_Mexico: The 1997 Pension Reform_ _3 7_ CONSAR has full supervisory authority over AFORES and SIEFORES, as well as supervisory authority over other participants in the pension system (such as banks and insurance companies) to the extent that the activities of such entities involve the pension system.

CONSAR has prepared an institutional development plan to provide itself with the resources commensurate with its new responsibilities. The annual budget of the CONSAR is expected to increase substantially. Over the next eighteen months, the plan envisages the installation of a new computer system, a substantial increase in staff, public education programs, the upgrading of key systems and the training of personnel. Two-thirds of the new staff will be mid- and high-level personnel. The annual budget at CONSAR is expected to increase by approximately 60%. The priorities of the plan in the areas of systems and personnel include: development of actuarial standards and methodologies of analysis; implementation of on-site and off-site supervision programs; drafting of examination manuals and training of examiners; implementation of systems and software to monitor trading activity and detect irregularities; development of methodologies for measuring risk and assessing the effectiveness of private securities ratings; installation of systems and preparation of staff to produce a regularly issued statistical bulletin providing key data on the performance of the pension system.

# **Operation of new centralized system for collection and individualization of accounts**

Mexico has decided to follow a centralized scheme for contributions collection and information gathering. Despite its theoretical advantages, the Argentinean experience has shown that this kind of scheme might lead to operation and incentive problems. The Mexican version of this process faced a critical problem in the worker's ID number - which was one of the key factors behind the failure of the SAR 1992 reform. There are other risks present in the Argentinean scheme that may appear in Mexico, increasing operation costs and reducing the workers' balances. These include delays in the flow of money and information due to excessive operations or identification problems in the national database _(PROCESAR)._ The enactment by the Assembly on October 28, 1996 of legislation postponing the implementation of the social security reform from January 1 to July 1 for voluntary contributions (and September 1 for mandatory contributions) sought to address this concern. The reform was postponed for two main reasons: (a) the Government was not ready with the unique identification system, which is essential to avoid evasion, ghosting etc; and (b) the Government was not ready with systems for collection of contributions by IMSS and their transfer to the AFORES. These actions improved the design of the system and greatly lowered implementation risks. At that time, the Mexican authorities decided that it was necessary to install a more powerful system for individualization of accounts and to move towards a centralized and more reliable and accountable computer-oriented scheme for the payment of contributions.

The objectives of the integrated collection system are to guarantee the quality of the information in the individualized accounts; integrate collection of all social security payments (including INFONAVIT contributions) in a unique contribution payment system; facilitate payment by employers; and facilitate conciliation and control by social security institutions. In fact, in a fully funded DC system, information is as critical as the actual funds - a payments without the correct information will not be deposited in the workers' account. This required an efficient system with a high level of computerization and transparency.