Colombia: Candidate Pension Reform Opens Debate · Global Voices

BOGOTÁ (AP) — Left-wing candidate Gustavo Petro has raised concerns in the Colombian private sector by proposing a pension reform that extends coverage and changes the distribution of resources by shifting much of it to a public fund and easing the burden of private funds.

The presidential campaign in Colombia began this week after Sunday's election day that defined the presidential candidates of three political blocs: Federico Gutierrez on the right, Gustavo Petro on the left and Sergio Fajardo in the center. Petro won the most votes in the primary and, if he won the presidency, he would turn the country currently led by conservative Ivan Duque one round.

Petro suggests giving a “pension bonus” of $130, half the minimum wage, to seniors who have not been able to retire. According to official data, about two million people receive a pension in Colombia, despite the fact that some seven million people are of retirement age.

The system is currently divided into two schemes: the state and the individual savings system, which is managed by private funds. Workers can voluntarily choose which one they want to contribute to.

In the public, contributions are paid into a common fund and then distributed. A large part of the pension is subsidized by the state and is usually higher as long as it meets certain requirements: having contributed for 1,300 weeks and been over the required age, 57 for women and 62 for men. In the private fund, people have an individual savings account and by contributing 1,150 weeks, they can retire but do not receive a grant from the state.

Petro says that in Colombia the right to a decent old age has become a “business”, so he proposed that part of the savings that are in private funds be transferred to the public fund.

“With this money, you immediately pay the current pensions that the state pays today, so you release the state 18 trillion pesos a year in the budget ($4.7 billion) and by releasing it, you spend it on the old ones who do not have a pension today,” the candidate said in a recent debate presidential.

The Colombian Association of Administrators of Pension and Unemployment Funds voted against this proposal in a statement in which it considered that “changing the distribution of members' resources amounts, in practice, to expropriating pension savings”.

Petro, who in his youth was a member of the M-19 guerrilla and was active in several left-wing parties, said his proposal consists of a universal public system for those who earn up to four minimum wages. From that point on, pensions would be income-dependent and workers could choose whether or not to contribute to a private fund on a voluntary basis.

Two analysts consulted by The Associated Press agreed that Petro's proposal is good in the short term, but that it would put the system at risk in the future.

“Today, this speech is valid because we only pay pensions for 25% of people. If we believe that everyone contributes and receives the pension, it must be paid at 100%,” Stefano Farné, a former consultant to the International Labor Organization and a professor at the Externado University, told AP. “In the long term, pension obligations are generated and in the absence of pension reform, the State will have to pay a lot more through the national budget,” he added.

Andrea López Rodríguez, an economist at the Universidad de los Andes and a pension expert, explained that Colombia needs a reform that addresses the structural problems of the system, which would not mean the elimination of private funds but “competition between regimes.”

“The public system as it works today is quite regressive, that is, it is the state that subsidizes the highest pensions and extending it without carrying out structural reforms would only aggravate the current problems. It is necessary to restructure the system so that subsidies reach the people who need them most,” added López Rodríguez.

Other candidates criticized the proposal.

Fajardo assured that he also offers a bonus of $130 to elderly people without pension but with tax resources and not with the “savings of Colombians in private funds”.

Meanwhile, Gutiérrez asked him: “Are you going to nationalize the savings of Colombians? ”

A possible reform such as that suggested by Petro must be approved by Congress, where majorities would not be assured. As his Historical Pact movement has reached the largest left-wing bench in the country's history, he would need to forge alliances with traditional parties.

Presidential elections will take place on 29 May and if none of the candidates exceeds 50% of the votes, a new round will be called.