Uruguay will have a pension deficit of 6% of Gross Domestic Product (GDP) due to global demographic change—which is trending toward fewer and fewer births and a population aging that, at the local level, is already being experienced significantly—according to a recent report by the International Federation of Women Administrators Pension Funds (FIAP).
The pension situation is a present concern in Uruguayan politics: with the provisional results of the last Census, It became clear that the population is virtually stagnant and in the beginning of experiencing a aging process which was expected only in 2043.
This scenario, in any case, had already been addressed during the parliamentary debate on the social security reform law which was approved at the end of April and whose first provisions came into force in August of last year. The main problem today is the plebiscite what he intends PIT-CNT to reform the Constitution in pension matters; something that, according to specialists, would mean a significant setback in terms of the viability and sustainability of the Uruguayan retirement system.
Alert for the delivery system
In its report, the FIAP warned that the delivery systems They are no longer a good option for some countries in the world due to the aging population trend.
This system, which consists of the contributions that workers make to social security are used to pay the pensions of current retirees – while personal or individual savings accounts do not exist – is one of the two pillars that constitutes the mixed system that exists in Uruguay. The other is, in fact, the capitalization or savings pension systemwhich in the country occurs through the AFAP.
According to FIAP, the majority of countries that present the pay-as-you-go system already present pension deficit —as can be seen in Uruguay itself—because the income received from the contributions of active workers is not enough to pay all the pensions of those already retired. The main reason for this is the demographic composition, which in the coming years will increasingly play a key role.
As an example, the organization confirmed that in 1950 only 5% of the population of Latin America and the Caribbean He was over 60 years old. Currently, this figure reaches almost 10% of the population, added to the fact that in 2100 it is expected to exceed 35%, so that for every 100 citizens of Latin America and the Caribbean in that year, 35 will be over 60 years old.
These demographic changes are the result of two trends: one decrease in birth rate and, on the other hand, a increased life expectancy which means that there are more and more older people—and retirees—at the same time as the number of active workers who support the pension system with their contributions is reduced.
In this sense, according to projections of the Inter-American Development Bank (IDB) Regarding the pension deficit for selected countries in the region in 2030 and 2060, it is estimated that in 2030 Uruguay would reach a deficit of 6% of GDP. Added to this are Brazil (9%), Argentina (8%), Costa Rica (4%), Honduras and Panama (1%).
On the other hand, by 2060 the national pension system is expected to reach a deficit of 12% of GDP, while in Argentina it will be 15%. Brazil, meanwhile, will reach a 28% deficit, followed by Costa Rica (11%), Honduras (6%) and Panama (5%).
Source: Ambito
