Mexico - Contractual Savings Development Program

 ICRR 10106 Report Number : ICRR10106 ICR Review Operations Evaluation Department 1. Project Data : OEDID : OEDID: L4123 Project ID : P041820 Project Name : Contractual Savings Development Program Country : Mexico Sector : Financial Adjustment L/C Number : L4123 Partners involved : Interamerican Development Bank Prepared by : David Greene (consultant), OEDCR Reviewed by : R. J. Robinson Group Manager : Ruben Lamdany Date Posted : 06/17/1998 2. Project Objectives, Financing, Costs and Components : First of a series of operations to support Mexican pension and financial sector reforms . Assisted conversion of the existing public, benefit social security scheme into a privately managed, mandatory, defined contribution scheme . Specifically the objectives were to establish an equitable, efficient, and financially sustainable system; limit the fiscal costs of the existing system and the costs of transition; enhance capital markets, and increase the volume and improve the allocation of financial saving . The project involved US$ 700 million, of which US$ 400 mission was provided by the IBRD and US$ 300 million by the IADB. The bank loan was a single tranche operation in which the principle actions were taken before loan approval . 3. Achievement of Relevant Objectives : All the immediate objectives have been attained; the legal and regulatory frame work was established; an investment management regime was established; the performance of the National Workers' Housing Fund was improved; the fiscal costs of transition were assessed; individual accounts were established and the capacity of the Mexican Social Security Institute to manage the new system was enhanced . 4. Significant Achievements : The first nationwide pension reform system supported by a World Bank loan . Innovative use of a series of single tranche operations to support an agreed medium term strategy . The new pension system is operating satisfactorily . 5. Significant Shortcomings : none 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Highly Satisfactory Highly Satisfactory Institutional Dev .: Partial Substantial Considerable change in the country's social security system. Sustainability : Likely Likely Bank Performance : Highly Satisfactory Highly Satisfactory Borrower Perf .: Highly Satisfactory Highly Satisfactory Quality of ICR : Satisfactory 7. Lessons of Broad Applicability : Bank loan demonstrated how politically sensitive reform can be supported, by making sure there was agreement on a reform agenda, mounting a highly competent technical team, ensuring that key measures were taken before loan approval (thus de-emphasizing "conditionality,:) and taking a "low profile". 8. Audit Recommended? Yes No 9. Comments on Quality of ICR : The ICR is of high quality, complete, and clear . Its length is justified by the complexity of the reform . One quibble is that the use of numerous acronyms makes reading somewhat difficult .