The eventual approval of the plebiscite that drives the PIT-CNT against social security reform would bring “at least ten negative consequences” for the Uruguayan economy, as warned by the CEO of Ceres, Ignacio Munyo.
The campaign of PIT-CNT, which has already collected more than 150,000 signatures, must exceed 270,000 for the proposal to be tested in a plebiscite on October 27, in conjunction with the elections 2024.
Given this scenario, Munyo He questioned through his Kirchnerism”, which in 2008 advanced with a similar model.
He even described the initiative as “so populist as retrograde” and questioned that it adds “emotional arguments of immediate interest, which clash with the day after.” For this reason, she asked to “avoid the populist temptation” of signing the ballot.
Increase in spending due to greater liabilities and low retirement age
The first of the negative consequences that the Ceres CEO warned about is the increase in spending due to greater passivities. The economist warned that “more than 1.1 billion extra dollars per year would be needed to equalize retirements and pensions to the national minimum wage,” arguing that they are resources that the country does not possess and that they are equivalent to 1.5 of the GDP.
Secondly, he mentioned an increase in spending lower the retirement age to 60 years, something that represents an increase in estimated spending of around 3,000 million dollars, including the BPS and the Military, Police and Parastatal funds, equivalent to 4% of GDP.
State trials and tax increases
For Munyo, the third negative consequence is linked to potential lawsuits against the State and this is how he graphed it: “It is feasible that members will initiate lawsuits for the confiscation of the savings managed by the AFAP (22,000 million dollars).” He even anticipated that “the AFAP could do the same, claiming lost profits for the commissions provided until the members retire.”
In parallel, the text raises Raise taxes in the face of extra costs. “The union initiative presupposes an increase in IRAE, Wealth Tax and higher bands of IRPF”, he highlighted, something that he considered would bring “serious damage to private investment and the future growth of the economy.”
Loss of investment grade and legal certainty
Munyo pointed out months ago that a measure like that of the PIT-CNT puts at risk investment grade from the country. He remembered that “Uruguay It was obtained after the pension reform of 1997, it was lost with the crisis of 2002, it was recovered a decade later and it was only now solidified thanks to the pension reform underway”, which is why it is a complex process.
At the same time, he stated that it would cause harm to the legal security, key internationally. In this regard, he said that the initiative “leaves open to interpretation the exclusivity of the State in the management of services in all areas linked to the social security system, such as, for example, health.”
Along the same lines, he stated that it would mark “a setback in the agenda of development in which the country must advance”, describing it as “a brake for Uruguay and a drastic change of course towards a path followed by countries that fared worse.”
Reduction in private savings and complications in income distribution
On the other hand, the director of Ceres considered that the approval of the plebiscite, which was signed by Carolina Cosse, would generate a reduction in private savings, due to the ban. “People with higher incomes will look for alternatives abroad, as international evidence shows,” she anticipated.
In parallel, it would represent regressive effects on the income distribution, since “higher-income contributors will have incentives to reduce their contributions and benefit disproportionately from the minimum benefits of the new system.”
Munyo indicated that the proposal also reintroduces “inequities” To the system. “There is a reversal in the unification of subsystems (Cajas) with different benefits for similar contributions, which was an advance of the last retirement reform,” he said.
Source: Ambito
