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SÃO PAULO – One of the great challenges of President-elect Jair Bolsonaro (PSL) at the beginning of his term is the implementation of changes in the current social security system, which reached 268 R $ Given the results of the National Institute of Social Security (INSS) and Union officials, 8 billion last year, this measure is considered by experts as a necessity to sanitize the public accounts of the country.
Up to now, conflicting signals have been given regarding the content of the proposal, as well as the political operating strategy of the National Congress. Last week, Bolsonaro said that he should send the bill to Parliament and that the trend would be to begin the changes according to the minimum age required for retirement. Behind the scenes, we even considered taking advantage of the text drafted by the Michel Temer government, which is in the House. The idea lost with the badessment that it would be too risky to be manipulated and unable to solve problems.
The future Minister of the Economy, Paulo Guedes, defended the immediate approval of measures to solve the structural deficit, with the adoption of a minimum age for workers. men and women and badimilating the general and appropriate systems. Secondly, its goal is to replace the current pay-as-you-go model (in which active workers retain inactive retirement) with a capitalization model (each contributing to their own retirement). As stated by the advocates of the measure, in addition to ensuring the sustainability of the social security system in the long run, the capitalization generates savings, which can lead to investments to stimulate the economy. economy.
One of the models studied by the bolonarists is implemented by Chile in 1981, during the dictatorship of Augusto Pinochet.
"This is something the team has always advocated, a capitalization plan … that allows Chile, with its capitalization scheme, to support Chilean growth, according to the experts. About 15.5%, or close to If we reach 19 or 20%, Brazil has sustainable growth, with its own resources, of 3% per year, and I mean, if Brazil grows by 3%
Despite the compliments of the future Brazilian government, the individual capitalization system has often been criticized in Chile, and today the country faces counter-reforms aimed at correcting distortions. to offer a more supportive model for pensions.
For Economist Andras Uthoff International Consultant and Regional Adviser to the ILO International Labor Organization) and Professor at the Faculty of Science economic and commercial the University of Chile, the promise that the system would generate enough savings to revive the economy and ensure the creation of quality jobs. He recalls that, currently, with the reform advocated by Michelle Bachelet, 79% of pensions are below the minimum wage
The specialist was in São Paulo two weeks ago to participate in a seminar on the reform of social security at Brazil. Brazil and the lessons of the Chilean model, promoted by Crivelli Advogados Associados. In an interview with InfoMoney he deepens his impressions of the dilemmas facing both countries:
InfoMoney – How has the capitalization model of Chilean social security been structure?
Andras Uthoff – O This capitalization system was born in 1981 when a group of economists linked to the University of Chicago set up a neoliberal-type organization for the purpose. ;economy. With regard to social protection, one of them, José Piñera, then Minister of Labor, defended the elimination of public social security and its transformation into a market. mandatory individual savings in Chile.
Workers became affiliates. to a security system and to be a consumer of the financial services sector offered mainly by pension fund managers. Twelve AFPs were created, which soon reached 21 and there are now six. At the same time, the state had to close the public system, which meant taking over the debt. This was a high transition cost, estimated in current value at 130% of GDP.
In the case of Brazil, we estimate more than 200% of GDP. As we were under a dictatorship, this was adjusted by reducing spending on health, education and housing, slightly increasing debt and increasing some taxes, which was done without no parliamentary debate. It is a very big sacrifice that is difficult to achieve in democracies.
IM – How did the system work in practice?
AU – All of the affiliates' money went to the financial market without the state using resources to pay the debt. According to the model, this strategy would generate significant savings, which would be invested in companies, and since entrepreneurs would not have to pay for social security and the cost of labor would be cheap. everyone would have a good job.
But the reality has turned out. different Managers have started to invest, but no real investments in the country. Today, half of workers' financial badets are invested in financial instruments abroad. The Chilean labor market remains precarious, characterized by many informal activities, a high turnover rate and a need to undertake. This has made the majority unable to contribute permanently during the 40 years of active life. When the first [Michelle] Bachelet reform was made in 2008, it was diagnosed that half of the elderly were without a pension.
After that, the state began to provide badistance to the poorest seniors. years). A basic solidarity pension was created, from which he had spared nothing, and a temporary and complementary contribution to those who had spared something. But the contributions are very small and the level of benefits is insufficient. Today, even with badistance, 79% of Chile's pensions are below the minimum wage ($ 420) and 44% below the poverty line.
IM – What would be the main misconceptions you would report?
UA – The labor market was not inclusive as promised and, therefore, people can not afford to save. The one who saves does not do it regularly enough and the rate is very low. The returns provided by the AFPs were very high at the beginning (above 10% in real terms), but have decreased and are now at 4% in real terms. When workers reach retirement age, they have no choice but to buy a lifetime income and tell them that life expectancy has increased, this which makes the savings insufficient to fund a good payment.
IM – One of the concerns of the debate on the migration of the social security system is the cost of the transition.
AU – The sum of the operating expenses (old-age pensioners' payment) and the recognition premium (payment of taxpayers from the old system that migrates in the capitalization) accounted for 130 % of GDP in present value. At that time, it meant spending 4 to 5 points of GDP. We continue to pay now.
It turns out that when transition costs go down, the government realizes that the system does not cover everyone. As a result, he must begin to improve the guarantees he will give to the population to survive in old age. In the end, we return to the same situation that we started, in which the state has to contribute to a pension system, whether it is the capitalization or the social Security.
IM – How do you envisage regulating AFPs in this context?
UA – Companies are strictly regulated, but this is a prudential regulation, which means that they do not allow them to invest in very risky financial badets. What did it mean? In Chile, and around the world, it is difficult to find instruments that are not too risky but have a real impact on the economy. All countries must invest in small and medium enterprises, but there are few safe instruments to do so. Latin America generally lacks instruments that allow financial intermediation to meet real investment needs. As a result, in the case of Chile, 40% of the money is invested in foreign debt, with a very small real impact on the country.
IM – One of the recently strengthened proposals in Brazil was presented by economists Arminio. Fraga and Paulo Tafner. It is a model that combines a minimum of badistance, sharing and capitalization.
AU – This is what we wanted to do in Chile: an important base offering citizens' rights to the entire population of the elderly; a system of social solidarity very favorable to bring this level to a certain level of sufficiency; and, as a voluntary or compulsory supplement, the individual capitalization system. But we start from the opposite and we find that we are not building the minimum subsistence level for all citizens and that we are destroying the solidarity social security system. We need to create this multi-pillar system, which exists in most countries. If that is what will be done, it is an approximation that follows international trends, but it is necessary to discuss the size of each pillar.
IM – Changes in the labor market with jobs that cease to exist, robotization and even informality and outsourcing also affect the health of social security systems. What are your concerns in this regard and how do you manage this new reality?
AU – This is an essential theme. I think that social protection based on the labor market, where the labor market generates jobs for the worker to contribute, is a promise that has not been fulfilled and will be weaker and weaker. We live with increasing informality, mechanization, robotization, automation, with fewer jobs and more dependent, stable and able to contribute.
This means an inflection of social protection that is happening around the world. We must agree on what we can do in this situation. This is a reproduction of inequality, the labor market is not inclusive. On the other hand, inequity means that there is a wealth generated and that is what tax reform must do to have the resources and be able to set up a system of solidarity. These guarantees involve ongoing expenses, so you need to see where to withdraw the resources. This involves discussing, with the pension reform, a good tax reform.
IM – One of the main criticisms of the Chilean model concerned what is meant by excess of power in the hands of the AFP. What role do these groups play in the local political process? How do they intervene in public policy decisions?
AU – These pension fund managers are linked to major national and international financial groups. And these groups manage a large portion of the resources of the economy, directly or indirectly, including overseas. What we observe in the Chilean situation are two phenomena: 1) a large part of the professional elite who can think of a different model ends up being co-opted by these industries; 2) most parliamentarians funded their applications with resources from these companies. There is a cooptation of politicians and significant professional elite, and an objective view of it is needed.
What is happening is that citizenship is starting to react to these feats. One of its main events is the No + AFP group, which has managed to put more than one million people on the streets.
IM – Which international models would you highlight as references of solidity, durability and solidarity, despite the peculiarities of each country in terms of demography, culture, economy
AU – J & # 39 have observed the evolution of pension systems in OECD countries. Contrary to what is said, they do not revolutionize the system of individual capitalization, but form a public system more and more solvent with parametric reforms and implementing three types of pensions: minimum, minimum and pension. What they do, is create a very good coverage for the majority of older people at the levels of sufficiency agreed by the company, then, in addition, a possibility of voluntary or compulsory individual savings.
IM – How to create a model that guarantees the channeling of resources of social security contributions into investments in the real economy?
UA – There is a gap between development finance and what can be called financial development, namely the market. must be done so that the effort of the workers can be channeled into real investment projects. We need to create financial instruments that support the real investments that serve the country but are safe enough in terms of profitability and risk. There is no one who does it. This is a job that should be done by the development banks.
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