Industry watchers bemoan the government's move to nationalise private pensions and reduce the retirement age, Rodrigo Amaral reports
Bolivia earned praise in the 1990s for implementing radical reforms that placed the country’s pension system among the most advanced in Latin America. But a left wing populist government has decided to reverse much of the progress made in the past 15 years. According to experts, changes to the Bolivian pension system being implemented this year constitute a significant step back for the country.
At the end of 2010 the government of President Evo Morales approved a new bill that transfers to the state pension savings that have been under the responsibility of private fund managers since 1997. The reform also changes the rules regarding the calculation of pensions and brings back the retirement age from 65 to 58 years old. This is despite the fact that, as elsewhere in Latin America, the country is ageing at a faster pace than in previous decades.
“Bolivia is moving backwards with the migration from a fully funded system to one where the state guarantees the payment of pensions,” said Ruben Ferrufino, an economist at the La Paz-based Fundación Milenio.
“Unfortunately Bolivia is going against global trends not only in what concerns the pension system, but other areas of the economy too,” agreed Luis Carlos Jemio, a Bolivian economist who is advising the government of Macedonia in its own pension reform.
In line with his reputation of having a knack for populist moves, Morales has followed the tested recipe of demonising privately-managed pensions as a privilege for the wealthy in order to nationalise pension funds with little opposition. “There is no doubt that the argument for the reform is a political one,” said Ferrufino. “It claims that the 1997 reform had privatised a social right. It has been argued that pensions were being treated by fund managers as a merchandise, rather than a right.”
Argentina’s approach
A similar strategy had already been deployed by his Argentinian counterpart, Cristina Fernández de Kirchner, in 2008. As in Argentina, the nationalisation is expected to give a short term boost to the value of pensions, so it has been well received by those who have a more immediate interest in the matter. It doesn’t help either that Bolivian voters, as other Latin Americans, tend to see pension contributions as a tax rather than savings, and are not usually concerned about the long term sustainability of the system.
