Public Disclosure Authorized
Docunent of
The World Bank
Public Disclosure Authorized
Report No: 24387 BR
D PR nECT APPRAISALT (YhT A Wil rIL
Public Disclosure Authorized
Tr%y%-~Crr
Public Disclosure Authorized
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AMVUUIN 1
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TO T-HE FEDERATIVE REPUBLIC OF BRAZIL FOR MUNICIPAL PENSION REFORM PROJECT June 25, 2002
Poverty Reduction and Economic Management Unit Rtrazil
Countrv Management IJnit
Latin America and Caribbean Region
CURRENCY EQUIVALENTS (Exchange Rate Effective ) Currency Unit = Real R$1.0 = US$0.37 US$1.0 = R$2.70
FISCAL YEAR lv)
ABBREViATioNs A-ND)ACRONYMS
PARSEP
State Pension Reform LhL
PREV-MUN CRP
Municipal Pension Reform Project Pension System Certification (MPAS certifies sub-national govermments)
ASD A
SPS DEPSP CONAPREPV
INSS PROST SIPREV PrC.U
PEU RGPS INAI
Compensacao Financiera
Ifinii.uy
of
S.)or
1oc-ia i;
al
Asistencia Secretary of Social Security Department of Public Social Security Systems National Council of Officials Responsible for Sub-National Pension Systems National Social Security Institute Pension Reform Options simulation Toolkit Integrated Pension Information System roIject
WAU[)LUUIdIUig
UInit k1iiLanciai
1U--LViU
de
Previdenciaii e
As
iscia
Sector *'a'b-i'
.
Task Team Leader/Task Manager:
Socia
Secretaria de Previdencia Social Departamento dos Regimes de Previdencia no Servico Publico ConseLho Nacional dos Dirigentes de Regimes Proprios de Previdencia Social Instituto Nacional de Seguro Social
Sistema Integrado de Informacoes Previdenciarias uPr-unidade ue Coordenacao ce rrojeto
execution) Project Executing Unit in DEPSP (also UEP-Unidade Executora de Projeto "Technical Unit") National social security system Regime Geral de Previdencia Social GoV-.I11LL VIILFAVyVU social oc-4uiayL .regilv oiUpio UV r lVIUViIL.id. system Financial ompensation (to sub-national Compensacao Financeira governments for liabilities assumed)
Vice President: Country Manager/Director:
I
Social1
Programa de Apoio a Reforma dos Sistemas Estaduais de Previdencia Programa de Apoio a Previdencia dos Municipios Certificado de Regularidade Previdenciaria
David de Ferranti Vinod Thomas .1JRoa.d.
MA.I -
Chris Parel
TilA '7TTY
MUNICIPAL PENSION REFORM PROJECT
A. Project Development Objective 1. Project development objective 2. Key performance indicators
Page 2 2
B. Strategic Context i. Sector-reiateu' Country Assistance Sirategy (CAS) goal supporteu oy ie project 2. Main sector issues and Government strategy 3. Sector issues to be addressed by the project and strategic choices
3
3 5
C. Project Description Summary i. 2. 3. 4.
Project components Key policy and institutional reforms supported by the project Benefits and target population Institutional and implementation arrangements
6 8 9 9
D. Project Rationale Project altematives considered and reasons for rejection Major related projects financed by the Bank and other development agencies Lessons learned and reflected in the project design Indications of borrower commitment and ownership 5. Value added of Bank sunport in this proiect
1. 2. 3. 4.
10 10 11 12 12
E. Summary Project Analysis
4. Institutional
12 13 13 13
C. EA1-vu-----
C-,1
6. Social 7. Safeguard Policies
15 16
1. Economic 2. Financial 3. Terhnica!l
F. Sustainability and Risks 1. Sustainability
16
17 18
2. Critical risks 3. Possible controversial aspects G. Main Conditions 1. Effectiveness Condition 2. Other
18 18
H4. Readiness for Implementation
19
I. Compliance with Bank Policies
19
Annexes 20 24 30
Annex 1: Project Design Summary Annex 2: Detailed Proiect DescriDtion Annex 3: Estimated Project Costs AUUl
A:
C-os B
Annex 5: Annex 6: Annex 7: Annex 8: Annex 9: Annex 10: Annex 11: Annex 12:
MAP(S)
er.efi A., ---
cuj-,
orf'oLst-E
fl0+O AJ,-1-
V
.LJ..31
Financial Summary for Revenue-Earning Project Entities, or Financial Summary Procurement and Disbursement Arrangements Project Processing Schedule Documents in the Project File Statement of Loans and Credits Country at a Glance Additional Information Differences and Lessons Learned
33 34 45 46 47 51 53 59
BRAZIL Municinal Pension Refornm Proiect
Project Appraisal Document Latin America and Caribbean Region
IDate:
June 19. 2002
Team Leader: Chris Parel
Country Manager/Director: Vinod Thomas
IP--+ ID:. 1.
Sector Manager/Director: Ronald E. Myers
PD7A4777 .
-
Seetor(s-
Lending Instrument: Specific Investment Loan (SIL)
[ ] Credit
[XI Loan
SI - P
3%;"VI k31
1 II
[ Grant
1-
o
& Sc
%L11U MLJ 0 LX
L-r
V,U~L,AJ UI,OUIa1IV.,
Theme(s): Public Sector Poverty Targeted intervention: N
[ Guarantee
[ Other:
Amount (US$m): 5 Borrower Rationale for Choice of Loan Terms Available on File: 0 Yes rroposea Terns (titGj: variabie-Spread Currency Loan (VSL)
Front end fee (FEF) on Bank loan: 1.00% F,inciriit!,-. i°,i; BORROWER IBRD Total: Borrower: GOVERNMENT OF BRAZIL ~ ~ 1ufTM1VTV C1~ V(V~T Responsible agency: ,SR OFSCAT Address: ESPLANADA DOS MINISTERIOS BLOCO
Tta-
5.00 4.45 9.45
1
T7Vf(T TDTTV P.
Cnf'TAT A QTQ AXJ1-1C' E vPT&SCILSITNE
r
7th FLOOR-SALA 723 700U5Y-Y00--BRASLA-43F
Contact Person: Vinicius Carvalho Pinheirob Secretary of Social Security Tei: (55-61)-317-5236 Fax: (55-61)-,i 7-5i95 Email:
[email protected] Estimated Disbursements ( Bank FYIUS$m): Annual
0.20 f.mn4,I
)A
2.10 )I
1.61
0.57
01
A AO
Project implementation period: 6/2002--6/2006 Expected effectiveness date: 09/03/2002 Expected closing date: =C PAO Fl
R.
2ld MM
0.52 A n0
12/31/2006
0.00 0.55 0.55
1
5.00 5.00 10.00
A. Project Development Objective 1. Project development objective: (see Annex 1) 1.
Project Development Objective The objective of the Municipal Pension Reform Project ("PREV-MUN" or Programade ,4poioaI PV,01iAPn,.'i" Aoc Af imhininv ;ir.
;a. is to tir.i u
pAI m.wcil
pnsin
mnr-fmPnt
It will do this by (i) addressing critical pension problems in 26 of Brazil's most important municipaituies comprising many state capitals plis large lulicipalities, and (ii) strenguthening the capacity of the Ministry of Social Security and Social Assistance (MPAS) to carry out its legal mandate to provide technical assistance, monitor and evaluate pension management and validate performance. The loan targets these larger municipalities because they account for a preponderance of the total aggregate municipal pension debt. Also, given their importance and geographic distribution, they can eventually become vehicles for extending the PREV-MUN approach to the over 2,700 municipalities operating public pension systems Tne project is modeiedu on mhe Bii'an-s Strate Pension Reform LIL (" rAiEa "r; Loan ffQ369). It has similar objectives and will adapt approaches and methodologies currently being implemented in Brazilian states. Similar to PARSEP, the operation will focus on the basic building blocks of pension reform for municipalitieswhile strengthening the capacity of MPAS's Secretary of Social Security ("SPS") and its Department ofPublic Service Pension
Regimes ("DEPSP") to manage sub-national pensions. 7 KPYv prfrnrmunep inaiiC'tarc* (qpp
A. *
Ministerial/SPS Indicators Provision of Technical Assistance: maintenance of a team of PREV-MIJN supported specialists able to provide technical assistance in project formulation/management, information Jtive *cAnolWflJgy, Legisb
*
* *
*
AnnpX PI
anJd
aeV
Attaal
arne
fiAm. DPSP
or;ir thel fiA
as .n10 ed
Acquisition ofHardware & Software: Installation and operationalization of budgeted SPS
haruware package. Trainingand Dissemination:Completion of programmed SPS training; sponsorship of at least two national-workshops; publication and dissemination of materials essential to sub-national pension management and legal compliance. IntegratedPension Software (SIPRE;) Development and Implementation: Successful
installation and oneration of SIPREV and its actuarial or benefits modules in 20 municipalities respectively; identification of "replicators" to provide permanent SIPREV ~~~ G~CA1LU L]L,AJI OULPrIiLLWJIMu r V'.ilUj±..dJLL0. InstitutionalStudies: Completion and dissemination of studies on (i) fund/asset management, and (ii) strategy for extending PREV-MUN coverage to other municipalties.
-2 -
Note that twenty-six municipalities have been targeted. However,, each one is unique. Hence, similar to PARSEP, some merging and self-financing of activities is expected. Consequently the number of municipalities established as 'indicators' varies across activities. * Acquisition of Hardwareand Software for SIPREV: installation of a small hardware/software equipment package in 23 municipalities. * Cadas.t.reLJpgr7p,ade:PRE PPV-AM,TJN suppovrtAed "rn-.oa i-n 23 rii'iintia * ActuarialEvaluation: analysis performed with PREV-MUN support in 23 municipalities inciuding.financiai diagnostic and reform proposai development. * Municipal Workshops andDissemination: carrying out of at least one stakeholder workshop in 26 municipalities. * Municipal Training: varticipation in two MPAS sponsored workshons and implementation of local training programs in 24 municipalities; identification of a rprmn%pmimt uipn1P(Ql fnw t-minn anA i X,. .~J **~ .,r
hr
.srn..
ovaitnoip
.. __U L tOw_SC_s'Sw_.
B. Strategic Co..text 1. Sector-related Country Assistance Strategv (CAS) goal supported bv the nroiect: (see Annex 1) Document number: CAS: Report No. 20160-BR/March, 2000/CAS Update: Report No. 22116-BR/May 1, 2001 Date of !atest GAS d-scus-sIn: CAS: March 30, 200/CAS Updtte: May 24, 2001
2. Main sector issues and Government strategy: The Problem. The most recent Country Assistance Strategy characterizes social security reform as "the single most important fiscal isse facing th.e FedPral and sub-national Goernments". Thpe Cr45 eslated the ovxerll pension deficit including interest and public debt accumilated on behalf of public pensions at about 9.5% ofi GTYDP or
-. ,a
$80QbiA.'ion.
F JLr fifiais of
+- perio*
Adeiitf
is pUflJU..bz*dl -abut
hlf
v
bU.
ltt-,s to
states and municipalities. Last year's CAS Update reaffirmed that social security and pension reforms rema-Ir "cl-ic-a componmalt of fic IrefLI" There is a paucitu nfinfnrnmatinin rprlrtlir,lc miuninci.al npncrin suytprn.s
N^.rthol1sc
Adlta othra.rPd ae nort
of loan preparation suggests the importance of pension reform for Brazil's capital and larger municipalities gee;nhis.ui
*
*
*
operation*.
The 26 state capital municipalities ran a combined deficit of R$2. 1billion which accounted for 80% of tota aggregate municipal deficits of -2.6 billion ir, 1999. esUe same 2U plus Uue 23 largest municipalities with population in excess of 400,000--a total of 46 million urban inhabitants-account for about 96% of total municipai pension deficits. Pension deficits are large and growing in most municipalities. CY2000 data for Brazil's 26 state capital municipalities show four witn small pension surpluses while in the remaining 22 expenditures exceed contributions by anywhere from R$4 million in Macapa (Amapa State in northern Brazil) to R$66 million in Belo Horizonte, R$107-109 million in Salvador and Porto Alegre, R$565 million in Rio de Janeiro, and R$1.1 billion in Sao Paulo. CY1999 data for these same municipalities show that social security deficits consume a significant
-3 -
proportion of municipal receipts _5 mminiipnalities ran deficitc amou nting to 3-5% of totnl receipts -11 municipalities had deficits from 5.1% to 10% of receipts =5 mun"idnaitiudes -1f-.pA
defici,
niror !0O%.
.nhl,A,'
Saon P-al
and Po,tr, A legre (14O.21
(17%), Rio de Janeiro (18%), and Cuiaba (21%). fr.r)nAA -4.A.. -r -"-;+e1 Jr-.._rt v lv-ni XWVdV ; atUU w"ll 11 ,1IJl Lt1 vullU ulaL uULUI requirements of Law 9717 (see Annex 11) regulating pension administration. A
_A
- ILSVVV
inudedU
pU-oulC
*
-
Ut ml
peliou
-;---1.4-A
WuU byatalls w,os
41U
-+ aL UVOL
I2
-
UeUCliL5 Uifie-eU 11(Irl uiosU
-*_
._1-,
_#U
VUUJ%a%.
Szalao-Ar
VIUI
-+ III%
The most serious
WC law (19 perII1iLL.U UIIUndeCr
municipalities), inclusion of health insurance in the social security system (8), and inclusion of financial assistance (6). Only about 40% of all municipalities with pension systems are currently in compliance with pension reporting and administration requirements. In a two day project preparation workshop, municipal secretaries and pension agency chiefs from 22 of the targeted, capital municipalities corroborated the fiscal burden imposed by pensions and highlighted the poor state of computer equipment, systems, data bases, and lack of actuarial analysis. They also cited the lack of qualified personnel to address pension problems. It is presumed that the situation is no better in most of the 2,700 smaller municipalities also operating their own pension systems.
The absence of comprehensive, reliable municipal pension data is being remedied by DEPSP, the Department in MPAS created scarcely three years ago to monitor and evaluate sub-national pensions, provide technical assistance and, more recently, to validate compliance with new Federal legislation. The new legislative framework also establishes legal and actuarial reporting obligations that will allow the Government to gather the requisite data to supervise sub-national pension systems. PARSEIP played a strategic role in creating DEPSP and addressing these problems in states and PREV-MUN will replicate this work in municipalities. (Invemment
tlrtpt,v
Therp iS a grnwinrg c.nepnsus among gover.nupmernt officials that the fiscal burdens imposed by social security are not sustainable. keform proposals most often discussed--there is no formal L]ntarim Stategy,.
age to receive pensions, retirement ages for men and women, and disability and death benefits. The aduvak1v r,U'age
of,-leuin
pubic.
per,si,-,
IIegXf,, ewropric
oS dFCvLUcfa-LRPU)
UIL
soiaU sea-uILty
(Regime Geral de PrevidenciaSocial--RGPS) is also discussed, especially for small sub-national systems. However, 'uLese reifu - are aliu iugny political anu require, in some cases, Ciusurutiuonal amnenuments.
Hence they would only be possible following the fall, 2002 elections and would require broad based political support. In the absence of a new round of benefits reform, the Government has followed an interim strategy to improve pension regulation and management and strengthen the pension reform constituency. It has done so by first implementing important reforms in the legislative framework governing sub-national pension administration including imposing restrictions on use of pension funds, establishing reporting requirements and requiring actuarial balance. Second, it has undertaken to provide technical assistance to imnprove state and municipal pension management And third, it has built up MPAS's capacity to monitcor, evaluate, validate performance and provide technical assistance. It has done this with the support of multilateral institutions and especially the World Bank. Leg'islative Framework Reforms. Three years ago the Federal Govemment was constitutionally constrained from intervening in state and municipal pension regulation, had no intemal unit concemed with -4 -
such matters, and knew next to nothing about sub-national pensions. States and municipalities managed ULVeir
yper.uior
uit.tJ..4.UI
0UL
Vd .wIut
uth
ber.eLft
VI
lawO,
zua.etj~
tuta
syste..s,
-ases,
UI.fniaL
opinions, or qualified human resources. Brazilian policy makers took up the challenge of pension reform UUfiiig rlrsIUei
L CA4UI.ThU '
sLeUIIU L.e11.,
app,-o-VUIn
a 11411fd UhaLL1
ee awLs 4 ar.1d dUUo1r've
l
sgicUa.t
OVr
the past three years beginning with Constitutional Amendment 20/1998. These are detailed in Annex 11. Among the more important advances were reduction of benefits, stricter eligibility requirements and the phasing in of the new (i) Complementary Pension regime (ii) requirement of individual accounts for pension participants and regulations regarding participant and public contributions establishment of actuarial and financial standards and requirements for pension funds (iii) based upon accurate cadastres requirement of regular reporting, publication of results and transparency (iv) MPAS validation of compliance, and penalties for non-compliance (v) restrictions on the use of pension funds for non-pension ends and on investment of funds in (vi) government instruments reimbursement by the Federal Government of pension liabilities assumed by states and (vii) municipalities (Compensacao Financeira) (viii) enhancement of the Government's role through MPAS to assure adeauate supervision, monitoring, validation of results, and provision of technical assistance. Strengthening MPAS Capacity. Few states and even fewer municipalities possess the resources to ujnilateralyV rfnorm npneinn manageme-nt andA r-mnIv Urith the new 1-vodiCltive frqm_wnrk- MTpnn-- th-challenge for the Federal Government has been to create in MPAS an organization capable of monitoring, vvauuatunu
ai,. vcua%n,lh-g pens.on
-efo
-Alr. OOO*Ot...
-.nar.ce
sub *jU-lS-*I
6 JvSctflrfk.ts
to rIA,^rn.
T.ls as
done primarily through the establishment and strengthening of DEPSP. World Bank pension reform support includes important project funding, ESW and technical assistance. Bank operations inc;lude PASEP and tuhe FederalPenson Reormn LIL, and LWO BanIk /SecaLs for nearly $1.4 billion in 1999-2000. PARSEP, has been an especially important catalyst in creating and strengthening DEPSP and financing state technical assistance. As part of its interim strategy, the Govenmment has decided it is time to address directly municipal pension problems and has called upon the Bank to adapt PARSEP to create a municipal project, PREV-MUN. 3. Sector issues to be addressed by the project and strategic choices: PDEDtQ'AlTTM
-.
11
4
adrMess tha mrnot es: niiu
inetvit4innn1 ismsue
-nnfrfnntincy
m,,,,niinn)ifipq i, ineliwIrno
training, cadastre upgrade, actuarial balance, hardware and systems, and strengthening of the pension refor,..
col-101LUV1.cy.
oSi..laO.Ily, LVII
To aauress une sector iss-ues
*
vvlWI
bVe UL
*UIhnUeA&
u'ul folllo-wUg suF4Leg
Lto Vc.LS j
choices 1ic -were
o
i..k-
%J1
.-.
I -W
ade.
How to begin? The project is beginning with WPAS strengthening and technical assistance to 26 capitail/arge municipalities. At mid-term it will develop a sirategy for addressing The needs of otier municipalities.
*
How to ensure MPAS can carry out its legal mandate to validate sub-nationalperformance? DEPSP * io- pro,Ai
t?-^^r
ngtoTVC
ifrpectr
&-e sprad -ho
reg;.orly, .- nd-A
cour..tr
-ho vA
-nll ba
responsible for validation, making use of the SIPREV actuarial module as it is implemented across
* *
*
How to ensure DEPSPhas adequate capacity to service municipal needs, especially over the next 4-5 years when systems changes must be introducead DDEP,SP optea to retamin consultants rather than increase pernanent staff during the peak demand years which will be financed in part by PRE V-MUN. How to address actuarialimbalances in sub-nationalpensionfunds? DEP'SP will provide technical assistance and fund cadastre upgrade, actuarial studies, development of reform proposals, and stakeholder dissemination efforts to support reform and build local reform constituencies. Depending upon the outcome of a PARSEP pilot, it may also help municipalities to evaluate and sell off assets with the proceeds going to pension funds.
How to assure that SIPREV and its modules can be maintained and upgraded as needed' including the provision of technicalassistance and training? DEPSP has decided to contract out this service to private companies while maintaining a core staff sufficient for project oversight and module development needs.
*
How to provide permanent, accessiblepension trainingfor sub-nationalgovernments? DEPSP will retain one of several foundations (FINATEC, FUBRA, CESPE) linked to the Federal University of Brasilia. to provide train-the-trainers and direct municipal training. The hope is that one of these could become a permanent purveyor of pension training.
C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown):
Component I: Institutional Strengthening of MPAS/SPS and Project Management This $2.1 million project component addresses institutional strengthening of MPAS--specifically of SPSiDEPS--required to manage PREV-MUN and carry out its mandate of monitoring, evaluating, validating and providing technical assistance to sub-national governments. Specific sub-components include the following. A. Provision of Technical Assistance. Following PARSEP's successful formula, a core group of consultants in information technology, actuarial science, and pension legislation will be retained at DEPSP to supplement MPAS staff and service municipalities during the project. Proiect Management Support. The DEPSP Project Executing Unit (PEU) comprising DEPSP B. staff and several project management consultants will be retained plus a financial management: specialist. The size of the team required to administer the program for 26 municipalities is based upoil PARSEP experience with a similar number of states. C. Technical Assistance for Municipalities--Logistics. Experience demonstrates that pension reform cannot be managed centrally but rather requires the continuous presence of MPAS specialists in the field. HenGe care has heen taken to ensure that resources are adeauate to sustain the nroiected level of field operations. A zmiil ($58,500) amoulnt of cnrnmputer equipnme.nt A^.nvisition of Hard.ware and Sonftwre. D. including computers, printers, software, and ancillary equipment has been budgeted to ensure that DEPSP La
E.
A.^.I
to
DLnV=.,.T.IN
ar.d naW mnana
its mnd,^fto
senr,.a 0 1 1 hnat.onal gover.^.ne.ents.
MPAS Sponsored Workshops and Publications. DEPSP will sponsor three training wor;kshops for
1wUlltilpdI U11UII l
dUIU UUISI llLVdIlL MiIllUlUclo.
IL Will a1UU pUuu3IIl a LVIUUm..al brilu
IU Ul1bbrl1lulaL
laws, regulations, best practices and other materials relevant to sub-national pension management. F. Institutional Studies. Two important studies will be undertaken: (i) pension fund asset management that might also include asset evaluation and sale with proceeds going to funds, and (ii) needs evaluation and strategy for assisting the universe of municipalities operating their own pension systems. This latter study will be done around the time of the mid-term review and will draw upon the combined experience of PREV-MUN and PARSEP and administrative and actuarial compliance data bases. G. Trainine for SPS Staff. A small training program will ensure that MPAS staff are exnosed to best practices internationally and acquire the requisite skills to ensure that PREV-MUN makes use of the latest knnwledge and methodologies= H. SIPREV Development and Implementation. Implementation of the SIPREV electronic cadastre foEnat uAll ensMre thnt tlfh requisite data for be.nefits calculation and actarial analysis is availableina uniform, accessible format. Actuarial and benefits modules will also be installed and other modules developed.
ML
M ,
wd
iaL r.odule.
wil
Me
given *iee
to suh
nuaLicii,LjstiJs.
LIno .
UU-% ub
II1po.II-L
comprises the costs of installation, maintenance, upgrade, training, and refinement and development of new Iuouuues.
Component i: InstituionulStrengtheningof MunicipalPension management A second component totalling $6.5 miiiion (65%) of the project total is dedicated to upgrading pension management in the municipalities. The sub-components are a follows. A. Acquisition of Hardware and Software for SIPREV. Small hardware/software packages valued at about $19,000 will be provided to each municipality to ensure that the pension agency has the requisite equipment to operate SIPREV and otherwise carry out the project. B. Cadastre Upgrade. At $2.2 million this is the largest sub-component and one of the pillars of the PARSEP/PREV-MUN approach. Each municipality will be provided with consultant services valued at $80,000 plus assistance from DEPSP specialists. The advantages for the municipalities of cadastre upgrade include accurate actuarial analysis, savings from elimination of unjustified benefits payments, and submission of reimbursable pension costs to the Federal Government under the Compensacao Financeira program.
C. Actuarial Evaluation. This is a second pillar. It includes financing an actuarial diagnostic--something legally required of all sub-national governments starting July, 2002--plus the development of proposals for achieving actuarial balance and reforming pension systems. D. MuniciDal Workshops and Dissemination. Stakeholder participation through municipalitv sponsored workshops and the dissemination of pension materials is an essential part of the PREV-MUN proamm The nmrpose is to dissezminate the PRFV-MUlN program, reponrt res.ults, providde knowledoe on best practices, advance reform proposals, and strengthen reformn constituencies. Each municipality will conduct two such workshops accon.panied by the prparation and dissemination of materials. E. Municipal Training. Two types of training are contemplated. The first is a workshop in basic pensio1UU rz.ze..e,
.t,WV
CIAcJ U V3 anU
-MLf
to
Vo
11penion
agr.cAy
oIfL.4CiLa 'siii fo..
111c iU"U.IaIi.y.
A second venue will be training for groups of up to fifteen agency officials held in the municipalities. One 'sy
project
couIbuitiOn U wU11ill beUVuI
lidlfiLiLOa
ot pVIIrIllrlLt,
governments.
-7-
accessuible
udiling venues
s-nutllULi Sub
II. Institutional Strengthenina-MPAS A. Technical Assistance
IPensions & Social
1
43
4 31
7.2
0.36
Insurance
B. Project Mqs qg ement
Perions &,Soci
A
A0
Insurance
C. Hardr
i.SoftwarCe
s
Pensions & Social
0.06
0.
0.00
1.0
0.56
5.6
0.15
3.2
0.04
0.4
0.04
0.8
0.9
0.083
Insurance
E. Workshops & Dissemination F. Institutional Studies G. Training of MPAS/SPS Staff
Pensions & Social Insurance Pensions & Social Insurance Pensions & Social
0.09 I
Insurance
H. SIPREV Implementation
Pensions & Social
I
I
1.6
0.29
2.9
0.07
1.4
0.49
4.9
0.40 |
8.0
Insurance
II. Institutional StrengtheningMunicipal Pension A. Hardware & Software-SIPREV B.
Cd.ste..
|C.
U-Jo
Pensions & Social IManagement T rnsurc.e
1&In
Ad inaJors
Insurance lPer.sion.s &; Social
rAc.jiai tvaiua.Uuon
o~hops -D. 'Workshops & Dissemination
|Insurance
|j.
|cssernaon Insurance
|
..
E. Training
1
21I
0.89 1
IPensions & Sociai
35
1.7'5
u0.6o1
8.9
.0
i3.0
i.77
1 i7.7
1.18
11.8
0.35
0.40
4.0
0.0()
0.98
9.8
0.5 11
10.2
4.9'|
99.0
Pensions&Social
0.5
I
10.6 7.0
Insurance
1I1. Component Residuals Pensions & Social A. Multilateral Procurement Agency Insurance B. Contingency Pensions & Social
j
I
0.0
IInsurance
Total Project Costs
9.95
Fmnt-end fee
0.0
Total Financing Required
10.00
99.5
I
,
100.0
n n.
A
5.00
100.0
2. Key policy and institutional reforms supported by the project: PREV-MUN supports institutional reforms in sub-national pension management in the following ways: * Promotes professional pension management with reliable date and compliance with Federal laws through cadastre upgrade, SIPREV, legal and actuarial assistance and training. * Develops sub-national pension refonns based upon actuarial and financial diagnoses. * Supports reduction of fiscal burdens associated with pensions. * Strengthens MPAS/SPS so that it can carry not its legal mandate of sub-nationa- pnenon ninitMonrn evaluation, and provision of technical assistance.
-8-
1
Strengthens the reform constituency throuah stakeholder workshons and dissemination.
* 3
RBpiefits-and taretpopunanion:
Most of the 26 targeted states are already running pension deficits that range from 5% to 21% of total receipts. This constitutes a huge drain on their resources and ability to undertake growth and poverty alleviation investments. Few have staffing or systems that permit adequate pension management to dimension their pension problems and develop solutions. Many are not able to comply fully with Federal legislation governing pension management and reporting. PREV-MUN will address these problems. Hence the:target population is first the municipal governments participating in the program and indirectly other municipalities who will benefit from the PREV-MUN experience and the assistance preferred by MPAS/SPS. Second, public officials enrolled in the pension programs will benefit from having pension fimds analyzed and actuarial and other problems addressed. Third- the nonulations of the municipalities--upwards of 20-30 million inhabitants--will benefit from the eventual reduction in pension hiirdens and improved liquifiity enabling resources to be nut intn other activitiss. 4. Institutional and implementation arrangements: The project executing agency will be MPAS. Within MPAS there will be a Project Coordinating Unit (rCU)and a Project Executing Unit (rPt u) wnose attributions are described below. Both units exist and both are managing Bank projects. A formal agreement ("portaria") will establish their respective roles and responsibilities regarding PRiEV-Muu implementation. Proiect Coordinating Unit (PCU). A PCU exists in the Executive Secretary Office of MPAS. It is charged with financial management/execution of the Ministry's projects. The PCU successfully manages the Bank's NVSS LIL and will soon assume responsibilities for PARSEP. PCU responsibilities are to * manage Project budgeting and financial control * orient the PEU (see below) regarding Bank guidelines and procedures * guarantee that Bank norms and procedures are followed * supervise and ensure the completion of the Project's physical, budget and financial chronograms * respond for audit and Project evaluation requirements * provide the Bank with financial and evaluation reports, statements of accounts and other reports as needed * ensure the implementation of PEU approved activities and procurement in accordance with the Onerations Manual. * ensure the payment of the Project's contracts and acquisitions. Proiect Executina Unit (PEU). The PEU will be responsible for the technical execution of the Project. It -All
reidep
w
thin DEPSP in the
.cPitiw,
of Scinal 4Zavr.tY .4Z (SPS)
The PPT T u
rnmri-a crl
same employees that are successfully managing the technical execution of PARSEP. f
CU'TTPDUTT anant Ui L,k LUaIi
5.ULWJIL
is -- l10 OULUIU
~~0t
*.o wh+ +latex
L%VJ VYRML
4s jul
DADCUVD excep that + I rXK%~.JL.l UA~JJ .lat
UkA
P WI'TT 'AieLM. : I S.~ J jFI3l
vnv,y nf th*
The current UIUlL
of Finance and not MPAS. PEU responsibilities are to tuhe
*
cowrdinate, plan and
* * * * * *
ensure that Bank norms are followed elaborate technical reports regarding Project implementation form a Procurement Commission to accompany and evaluate purchases and service provision support the Bank and SPS in generai Project supervision and evaluation provide documentation required by auditors disseminate Project results within and outside of MPAS.
supel vise
UIir.11VIpLmL4aiUo
VI nuIcipail
-9-
adPSacdV-viie
1VLUUOLXy
The DEPSP team is responsible for PARSEP's execution including technical aspects and most of the procurement It is experienced, well staffed, and has earned the respect of state and municipal officials. It has also worked closely with the CMU's Implementation Team and UNDP, which will be retained to support procurement operations. Given PCU and PEU experience, strong project management is expected.
D. Projert Ratinnala 1. Project alternatives considered and reasons for rejection: Pension Reform LnL. The LIL format was abandoned because (i) the Senate approved budget fi)r the first year
of
oUJFdUUi1J,
- I 2002, WUb uuy $24 IJ,000
Um.urIg IL UilpUiUbl1e
oU oImpIeLe L1Ie PIUJVAUl
tiLLUr
years, (ii) the new LIL requirements are very restrictive and do not allow for many of the activities to be carried out under PREV-MUN. GreaterAttention to Smaller Municipaiities. Tte Government has determined that it can address nearly
90% of the aggregate municipal deficit problem and thereby alleviate fiscal burdens affecting large populations (including many poor) by addressing first the state capital/largest municipalities. It iiarther believes that these municipalities, because of their relative sophistication, have a better chance of successfully implementing the PREV-MUN program and afterwards can serve as poles for replicating the approach. The Bank agrees with the client's approach and will consider pension reform impact upon the poor under a more appropriate AAA venue. The operation will include a study to determine the needs of municipalities of different sizes and will develop a strategy for delivering the requisite services. Larger Operation. PREV-MUN is modelled upon PARSEP, the highly successful pension reform LIL that
addressed the needs of 26 states. PARSEP success, the complexity of administering an operation with 26 clients, and budget constraints imposed by the Government resulted in a $10 million proiect. 2. Maior related nroiects financed by the Bank and/or other develoDment agencies (comnletedL ongoing and planned). Note that a survey of the Bank's social security loan portfolio was conducted to determine the relevance of initiatives undertaken elsewhere. Most of these operations were found to emphasize policy reform and address single, country wide social security systems unlike PREV-MUN which is modelled on the: successful Brazilian "State Pension Reform LL"(PARSEP). ^| rla !. X j: , - . 1
*,
~
~
~
, -- , . | t. . -,;,--1' ,te S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ n t................. j 4 z U '" 1
I I!mp!ementk,o
I
fln,,e!op,.,s.n.
Progress (IP) |Objetive (DO)
Bank-financed
... VIIOt S, IHSII SOuvia OV,%C-ILY ILBL all", PriOn LCILO LIL (PARSEP - P057910)
rUDiiC
rmanciai managemeFt
Social Security | Social Security
S
riscai and rinanciai
cManagement Technical Assistance Loan (P07329) |INSS Reform LIL (P062619)
COMPLETED
-10-
|
S
Public Sector Management
Fiscal and Admninistrative Reform Loan Special Sector Loan (P063341) lFirst Social Security Special Sector Adjustment Loan (SS ISECAL - P063340) |Second Social ISecuritv Snecial Rector Adjustment Loan (SS SECAL
Social Security|Adjustment lSocial Security
Social Security I
Public Sector Management Adjustrnent |Programmatic Fiscal Reform Q.S.,trUCt
S
S
S
HS
HS
|
S
A ) jusu.^leL Loan.
(PFRSAL-P060575)
|ther
Second Programmatic Fiscal Rt-f5 nrm Rtninhiru ShnclAd Adi tment |evelopment Loan (PFRSALII-P070641)
agencies
Inter American Development Bank
PROPREV (targets 5-6 large miiuufcipailucs and is modeiied on PREV-MUN; start-up " Y. , -, pnase) IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: Lessons leamed from PARSEP and similar operatons follow. A detailed analysis of PARSEP lessons incorporated into project design is presented in Annex 12.
* *
a
Client Commitment. Formal client agreements ("termos de adesao') need to be more closely linked to client action plans to ensure commitment. Client Tea.ms. Municipal proiect coordinators and their teanms should be integrated into the pension agency structure to mitigate problems of weak ownership and lack of influence. RVpnuo,pinr, Anr-ivitipm qhnllld nnt he qpniienned with rioidi tric aer t-.nnditinn-Q hiut rquthpr mmirninAlitieq should develop their own individual plans to strengthen ownership and avoid waivers, merger and elmn
*
*
ut nn f.r.
duffar.ant ci A ant - aaAt,
ndA n.iroc,e
Loan Components. The basic PARSEP structure and components including the need for a strong L'L
*
4
matnon oaf ,.nmnnnntfa
Or
Uavf
I.eaUL pr
ulg
tldcujica LLvl j aSaLsLiTICZ is apprL
iusi
uIuU.CI1patues.
Speciu
care
should be given to ensuring adequate travel expenses given the importance of direct DEPSP intervention to overcnse r'bibLanue p V vi l..'al wSsib'wice, and ii-nplmeni LUC proscL Training. It is not enough to train key officials. Given the lack of a pension career stream and specialized courses, personnei turnover and dependence on consultants in sub-national governments, a permanent and accessible training venue must be found. Cadastre Upgrade. T'he potential fmancial benefits to sub-national governments trom eliminating unwanranted payments and submitting bills to the Federal Government for restitution (Compensacao Financeira)are sufficiently strong incentives to overcome reform inertia. States have spent much more on cadastre upgrade than funding offered by PARSEP.
- 11 -
*
UDscaling. There is a need to find "multinliers" to become nermanent centers of technical assistance and knowledge sharing for sub-national pension matters given the huge number of potential mi1h-na
*
nnal 0overnments reLiirinasqsistance.
Actuarial Software. The Bank's PROST software was a very useful pedagogical instrument and was It sereA aa no
also empn.lnyed in coup"rl im,tnnntnt studies
mnAal fnr STPP- PV rdvalnopment
HUnr-o,pr
ownership, specific country needs, maintenance and upgrade issues argued strongly for development of local sol4.ware, especia'ly
Li
a
LuAuILy
wi tut1CLaLu
a
t%ecnic.1al
H1ence, I rA
FajacL.-y.
XOPL
a.JLu
PREV-MUN support Brazil's ongoing development and implementation of SIPREV and its modules.
0rInDnr:rs, I rnXA :_ _:, 1:_._ a,iFr iVflWflcunne;. IL: ivirto Will IiuL UV 4ulC LU 11lLaUL, UjJls dUC, U4UI WUC 01 UUl1LM who will demand SIPREV assistance. This function will have to be let out to a private group(s) with DEPSP supervising and working on upgrades. * Stakeholder Dissemination. Locally sponsored PARSEP workshops and materials dissemination have proven very effective in states to inform stakehoiders of project objectives and results and to build reform constituencies. The dearth of materials addressing pension management, best practice and the legislative fiamework hampers training, compliance with new guidelines, and management reform. Hence PREV-MUN supports a significant publications effort. C' ---IItl
I:_z_ -1
J
dIlU
-.
ULLVUl:i
4. Indications of borrower commitment and ownership: The borrower has demonstrated commitment and ownership in the following ways I~~J~LUJ~JUUk L4.WJi.I re40r IU 1 G UI1I U f+ JL~ L, .ia iu alocroicre2cm..un un L UiJl il jJIGLII a * 1Pxecognution vf peons as or.n r1(e Annex 11 for recent legislative reforms) * Grow-U of DEPSP sutalLig to over 20 p-rofessionls and assumiption of expandirg legau mandate to monitor, evaluate and validate performance and provide technical assistance * Successful implementation of PAKSEP, Winch was used as a catalyst to create and strengthen DErPSP, the unit responsible for sub-national pensionl supervision * Design of PRKEV-MUN components virtually identical to PARSEP * Diversion of funding from a larger IDB loan to address pension reform in six large municipalities following the PREV-MUN model * Submission of a budgetary request in the CY02 budget exercise of over $1.0 million to launch the project. * Allocation of DEPSP/PARSEP staff to work on PREV-MUN. 1
%I.L.a
%U,&liLLt.U%
5. Value added of Bank support in this project: The Bank has successfully partnered with the Government in pension loans and ESW, providing resources, techlillcal assistarce aantda[l U 117u lur ueuatung pei1lUlI INSNUU. DaUIK upuratLulls-reusznr, LUC 1UN LiL, two S/SECALs and important AAA-have supported the Ministry's formidable reform efforts. Relations are excellent and the Bank has become a valued sector interlocutor. Tne Bank has coliaborated in the refinement of the PARSEP model to address municipal issues. And good relationships between the Bank and MPAS assures that PREV-MUN implementation will move forward smoothly. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): O Cost benefit NPV=US$ million: ERR = % (see Annex 4) O Cost effectiveness Not applicable (NA)
-12-
2. Financial (see Annex 4 and Annex S):
NPV=US$ million; FRR = % (see Annex 4) NA
Fisca; Impact: At only $5 million in loan funds and an equal amount in counterpart funding, and given Bank terms, the fiscal burden is not significant. However, the eventual positive fiscal impact from improved pension management for the tareeted municinalities -and considering that the 26 state canitAl mumicinalities
account for some 800% of the aggregate municipal pension deficit of R$2.6 billion--could be quite cianifilent
R.anit7i,nv
ofnclanntres
alne
haS nrnvpn a hiohh l,ie-rAitvp
=
f.foiprt2lfl r t.tes, nf.en
generating savings of tens of millions of dollars annually. 3. Technical: There are no serious technical impediments to PREV-MUN imnlementation. The comDonents have either been successfully tested and implemented by PARSEP in the states or, in the case of the SIPREV modules, w:ll sonn he launched. The nrincinal challenges are the fohlovwin * SIPREVIntegration. Implementation of SIPREV and its modules requires municipalities to decide whether the nPw svystemc will rpnelac exicting pnavrnll lnA hbnefits c-alcla-ltinn csetpem andi if nnt hnw the incumbent and new systems will be integrated. MPAS specialists will assist the municipalities to reolve Ut-s, quest.+on
*
SIPREVMaintenance. MPAS has decided that it will retain private sector entities to maintain OiERIJXV aL-d pIvv.ud
LU.e WC1 11alI ass1iLsUc
aIlU UaIg,
IreqLLedU LV
rIn.ULUI.Le IVYIEU
MUIifILU
While
ensuring that institutional memory and capability are made accessible to sub-national governments on a peniar[erit busis.
* *
*
"Replicators". MPAS has decided that it will identify and work to strengthen "replicators" to support sub-national pension agencies. Tnese could include groups associated witn municipal institutionai strengthening. Training. Permanent and accessible training venues are needed in the pension area. Because there is no formal government career path for pension specialists there are few courses available. MPAS will identify permanent training venues and verify if they are appropriate for sub-national governments. There are three Federal University of Brasilia foundations that could provide the desired training vehicle and one has already been used for PARSEP. 2,700 Municipalities. The question of how to assist the universe of municipalities of different sizes and needs will be studied with PREV-MUN support around the time of the mid-term review. It is expected that experience accumulated with two years of PREV-MUN (and PARSEP) plus access to legally required legal and actuarial reports will provide the necessary information to conduct a needs assessment, and develop recommendations.
4. Institutional: Within MPAS there will be a Project Coordinating Unit (PCU) and a Project Executing Unit (PEU) whose attributions are descrihed below and detailed in Section C-4. 4.1 Executing agencies: Project Coordinating Unit (PCU). A PCU already exists in MPAS in the Executive Secretary's Office. It ic c.harvrpge
uith finninnisd mannacPmPint/P.YP-iitinn nf th. MTnAi'tru'
nrniorts
T.hDs PCU is Lhe
oritina
agency for the Bank's Federal Pension Reform LIL and is in the process of taking over PARSEP. It also is upgrading a financial man.agem.en.t module c.w..'y bein.g ued to manage the LIL and customized for
- 13 -
Bank type operations. This work is nearly complete and will facilitate the work of managing all of the Bank loans including PREV-MUN. A financial management assessment found that the PCU is fully capable of executing the operation. 4.2 Project management: Project Executinz Unit (PEU). The PEU will be responsible for the technical execution of PREV-MUN. It also resides in MPAS, within DEPSP in the Secretary of Social Security (SPS) and on the same floor as the PCU. The PEU will comprise many of the same employees that are successfully managing PARSEP. The DEPSP team has successfully implemented PARSEP and the two operations are very similar in terms of management and procurement. It is experienced, well staffed, knows the Bank and its procedures and has earned the respect of state officials. Hence, the expectation is that this will be a very strong PEU. A
Ar.JL'I
ALvUI9'lV..lL
LOOLUa.
While PARSEP was formally executed by the Ministry of Finance since its inception, project management--including procurement--has largely been handled by the DEPSP team. DEPSP develops TORs and is responsible for all procurement cycle matters including contacts with the Bank, UNDP (which is also the PARSEP procurement agency), state clients and vendors. DEPSP maintains good relations with the strong Brasilia based CMU Implementation Team that helps with PARSEP procurement matters. It has become experienced in Bank procurement procedures through close Bank contacts and training. The Implementation Team will again provide PREV-MUN with all necessary nrn
ilrement supnnrt
Pinally,
wrnPlefpmPent
its components. DDVXI_WAT fl'J
I J'L V~AVItJL.
:ill be smplifmiped hbecaius P,RFV_MT1N ic
dimpePinnpA sim.ilnr
to PAQ'Z1P incluiiring
It is expected that PARSEP procurement documents can easily be adapted for
Alcr
[LZO'.,
-,n. r%f t+cn,
M_.WIy of t.he smf
.o,nc
-e ,ve-1o.-s
nuila,,,.,
will
e
IIVUA V
4.4 Financial management issues: The Bank has evaluated the Project Coordinating Unit financial management capacity and found it to be sa.fiasla"uy
(se
r;
Ar.n
6).
I I.e
I
isAJia1AL.UII,
OUILVVaI-
UtaL
WAIL
Vb
er.^.IployeU
OFpecificlly.-3
LVr
PREV-MUN and other multilateral projects executed by MPAS. Again, the loan is similar to PARSEP anu ihe iNSS LIL, w'nch are bcing managed satisfactorily, hnce no dii0 cuituies are expected. Environmental Category: C (Not Required) 5. Environmental: 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. NA 5.2 What are the main features of the EMP and are they adequate? NA
5.3 For Category A and B proiects. timeline and status of EA: Date of receipt of final draft: N.A
5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA iPuIL
MI UIV 16iLV UUIIV.dILa1
J111pU1L3
mlLK FAUyUJOL.IdVVLJUIUILAIVL.I1a.LI~R U
of consultation that were used and which groups were consulted? NA
- 14 -
jJIULI
~OIIU" III..~IIaLUOJLI3
5.5 What mechanisms have been established to monitor-and evaluate the impact of the proiect on the environment? Do the indicators reflect the objectives and results of the EMP? NA
6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social developnent outnrnes.
This is an institutional strengthening operation and there are no significant social issues. The eventual social development outcomes would relate to (i) improved municipal liquidity which would allow for increased development and poverty alleviation expenditures, and (ii) strengthened pension reform constituency. 6.2L
oa".lFpawluy AppJ.-oac`
ldeJs
How arev key s
pal .
FLL.pa.LuiUl
uit,
pJJ% FJI.
Stakeholder needs and concerns have been elicited and taken into account in two ways. First, PARSEP is well known among many municipal officials. Furthermore, DEPSP is continuously in contact with municipalities providing technical assistance in the legal, actuarial, cadastre, and SIPREV/systems support. Consequently, DEPSP has already acquired an understanding of municipal capacity and needs and these are reflected in project design. This is especially true in the legislative area owing to sub-national governments' obligation to comply with new guidelines governing the management of their pension funds and benefits regime. DEPSP has set up a website and nublishes the results of its validation exercise for each sub-national government. It knows which municipalities have submitted, which are in default, and, their nenri reire'q Iega! ff-rewnrI iS accentAle iinder the new fother guidelines. Second, a two day workshop was held for municipal secretaries and heads of pension institutes to assess p
eAAW. -. A
sIOLuVIILIV U%O
S
-
OJU.U V
tpA, W Ule
DD lQ I R L
TUT TM VIV.JL
-_-.
JiVapp
X.
Dn
s
_.Ja..,u. II I
IWUI
--
VV W,A_
-.
,na.
A.
At-,
A1,A
li,
1A-nl.
VT *t, 5 UOfl_-
VW
framework governing sub-national pension management and reporting. PREV MUJN was also presented HiAudUUing
execuUUMIo
4-1 Anr,-VeMWJLts a-ULIUrJIUJct %;,IIjJPVLIVLer'
lugm.,
UadU-V,
air
MUV
auld iL rr,oULles,
workshops and training. Participants' views were elicited regarding their most pressing needs, priorities, and the appropriateness of the PREV-VIMUN design. Tne participanis were su-ongly supporuve of uie operation, and the current project design reflects their input. Nineteen letters of intention from mayors have been received to date. 6.3 How does the proiect involve consultations or collaboration with NGOs or other civil society organizations? Each participating municipality will have an obligation to conduct two stakeholder workshops. Budgets have been provided for the workshops and also for the preparation and dissemination of materials. The municipality will decide the timing of the workshops but it is likely that many will choose to launch their participation with a first stakeholder event and conduct a second in 2-3 years to present cadastre and actuarial results and debate reform proposals. These workshops are also a PARSEP requirement and have proven highly successful in informing NGO's and interested civil society and government officials of the program and its results. 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcor.,es?
This is a technical assistance operation focussing on institutional strengthening of MPAS and participating municipalities' pension management. Neither changes in benefits' regimes nor extension of coverage are
addressed. The most important social outcomes would be control of pension expenses through cadastre upgrade and strengthening of the municipal reform constituencies. The first is covered by a specific cadastre project component and the second by stakeholder workshops and publications. 6.5 How will the project monitor performance in terms of social development outcomes? Progress in each component will be monitored as part of normal supervision. Indicators are presented in Annex 1. 7. Safeguard Policies: 7.1 Do any of the following safeguard policies apply to the project? .&_J1et * 2.---i P.olicy"... |
INatural
I afetv
1 1
of Dnam (OP 4.37. RP 4371
bULLV, 1 provisioins .. laUd
0 Yes * No O Yes * No O Yes * No Yes * No OYes * No OYes * No 0_ Yes*_NoI 0 Yes * No 0 Yes * No
I 1
Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) Prneets In Disputed Areas (OP 7.60, RP 7.60, CP 7_60)* 7.2
uy UIV pject
Lafeguauto eure
c...pliar.ce
Xf--
OYes * No
Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) Habitats (OP 4.04, BP 4.04, GP 4.04) Forestry (OP 4.36, GP 4.36) Pest Mana2ement (OP 4.09) Cultural Property (OPN 11.03) Indiienous Peoples (OD 4.20) Involuntary Resettlement (OP/BP 4.12)
!
-wi,u applicable
polcies.
Not Applicable
F. Sustainability and Risks 1.
SustaOrnabUa+y:.
Project sustainability is assured owing to the following. (i) The legislation governing subnational pension systems management has recently been reformed providing a permanent framework with strict compliance rules. It requires sanitized cadastres, actuarial analysis and balance, regular reporting and compliance with administrative regulations including those governing pension funds management and the permissible benefits regime. PREV-MUN facilitates municipal compliance in each of these areas. (ii) PARSEP has successfully piloted methodologies in states that will be implemented in PREV-MUN. This is especially true of SIPREV which responds to sub-national government demand for a comprehensive electronic cadastre formnat to unify pension data managed by different government branches. SIPREV and the new actuarial and benefits calculation modules also respond to strong sub-national government demand for pension management tools.
(iii) Growing awareness of the fiscal burden imposed by pensions together with the Fiscal ResponibtfiOlitLy Law
IV-;toM fVIflon ,
s'JtOa'.e paj
v!!sl
are.
strorn,g ;,r.centive
*v: *
,n flflw.lt.AiJes "J
'.o S,.d
solutions to their pension problems. PREV-MUN helps municipalities to assess the burden in actuarial Le[IIs and deve:op
pImposahs
Ir Udealing wLUI IL.
tLproViUde
11IULLL
i.J4IILeswiuiL .oo:s IUrsU,11gUA,e,,Lg
the reform constituency. (iv) Fiscai incentives aiso contribute to sustainabiiity. SiPREV faciliiates the solicitation to the Federal Govermment for reimbursement of pension liabilities (Compensacao Financeira)and cadastre
upgrade can eliminate significant unwarranted payments.
- 16 -
In addition, MPAS has taken strategic decisions that will reenforce the permanence of its interventions. As a result, it is looking for permanent, accessible and self supporting venues for training and SIPREV maintenance. This becomes especially important considering that many of the 2,700 municipalities operating their own pension systems will need support. Regarding training, a University of Brasilia foundation will be retained to provide train-the-trainers courses and direct training in pension management. If successful it could become a permanent purveyor of pension training for sub-national governments. Finally, DEPSP has determined that it should dimension its staffing to provide technical assistance in the lega area -- ' -! sub-natonl -oen=et -- il . to-epspcifi_ request- ... other area. At belie_,e this will be possible with its current staffing levels. This proposition will be tested over the four year loan
~I'.J I.
MA"~
~.J U.
-XWA~lA.VYIi A
.riuival ui fi
|-
*^
'
LILGA4.. UU.%,AA UjJ'.JR 1ULIJ1L.L1XVMaL4UIV
I.U III 01
-iciuvlig Ul1v ktulM0 Uc klU'al a:UImpUOIIs IUlUIIU HI1U1U IUUOUI
;~Rislk
|.Rlsk.Ratin,icF I
i
From Outputs to Objective
l:'
r
anneX 1):
. -.-Risk MitigationlMeasuro
l
Politically motivated delay in pension fund
H
l
PREV-MUN will mitiRate this problem in part
and benefits reform--which require a Constitutional amendment-will result in mounting fiscal burdens
through improved pension management, development of reform nronosals and strengthen the reform constituency.
PREV-MUN approach and methodologies !not easily replicated in numerous I municipalities not covered in the loan.
M
|Legal framework requires compliance and their lare strong positive managerial and fiscal incentives associated with pension reform and snecificallv with cadastre upgrade and SIPREV. I PREV-MUN will help to find permanent, l Qeihe'~vem1ues fnr tMni and seru1cm l and pay for a strategy paper
SIPREV
.Addroocinr rnlica.ot4inn
Many municipalities will lack the 1neressay
resou.-ces
tLo ivest
H
PREV-MNUN will help to identify the problem
in pension
anUd puoiblue oiUUVrLs.
funds to ensure actuarial balance. MPAS capacity to monitor and validate periormance wiii be overwheimnea y 2,700 municipal clients
M
I
Small first year budget will undercut |interest and prejudice project |implementation
IL
is LIUL U:iZ1UIU LU
resolve the problem although it will strengthen reforni constituencies. SPS will provide training to MPAS's regional teams of inspectors. It is believed that tnese wiii be sufficient especially given the formatting of reporting and eventual implementation of the actuarial module. DEPSP will finance much of first year activity with own resources and also leverage PARSEP funding to assist municipalities.
M
From Components to Outputs
General: Budget constraints will delay limnp1mentatinn
M I
PARSEP budgeting has been satisfactory once Iimplementation cnmmen .eePA
PRF.V-Ml
N iS
small and resources should become available I Component 1: MPAS/SPS Institutional Su-rl-gu^er
iL-g
a-up~~ovn im..prt-2rlf.j
|
l
17-
-17 -
of
nperion refom^..
l
IDEPSP staff will not be adequate to service 26 municipalities given its requirement to attend all sub-national
M
|DEPSP is already servicing many municipalities and believes it can handle the work load. More staff and consultants can be brought on if
governments.
needed.
SIPREV and its modules will not be laccepted by municipalities
I
I
I
N
States have uniformly adopted SIPREV and modules are demand driven. Many municipalities are requesting SIP'REV and Iinterest confirmed in PREV-MUN workshop among targeted municipalities.
o
Component 2: Municipal Institutional Strengthening
Political opposition from local public
M
These problems are being overcome in PARSEP ithrouah intervention of DEPSP and local workshops and municipalities run smaller vqtemn and have fewer nTnhlem.
M
IPREV-MUN implementation of cadastre clean-up, SIPREV and actuarial analysis will simnlifv nension management; emnphasis on finding a permanent, accessible training venue
lofficials and branches of government to relinquishing hold over pensions will Inrejudice implementation FHigh turnover, reliance on consultants and lack of preparedness will complicate limplementation and sustainabilitv
(linirpA to the Fedi-l
niupreitu of BrPeilia) ar.d
ltrain-the-trainer courses will make possible
I~ ~ ~~~ ~~~~~~~~~~~~nltfint
t^^1| ro.nn
.
|Overall Risk Rating
T
M
of pnsonn
n1
.wn1ci^
The risks of not satisfactorily meeting the
Projects objectives are "modest" even though political and financial problems may impede l______________________________ l
ladoption of solutions.
Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3.
r ossUib:
..UUII
r.a
Aspec:s:
Pension reform is likely to cause concem among municipal stakeholders similar to what transpired in some states. However, once the PARSEP program was understood the problem disappeared. DEPSP missions, local stakeholder workshops, publications and disseminations of findings and proposals have been used effectively to dispel opposition in states and should be equally effective in municipalities.
G. Main Loan Conditions 1. Effectiveness Condition *
rulilLal agwraemvin
*
Project Coordinating Unit in the Executive Secretary's Office and a Project Executing Unit in SPS. Finalization of an agreement witn a multilateral procurement agency expected to be uNEDP.
puria") j 'wuuaisiUg LimIs anU resp1nsioiucLICs sausfactory to tne BanK for a
-18 -
l
2. Other [classify according to covenant types used in the Legal Agreements.]
H. Readiness for Implementation
Li 1.a) Tne engineering design documents for the first years activities are complete and ready for the start of project implementation. Z 1. b) Not applicable. 1 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. Z 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. El 4. The following items are lacking and are discussed under loan conditions (Section G): Note that the Government has authorized only $275,000 for CY02 operations. A procurement plan for this amount has been approved--it includes workshops or computer eauipment for a limited number of municipalities. Procurement arrangements are similar to those for PARSEP for similar activities and are eaqilv nrenared and nrocessed. !. Cm,!la~
nuie wlt
Bnk,
Polce
1 1. This proiect complies with all applicable Bank policies. 1] 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other annlicable Bank nolicies.
Chris Parel Team Leader
Ronald E. Myers C) Sector Manager/Director
Vinod Thomas Country Manager/Director
Annex 1: Project Design Summary BRAZIL: Municipal Pension Reform Project Key Performance [Data Collection Strategy | Hierarchy of Objectives I
Indicators
=;
Sector-related CAS Goal: Sector Indicators: Support pension management Improved municipal pension reform management and reduce associated fiscal burden
Strengthened SPS/DEPSP 'abit*. car.-y ouiw -mmda:e
.
Critical Asuifptions
-
Sectorl country reports: -Supervision Reports -Senate approved budget
(from Goal to Bank Mission)
idem
idem
Prujuec rpur;
itorm
]
-Continued Giovernment support and enforcement of relevant legislative requirements -Adequate budget authorization -Approach and methodologies are successfally implemented in PARSEP and can be adopted for targeted
to oversee sub-national nensinn sysqtems
rUJut
vuiDveopmuiet
Objective:
.oulu.u,la
'(i) Improved mn^ar.agn^.emnt in Sutpernisn . reports
Sup-,ort penssion reformr in 2
of Brazil's capital/largest Imunicinalities
I:pact
Objective 0oGoalj
Indicators: 'ide.
26 municipalities: I cadastre unprade (20) 1 * SIPREV (20) and module (15) implementation * actuarial analysis (20) * constituency building through stakeholder workshops & dissemination (26) * improved human resource capability through training programs idem
(ii) SPSDiEPSIPsuccesstully
idem
* implementing project * institutional strengthening through raining p.-ogarn
* validating nerfnrmancelegal
| I
II
compliance (24) pFroviding technical
assistance (26) .(iii) Development of a strategy IStudy and program to attend the |needs | of numerous | municipalities not covered by PREV-MUN
-20 -
Assumes feasible snlutinns for cadastre upgrade, SIPREV | and module implementation. and actuarial balance and Constitutional reforms
Pr
OQutput !ndlcators:
*from eac'h Output Component: r Gmnonent 1: MPAS/SPS
ct reports:
political and budget support
Institutional Strengthening A. Provision of TA in systems, actuarial, legislative and project management
lB.
Maintenance of core project team C. Logistics support for DEPSP team to work in municipalities D. Installation of budgeted hardware/software package E. Successful conduct of training workshops; publications
(fo Output_s to_____ .J_._ Continuing GIve
* Maintenance of consultants in DEPSP
| -Supervision reports
* Compliance of 24 municipalities with legislation/regulations * Development of 26 vaiiuaiea municipa; action plans
-Supervision & official GOB website (CRP) publishing Icompliance resuits
of teamn * Maintenance relluired to manage project
Supervisionreports Spriinrprsie
* Resources necessary for logistics support of municipal activities * Installation of $60,000 package * Three successful workshops/ forums addressing critical topics | it 26 municipal
|idem
Supervision reports
idem
-Supervision reports
idem
|
-Supervision reports and exit evaluations
Municipal participation
participants
studies & newsletters
6 newsletters 1
.,
In
sI
sn^u-ionalss^ * Co.m.p ......... - ;on..A do
validation of reports
(i)asset management, ad il(n'i
, fnr
serving other municiDalities--results validated by the Bank
Successful completion of Supervision reports programmed training -Supervision reports | * Implementation of |H. Implementation/ SIPREV in 20 maintenance of SIPREV, its municipalities modules and development of * Implementation of new modules actuarial and/or benefits in 15 ! ~~~~~~~modules | municipalities 0 * ~~~~~Development/implementa| 0 G. SPS/DEPSP training
|
IH.Implementation/
I
tion of new modules (to
be defined)
-21 -
-SIPREV and modules accepted by municipalities
Component I: Municipal Institutional Strengthening A. Installation of hardware/ software packages B. Cadastre upgrade
*IM4IL4UII I
In f
J3allpes
VIelo'l
municipalities l 0* Upgrade oftcadastres in -Supervision reports 20 municipalities sufficient for comprehensive diagnostic
p-uri-oses * Realization of significant C. Actuarial analysis
* Projectsupported
_
_
_
_
_
_
-SbmiiOnoflepaaly,
* Implementation of one or -Supervision reports more workshops in 26 -Exit interviews municipalities including dissemination of materials * Participation of officials -Supervision reports in MPAS training workshops and larger groups in locaily administered | workss,ops--24
I
i:rsts l
I
_
l -Collaboration of ditferent government branches -FiscaiAegai compliance incentives outweigh vested
I-MuILniMcpal uValUaL.iVon
analysis in 20 mandated actuarial reports municipalities inlu-ding reform recommendations
E. Training
l
l
-Supervision reports
benchmark acSubr,c
D. Stakeholder Workshops & Dissemination
l
Identification and piloting of permanent,
| Municipality takes ownership of participatory approach
1 -Successful training vehicles can be developed and maintained
su-stainnhle trinina
venue
-
22 -
Hierarchy-of Objectives | '.: Project Components / Sub-components: 1. MPAS/SPS Institutional Strengthening A. Technical assistance in IT, actuarial, legislative areas B. Technical assistance for the PCU/PEU C. Technical assistance for municipalities--logistics D. Hardware/ software E. Workshops & publications F. Institutional studies G. Training H. SIPREV and modules implementation, training, maintenance 11. Municipal Institutional Strengtnening A. Hardware/ software B. Cadastre upgrade C. Actuarial evaluation D. Workshops & dissemination E. T raining If,_n"
iidifcators
'
-
Inputs: (budget for each
I.-CriticaI Assumptionsj. (from Components to Outputs) Same as above
-S.;-.
Project reports:
component) Same as above plus audit reports $432,000 $288,000 $291,000 $59,000 $557,000 $43,000 $91,000 $290,000
Same as above plus audit reporEs $494,000 $2, 89,000 $889,000 $1,,768,000
Same as above
ll
$i, I82,000
l
I~~~~~#ZOn'77 nA
Cooingcncy %,
|$7,0
Prnnlreement agency
| 4'A(1
l
-23 -
l
Annex 2: Detailed Project Description BRAZIL: Municipal Pension Reform Project By Component: Project Component I - US$2.01 million
Component I: Institutional Strengthening of the MPAS/Secretary of Social Security and Project Management Sub-ComponentA: Provision of TechnicalAssistance
-
$432,000
Experience with PARSEP demonstrates conclusively that there is a huge demand for technical assistance across project components that can best be provided by maintaining expert consultants full-time at SPS. These consultants will work on and refine project sub-components and respond to requests for assistance from municipalities. Six consultants will be maintained for three years at a cost of $2,000/month/consultant which translates into $144,000/year and $432,000 for three years as follows. A- 1. Information Technology Consultants (2). These consultants will work on SIPREV systems develonment including modules Thev will also nrovide awmistance to municinalities to imnlement STPRF.V and the modules, training, maintenance and responding on technical issues and queries. A-2. Actuarial Consultants (2). The new social security legislation (see Annex 11) requires actuarially bala_nced pension f-"ri
A phia1 ar
is iLmnost ,.^tm,.y
new
to BP
iar persion m.aragement
having been introduced in the states primarily through a PARSEP component. The actuarial consultants Wil1p.ovide -UjJ_JtJ1 +_ to I1icipa t;... WUh aU. _ fl w -A+_ puce a.rn- GacuaIa. diagnostics of their funds. They will support the development, implementation, training and maintenance o.0,1-
Io
CTflThr!~X
Lue airIP^V
.
1.TL1.
Wa.uaiUi
i*,^,ouI.
A_
a
.___
.
tUuL, basdu upun
IN A T10~T."
.1
.
~,L..VucaiuuuA upotiA
rtu .r.r experieiieUV, ulvy wi
__1
continuously by municipalities for professional support regarding contracting of actuarials, compliance with legisiative requirem-n-ets, and to understaind the implications ofithe actuariai results produced. A-3. Legislative Consultants (2). Tne maintenance of two consultants fuli-time basically substitutes PARSEP Phase #3 which programmed $200,000/state for consultants to help with the development of a reform legislative framework in each state. Legislative advances provided the model legislative framework contemplated in Phase #3 and accompanying regulations that govern sub-national pension management. Sub-national goveunments also have lawyers in sufficient numbers to adapt local legislation to Federal statutes. What is most needed in the case of states (PARSEP experience) and municipalities is a core of expert lawyers on call to (i) provide clarifications regarding the new legislation and how it relates to existing sub-national legislation, (ii) provide technical assistance as needed to assist sub-national governments in adapting the new Federal laws, and (iui) validate the sub-national governments' legislative framework which is now part of MPAS's new compliance mandate. Note that the results of the validation exercise was published in the recently launched MPAS website, "CRP". Every state and municipal government will have its legislative framework evaluated and results Dublished. These consultants will also assist in the development of a model framework and technical assistance for adapting the Complementary Law (annmrval expected sonn) to the requirements of the Piscal Respoznsibility Law.
-24 -
Sub-Component B: ProjectManagement Consultants-$288,000 B-1. Permanent Proiect Management Capacity. A permanent staff of five professionals is contemplated at a
UIU- yeaI L.UL of VI
I V,000 Lt (i)
dUeVe:op adIl UIIUrILIII pIUJMLcL lall5dgelllIi1 cUpdacLy UcapaleI
of
monitoring and evaluating the development and implementation of terms of reference and contracts, and (ii) responu to tue numerous informatuon ana nelp requests ror 2o municipaliues spreaa across the country. These professionals will provide technical assistance to municipalities during project launch when they will be required to develop and commit to an action plan. T-hey will also monitor the updating and implementation of these plans over the four year project period and generally assist municipalities with procurement and implementation matters while providing project management input and support for the various monitoring, evaluation and reporting efforts that must be carried out throughout the life of the project. The configuration of project management staff is based upon the PARSEP experience with 26 states. The following positions will be staffed -3 Project Management Consultants @ $2,000/month/consultant -1 Administrative Assistant for Project Management @ $1,000/month/consultant -l Auxiliary Administrative Assistant for Project Management @ $1,000/month/consultant B-2. Financial Management. The financial management of the project will be done through the experienced Project Coordinating Unit that is already managing the Bank's INSS LIL and that will soon assume responsibility for PARSEP. Consultant support for managing the system is estimated at $24,000/year for a three year total of $72,000. Vuh-n-mnonen,tt
Tprhnirv,I Aeddane, for
fu,4na1iiipe.LnaSiesgii'e... 2G°,2QQ
One of the critical lessons learned in PA1?EP is the need to have sufficient logistics
nding-travel nd
per diem--to ensure that DEPSP staff and consultants, including those retained in Sub-Component A WWWS WV
MVlS
;O.O-LI
C
UZI
UVL 5VLUUIIU
WIl%JL
L1A5%UV1.
LI
LD
UU&UrL ILVII
jJVVIUUD
WUI
IVrDULb
funding for * Gen-eral project super-vision * Municipal action plan formulation * IT/SiPrEV support * Actuarial support * Legislative support Sub-ComponentD: Acquisition of HardwareandSoftware - $58,500 The objective of this component is to ensure that DEPSP is adequately equipped to carry out its mandate. A modest equipment package of $58,500 is contemplated for DEPSP staff working on PREV-MUN and municipality issues including project management, monitoring and evaluation and SIPREV development. Roughly two thirds of the budget--$37,500--is for 15 Pentium computers costed at $2,500/computer and another $10,000 is for notebooks, also at $2,500/unit. The equipment list includes * 15 Pentium'computers * 4 Jet ink printers * 1 color laser printer * 2 ZiD Drives * I multimedia projector * 1digital camera * 4 notebooks
-25-
Sub-Component E: MPAS Sponsored Training Workshops andDissemination-S557,000 E-R1. Workshops. Three DEPSP sponsored workshops are contemplated for municipal participants. "P'epicaf.oJLU
ViralLALAJ,JJl
(3LsatL
asocG,a1VorV
Io LALUl IU1JIuUs,
jJilVa.
a0I.%,LVJ ULaL
1l4ly tV
lIv OVit
of VnIi,e
the DEPSP responsibilities for SIPREV maintenance, technical assistance and training may alsco be invited to participate.dL iThe first forl. Scto 501iiiiia. eiia. rItW; olwd'y be uwO I110IILZ UIPM. IUWU wifl HI beagre7:A,>aR.'~ -lbi#^:
ITime taken to prepare the proJlect (months) |
First Bank mission (identification)
06/01/2001
Appraisal mission departure
|
09i/1/2001i
Negotiations
11/15/2001 12/15/2001
1
Planned Date of Effectiveness
07/23/2001 05i/152002 05/15/2002 09/03/2002
Prepared by: Chris Parel Preparation assistance:
Indermit Gill Truman Packard Tulio Correa Efiaim Jimenez Mnqri Crrmen Minnsn
Tania Hollestelle Bank staff who worked on the project Included:
C 4
-:.iName
Chris Parel Indermit Gill ITruman Packard Tulio Correa Efiaim Jimenez Maria Carmen Minoso |Tania Hollestelle
''
' i
'Speiaiaty.;
'
. ..
Task Management: Public Sector Management Pension and Macroeconomic Management I ernsion miauiagemwint Financial management specialist Procurement Operations Assistance Program Assistant
-45-
.J-A,
:
.
Annex 8: Documents in the Project File* BRAZIL: Municipal Pension Reform Project A. Project Implementation Plan The detailed budget and procurement table included in Annex 2 summarizes the PIP. The first year's procurement program has been approved. Procurement, financial management and component descriptions in the PAD taken together constitute a comprehensive implementation plan, especially considering that MPAS has successfully implemented an almost identical operation at the state level. B. Bank Staff Assessments * *
Financial Management Assessment Procurement Assessment
C. Other * *
PCD and annexed materials together with reviewer comments and the PCD minutes Proposal from the TM to elevate the revised draft to a PAD and authorize negotiations which details how concerns raised at the PCD have been addressed. * PAD * Draft Legal Agreement * Integrated Safeguards Data Sheet (ISDS) * Survey of Bank pension projects over the past five years, "Comparison of Financed Activities of IBRD Pension Reform Projects within Last Five Years". * Diverse emails containing reference material used in project design and elaboration, and clearances *Including electronic files
Annex 9: Statement of Loans and Credits BRAZIL: Municipal Pension Reform Project 03-Jun-2002 Difference between expected atnd acual d... .....
OAgIonal Auriount in US$ Milios Project ID P051696
FY Purpose 2002 SAO PAULO METRO LINE 4 PROJECT
IBRD 209.00
IDA 0.00
GEF 0.00
P055954 P060221
2002 GOIAS STATE HIGHWAY MANAGEMENT
65.00
0.00
2002 FORTALEZA METROPOLITAN TRANSPORT
65.00
0.00
P057665
2002 TA Financial Sector
68.00
P043869
2002 BR-FAMILY HEALTH EXTENSION PROJECT
62.80
P074085
2002 BR SANTA CATARINA NATURAL RESOURC &POV.
P057649
4
Cancel. 0.00
Undlsb. 209.00
0.00
0.00
63.34
6.10
0.00
0.00
0.00
67688
0.00
0.00
0 00
0.00
0.00
66.00
0.00
0.00
0.00
0.00
0.00
62.60
0.00
0.00
20.60
0.00
0.00
0.00
20.59
-0.21
2001 Serglpe Rural Poverty ReductIon
54.35
0.00
0.00
0.00
50.31
7.41
0 00
P050881
2001 Rural Poverty Reduction Prnjed - BA
22.50
0.00
0.00
0.00
21.08
10.18
0.00
P050880
2001 RURAL POVERTY REDUCTION PROJECT -Pi
30.10
0.00
0.00
0.00
28.90
2.13
0.00
P050875
2001 Rural Povert ReductIon Project - PE
37.50
0.00
0.00
0.00
32.48
4.24
0 00
P050772
2001 Rural Poverty Reducton Project -CE
202.10
0.00
0.00
0.00
160.93
36 33
0.00
P059566
2001 LAND-BASED POVERTY ALLEVIATION I (SIM)
90.00
0.00
0.00
0.00
88.24
-1.76
0.00
P059565
2001 BR- CEAI4A HPcIC EDUCATION
69.60
0.00
0.00
0.00
33.65
-10.59
0.00
P073294
2001 BR- BA BASIC EOUPROJECT (PHASE I)
8.66
0.00
0.00
0.00
7 91
1.96
0.00
P047309
2000 BR FIsca &Fin MorntTAL
0.00
0.00
15.00
0.00
12 06
3.40
0.00
P039200
2000 BR ENERGY EFFICIENCY (GEF)
43.40
0.00
0.00
0.00
42.66
1460
0.00
P039199
2000 ENERGY EFFICIENCY (ELETRO6RAS)
30.30
0.00
0.00
0.00
29.60
-0.70
0 00
P035741
2000 PROSANEAR2
15.00
0.00
0.00
0.00
13.09
9.45
7.16
P006449
2000 NATL ENV 2
138.00
0.00
0.00
0 00
123.41
47.24
P062619
2000 CEARA WTR MGT IPROGERIRHI (SIMI
00n
00
000no
P050776
2000 INSS REF LIL
50.00
0.00
0.00
0.00
40.40
P043874
1999 NE Mlcrofinance Development
100.00
0 00
0.00
0.00
611.67
P050763
1999 BR- DISEASE SURVEILLANCE -VIGISUS
202.00
0.00
0.00
0.00
42.52
-22.48
0.00
P054120
1999 BR- Fundescola 2
0.00
0.00
3.50
40.88
41.88
0.00
P048N9.
1000 EIR. AIDS & STfllC-,ntrlo,
165.00 11II50.fln
0.0n
0.0f
n.on
107.67
7001i
0.00
P058129
1999 SALVADOR URBAN TRANS
15.00
0.00
0.00
0.00
8.93
8.93
6.93
P038947
1998 BR EMER. FIRE PREVENTION (ERL)
155.00
0.00
0.00
0.00
121.29
121.29
0.00
P038895
1998 BR- SC. &TECH 3
196.00
0.00
0.00
0.00
118.62
106.92
52.96
P05`1701
1998 FED.WTR MGT
60.00
0.00
0.00
0.00
10.37
1.57
0.00
P043420
198 BR PENSION REFORM LIL
150.00
0.00
0.00
0.00
146.99
141.06
123680
P042865
1998 WATER S.MOD.2
60.00
0.00
0.00
0.00
26.92
17.72
0 00
P035728
1998 PARAIBA R.POVERTY
51.00
0.00
0.00
0.00
28.92
26.80
9.31
P006559
1998 BAHIA WTR RESOURCES
45.00
0.00
0.00
0.00
22.33
22 33
0.00
Puvu474
long8 (8F-R)SP.TSP
oU.u
lJu
Vut,
0.00 517 o.Jn
358
23.02
P048357
1996 BR LAND MGT 3 (SAO PAULO)
P043421
1998 BRAZIL CEN.BANK TAL.
P006475
1997 Ri M.TRAN-SIT PRJ.
P046052
1997 LAND RPMPILOT (SIM)
P006562
i97
P038895
5.081
.1.0,
Orig FrmnRev d 0.00 0.00
10n7
0.0
0.00
000
nA8
-05An
-9.60
0 00
61.67
0.00
20.00
0.00
0.DO
0.00
0.02
0.02
-7.30
188.00
0.00
0.DD
17.17
138.11
155.28
0.00
00.00
0 00
0.00
0.00
23.77
23.77
0.00
9.60
0.00
0.00
0.00
1.93
1.93
1.66
iuu.00
0.00
0.00
0.00
51.66
51.66
5.99
1997 BA-HIAMUN.DV
24.00
0.00
0.00
0.00
0.57
0.57
0.00
P034578
1997 R.POVERTY(RGN)
70.00
0.00
0.60
0.00
53.54
51.21
40.21
P043873
1997 RGS HWY MGT
60.00
0.00
0.00
0.00
33.57'
33.14
22.59
P006532
1997 AG TECH DEV.
300.00
0.00
0.00
0.00
152.73
152.73
65.61
P043888
1997 FED HWY DECENTR
100.00
0.00
0.00
0.00
57.13
41.99
19.16
P040028
1996 ROS LAND MGT/POVERTY
350.00
0.00
0.00
75.00
17.65
92.65
17.65
P006210
1996 RAILWAYS RESTRUCTURG
0.00
0.00
10.00
0.00
2.88
4.04
4.66
P037828
1996 GEF BR-NATL BIODIVERSITY
175.00
.0.00
0.00
0.00
82.87
82.27
74.28
P006554
1996 BR (PR)R.POVERTY
300.00
0.00
0.00
0.00
103.63
103.63
0 00
P006564
1995 BR- HEALTH SECTOR REFORM -REFORSUS
99.00
0.00
0.00
0.00
18.12
16.12
0.00
P038882
1995 BELO HM.TSP
102 00
0.00
0.00
0.00
13.40
13.40
0.00
P0064-36
110081 RECiFE MTSIP
140.00
0.00
0.00
0.00
18 50
18.50
12.50
CEAJRA WA:IER PLlJT (SIM)
Ceara Urban Developmnent &Water Resource
- 47t
-
Differnce beteetn expected and actual disbursements
Original Amount in USS Millions Projec ID P006543 P006522 P-54P006505 P006454
FY 1994 1994 -1993 1992 1992
Purpose
IBRO
BR- MINAS GERAIS BASIC EDU. ESP.SANTO WATER °R W'R 01.N(SPIM.wED) MATO GROSSO NAT RES RONDONIA NTRL RES. M
IDA
150.00 154.00 245.00 205.00 167.00 Total:
5797.48
48
0.00 0.00 01.00 0.00 0.00 0.00
GEF
Cancel.
Undisb.
0.00 0.00 0.00 0.00 0.00
0.00 54.00 5.15 15.00 10.00
326
25.00
.
179.83
11.94 4.18 12.12 10.64 2834.73
Orig 326 65.94 19.311 27.12 20.64 1739.72
Ffn Revd
0.00 6.92 3.581 0.00 0.00 492.10
BRAZIL STATEMENT OF IFC's Held and Disbursed Portfolio Jan - 2002 In Millions US Dollars Committed IFC FY Approval 1997
1998
Company Guilman-Amorim-
Equity^c
Loan 25.78
Equity 0.00
Quasi Partic 0.00 57.47 Q0~~~~.UU 0.00 U.Uv.J 0.00 60.00
U "Ul..y
0.00 v v
1999
Innova SA
20.00
5.00
1980/8.7/97 1999 1999 1995 1995
Ipiranga Itabemba JOSAPAR LATASA - Brazil Lojas Americana
29.33 0.00 8.00 1.33 14.00
0.00 5.34 0.00 0.00 0.00
Macedo Nordeste Mallory Oxiteno NE Para Pigmentos Perdigao Politeno Ind. Portobelo IYYQ~~~~~~UWUL
6.33 4.36 10.00 21.50 15.31 5.85
0.00 5.00 0.00 0.00 5.00 0.00 0.00 9.00 0.00 0.00 0.00 0.00 !.IC n.nn C~~~~~~~~~~.1 £0 VCC
I
Ica
998
1987/92/96/99 0
1996 1975/96 1994 1987/96 1989/95
;994/Oo/02
2000 1998 1991 1995 1990 1997 1994/96 1987/97 1994/95/97 1997 2000 1998
0 2001 1997 2001 1996 ;992/93 1998 2001
20.00 Z.V UV
A.....
Puras Randon Rhodia-Ster Rhodiaco/PTA Ripasa Rodovia S.A.I.C-C SP Alpargatas Sadia Samarco Sainaritano Saraiva Seara Alimentos Senetiba Sucorrico Synteko TIGRE TRIKEM Te io R
1993 1999 1997 1999
Tecon Salvador Votorantim Vulcabras Wembley Wiest AG Concession
2001
A:garTeleco.
1996/97 2001 1998
Apolo Arteb
Total Portfolio:
.
.'
n
IJ.IJV
4.67 6.53 0.00 7.50 0.00 27.22 0.00 16.67 20.50 11.70 20.00 10.38 0.00
0.00 0.00 7.00 5.00 5.00 u.R
57.27 0.00 0.00 0.00 2.00 20.00
0
0.00 0.00 0.00 12.32 2.00 0.00 .0n
Jv V
Loan 25.78 0.00 20.00
Equity 0.00
29.33 0.00 3.00 1.33 14.00 ..
0
6.33 4.36 10.00 21.50 15.31 5.85
.0 1.:5
V.JI
5.00
Quasi 0.00 0.00 .U 0.00
Partic 57.47 0.00 UJ 60.00
0.00 5.34 0.00 0.00 0.00
0.00 0.00 7.00 5.00 5.00
57.27 0.00 0.00 0.00 2.00
12.;4 L.'
0
0
.00
0.00 0.00 0.00 0.00 0.00 0.00
.00
0
.U00
5.00 0.00 0.00 9.00 0.00 0.00
0.00 0.00 300 12.32 2.00 0.00
0.00 0.00 5.95 0.00 5.00 0.00 2.85 0.00 0.00 0.00 0.00 3.00 3.88
0.00 3.00 0.00 0.00 0.00 0.00 0.00 5.00 6.83 0.00 0.00 0.00 0.00
0.00 0.00 0.00 3.00 0.00 47.70 0.00 0.00 109.33 6.67 0.00 0.00 0.00
0.00
8.00
0.00 0.00 5.00 0.00 5.50
0.00 0.00 6.41 0.00
I
0
10
.00 UU
An.
JV-V
0.00 3.00 0.00 0.00 0.00 0.00 0.00 5.00 6.83 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.00 0.00 5.50
0.00 0.00 0.00 3.00 0.00 47.70 0.00 0.00 109.33 6.67 0.00 0.00 0.00 8.00 0.00 0.00 6.41 0.00
4.67 6.53 0.00 7.50 0.00 27.22 0.00 16.67 20.50 11.70 0.00 10.38 0.00
7.50 18.00 13.46 0.00 6.65
0.00 0.00 5.95 0.00 5.00 0.00 2.85 0.00 0.00 0.00 0.00 3.00 3.88 0.00 0.00 0.00 0.00 0.00 0.00
14.84
7.50 18.00 13.46 0.00 6.65
. n0n 0.00 0.00 0.00 0.00 0.00
3.50 4 43 16.68 0.00 0.00 0.00
1.00 0.00 0.00 10.00 0.00 15.00
0.00 0.00 0.00 0.00 8.00 15.00
5.00 0.00 0.00 0.00 0.00 0.00
3.50 1.43 16.68 0.00 0.00 0.00
0.77 0 0.00 10.00 0.00 0.00
0.00
8.17
0.00
0.00
0.00
8.17
0.00
0.00
8.00 20.00
0.00 7.00
0.00 0.00
0.00 18.33
3.00 20.00
0.00 7.00
0.00 0.00
0.00 18 33
731.43
159.78
133.83
649.28
657.65
131.34
115.53
644.16
32. A
co
Disbursed IFC
-49 -
17.n
14.84
0.00 5.00 .00 0 .00 0.00 0.00 0.00 0.00 0.00 8.00 0.00 0.00 0.00
Aynrnvqlc PendIina Cammitment
FY Approval
Company
Loan
Equity
Quasi
Partic
0.0J
0.uu
uu
I00 .00
0.00 20.00 0.00 7.50 0.00 0.00
50.00 0.00 40.00 0.00 0.00 150.00
2002
DiuAi lmu I
2000 2001 2001 1999 2001 2002
BBA Brad Templeton Cataguazes Cibrasec Satipel Unibanco-CL
10.00 0.00 45.00 0.00 15.00 0.00
0.00 0.00 0.00 0.00 15.00 0.00
2001
uJ bul
IJ.U0
0.U UAJI
0
2002
Univali
10.00
0.00
0.00
0.00
Total Pending Commitment:
95.00
15.00
27.50
340.00
-50-
0
Annex 10: Country at a Glance BRAZIL: Municipal Pension Reform Project Latin America Middle." Brazil &Crb inme Development diamond'
POVERTY and'SOCIAL:
2000
-Population, Fmid-year (mi'i'llons) GN I per capita (Atlas meithod, US$)
i70.1 3.590
SiS 647' 3:. O .4,12
GNI (Atlas method. US$ billions), Average annual growth,19S94.00.j
8.10.1
1,895
1.3 .
1.6 23
3 20
75
78
Population (%) Labo force M%
.
TZ86
Most recent estimate (1atest yoar. available, `1994-00). Poverty. (%of ooDulatlon below national oove rt iine) Urban population (%of total populetion) .
8
Gross national savlnaslGDP Interest'p8vments/GDP Total debt/GDP Tntal
dlaht
.
9.1 21.1 17.8
10.9
vi 113
Upper-mIddle-income group
9I 529.4 :20 4 108, 19.3
.
.
Present value of debtlexports
..
1980-90
04
.
~-
STRUCTURE of the ECONOMY (%of GDP,
.
403.7
2.9 1.3 5.5
12.0
2000]
2.7 . 7.5
~
0.8
.
-0.5
.
~ ~~~1980 1990
3.6 2.3: .13.0'.
-
1999
2000
Iorowthf lnveatment and GP(%
7.2 27.5
74 286 An 84.0
8.1 38.7 53.2
65.3
Private consumption
69.7
59.3
61.8
(average annual growth) Agriculture Industry Manufacturing services Private consumption General aovemnment consumDtion Greoss domestic Investment lmDorts of goods and services
Indebtedness
; 000-04
4.5-.. 3.214.0o
.
:
11.0 43.8 3359 45.2
Imports of goods and services
770
I I
.
Agriculture Industry Manufacturing Services
General government consumption
Investment
- *
397
'112 '--
.4
1999
Domestic aig
2 .456
.
1099800
65988 2 10.9Trd 193~
16.1
--.-
28 2-5
nArvi'aexnrs'AS4
(averace annual growth) GDP GDP per capita -. Exportsoaf goods and services"
5
I
Access to Improved water source
8;7.. 10. 0soi.
*.12
1990., : 405.0 20.2 8.2 21.4
.304
Present value of debt/GDP
69 2
:
.106
2.7.
.
70 30 Si 85
S' 87 15 125
.23.3 .
primary enrollment
40o
1
KEY ECONOMIC RATIOS and LON4G-TERM TRENDS 1980 .
IGross Per capita
22
-
Life expectancv at brh(es).7 Infant mortalitv (per 1.000 live bilith.) .32 Child rhialnutritlon (%of chlidren under 5) Access to an Improved water sourcea (%of population) Illifteracy ?% of population age 15+) Gross primary enmollment I% ot school-age population) Male .
GDP (UJS$billions) .235.0 Gross doinestic InvestmentlGDP tx6ortsotfooods and services/GD3P Gross d6mestic s vnSlD
Ltfe expectancy
9.2
2
119.3
118.9
8arazi Upper-mIddle-Income group
I
10
O
314~
62.5 .a 182GDl 12.1
11.3
7.0
11.7
1980-90 2.8 2.0 1.6 3.3
1990-00 3.2 2.6 2.1 3.0
1999 7.4 -1.6 .0.7 1.3
2000 3.0 5.0
1.2 7.3 3.3 0.5
5.7 -1.7 3.4 11.9
6.1 -9.3 43.0 -14.8
9. -5I 5.0 13.8
-
-GDPP
Growth of exports and Imports (%)
140T
A
X .
...
f
3.9
j97
"a
[M2
-
Exp"t
l--mports
Note: 2000 data are preliminary estimates.
The diamonds show four key Indicators Inthe country (in bold) comDared with Its income-group average. If data are missIng, the diamond will be Incomplete.
-
51
I
I
Brazil PRICES and GOVERNMENT FINANCE 1980 Domestic prces (%chan,e) Consumer prdces
Impliclt GDP deflator
..
87.3
1990
1999
2000
2,947.7
8.9
6.0
2,509.5
4.3
8.5
|Inflatlon (%) zooo.
1,S3
I
1.000
Govenoment finance (%of GDP, incdudes curernt grants)
500 o
cu5nun iuvuiru
..
Current budget balance Overall surplus/defct
,,
19.5
2u.U
0.4 -6.8
1.0 -3.2
1990
1999
2000w
31,414
47,140
2,656
2,74
2,854 19,624
1,593 35,312
53,589 3.040 2,188 41,027
..
..
O 99
Y
97
go
YY
GDP deflator
TRADE 1980
=
Total expos (fob) Coffee Soybeans Manufactures
.. .. ..
Total ImDorts (c)
..
20,661
49.275
55.800
..
1,379 4,354 5,932
1,655 4,258 13.570
1,507 6,362 13.593
80 65 123
81 74 1U9
91 113 80
97 118 82
1980 21,857 27,788 -5.931
1990 34,615 26.708 7.907
1999 55,205 63,443 -8,238
2000 64,470 72,741 -8,271
-7,044
-12,523
-18.840
42
834
1,689
1,521
[3
-3,782
-25.397
-24,6366
4
.,
Food Fuel and energy Cagialooods
Export price Index (1995=100) Importprlceindex(1995=100) Terms oftrade (1995=100)
.. ..
.
meooI
,flm.)
.
i,.IOV
T
1i_i_ in m m 25.000
_
_
9j
9s sr *Exports
_d_
*-_
m m uu mi _
n 97
o
98
*ITIaworts
BALANCE of PAYMENTS
(USS mIllions) Exports of goods and services Imports of goods and services Resource balance
Net income Net current transfers
Current swwunt bhlannn
-12,9 0
-i 7,u_
Financing items (net) Changes in net reserves
8,990 3,943
-5,043 8,825
13,634 11,763
33,815 -9,179
Memo: ResevesIncluding gold (US$ mIlions) U rven _- (D ECt,;,aus;J o12E-11
5.853
9,175 2.48E-S
35,725 t .8
33,011 8
1980
1999
1999
2000
Current account balance to GOP (%) ° ___ ''' r4
E
2
E *
_
liii K EIKI ___
EXTERNAL DEBT and RESOURCE FLOWS (US$ millions) Total debt outstanding and disbursed IBRD IDA Iot^ d6eb-, snc114,7S57 IBRD IDA ComposItfon of net source flows Official grants Official reditorsm Private creditors Foreign direct investment Porlfnll rKIr n n0
[Composltlon of 2000 debt (US$ mill.) 71,520 2,035 0
119,877 8,427 0
241,468 6,822 0
236,200 7,377 0
275 0
8,168 1,975 0
667S,22 1,381 0
53200 1,351 0
41
62
A-7577
c 1,768 G: 29.486 48,358
99 14 25 3,745 1,911 0
433
6eo
-427 989 0
-11,828 32,659 1,981
-2-037 -32,675 1
F
World Bank program
CommKaments
820
905
1,863
1,593
Disbursements PrncIpal repayments Net flows Interest payments Nettransfers
343 98 245' 177 68
788 1.251 463 725 -1,187
1,533 952 580 428 152
1,692 887 805 464 341
Development Economics
2
A-IBRD
|B-IDA
CC-IMF
D-Other mulUlateral
E -Blateal F- Prvate G -Ehot-erm
9/17101
- 52 -
Additional Annex 11 BRAZIL: Municipal Pension Reform ProJect RECENT 12REFOnD S IN lD A7n TA N PENIQON T EGIST ATTON
Tne Public Sector Pension k`SP) system is in tne process of consolidating its principals and norms. This process, was launched with the passage of Constitutional Amendment n° 20/98 and made the following key developments possible: *
Establishment of the Department of Public Service Pension Regimes (DEPSP) Drafting Law no 9.717/98 and Government Decree no 4.992/99 Preparation and implementation of the State Pension Systems Reform Project (Programa de Apoio a Reforma
dos Sistemas
Estduaiua
de
PrpviflAnnin
-PARSEP) -
A
key
ALFaCaauu
accom.p-iOLmIentL
lVI ULF LLLUJiipaI I PnVILbLI RefIoIrI
LeOLL1:LIAr,iv
A14 V1Irngir.
UILeffo LU
LP411.
IVIrIef
uih
V41IiUU
ruUiic
Sector
Pension (PSP) Systems" is the heightened consciousness and involvement of federal, state and municipal authorities in finding solutions to challenges associated with rationalizing their diverse pension systems. Consolidation of PSP legislation constitutes one of the principal indicators of reform progress. Consequently, an array of laws and norms have been developed to reduce chronic distortions in public sector pensions including (i) insufficient or non-contributory nature of the system; (ii) premature retirements (iii) high replacement rates; (iv) inclusion of retirement benefits; and (v) accumiulation of retirement henefitq.
The nrincinal legal reformn are enumerated helow
I.
Constitutional Amendment n° 20/98
The Amendment established the following norms. Prohibits collection of accumulated retirement revenues in cases where the pensioner continues to be emnloved in a nublic office excent in those cases exemnted in the Constitution, (elected, nominated or commissioned posts) which are exonerted;
Prohibits the accumulation of more than one retirement pension, except in cases wnere allowed by the Constitution; Ensures public employees of federal, state, and municipal posts are covered under a pension system of a contributory nature, that will observe requirements geared to preserving the financial and actuarial equilibrium of the system; Reforms retirement limits in age and contribution periods for a public employee
- 53 -
entering into either the federal, state or municipal administration as a regular employee , effective December 16, 1998: the age limit is 60 years of age for men and 55 years for women and the contribution period is 35 and 30 years respectively. Those public employees who entered into the public sector prior to December 16, 1998, can opt for the former transition rule, that estahliqhed a 53 year age limit for men and 48 year aOe limit for women. This option would require that the contribution period be increased 20/Ol -arl LU/U a£LifL.
-sec+:-Ly, erlp e toelgiletocli -?A401-/ /v i..,OFj%JL V.LVAL4y, 1.-l order U U11 iU.forJULq-vhe U fIJ11IJVkUy LU be UV cosdee %,-IAJ A- -Lq-1.IU VUI1rUI%, LU allll.I
integrated and proportional pension benefits. * Requires 10 years in public sector and 5 years in existing post. * Ensures that retirement revenues and pensions not exceed the amount of the civil servant's last paycheck; * Prohibits any fictitious accounting of employment period; * Allows for the establishment of a system that would complement those of the federal, state, nnd mumic-ipal governments, thus enabling the array of PSP uystets to fix the same ceiling on benefits payments as that established by the General Social BnLLef
'Mr L'UU.JL.
I 11n
law
W
reulte
this UuULuII,
JuisL1y
under discussion in Congress. All employees who have filled a public post prior to the instatement of the Complementary regime, can either continue in the old regime or migrate to the new one; * Permits the PSP Systems to establish funds comprised of contributions, goods, duties and assets of any nature. H.
The General Public Pension Law (Lei Geral da Previdencia Publica - Lei n° 9.717)
Enacted on November 27, 1998, and modified on September 26, 2000 via Provisional Measure 2.060, this law established the general by-laws governing the organization and functions of the PSP
yvdtPmQ of fMe&rnl
qtnte aRnd mlinininAl emnlnveps
Amninclm'nt n° 2I09R eniolht tn mntiifu
the nature of PSP Systems, by modifying retirement by-laws. Law n° 9.717 sought to standardize lUlub gUVVralir, Ul, UlgaldJU4L1UiUII
U- ti
MaL.uia
U1s5S bybLviks, ubUU
CvaluatLonLII
nlm%U
IV"UUUWIrg.
one ofachalnuual baElance sheet; vandr
* Contributions made by insured members are only to be used for pension purposes * Coverage of a minimum number of insured members; * Coverage provided exclusively to civil servants and pacts or consortiums between public agencies are strictly prohibited; * Establishment of an individualized accounting registrvy * Consolidation of disability and retirement payments via financial statements and * *
Subject to internal and external control agencies of actuarial, accounting, financial, oudgetary, and pautimoual inspeciions and audits; PSP Systems forbidden to provide benefits differing from those of the General Social Benefits Regime.
This law also establishes certain modifications regarding limits to pension benefits expenditures of state agencies:
-54 -
* It prohibits the establishment and maintenance of PSP systems by those municipalities whose own direct collection revenues do not exceed revenues from the national government, with the exception of those cases of municipalities which had establish.ed
a PSP systpmr nrior ft piulicatino n
tfthe luaw in nlipetintn
Contributions made by the Federal, State, District and Municipalities to their respective PSP Systems should not exceed twice ihe contribution of tie insured. (beginning 01/01/2002); * Net outlays for inactive and retired personnel covered by PSP Systems should not exceed 12% of their current net income (beginning 01/01/2002). With respect to exvenditure control it established the following: * The Financial and budgetary statements of the Federal, State and Municipal Govermnents should be published for a period of 30 days following the close of each bimester. Such statements should nresent total nension incomes and outlavs and accumulations per financial exercise. In the event that the statements were to reveal 1
n.on=conna
nxperA1 .-u.
lir.+c.
0 0 tb1ished
via Tow
n
0.in 07!'7,
anyans
taken (revisions, adjustments, adaptations) that would promote an increase in pension outiays would be rendered nuli and void; * Municipalities with population under 50,000 inhabitants will be permitted to publish their financial statements up to 30 days following the close of each semester; * State agencies should adjust their cost-benefit projections in those cases where the limits established in the above cited Law are surpassed, to ensure that the established limits are complied with in the subsequent financial exercise. VY
iLUl LVDV_,
LV
5J!IL2ALJIIU.
.L-n'A1 Q+..+_, a.d-Ager.is?tn.cipal of +-.-. o ~UII r.., . by Y %I u JLcu JL L&"ILUUJVijJU U 1AJ. ul'.J L. F'JIUv L'JIj established in Law n° 9.717 will result in the enforcement of the following penalties, beginning 01/07/99: * Suspension of voluntary transfers of resources from the Union; * Banning of entry into agreements, contracts, covenants or adjustments, as well as reception of loans, financing, collateral securities, or subsidies from any Government -
.KTone I
AIpMaI
i
Jy
aLV,
`U
5
agencies; *
*
of loans and financing originating from federal financial institutions; Suspension of financial compensation payments owed by the General Social SIRupenqinn
* The directors of the agency or firm managing the individual State SPS systems, as well as members of administrative and fiscal counsels of funds governed by Law no 9.717, will be directly responsible for any infractions to said law, and thus subject to penalties as established under Law n° 6.435, of 7115/7. With respect to fiscal control:
-55-
The MPAS will be responsible for: Guiding, supervising and supporting PSP systems to ensure compliance with provisions set forth in Law n° 9.717; * Drafting by-laws and general provisions of said law; cx sna.,ar.d1~wntri nwliA.ti l rnm1tie in c * investigating infactions, by ar ''A;t..A cases where an infraction to the law has been revealed; * State SPS systems snould present all information requested by iirAS. *
m.
Complementary Law no 101
Enacted on May 4, 2000, this law is also iKnown as the Fiscai Responsibility Law. It establishLes public financial norms aimed at ensuring fiscal responsibility. This law establishes that the governing authority should follow a series of rules associated with public financial management. Noncompliance with such rules will result in a series of penalties to be imposed on government entities and the responsible officials. One of the key provisions under this law is that the total disbursement ou tlavs shoiild not exceed 50% of the national current liquid income and 60% of the current liquid income of the states and municipalities. In the event that the required reductions -Under U1
gov rnmel-It agency will be unab.le LL a.clue ve tUULe law le nt-
: Receive ,lr+-
* *
t0:
Afem,;
Obtain direct or indirect securities from other agencies; Undertake credit operations, with the exception of those aimed at refinancing fixed asset debt and those geared to reducing pension outlays.
Both the Budget Execution Summary Report and The Fiscal Management Report are two important pieces of the Fiscal Responsibility Law. On the one hand, the Summary Report is a publication which will be released bi-monthly in tandem with a Balance Sheet statement of pensions income and expenditures. In the final two months of the exercise this summary is to be supplemented wnith a PSPS Actuarial Prnipet-ian. The Fiscal Management Repnort to be published on a quarterly basis, will present expenditures and inactive personnel figures., so as to be Law. y tIIIL estab-lshed in t} e ComPlem ta.rL able tL UCIJ-lIpaetulse -wuIulte BUo' t.i
abuuovve
mertLLiIoniedUsuinm,
and govern.enllllt agencies' Bal,ance Shtas shouMl obey "J.w aries
time limits established for their publication. Noncompliance with stipulated deadlines will prevent the agency from receiving voluntary transfers and contracting credit operations, except for those aimed at refinancing the principal. Three other points warrant mentioning. * The national government will provide municipalities with technical assistance and financial cooperation necessary to modernize their respective tributary financial, patrimonial and pensions administrations, with a view to ensuring compliance with the Complementary Law; *
Art.610
reiterates
tlhe conrifrnutor-
chm-acter of
an
?we
PSP that shniolId be
established and also that it should be managed according to acceptable accounting and
- 56 -
actuarial norms so that its financial and actuarial equilibrium are maintained. It further establishes that infractions to the provisions of the law will be punishable lun.der the penal code of Law nr 1.079 of April 10, 1950; Legal Deree n° 201 of February 27, 1967, Law no 8.429 of June 2, 1992 and any and all other pertinent IV.
lgisIa YveA
G I.rovernmentah;n DLecree T2 _E ___
.
IIE
S-l
AloA
NPrAS --.1
I Afn
Enacted on reoorudy OJ, I199
A
n° 4.YY9 -0l%
-.
-
1
,nr1
-anu iuumifiu viai IJeree ln 7.7iO,
_.
Ul
A---
-,
l%
tAugust 2O, 2000
-
it
regulates the general parameters and directives encompassed in Law n° 9.717/98 and Complementary Law
n' 101/2000.
The Secretariat of Social Welfare Assistance will be responsible for receiving the financial statements, as well as the actuarial evaluations and projections as required by Law n° 9.717 and the Fiscal Responsibility Law. The Secretariat will also be responsible for evaluating these and emitting a technical opinion as to their compliance with the general parameters and directives established in Law n° 9.717/98 and Government Decree ne 4.992/99. This Decree also establishes penalties for directors of the state government agency or of the managing agerncy of the PSP system. as vwell as for m,,fmrA of thep mn;atrtvP ar.d fisrca counsels of such pension funds. Such penalties include Warnings; Temporary dismissal for management posts, directors, and members of administrative and fiscal counsels. lThe MPAS will also enjoy free access to managing units of the PSP systems and to benefits tunds, allowing them the right to inspect any and all books, recoids, technical notes and documents. V.
Law n° 9.796 (the Hauly Law)-Financial Compensation
Financial compensation constitutes a settlement of accounts of the National Social Security Institute -- INSS, the Federal Government, and those states and municipalities that have their own p-erioin rpag,nies. lims sebLUUmnL Was ,nade n11 essab.ly WIUI Uih
paage
V
t Ulf 1YYO
.9918 1IUUII 01 UlV Rexpub,,c
which entitled states and municipalities to establish their own individual pension systems. As a result, many public employees who previously had fallen under the INSS pension system, migrated instead to one of the new regimes. Upon retiring, these employees become eligible to receive benefits from the new systems, instead of the INSS, despite contributions made to the latter. This has resulted in a situation where states and municipalities are obliged to pay for services they have not received nor been compensated for. This distortion is corrected by Law n° 9.796, of May 5, 1999, also referred to as the "Hauly
-
57 -
Law", which seeks to include financialcompensation in the pension regimes. T.k.eree ato. ti vo-k, -.+-A l-w was set out .n Dere me l for- +he abov .4IAA&i aw vvc O.L ~ subsequently modified via Decrees no 3.217/99 and n° 6.209/99. I
he~
1m.WS4.U4VjL
LXL
%41%1 (IUJVN.
VUL
JAL
r. 312/99, .).I I 77, IL
/.f
According to the above-mentioned legislation, for the financial compensation process to be put into effect, a Financial Compensation Covenant (Convenio de Compensag4o Previdenciaria)
must first be entered into between the Federal Government, and the Ministry of Social Security and Social Assistance (MPAS), with the INSS acting as intermediary. Subsequent to contract signature, and after a cadastre of the Federal Government's pension wb unuI..id U1 uJ II li1Va~I IlIuu1uVi JlUWSU IU Wl US access to COMPREV, an IT system capable of processing and analyzing financial compensation eligibility requirements. Tnese agencies will also have access to SISOBI, a systems database designed by the Social Security Technology and Informations Company (DATAPREV), which maintains death records since 1994 which accounts for an estimated 2 million deceased. To date, approximately 400 Federal agencies have sent requests to the INSS and MPAS to be included in the financial compensation system. Of these, a total of 263 federal agencies have already signed Financial Compensation Covenant. Of the total number of states and municipalities th.it have signed the cnvenant- 61 aienrie, reasirendv recevn.ivi rnmpencntnr rPinursAes, as illustrated in the following table.
-58 -
Additional Annex 12: BRAZIL: Municipal Pension Reform Project
PARSEP AND PREV-MUN DJIFFRENCESW
~~ C? ~~~A IkTW% V '1C? C? A~%T~1 AND41 LESSONS
V U.
A
VT?
LJLARi)iTE
A survey of the Bank's pension operation portfolio confirms that the Brazil State Pension Reform LIL (BR-4369), under implementation for over two years, is the best reference point for evaluating the Municipal Pension Reform Project (PREV-MUN). Main differences and lessons Ipfirnp' art-
IIi
Difference
Nnip,-4 ftn,-J
i.11T
!
client/follow-on
PARSEP ~ ..
mm11MMi7Pfd hPlnuW
PREV-MUN
qtsktfP t,1ipme f~n1inr-wnn
kIZT
*...
tL.f.a.....
-
Ait
rn-')
Explanation/LessonsLearned]
IDO PUAM TM
- .-.J A... va ... u. Y02
operations would likely be in capitallarge individual state(s) Imunicinalities: follow-on
operation
I
- tarir- a TITt.f A...perafions.would
but lack of CY02 counterpart funding and new- retnrctive T.I. gmidelineq
would be up-scaling to mitigated in favor of a 4-year SIL. l additional municioalities IPARSEP LIL has been excellent vehicle for piloting and confirming utility of pension management reformI
I
lapproach.l
12.Client agreements ( "termos de adesao" ) and action plans
Termos de adesao committingl Cmmitment letters from In PARSEP the action plans were stat to compliance with loan mayors are required paper documents, soon became requirements were obtained during preparation. obsolete, and the state convenios during preparation and Action plans will be provided little link to specific preceded action plans which developed during early commitments. PREV-MUTN will were required for stages of implementation attempt to make the individual action disbursement. Plans were with consultant support plans meaningful documents linking cuonstrained by PARSEP'S and convenios wiii roliow, tnem to municipai convenios and strict sequencing of both being a condition of providing for updating as needed. ,.;vities. d I ,, ciI V -iVIU1N plans win 1or eacn plans will determine municipality the sequencing (see sequencing. 'beL..,I ad b.ence ... be1 r..o.I
rl?...lb-ul,n. uciinc
II
L
II
teams
and not always a part ofthe nIpensio-n agenev and/arwith |sufficientinfluence to | influence vroiect |implementation. IPARSEP had 3 distinct. sequenced phases-cadastre/ |actuarial diagnostic/ reform framework-with triggers for {moving from one to the other. This scheme became problematic owing to the fast
be influential figure withindid not work. Ownership and effective agtency and fern-ninn imnpntatinn reqnuire stabhlishing i |selectedbymayor/agency Icoordinators'and teams withinrelevant Ihead. The team must be lagencies and ensuring their authoritv. part of the agency. t r IActivities will not be IMunicinal differences and ther--pid rigidly sequenced, evolution of reforms mitigate against individual municipalies rigid sequencing with trigger will do action plans conditions. determining sequencing I and there will be no triggers. For instance,
I~~~~~pace of national pension
Igiven the new legal
LEal ,p.-i^p-gt
I |
14. Sequencina components and triggers I
I
I
I Tpemc required in
II
I
l~~~~~~~~~
a!.
reform and state differences. requirement for actuarial Phases were merged in some Ianalysis, some states may
-
59
-
ll
~~
~~~~~important.I
|
| states and in others were paid choose to undertake this for from own resources. activity prior to cadastre Phase #3 was largely upgrade.
s-uperseded by legal reormis.
I
t5. c licue in IA. -flo,, 1- B^~IIo, inplu,ApA ;~PADIZIP uA1h ,or
componients-:
_____________
t
takeo in assuring
PARSRP team to implement loans and
for frequent team trips
as critical. PREV-MUN structured
actuarial
prvddtcncl sitneaalbi-ity of financing
diaenostic, legal
and the team traveled
assistance, training, constantly to states to provide
1
16_ Training 16.Training
7. Cadastre Upgrade
E b
Ito ensure adequate resources for traveli municipalities. There is a huge need to find more
mto
| More DEPSP training
|training of DEPSP staff coupled with DEPSP sponsored training workshops for 2 state officials. At MTR
($90,000); DEPSP |permanent training venues/vehicles.| sponsored forums plus j and training that can reach larger training provided in the numbers of state and municipal staff . municipalities becomes a Both operations are collaborating to
needfor permanent training
major component and part find a solution to this problem which is
venue and training of state teams was recognizea ana |budgeted. unginally rAKxtir Icontemplated working with a
Is
of an effort to identify a pernanent training |venue. Iotai cadastre upgraae will be supported. Care
lzed;I,J-/O saiu,pf
|
I ~~~and new le-s.latim.
I
states to undertake pension Ireform so loan ended up supporting comprehensive l~~~~upgrade and states
I
overcome -diffic-ulties wias recognized
|PARSEP budgeted minor
| ~~~~"Compensacao Finaniceira"
|
I
loan similarly and great care was taken
I assistance
workshops
th M:.andiApp,rop w riatenessof basic com pone.n.ts ........ n,ni nrnnf
care corroborated. Constant travel of PREV-MUN. Speciallcaeexcellent
results; DEPSP
acafnqtr- *graie-I b-a'sed 50nsultant
+,.,,.A
-fiae
wxen-eusu[uzrlPr t
| ffcals can travel to
exacerbated by the absence of a public service pension career patt ana tne lack of specialized courses. S,ub-nanonai governments have strong9 cost/benefit incentives to upgrade caUiLsires. MaJor instiJiu a and |problems in centralizingpnsos n
.A,4- ,cpltiswe
rs-l
needed. Flexibility I a!!owed in Renli" budgeting.
and the solution seems to be
A -dn
nnntini o
data bage c:r-veepce
nre_enne
of
II~~~~~~~~~~~~~~~~~~~~~~ I
|help resolve 'turf' problems, promote Iprrogram benefits and urgeI
supplemented PARSEP with
l~~~~own resources, Serious
}
problems encountered with resistance to centralizing
implementation.
lll
I
| l
(executive, legislative, judiciary, others) pension datal bases/management. There is also a problem with data
'base/payroll being separate
I I
,, a-, 1