Agreements and administrative arrangements signed in Guadalajara on 29 June 2004. The agreement must be submitted to the U.S. Congress and the Mexican Senate for consideration before it enters into force. SSA has no written guidelines or procedures to follow when entering into totalization agreements and the steps it took to assess the integrity and compatibility of Mexico`s social security system were limited and were neither transparent nor well documented. SSA followed the same procedures for the Mexican proposal agreement that it used in all previous agreements. SSA officials told the GAO that they were visiting Mexican facilities at the moment, observing how their automated systems were working, and identifying the nature of the data managed by Mexican workers. However, SSA did not provide any evidence that it assessed the reliability of Mexican revenue data and internal controls used to ensure the integrity of the information relied on by the SSA to pay for social benefits. The proposed agreement is likely to increase the number of unauthorized Mexican workers and family members who are eligible for social benefits. Mexican workers, who have not normally been able to benefit from Social Security pension benefits because they have not received the 40 coverage credits needed for U.S. incomes, could benefit from partial social benefits with only 6 coverage credits. In addition, under the proposed agreement, more family members of insured Mexican workers would benefit from a new right, since agreements generally waive rules preventing payments to dependant survivors of non-citizens living outside the United States.
The cost of such an agreement is very uncertain. In March 2003, the Office of the Chief Actuary estimated that the cost of the Mexican agreement would be $78 million in the first year and increase to $650 million in 2050 (in 2002). The cost insurance estimate predicts that the initial number of eligible new Mexican beneficiaries corresponds to the 50,000 beneficiaries who now live in Mexico and would increase six-fold over time. However, this number of agents does not directly account for the estimated millions of current and former Mexican workers and family members who are unauthorized and appears to be small compared to these estimates. The estimate also assumes, by its very nature, that the behaviour of Mexican citizens would not change and does not recognize that an agreement would provide more incentive for unauthorized workers to enter the United States to work and keep documents in order to assert their income under a false identity. While the actuarial estimate indicates that the agreement would not have a long-term measurable impact on the actuarial balance sheet of trust funds, a subsequent sensitivity analysis to the GAO request shows that a measurable effect would occur with an increase of more than 25 per cent in the estimate of the initial new beneficiaries. In previous agreements, error rates related to estimating the expected number of new beneficiaries were often greater than 25%, even in cases where uncertainties about the number of unauthorized workers were less widespread. Due to the large number of unauthorized Mexican workers in the United States, the estimated cost of the proposed totalization agreement is even more uncertain than in previous agreements. Comments posted: SSA returned to Mexico and conducted additional studies of the Mexican social security program that GAO deemed insufficient. The Agency has also developed several initiatives to identify risks associated with totalization agreements, including the implementation of vulnerability assessments, to identify potential problems with documents and data from abroad.