volatility over time of social security policies in Argentina
By Cristian Bergmann
The issue is complex and requires a cross-sectional analysis. AFJP model, driven by the tandem Menem-Cavallo and voted on by Congress (the same who voted privatization) was poorly implemented from birth. First let the big business of the committees. De la Rua subsequently forced to invest a high percentage of the portfolio of the administrators in state bonds, said that one year after the default of any debt. In 2005 it was the debt swap with Lavagna and Kirchner in the lead, they surrendered to AFJP bonds whose performance was tied to inflation (CER) and growth economy (coupons tied to GDP). Unfortunately these bonds since 2007 saw their performance was fading, to the beat of the intervention of Moreno and Kirchner in the INDEC, whose numbers were saying that inflation was 9%, and that the real rate was 25%.
As we said at the beginning, this shows that there are many factors that are involved in this issue: consent of the State to private negotiated, lack of a regulatory framework that actually defends the rights of workers and future retirees, an obligation to AFJP of some governments to break the originally planned investment schemes, default of these securities and as strawberry dessert lies INDEC.
private pension system, allowed the AFJP dump a huge flow of funds on the capital market. Promote capital market resulting in greater investment in businesses, improvements to the consumer always benefits. Additionally, the Pension Funds invested in trusts. This is a technical matter, the trusts are a good financing tool for these companies, being able to liquids that are financially illiquid debts (credit sales), all of which means that consumers enjoy better financing terms, fees, lower rates , etc. Much of the boom in consumption seen in the 2003-2007 period was driven by purchases on credit. Here in Argentina worked. In the U.S. the lack of a regulatory framework sincere and real, encouraged the creation of a financial bubble (with a leverage ratio of real debt of 50 to 1).
Common sense tells us that as a country need to stop going to extremes. Neither was good the system as conceived in the last decade, or is good this appropriation of funds of workers, which hides an underlying problem of the current administration: the tax liability for next year. The fall in the price of soybeans, which was based on retention one of the fundamental pillars of fiscal surpluses, the impossibility to raise the exchange rate indefinitely by the inflationary consequences it would bring and growing public debt obligations, were the breeding ground for a bill that is far from secure funds for future retirees. If this would be the ultimate goal, should put one in the bill a clause to ensure the inviolability of those funds in compliance with the article that is enshrined in the Constitution, leaving it outside the ANSES the management of these funds, which ends swell the Treasury coffers with funds that are not proper, since their only owners are the workers.
