Report Nº: 100910/04/2023
The polemical bond swap imposed by the Ministry of Economy to the social security agency (ANSES) operates as a new confiscation of pension savings. By respecting the ANSES autonomy, established in the Constitution, demagogic pension rules and new confiscations could be discouraged.
The decision of the Ministry of Economy to swap the dollar-denominated Treasury bonds held by the Sustainability Guarantee Fund (FGS) of the pension system for peso-denominated securities caused consternation and rejections. The government is accused of confiscating pension savings to finance the national Treasury.
The FGS is a reserve to face future pension payments. Even in pay-as-you-go schemes, it is a necessary tool. In Argentina, it was created in 2008 when the capitalization system was eliminated. The measure was promoted by the current Minister Massa, who was then Chief of Cabinet, and by Amado Boudou, who was then Minister of Economy, accompanied by a broad consensus of the ruling party and the opposition at that time, with many of the latter now forming part of Juntos por el Cambio (the main opposition party). The main argument was that, administered by the State, pension savings would be better managed and more protected.
Fourteen years after that expropriation, it is possible to evaluate the quality of the FGS management and how well the pension savings were protected. In particular, it is worth asking whether this is the first time that the FGS has been used to help the Treasury. According to ANSES data on the FGS it is observed that:
These data show that the FGS management has been rather poor. The proportion of pension spending that it manages to support has decreased and the share of government debt securities in its portfolio has increased. In other words, in a less explicit way than with the swap decree, the national Treasury has been using FGS resources for a long time. Therefore, instead of being upset over the securities swap implemented by the government on the pension system, more self-criticism and less hypocrisy are needed to find a way to recover the sustainability of the pension system.
The ANSES is supposed to be autonomous and decentralized from the Executive Power. But in practice, it operates subordinated and integrated into the central political power. This generates two very negative issues. On the one hand, it promotes that pensions rules are made by the three levels of government without foreseeing its financing. Laws, decrees, and court rulings set pension benefits without actuarial analysis to support them, under the assumption that it will be “the State” that will pay. The foreseeable result is unsustainable pension provisions that generate chronic fiscal deficits. On the other hand, the ANSES subjugation to central power encourages the use of pension savings to alleviate macroeconomic imbalances.
The ANSES subordination induces irresponsible decisions that lead to macroeconomic crises which are used as arguments to appropriate pension savings. A very important step to break this vicious circle is to regulate the independence of the ANSES under the provisions of Article 14 bis of the Constitution: “…compulsory social insurance shall be the responsibility of entities with financial and economic autonomy, administered by the interested parties…”. To be credible and effective, the autonomy should be strict including, for example, the establishment of criminal penalties for officials who promote or tolerate the diversion of social security resources to help the Treasury or who do not require actuarial studies to prove financial sustainability, before applying provisions –from any branch of the State– increasing benefits.
There is a consensus that to overcome inflation, an independent Central Bank is needed. For this to be effective, the pension system must be sustainable to stop being a destabilizing factor for public finances. Therefore, in order to give independence to the Central Bank, the ANSES must be given independence as well.