INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: AC1616. Date ISDS Prepared/Updated: 10/06/2005 I. BASIC INFORMATION. A. Basic Project Data

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Date ISDS Prepared/Updated: 10/06/2005 I. BASIC INFORMATION A. Basic Project Data Country: Brazil Project Name: State Pension Reform II TAL Task Team Leader: Chris Parel Estimated Appraisal Date: December 15, 2005 Managing Unit: LCSPS INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Project ID: P Report No.: AC1616 Estimated Board Date: February 16, 2006 Lending Instrument: Technical Assistance Loan Sector: Non-compulsory pensions, insurance and contractual savings (100%) Theme: Other public sector governance (P) IBRD Amount (US$m.): 5.00 IDA Amount (US$m.): 0.00 GEF Amount (US$m.): 0.00 PCF Amount (US$m.): 0.00 Other financing amounts by source: BORROWER B. Project Objectives [from section 2 of PCN] PARSEP II s development objective is to promote Brazilian states fiscal stability and sustainable economic growth. This is to be done by addressing what is arguably the states most pressing macroeconomic issue pension reform. Stability and economic growth will be achieved by generating revenues through better pension management, developing strategies for addressing pensions onerous costs, and building reform constituencies. PARSEP II targets are to reach at least 20 of the participating 27 states in critical systems and organizational strengthening activities. C. Project Description [from section 3 of PCN] The loan has 6 components described below. Note that each of these components figured in the first PARSEP operation hence this operation will consolidate and advance those initiatives. 1. Upgrade Cadastres and Information Technology ($4.8m). The reformed legislative framework that has emerged over the last seven years, including two Constitutional amendments and a battery of new laws, subject the hitherto independent and autonomous state RPPS to rigorous new controls. Of especial importance is Law No approved in 2004 requiring

2 each sub-national government with a RPPS system to create a single unified administrative entity (Gestor Unico) and develop an integrated pension data base for the hitherto autonomous agencies that managed different parts of the states RPPS. This coupled with the fiscal benefits resulting from cadastre upgrades and eliminating unwarranted payments have created a huge demand and need for this sort of work. MPS believes that savings generated from this component will pay for PARSEP II costs many times over. - Complete the Executive branch cadastre upgrade (27/$1.8m). This work was begun in PARSEP and produced huge benefits for participating states. The sub-component will extend cadastre upgrade to the entire Executive branch complement of pensioners, inactive and current employees and include states that did not participate in the first loan. Follow-up will be done to verify that benefits identified under PARSEP are being realized and savings from this work will be systematically identified and reported. - Create a functional state RPPS cadastre (27/$1.5m). PARSEP targeted only pension cadastres. PARSEP II will upgrade and integrate the states functional cadastres which contain employee career and profile related information. This will support the general cleansing effort underway for pension cadastres and permit effective cross-referencing of information. - Upgrade the Legislative & Judicial branches and other cadastres (27/$1.5m). PARSEP was unable to introduce states cadastre upgrade to the autonomous legislative and judicial branches including Ministerio Publico, Tribunal de Contas, public enterprises, foundations and various other state organs. However, new legislations now requires merging of states independent audit agencies under a Unified Administration and the regularization of cadastres. Hence, this component will extend cadastre upgrade to these state pensions. 2. Upgrade/Implement the Integrated Pension Information System (SIPREV) ($1.1m). The SIPREV system was developed under PARSEP by the Ministry based in part upon the Bank s PROST software. It is considered best case by Bank specialists. Building upon Law No a subsequent decree detailed integrated data base requirements which conforms closely to the SIPREV software being offered free of charge by the Ministry to all sub-national governments. SIPREV has been implemented in some states but there is considerably more work to be done to make it universal and functional. SIPREV also offers an actuarial module that runs off the upgraded cadastres inputted into the system. Additional modules including benefits management and payroll are being developed and should be of particular interest to smaller states and municipalities. - Refine and implement SIPREV and Modules ($650,000). This will complete implementation of SIPREV in those States that request it and also develop and implement the new modules over the course of the loan. - Integrate SIPREV with other extant data bases ($330,000). One of the huge benefits of having SIPREV and cleansed cadastres is that they can now be cross-referenced with extant data bases including nationwide systems that capture obits, benefits, contributions, and work experience. Crossing SIPREV and SISOBI (obits) potentially will results in tens of millions of dollars of savings from elimination of unwarranted claims. The general upgrading of pension data base information will also be important for actuarial and financial diagnoses and the development of solutions to address RPPS fiscal burdens. - Transform SIPREV into a management tool ($160,000). To date, SIPREV and its modules have been developed as a technicians tool with relatively narrow specifications for capturing and processing data. The addition of software will transform the systems into much

3 more user-friendly pension management tools and enhance the attractiveness of the systems to sub-national governments. 3. Implement the Unified Administration Model ($840,000). Law effectively ended the autonomy of legislative, judicial and related pension agencies and required that all RPPS pension management be centralized under one state agency. Previously, the executive branch which implemented PARSEP had no right nor accessibility to other branches RPPS data. Huge benefits are projected from cadastre cleansing and data base integration. However, now that the legislative requirement to merge systems exists, there is a need for technical assistance to determine how this should be carried out. - Prepare a Unified Administration Model ($210,000). A normative model that can be adapted by States must be developed within the legislative framework. This sub-component will pay for the requisite studies followed by publications and workshops to assist state efforts to comply with the new law. - Strengthen IT capacity (27/$630,000). Following successful practice in PARSEP and PREV-MUN, IT equipment packages will be defined for each state s new Unified Pension Administrator unit comprising servers, computers, printers, scanners and software. Minimally, sufficient capacity is required to input cadastre information and implement and use SIPREV and its modules. 4. Strengthen State Institutions Through Training and Dissemination ($600,000). An extensive program of workshops and training is required for states to comply with new legal and technical requirements associated with pension administration merger under a Unified Pension Administrator. - Training states pension managers and technical staff (27 states/$90,000). A PARSEP II launch is planned to acquaint state officials with (i) the legislative requirements for the Unified Pension Administrator, cadastre and data base merger and upgrade, and (ii) how the MPS will assist states, supported by the loan components: SIPREV, cadastre cleansing, actuarial analysis, training. This sub-component is a 5 day workshop in Brasilia for states pension officials at which these matters will be addressed. - Dissemination Work Shops (27/$360,000). Following the PARSEP model, state sponsored stakeholder workshops are planned to disseminate legislative requirements, the results of cadastre work and institutional strengthening reforms to be implemented under PARSEP II. - Training states Legislative, Judicial and other branches (27/$150,000). One of the biggest changes in sub-national RPPS management has been the interjection of Federal laws and regulations, and especially for the legislative, judicial and related branches which ran their own pension systems and maintained autonomy from executive branches. The imposition of a Unified Pension Administrator under the executive branch requires a concerted dissemination and preparation effort, especially in light of the power wielded by these branches. This subcomponent is a 5 day workshop for state officials. 5. Strengthen the Ministry s Secretary of Social Protection -SPS ($2m). SPS was created and supported through PARSEP and the legislation that evolved consolidating the Federal Government s increasing role in RPPS pension oversight was made possible as a result of these innovations. The structuring and strengthening of the Government s capacity, through SPS, to

4 monitor, evaluate and provide technical assistance through public and loan finance requires continuing PARSEP s support for SPS. - Study states complementary pension management needs ($200,000). The complementary pension system and how it must be integrated into the Unified Pension Administrator must be clarified. This sub-component is for a consultant study to be followed by dissemination of results and five workshops. - Strengthening of the National Council of RPPS Directors--CONAPREV (27/$200,000). Each of the major ministries convokes and support organizations of state and municipal officials on a regular basis to disseminate and debate relevant sector issues. Prior to PARSEP this did not exist for pension officials, in part because the states RPPS systems were completely autonomous under the Constitution. This was changed by Constitutional amendments and subsequent legislation. MPS then created CONAPREV, supported by PARSEP and it has assumed an increasingly important role in pension matters including approval of PARSEP II s design. This funding is for bi-monthly workshops for a period of two years. - Actuarial analyses of states pension systems (16/$360,000). Annual actuarial analyses are now required under law. Sub-national government compliance is posted on a website similar to what is done for their legislative frameworks (CRP website sponsored under PARSEP). Actuarial analyses accompanied by the development of financial scenarios was undertaken under PARSEP. With new laws, SIPREV and the actuarial module plus cadastre improvements it is necessary to finance one more audit to consolidate this legal requirement and set standards for compliance. - Preparation of states health and security legislation linked to RPPS ($200,000). Numerous sub-national governments commingled public servant pension and health issues prior to reform legislation being passed. As mentioned above, the MPS monitors and evaluates subnational compliance with legislative framework standards and publishes the results on the CRP website. However, the issue of public servant health security continues. This sub-component will finance a study, dissemination, workshops, and the development of draft legislation. - Project Implementation Unit ($1.2m). The management of systems development, monitoring and evaluation, and provision of technical assistance by SPS, a relatively new organization with an expanding and increasingly demanding mandate, is a significant cost item. The need to retain consultants required for short and medium term assignments and support travel costs and related expenses associated with the SPS mandate was recognized in PARSEP and will play a significant role in PARSEP II. This sub-component will finance these activities over a four year period. It will also fund a variety of MPS publications ($130,000). At the time PARSEP was launched there were almost no pension publications available regarding Federal and state pension systems, legal compliance, best practice, or relevant experiences. PARSEP supported the development of such publications, including a series of soft back technical books called Colecao Previdencia Social (Social Security Collection) that has come to play an important role in disseminating pension information. Support for publications will continue under PARSEP II. D. Project location (if known) Brazil, Brasilia E. Borrower s Institutional Capacity for Safeguard Policies [from PCN] N/A

5 F. Environmental and Social Safeguards Specialists II. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Cultural Property (OPN 11.03) Indigenous Peoples (OD 4.20) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) Environmental Category: C - Not Required III. SAFEGUARD PREPARATION PLAN A. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared: 10/15/2005 B. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS: 10/15/2005 C. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing 1 should be specified in the PAD-stage ISDS. n/a IV. APPROVALS Signed and submitted by: Task Team Leader: Mr Chris Parel 09/29/2005 Approved by: Regional Safeguards Coordinator: Mr Jean-Roger Mercier 09/29/2005 Comments: Sector Manager: Mr Ronald E. Myers 10/06/2005 Comments: 1 Reminder: The Bank s Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons.

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