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OP-ED | 16-12-2017 12:11

Editorial: Golden years and brass tacks

There is a simple enough explanation for both motive and strategy – the objective of cutting a bulging fiscal deficit and the idea that the most unpopular legislation should be pushed through as early as possible in the honeymoon following an electoral triumph.

Some of the families of the dead from the 1994 AMIA Jewish community centre terrorist blast complain that the legal uproar over the treaty with Iran diverts attention from the actual investigation of the atrocity. 

Much the same could be said about Thursday’s mayhem in and around Congress over the pension reform. It would be easy enough to write an editorial devoted to self-evident condemnations of police brutality and extremist violence, or to enter into the intricate blame game over which side did more to block Congress debate. But it would be more important not to lose sight of the substance of the problem. 

At no point has the government been honest about either the motives or the contents of this move but if it thought it could rush through legislation affecting the pockets of around 40 percent of the population (via the updating of not only nine million pensions but also eight million other benefits) without any backlash, it evidently had another think coming. 

There is a simple enough explanation for both motive and strategy – the objective of cutting a bulging fiscal deficit and the idea that the most unpopular legislation should be pushed through as early as possible in the honeymoon following an electoral triumph. But might not this retrenchment be a hasty improvisation in order to pay Buenos Aires Governor María Eugenia Vidal over 100 billion pesos in the next two years (as compensation for the money lost from freezing the Greater Buenos Aires Fund for a quarter- century) without affecting other provinces or interrupting the reduction of the fiscal deficit? 

By thus dipping into by far the state’s biggest pool of idle money President Mauricio Macri would be following a tradition going all the way back to Juan Domingo Perón who first systematically rifled the pension funds – the most recent major example would be Cristina Fernández de Kirchner nationalising AFJP private pension funds in 2008 when denied a massive increase in farm export duties. A reform drive also attacking privileged pensions of up to hundreds of thousands of pesos so that Vidal can give more handouts to the destitute of Greater Buenos Aires should not necessarily be seen as social injustice but nobody seems to want to admit that these cuts might be on behalf of the golden girl of today’s politics. 

Meanwhile deficient communication of the details has been counterproductive. Until very recently not only opposition politicians but also progovernment media have been stating that next March’s pension increase would be slashed from 14 percent to 5.7 percent, without explaining that the new quarterly index-linking of the reform would add a further estimated 5.6 percent in June, thus recouping most (but not all) of the loss. Nobody has explained until now whether the old system of updating every March and September covered the preceding or following six months, which is crucial for calculating the cost to pensioners and the savings for the state.

Above all, there are doubts whether the government has got its sums right in initially speaking of savings of 60 to 80 or even 100 billion pesos – these depend heavily on skipping the transitional period and the three-month delay in paying the second half of the current increase. Even if the government can clear the parliamentary gridlock (a feat which is by no means certain), this legislation faces a welter of litigation. The ongoing protests are against the social sacrifice but the costs might well end up being fiscal.


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