The political economy of pension reform in Argentina



Social security in Argentina. Past, present and futureThis is the new book by Hugo de Bertin (Redaction, 2022).

Burton holds a degree in economics from the UNLP and a master’s degree in political science (cum laude, honors). Currently professor for the postgraduate course in Economics of Social Security in the Master’s program in Provincial and Municipal Public Finance since 2017 and in Applied Subjects Public Expenditure (Social Protection) in the Master’s in Public Policy since 2021, both at the Faculty of Sciences • UNLP Economics and Social Security Finances Specialized in Social Security Law at the National University of Rosario. He is the author of publications on social security and political science issues in national and international journals.

Below is a preview of his new book.


Technical design of the pension reform

Argentina has more than two hundred different pension bases at the national, regional, municipal and private levels. In general, non-SIPA subsystems provide a better relationship between contributing effort during active life and perceived benefit during passive life.

However, in most cases, these discrepancies do not reflect disparate risks in related work activities (exhausting, risky or unhealthy), but rather reflect the ability of these groups to obtain more advantageous rules than those implied by SIPA. These schemes, in general, are not self-financing, since the income from contributions and contributions is not sufficient to pay for these differentiated benefits. Consequently, they end up affecting the equity, efficiency and sustainability of social security.

In the future, it is possible to consider creating a single pension system for citizens and strengthening the tools to address some of the differences between the groups mentioned. The parity pension system can be a crucial step in eliminating the aforementioned inequalities. Desirable improvements in the replacement rate between retirement and wages can be financed by voluntary, collective and individual savings programs, but without state guarantees, as they increasingly work in other international experiences.

The individual pension system consists of four pillars: the first, non-contributory, aimed at alleviating poverty among the elderly, which will benefit from the current standardized pension system, financed by tax resources; The second pillar will operate as a pay-as-you-go system, aimed at maintaining consumption habits in old age, with a benefit proportional to years and social security contributions paid during working life; The third and fourth pillars will be voluntary, with the aim of improving the replacement rate, through voluntary collective and individual savings without state guarantee.

The introduction of these tools must be accompanied by other adjustments to strengthen the sustainability and transparency of social security in Argentina.

The political economy of pension reforms

Pension reforms are a recurring process around the world that involves social and political struggles. In 1993, a global reform was carried out in Argentina (border and structural with the establishment of two competing systems: individual capitalization and distribution), and in 2008 the so-called “counter-reform” was structural and the capitalization system was abolished. An individual .

Lessons can be learned from both to achieve better consensus when embarking on a new process of change.

In 2002, the National Executive, through Decree 1934/02, held an intersectoral dialogue, with the participation of national and international experts, the results of which were reflected in the “White Paper on Social Security”, which represents a valuable framework for constructing the structure of the political economy of pension reform.

The way is dialogue and the search for consensus between civil society actors and political parties to promote reforms that reconcile economic growth and social protection, noting that the starting point is the delegitimization of the social security that exists among citizens, many of whom today do not expect to be able to “Live after retirement.

The political economy of reform in this context is as important as the artistic conception.

  • The reform of the protection of the elderly must emerge from a broad and well-founded debate which will make it possible to agree on a lasting reform of social protection over time.
  • It should collect the different opinions of sectors of civil society (trade unions, companies, associations of retirees, universities, national and international experts, study centers and international organizations, among others) on how they perceive the security situation. society in Argentina and how they imagine the changes to strengthen it.
  • It must combine technical consistency, financial cost savings and political feasibility.
  • It is necessary to embed the debate on reform in a political and social agreement because of the costs associated with it and to give it medium-term predictability at the local and international levels.

It is convenient to have an executive report with the associated actuarial and financial proposals and projections, which are made by a panel of experts, even with more than one opinion, as has been done in the pension reform processes in Spain in 1995, in the United Kingdom in 2006 with the Turner report, in Chile in 2008 and 2015 and how it is going in the pension reform in Uruguay.

National issues mentioned included various differences in the composition, working patterns and duration of assignments to the respective expert groups.

Thus, in the case of Spain and Uruguay, the commissions brought together representatives of the government (in the majority), opposition political parties and intermediary organizations of workers, employers and pensioners.

In contrast, in the Chilean model, representation was provided by national (2006) and national and international (2015) technical experts.

In the UK, the committee was made up of three members nominated by the Prime Minister, the Treasury and the Secretary of State for Work and Pensions.

In Spain, the Toledo Pact continues to operate and provides general recommendations or guidelines, every five years, on the operation of the pension system. These are dealt with by the Social Dialogue Body (composed of the three parties, governments, trade unions and companies), which formulates the most concrete and concrete aspects of the implementation of the general orientations contained.

In France, a permanent commission, the Conseil d’Orientation des Retraites (COR), was created in 2000, made up of 41 members, representatives of Parliament, professional organizations and trade unions, pensioners and families, members of the public administration and experts. Depends on the prime minister. The COR is an independent and pluralist advisory body, responsible for analyzing and monitoring the medium and long-term prospects of the French pension system.

In all cases, these working groups hired technical secretariats made up of civil servants from the ministries concerned.

Regardless of the form adopted for the composition of the Group of Experts, the Technical Report of the pension reform proposal is a useful tool for its evaluation in Congress.

The technical report must contain a documented and updated diagnosis of the state of the pension system, its strengths and weaknesses, as well as proposals for change and its impact on pension coverage and public finances in the short and long term.

A unified pension system for all citizens, in accordance with constitutional principles, would enhance efficiency, equity and financial sustainability. At the same time, a better balance of expenditure must be allowed between the first and the third phase of the life cycle of people and prepare us to face the process of aging of the population.

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