At the beginning of August, the Commission for Reforms submitted the final version of its proposal to the Government. There were several options. ANDadapt it and send it as a bill, certainly with little chance of passing the barrier (because it is a barrier) of the Constitutional Court. Twoto open a national debate around these ideas in order to improve them and (eventually) better alternatives would emerge. Threeto ask the group of constitutional defenders to refine the legal project in order to hand it over to the next Government. foursimply state that the topic is left for the future, without any additional input… this last time was selected…

The Social Security Disaster

What can be done in the next 18 months? The alternative would be to open a debate, find options including that of the Commission and leave that space (somewhat clear) for the Government in 2025. The second is to advance the debate, turn it into a bill and discuss it with the new National Assembly. In a certain way, the first is the minimum option, the second is the maximum. And it would also be “doing nothing”, but it would be too irresponsible… Irresponsible? Of course, because time is important. In four to five years, the system would enter “progressive bankruptcy”, this does not mean that day by day there would be no money for any kind of pension, but that people would have to reduce it by 10-15% per year compared to what was offered … be careful, additional reduction from year to year until the eventual reform. Serious.

What should not be a reform?… give it a “cat’s hand” or believe in miraculous solutions.

Let’s ask ourselves first what should not be a reform? The answer: to give a “cat’s hand” or to believe in miraculous solutions. For example, considering that it is enough to “control corruption + pay the national debt to IESS”, this is undoubtedly very important, but far from a permanent solution. For example, to believe that it is enough for the state to fulfill its obligation to pay 40% of pensions on time: this contribution (today slightly more than 2000 million dollars per year) doubles or triples in a short time and becomes unmanageable. For example, adding more contributors to the existing system, because although they would temporarily provide more liquidity (there would be a feeling that everything has improved), later the problem is amplified because each new contributor gets more than what he contributed.

Pensioners from IESS held a protest in Guayaquil to cancel the interest on the debt that the state holds with the social security

‘When they hire you, they don’t even mention membership, you accept it because that’s how it is’, says the young man: 8.8% of IESS members are under 24 years old

What is he facing? There are a number of options for attacking structural problems (the commission has taken one of those paths), but all must be guided by (at least) some basic principles that are not respected today. Onethat “the system can fulfill what it offers”: that the projection of its obligations is sustainable. Twowhich is sustainable for public finances. Threewhich is fair: today, subsidies and benefits are relatively higher for those with higher incomes. fourthat there is a reasonable relationship (not “fall from the sky”) between the benefits and contributions of each person. Fiveapply what people understand intuitively: the pension must contain a fixed part, whether the pension period is short or long, and some additional “savings”, that is, a combination of annuity and individual savings. Sixwhich attracts independents and others who are unwilling or unable to participate. seventhat there are funds for the poor who live to old age, without affiliation.

Question: Do current candidates understand this? (OR)