November 23, 2017
Sunday, June 8, 2014

And then?

The pension moratorium announced by President Cristina Fernández de Kirchner in midweek was largely absent from the front pages of most newspapers last Thursday — with far more interest in exploring the Orwellian implications of the newly created Co-ordination of Strategic Planning for National Thought, for example — but the sums involved are huge while there are various unknowns regarding this vitally important issue for the future, despite the extremely precise figure of 473,814 potential beneficiaries announced. Not least the sustainability of the whole scheme — on Wednesday CFK assured her audience that the contributions paid to qualify for benefits (plus the income caps for calculating discounts) would “guarantee the sustainability of the system” but at the end of the week Economy Minister Axel Kicillof came clean about the fiscal cost, which he quantified at 12 billion pesos. Thus Argentina ratifies its leadership in pension coverage in Latin America, a goal of social justice in a country with an stubborn third of the workforce informally employed which came to fix the ruinous system of private pension funds and which also could help explain the overwhelming victory of CFK in 2011.

Rather less uncertain are the prospects for this bill’s passage in Congress — while some critics are dismissing this moratorium as a typical example of uniquely Kirchnerite populism, the fact remains that various opposition sectors have advanced similar initiatives in the past, which would make it very difficult for them to block approval without losing credibility. Perhaps the main difference between this new moratorium and its 2005 predecessor is the introduction of means testing in order to avoid extending benefits to those who do not need them (including tax evaders and high-income groups which have not made any contributions). But the main objective of this moratorium is to enable those men above the age of 65 and women above 60 who fall short of the statutory minimum of 30 years contributions also to qualify for pensions with a payment plan to remove arrears.

Big as this multi-billion moratorium is, it does little to change the basic (and global) problem of pension system viability either for better or worse — the doubts about sustainability existed long before CFK sought to banish them last Wednesday. The main causes are demographic, the inexorable advance of an aging population, against which the 2008 nationalization of private pension funds permits only temporary respite.

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