Shedding light into the Mexican Institute for Social Security
Largest Latin American social security provider takes its procurement record keeping to the web in search for increased transparency.
Mexico has long been affected by high corruption levels. According to Transparency International, Mexico occupies the 95th place -out of 168 countries- in terms of corruption perception, with a score of 35% (compared to top place Denmark’s 91%). Further, the World Economic Forum’s locates Mexico in the 51st place -out of 138 countries-in terms of global competitiveness, as measured by a combination of 12 indicators; Mexico’s worst-performing indicator is Institutions, which focuses on legality, rule of law, government efficiency and trust, where Mexico ranks 116th. Per some estimates, corruption costs Mexico between 2 and 10% of its GDP. It is fair to say, therefore, that corruption is a tangible, severe problem for the country. (1) (2) (3)
Mexico’s social security Institution, IMSS (Instituto Mexicano del Seguro Social), provides health care services and manages retirement funds for its almost 75 million affiliates (60% of the population). With more than 370,000 collaborators, it is one of Mexico’s largest employers. It operates an infrastructure that includes 1,786 medical units (primary, secondary and tertiary care). (4) (5) (6)
What does it take to run such a bulky and complex organization? An intricate symphony of effort, talent, inertia, and a lot of money. IMSS is one of the main line items of the government’s P&L: in 2017 it will receive an annual budget of US$31 billion, or about 13% of the total national budget. (7)
Unfortunately, such a large budget serves as growing soil for corruption incidents, as have been evidenced by some notorious instances; to name a few:
- In 2015, IMSS awarded hemodialysis contracts to Pisa, whose expected savings were close to US$70 million; nevertheless, Pisa was being investigated for suborning Guatemalan officials for US$12 million to secure a hemodialysis contract in that country, which the company eventually won but failed to meet (8)
- In 2010, a leaked recording evidenced an IMSS employee asking for a 5% cut of a US$4 million contract to favor its awarding to Novartis (9)
- In 2006, IMSS lost over US$30 million after acquiring serum and insulin that were overpriced by 23% and 58%, respectively. The supplying laboratories were Baxter, Fresenius, Eli Lilly and Pisa (10)
To counter this, in late 2011, IMSS launched a transparency tool aimed at providing full access to its purchasing history. With this, any person can scrutinize the entirety of the Institute’s procurement decisions, which affect about 10% of its budget (US$3.5 billion). The tool runs on a dedicated website and features three main areas: (11) (12)
- Historic purchasing information, dating as far back as 2011 and including de aggregated data by region, product or service acquired, vendor and type of contract allocation
- Expected purchases for remainder of current period, including region, product or service demanded and application deadlines
- Dedicated section to access customized data queries, based on a specific product or vendor
The results look promising. At least in terms of increased public engagement, the transparency tool has proved to be an effective way to get more people to look at the Institute’s numbers, and make questions about them. For instance, the amount of information requests directed at IMSS ballooned from around 9,000 in 2010 to almost 30,000 in 2015 (actually, IMSS is the government agency that receives the most information requests). (12) (13)
Looking forward, the tool’s impact could be further enhanced by enabling a friendlier interface to download information; currently, it is difficult to consult a large data set on the website, but the ability to export it to a traditional spreadsheet would allow the automation of auditing exercises by a layperson. Also, IMSS could work on enforcing more stringent restrictions upon vendors that recur to corruption to influence contract allocation processes; having a “black list” of banned vendors, including not only firms whose wrongdoing has been proved, but also companies undergoing investigation for misconduct would greatly contain the recurrence of the practice.
These measures should allow IMSS’ procurement function to become corruption-free, once and for all. What’s at risk, otherwise? Providing costlier medicines and subpar services to 75 million people. Mexicans have endured burdensome corruption levels in many aspects of their lives for many years. Would they indefinitely survive a corrupt healthcare provider? (680 words)
Sources:
(1) Transparency International, “Corruption Perception Index,” https://www.transparency.org/country/#MEX, accessed November 17, 2016
(2) World Economic Forum, “The Global Competitiveness Report 2016–2017,” http://www3.weforum.org/docs/GCR2016-2017/05FullReport/TheGlobalCompetitivenessReport2016-2017_FINAL.pdf, accessed November 17, 2016
(3) Saldaña, Ivette. “Corruption costs Mexico up to 10% of its GDP,” El Universal, May 21, 2015, http://archivo.eluniversal.com.mx/in-english/2015/corruption-cost-mexico-105997.html, accessed November 17, 2016
(4) IMSS, “Conoce al IMSS,” http://www.imss.gob.mx/conoce-al-imss, accessed November 17, 2016
(5) IMSS, “Informe 2015-2016,” http://www.imss.gob.mx/sites/all/statics/pdf/informes/20152016/04-introduccion.pdf, accessed November 17, 2016
(6) UC Davis, “Mexico: Social Security, Migration, Economy,” http://migration.ucdavis.edu/mn/comments.php?id=3048_0_2_0, accessed November 17, 2016
(7) Editorial staff. “Aprueban diputados en lo general el Presupuesto 2017; reasignan 67 mil 707 mdp,” Proceso, November 10, 2016, http://www.proceso.com.mx/462211/aprueban-diputados-en-lo-general-presupuesto-2017-reasignan-67-mil-707-mdp, accessed November 17, 2016
(8) Editorial staff. “El IMSS entrega 20 contratos a empresa investigada por malas prácticas en México y Guatemala,” Animal Político, September 8, 2015, http://www.animalpolitico.com/2015/09/el-imss-entrega-20-contratos-a-empresa-investigada-en-mexico-y-guatemala/, accessed November 17, 2016
(9) Rodríguez, Ruth. “Cesan a funcionario por escándalo IMSS-Novartis,” El Universal, November 11, 2010, http://archivo.eluniversal.com.mx/nacion/181784.html, accessed November 17, 2016
(10) Sánchez, Axel. “Fraude contra IMSS equivale a la compra de 727 ambulancias,” El Financiero, April 08, 2015, http://www.elfinanciero.com.mx/empresas/fraude-contra-imss-equivale-a-la-compra-de-727-ambulancias.html, accessed November 17, 2016
(11) IMSS, “IMSS compró,” http://compras.imss.gob.mx/?P=imsscompro, accessed November 17, 2016
(12) OECD, “Public Procurement Review of the Mexican Institute of Social Security,” https://books.google.com/books?id=USBWAgAAQBAJ, accessed November 17, 2016
(13) Editorial staff, “IMSS, el que más solicitudes de información tuvo en 2015: Inai,” Procesohttp://www.proceso.com.mx/424635/imss-el-que-mas-solicitudes-de-informacion-tuvo-en-2015-inai, accessed November 17, 2016
Very interesting to see that digitalization not only disrupts or creates revenue streams, but also changes the way we conduct business. One of the great promises made by digitalization is democratized access to knowledge, and using that to increase the transparency of businesses and improve the way business is conducted in a country is a very meaningful way to use that promise.
Of course, when you are able to produce data, the immediate question about the usage of the data arises: Who is going to use this set of data, and for what purposes? Is the mere fact that the business conduct is analyzed and reported through a publicly available system going to shift the way the country operates? I believe that Mexico needs to find more effective ways of putting this tool into use to actually enable the change needed.
Samuel, this is very cool. I strongly believe in the flashlight effect – the idea that transparency will in itself create change. This is especially simple today with the advent of the internet and ease of data sharing.
I think the idea has promise – the US Government in fact has a dashboard that tracks IT spending [1] and shares it publicly to increase accountability and raise awareness. More public sector organizations should use this – I wonder if mandating that all divisions must share their spending data will drive change? As we saw in the recent current events, the issue today is that different people are getting a different set of facts – we aren’t able to frame our debates. This will at least take us one step towards ensuring everyone sees and uses the same facts in discussions regarding Government spending – a huge point of contention in countries around the world!
[1] https://itdashboard.gov/
Great post Samuel. This is indeed very exciting news to Mexico. Having worked in corporate finance and M&A for some years, I wonder whether they could further enhance its tool by providing two additional pieces of information:
– The original documents or contracts signed: I have seen many transactions where the final price, which is usually the main point of attention and makes the newspapers headlines, is contingent on several clauses that are hard to comply with, and thus making the final price paid / received something completely different from what was disclosed
– The result of their “risk management” assessment tool, if there is one. This would allow to prevent cases as the one you mentioned about Pisa.
Very interesting post, Sam! The transparency measures the IMSS has taken are definitely a step in the right direction. However, as I was reading this, I wondered who in the organization was leading this change. Is it just one person at the top? Are all employees bought into the idea? Since corruption has likely been an engrained way of doing business at IMSS, I think this shift needs to be instituted top down, but all parties must be bought in. Similar to class sentiments regarding the cases on corruption we’ve read, I’m worried about the longterm success of this big push to reduce corruption. As we have seen, if the entire culture of the organization does not rally behind this idea, corruption may continue to be a problem.