenditures budgeting and management
disparities in service packages system.
and per capita spending across
health institutions, assessing the Promote a national discussion to
move toward aligning the
feasibility of reducing these
package of health services
differences taking into account provided by various public
political economy and socio- institutions to minimize
economic factors. disparities in per capita
expenditures and services
provided.
Social Protection
Consolidate SPL Reform SPL institutional sector Fiscal and subsidy reform
interventions for better accountability and
coordination. Reform social security (revise
financing of contributory
Approved with broad system, incentivize coverage
consensus a Law of Social expansion).
Development
Finalize construction of RUP
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El Salvador Social Expenditure and Institutional Review
Improve Revise conditionalities of CCT Expand CCT program to urban
effectiveness of program areas
Social Expand PATI to new coverage Continue investing in impact
Assistance areas and complement it with evaluations to periodically assess
interventions associated interventions for program performance and
improved employability indicators
Revamp Labor Expand coverage of Reform INSAFORP to increase
Market Policies employment services with incentives to train unemployed
and Training public-private arrangements youth
Programs and with municipalities
Evaluate performance of
Consider implementing specific training institutions in light of
ALMPs (such as youth labor market needs.
employment programs)
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El Salvador Social Expenditure and Institutional Review
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