Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank RESTRUCTURING PAPER ON A Report No: PROPOSED PROJECT RESTRUCTURING OF SECOND STATE PENSION REFORM TECHNICAL ASSISTANCE LOAN PARSEP II January 10, 2007 TO THE FEDERATIVE REPUBLIC OF BRAZIL May XX, 2011 1
ABBREVIATIONS AND ACRONYMS CONAPREV DATAPREV MPS PARSEP PCU RPPS SIPREV SPS UPA National Council for Directors of Pension Employee Pension Systems (Conselho Nacional dos Dirigentes de Regimes Próprios) Social Security Information Technology Company (Empresa de Tecnologia e Informações da Previdência Social) Ministry for Social Security State Pension Reform LIL (P057910) Project Coordinating Unit Public Employee Pension Systems Social Security Software (Sistema Previdênciario) Secretariat for Social Security Unified Pension Administrator Regional Vice President: Country Director: Sector Manager: Task Team Leader: Pamela Cox Makhtar Diop Veronica E. Zavala Lombardi Mariano Lafuente 2
BRAZIL SECOND STATE PENSION REFORM TECHNICAL ASSISTANCE LOAN PARSEP II P089793 CONTENTS Page A. SUMMARY... 4 B. PROJECT STATUS... 4 C. PROPOSED CHANGES... 4 D. APPRAISAL SUMMARY... 6 ANNEX 1: RESULTS FRAMEWORK AND MONITORING... 7 3
BRAZIL SECOND STATE PENSION REFORM TECHNICAL ASSISTANCE LOAN PARSEP II RESTRUCTURING PAPER SUMMARY 1. The restructuring while keeping the original Project Development Objective (PDO) proposes the following changes: (i) reduce project scope to limit the activities to those that will be funded under the loan; (ii) revisions in results indicators to reflect reduction in project scope; (iii) extension of closing date by six months to December 31, 2011 to allow for completion of activities that are critical to the achievement of the PDO; and (iv) reallocation of loan proceeds to reflect nature of contracts to be pursued under the project. PROJECT STATUS 2. The project had a slow start and through December 2010 the loan still had not disbursed. However, between January and March 2011, 62 percent of loan resources ($ 3.1 million) were disbursed for the project s centerpiece activity: "recadastramento" (database cleanup) of state pension system databases. The client has signaled to the Bank that a pending disbursement request of US$ 0.9 million is awaiting the reallocation of loan proceeds among expenditure categories. This would increase the disbursement rate to 80 percent of loan proceeds. 3. Recadastramento processes have been partially completed for almost 85 percent of the public servants to be covered by the project. An action plan endorsed by political authorities and technical level staff from the Ministry of Social Security identified that a 6-month extension of the closing date is needed to ensure PDO is achieved. PROPOSED CHANGES Results/indicators 4. The results indicators will change following the change in scope. Please refer to Annex 1 for details. Components 5. The proposed restructuring requires the following changes, as requested by the Borrower,: (i) eliminate the development of new payroll module; (ii) eliminate activities 4
for the development of a unified database of state pension systems; (iii) substitute the original training activities with training activities on pension system structure and management, as well as seminars on public service pensions policy; (iv) eliminate the study of disability insurance and health and security legislation of the states (as well as consultation and dissemination related to this study); (v) eliminate actuarial analyses of state pension systems; and (vi) eliminate development of a prototype UPA and related studies. 6. The Borrower s request described above implies the elimination of components 2. MPS Data Base Implementation and Upgrading and 3. Unified Administrator Model, with the exception of the provision of information technology equipment, which is now folded under component 1 Upgrade Cadastres and Information Technology. In addition, it implies a reduction in the number of activities financed under components (4) Strengthening the Participant States Pension Management; and (5) Strengthening the MPS. Financing 7. There are no changes in the overall project costs. However, the elimination of components (2) and (3) and reduction of activities under components (4) and (5) necessitated a reallocation of loan funds between components. o Reallocations of Loan Proceeds 8. The proposed restructuring includes a reallocation of Loan proceeds given the nature of the contracts being pursued under the loan as per the following comparative table. There will be no change to the loan s disbursement percentage. Expenditure Category (No Change) Allocation % of Financing Current Revised Current Revised (1) Goods and Non- Consultant s Services 3,866,000 4,987,500 100.0 100.0 (no change) (2) Consultants services 1,097,000 0 100.0 n/a (3) Front-end fee 12,500 12,500 Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07 (b) of the General Conditions (4) Premia for Interest Rate Caps and Interest Rate Collars 0 0 Amount due under Section 2.07 (c) of this Agreement (5) Unallocated 24,500 0 n/a n/a Total 5,000,000 5,000,000 Closing date 5
9. The proposed restructuring also includes an extension of the closing date to December 31, 2011 The proposed extension is necessary to ensure that the key contracts under execution are finalized, as included in the Borrower s action plan to complete the project. This will be the first extension of the project. APPRAISAL SUMMARY 10. The proposed restructuring does not raise new social or environmental issues nor does it trigger new risks or exceptions to Bank policies. 6
ANNEX 1: Results Framework and Monitoring BRAZIL SECOND STATE PENSION REFORM TECHNICAL ASSISTANCE LOAN PARSEP II Project Development Objective (PDO): To enhance fiscal stability and sustainable economic growth in the Participating States through improved pension management Revised Project Development Objective: n/a PDO Level Results Indicators* Core D=Dropped C=Continue N= New R=Revised Unit of Measure Baseline YR 1 Cumulative Target Values** YR 2 YR 3 YR4/End of Project Frequenc y Data Source/ Methodology Responsibility for Data Collection Indicator One: Reduction in unwarranted pension claims, improved financial management and sustainability, strengthened state and federal pension institutions, and new reform constituencies C US$ New legislation and PARSEP reforms have strengthened pension managementfor the executive branch but much remains to be done n/a n/a n/a Cadastre upgrade ongoing in 17 states covering highest number possible of public servants based on available resources. Identification of revenues to be generated by reduction of unwarranted pension claims after completion of Recadastramento Process Social Security Secretariat (SPS) INTERMEDIATE RESULTS Intermediate Result (Component One): Reduce pension costs through cadastre upgrade to eliminate unwarranted beneficiary payments. Revised Intermediate Result (Component One): One: Identification of significant cost reduction potential through cadastre upgrades and system integration for executive legislative and judicial powers 17 states C US$ n/a n/a n/a n/a Cadastre upgrade ongoing in 17 states covering highest number possible of public servants based on available resources. Identification of revenues to be generated by reduction of unwarranted pension claims after completion of Recadastramento Process Social Security Secretariat (SPS) 7
Two: Provision of IT hardware to enable MPS and states to implement PARSEP II cadastre and systems upgrades and implementation support 17 states C (moved from original component 3) Contract was financed with 100% government counterpart funds due to procurement rule limitations. Equipment was purchased and delivered in 17 states. Social Security Secretariat (SPS) Intermediate Result (Component Two): Reduce pension costs and improve management and planning capacity through systems upgrade (SIPREV and its actuarial and other modules) permitting cross referencing with other data bases (such as obits) to eliminate unwarranted beneficiary payments and provide full work history information Dropped Component Revised Intermediate Result (Component Two): One: Cost reduction through systems (SIPREV) upgrades permitting systematic crossreferencing with national data bases on work history and obits and identification of unwarranted claims 20 states. D To be carried out by DATAPREV outside the Project n/a Two: Development and installation of: (i) user-friendly SIPREV refinements; (ii) actuarial module and benefits module; (iii) development of payroll module and installation SIPREV-20 states, actuarial module-20, benefits module-10, payroll module-5 D To be carried out by DATAPREV outside the Project Intermediate Result (Component Three): Assist states in implementing unified pension management agencies incorporating all public pension systems in accordance with recent legislation Dropped Component Revised Intermediate Result (Component Three): n/a 8
Intermediate Result (Component Four): Strengthen reform constituencies in the States through stakeholder communications Revised - see below One: State sponsored stakeholder pension workshops 20 states D Eliminated Intermediate Result (Component Five): Identify the magnitude of pension costs through actuarial analyses based upon unified and upgraded cadastres and develop fiscal strategies to mitigate this burden Revised see below The RPPS rules now require states to present an annual actuarial One: Complete and debate report to SPS, so actuarial/financial study in each this activity does state 20 states not require D incentive support through the Project Revised Intermediate Result (combined for Components Four and Five): Strengthen institutional capacity in the Ministry of Social Security and states through training, dissemination and workshops. One: Participation in programmed training venues 17 states R Participation in revised training program 17 states Social Security Secretariat (SPS) Two: Completion, dissemination and debate of two studies: (i) disability health insurance and (ii) link between health security and RPPS systems Three: Support for CONAPREV 8 workshops D C Eliminated Contract financed with 100% government counterpart funds due to faulty Social Security Secretariat (SPS) 9
procurement process in 2009. A total of 5 workshops had been completed as of April 28, 2011. Three more workshops are planned until December 31, 2011. Total of 8 workshops are expected to be completed by endof Project *Please indicate whether the indicator is a Core Sector Indicator (see further http://coreindicators) **Target values should be entered for the years data will be available, not necessarily annual 10
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