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IDB – Joint data base for MERCOSUR social security institutions

Organization(s):

National Social Security Administration of Argentina (ANSES), the Ministry of Social Welfare of Brazil, the Social Welfare Institute of Paraguay and the Social Welfare Bank of Uruguay. Strategic partners accompanying the initiative are the Inter-American Development Bank and the Ibero-American Social Security Organization.

Country (ies):

Argentina, Brazil, Paraguay and Uruguay

Overview:

This initiative aims to contribute to protecting the social security rights of migrant workers of the MERCOSUR countries, through the creation of a Single Data Base for Social Security Institutions (SDSI) in the MERCOSUR region. The purpose is to integrate the social security systems of the MERCOSUR countries by through developing and implementing a Data Transfer and Validation System (DTVS) to process retiree benefits under MERCOSUR's Multilateral Social Security Agreement. The initiative focuses its resources on promoting a horizontal partnership and capacity development, carrying out baseline studies to assess the situation before the project, developing and implementing the SDSI, training personnel from social security agencies, and disseminating information to stakeholders.

Background:

In 1990, Argentina, Brazil, Paraguay and Uruguay signed the Treaty Establishing a Southern Common Market (MERCOSUR), called the "Treaty of Asunción". Although this instrument laid the foundation for a regional bloc, it did not contain rules, regulations, or provisions governing or coordinating integration of social security at a regional level. Instead, MERCOSUR member countries entered into bilateral social security agreements with several countries on different continents to regulate the social security rights and obligations of workers that accrued years of service in the signatory countries.

In December 1997, MERCOSUR members signed the Multilateral Social Security Agreement and its Administrative Regulations. The agreement and its operational guidelines were meant to recognize the rights and obligations of the employees that work or have worked in one or more of the MERCOSUR countries, and their families.

In this context the initiative responds to problems affecting the benefits and welfare of current and future retirees by recognizing their work in any MERCOSUR country and their contributions to any MERCOSUR pension system. More specifically, it focuses on the systematization of the Multilateral Social Security Agreement. Before the project, transferring and validating a worker's data to honor his or her pension benefits was done manually. This took both time and resources. The more countries a beneficiary had worked in, the longer it would take to transfer and validate the data, and consequently the longer the delay in receiving benefits upon retirement. To address these problems, the member countries agreed to implement the Administrative Regulations of the Multilateral Agreement, providing a procedural methodology to overcome the current inadequate procedures. In the process of putting the Agreement into practice, the MERCOSUR countries realized that the disparities in technology and the lack of a legal framework to support it would require them to learn from each other based on their comparative advantages and weaknesses and to develop individual and collective capabilities to put the Agreement in action.

This initiative anticipated and achieved the following results:

i) the implementation of the Data Transfer and Validation System,
ii) the reduction in the time to receive benefits;
iii) the reduction of the number of workers evading social security contributions; and
iv) a reduction in the number of cases where benefits were still being paid to retirees that had passed away.

The initiative also generated some unexpected yet positive results. The most important perhaps are: i) the agreement reached with financial institutions not to charge transfer fees to the beneficiaries,
ii) the practice of conducting annual meetings among the information system departments/division from the social security agencies of all four countries,
iii) the request from Chile to join the initiative of a single based social security system, and
iv) the great interest generated internationally on the experience, even to be selected as the base for an Ibero-American Pension System. Implementation:

From outset, the initiative involved active participation from the partner countries. One of the MERCOSUR countries originally promoted the idea of an integrated social security system for the region, and once the partner countries had agreed to it, it was that country that brought the IDB and the ISSO to the table.

This regional public good is produced by Argentina, Brazil, Paraguay, and Uruguay, through their national social security systems— the National Social Security Administration of Argentina (ANSES), the Ministry of Social Welfare of Brazil, the Social Welfare Institute of Paraguay and the Social Welfare Bank of Uruguay. Under the project, the countries strengthened their collective action by creating a Multilateral Social Security Commission (MSSC), which consists of the different national agencies involved and forms a regional group of national focal points. The MSSC represents the interests of the member countries, assess the needs, coordinates the actions of the social security agencies, and more importantly, attempts to solve the problems affecting the benefits and welfare of current and future retirees. This regional participatory structure is the basis of the implementation mechanism complemented by a regional administrator, represented by ANSES, and a regional group of technical advisers appointed by the governments.

Two of the challenges the initiative faced were, first, the willingness of the partner countries to participate and, secondly, the disparities of data processing software and thus the level of technological preparation to perform the data transfer and validation. With respect to the first challenge, the project recognized that reaching an agreement among the partner countries was an intricate task. The political context was complex. The actors kept changing and this affected progress. Nonetheless, there was a genuine concern among the governments to resolve the issue. Eventually the political complexities were overcome by feasible technical solutions presented by professionals and experts within the social security agencies of the MERCOSUR countries. These were disseminated and supported in order to come to an agreement. The participation of the third parties, the Inter-American Development Bank (IDB) and the Ibero-American Social Security Organization (ISSO) generated trust among the partners and brought experience in the sector to the efficient and effective execution of the initiative.

With respect to the second challenge, one of the countries, Paraguay, required capacities in two areas: technology and the legal framework needed to support such technology. After assessing their situation, the Social Welfare Institute of Paraguay took the initiative to visit Argentina, Brazil's social security agencies to review their technological organization with respect to data digitalization, database construction and data input of beneficiaries; the social security systems and their legal framework. The project not only supported knowledge exchange, it also sponsored south-south cooperation between partner countries. Paraguay did not initially have the technology to implement a digital signature system, nor did it have the legal framework to support it. Facing such a big challenge, Paraguay and Argentina signed an agreement in which the latter committed to the delivery of the service – digital signature. This action enhanced horizontal cooperation and saved time in getting Paraguay on board. Additional comparative advantages were identified among the MERCOSUR countries. For example, Argentina's contributions to system security, Brazil's participation on data transfer and Uruguay's assistance on the operationalization of the DTVS.

Outcomes:

More than 800 migrant workers have been pensioned using the SDSI so far. At the same time this project has caught the interest of other countries and regions. Chile, a neighbor of the four original members, has asked to join the initiative. At the same time Spain, through the ISSO, has been working with the SDSI to harmonize its instruments and technological standards for an eventual integration into the SDSI.

This initiative has therefore achieved:

i) the implementation of the Data Transfer and Validation System,
ii) a reduction in the time it takes a retiree to receive benefits;
iii) a reduction of the number of workers evading social security contributions; and
iv) a reduction of cases where benefits were being paid to retirees that had passed away.

With respect to results i) and ii), the project estimates that before the implementation of the DTVS the waiting time to receive benefits ranged between three to eight years. As of now, the time it takes for a retiree to start receiving benefits is on average three months.

As for unexpected achievements, a few can be mentioned:
i) the agreement reached with financial institutions not to charge transfer fees to the beneficiaries,
ii) the practice of conducting annual meetings among the information system departments/division from the social security agencies of all four countries,
iii) member countries have strengthen their working relationship in the sector and have increased their communication and trust; and iv) the great interest generated internationally on the experience.

As far as the sustainability of the benefits, it is clear to the stakeholders that there is no going back on the implementation of the DTVS. The DTVS was implemented in 2009, and its benefits have been clear. The institutional capacities of the social security agencies have been strengthened through a mix of innovative and traditional ways. For example, consensus building capabilities inside Health Ministries and strengthening of coordination between the national pension institutes present an innovative approach to developing capacity, while training seminars on international law, new operating procedures, the operation and implementation of the DTVS; as well as the use of new technology for security, data transfer and validation consist of more traditional capacity development. Additionally, social security agencies have the resources needed to continue operating the system which allows for financial sustainability.. Evidence of such strengthening can also be shown on the participation of the initiative in the development of new products, such as the Local Currency System, to be used during the implementation of the payment module. The payment module allows for one country to transfer resources to another, to pay for the benefits the retiree generated while working in the first country. The Local Currency System has the potential of reducing significantly the transaction cost generated from transferring the payments, by eliminating foreign currency transactions from the process. As of now an agreement has been signed between Argentina and Brazil, other member countries are expected to join once it is in operation. There are further actions that could deepen the integration of the social security systems. For instance, payment systems and fund transfers among countries need to be developed and implemented. The IDB and the ISSO played an important role in supporting the coordination and administration of the project; they also acted as the honest brokers of the operation. The presence of these strategic partners can continue adding value to the countries and the beneficiaries of the SDSI.

It is worth mentioning that no study has been carried out to determine the cost effectiveness of the operation, despite the obvious and potential big savings on both sides (government and beneficiaries) of the participant countries. For other countries, a potential positive outcome is that the model can be expanded and/or replicated.

Aid Effectiveness:

This initiative supports the leadership and ownership principles of aid effectiveness. It has strengthened a productive and effective horizontal relationship among the partner countries. Independent social security agencies came together with no restrictions and were able to make adjustments to the plans actions and budget of their original proposal. This has enhanced knowledge exchange, south -south cooperation, and of course the demand driven character of the operation.

As stated above, the single social security data base initiative was proposed by one of the MERCOSUR partners. Even before the project started, the MERCOSUR countries had already initiated negotiations and signed the Multilateral Social Security Agreement. Therefore the partner countries have exercised leadership and ownership from the very conception of this proposal. In addition, throughout the execution of the initiative, the partner countries have been in charge of the decision making process and have identified and executed activities based on the needs and priorities the group has identified. For example, the partners agreed to remove one component of the original proposal, namely the creation of a supranational body to administer data exchange under the Multilateral Social Security Agreement and its Administrative Regulations. Over time, the partner countries agreed that the original idea was not practical and would have delayed the achievement of results. The resources for this component were then redistributed to support the expansion of the system (payments and fund transfers).

Decisions such as these are made within the Multilateral Social Security Commission (MSSC), which consists of the social security agencies of the four countries. Within the MSSC, three additional commissions were created: the Information Systems Commission, the Legal Commission and the Technical Commission. These commissions discuss and make proposals to the MSSC to guide the execution of the initiative. The IDB and the ISSO have limited themselves to coordinating, administering and facilitating the execution of the project. On the other hand, the initiative has followed IDB policies regarding procurement, auditing, accounting and financial reporting, and no national system has been used given the regional nature of the initiative. Having the participation of so many countries, it would have complicated the administration of the initiative if the IDB or ISSO tried to use the national systems and procedures from only one of the partner countries. On the other hand the project is directly related to the national social security programs of the member countries, to some degree to the modernization of state programs and the national health systems. On the latter there is a proposal to use the DTVS to support the possibility for an individual to travel to any MERCOSUR country and still be covered in case of sickness or emergency; there are ongoing discussions on how this can be implemented. Moreover, the initiative's success has been recognized by other countries and regions outside the MERCOSUR. Currently, discussions have taken place with Spain and Italy to participate fully in MERCOSUR's DTVS. These countries are especially relevant due to their historical, family and immigration ties with the member countries. Other regions such as the African Union, the Caribbean and Ibero-America have expressed interest in the MERCOSUR's pension portability system, as a tool to benefit their constituency and integrate their labor markets. Just recently at the 2007 Ibero-American Summit in Santiago, Chile, the participating countries signed the Multilateral Social Security Agreement for Ibero-America. The agreement will support a system similar to that of the MERCOSUR region.

Capacity Development:

It could be argued that the entire focus of the project is capacity development: to find technical and strategic consensus in the articulation of national pension systems into the SDSI and to reduce asymmetries in their technical capabilities to implement that consensus. It would have been impossible for one country to achieve these results without the active participation of additional countries. So the benefits from capacity development are the results of the project itself: the implementation of the DTVS, the increase in efficiency of data transfer and validation, the reduction of the number of workers evading social security contributions, and the reduction of cases where benefits were still being paid to retirees that had passed away.

Duration: Execution Period:

48 months Disbursement Period: 54 months

Name of Primary Contact Person:

Laura Bocalandro

Title of Primary Contact Person:

Coordinator, Regional Public Goods Program, Inter-American Development Bank

City:

Washington, DC