Bread for today, hunger for tomorrow
The Petro administration’s new pension bill is potentially game-changing: fewer than 30% of Colombians of retirement age and beyond currently have access to old-age protection. Reform would generate massive movements of people and money, & create considerable fiscal impacts. Under any scenario under consideration, the fate of private pension funds would change dramatically. The private pension funds would stand to lose anywhere between 47% and 69% of contributors, and 43% to 58% of gross contributions. A difficult and dangerous discussion has begun, related to the reform proposals potential impacts on the fiscal and capital markets. Some of these impacts will be felt soon; others in the distant future. The new pension provisions, now under consideration in Congress, are proposed to begin in 2025.
Let us hope Congress wakes up, smells the coffee, and does the same kind of job it is doing with the health and political reforms and, apparently, with labor reform. By paying heed to the potential social backlash when you focus too much on the actuarial and the fiscal – as in Macron’s France, say -- a more concerted effort is required. Discussions over the pension reform draft bill should take more time than the three months to Congress’ June 20th mid-year break, and should encompass the actuarial, fiscal and social/political triad as a whole.
March was a month of madness, not only for college basketball but also for a sudden awakening of Colombian "institutions," and the reaction of cool, media-related people distancing themselves from the government they help getting elected and ad from societal and political institutions either seeking to limit the excesses of the executive branch or voicing disappointment with the presidential administration. First, public opinion polls show a significant deterioration in President Gustavo Petro’s popularity, and his blizzard of initiatives demonstrating an erratic pattern. One day Petro bans copper mining in a municipality, and soon afterward gives carte blanche to the coca growers of another region, without leaving time for an adjustment. On another day, he tries to become the energy regulator. The polls seem to be punishing this rapid-fire approach.
Second is internal dissent, from the moderate and more economically experienced members of Petro’s cabinet. Protests by several ministers against the healthcare reform proposal unleashed a ministerial crisis, in which two other ministers – culture and sport – were ousted. Third, political parties in the government's coalition have distanced themselves from reforms they disagreed with, undoubtedly with an eye on the October 2023 regional elections. The most appalling of these proposals was for political reform, originally intended to create a type of one-party democracy in Colombia, à la PRI-Morena in Mexico or peronismo in Argentina. Indeed, substantive objections have been raised against the healthcare, pension and labor reforms that are the core of Petro’s economic and social agenda. We have reduced the probabilities of approval for labor and healthcare reforms. Some observers claim that justice reform could also be put to the sword.
Yet none of these challenges suggest that Petro will be blocked from advancing his positive agenda. Rather, he should moderate the negative and destructive parts. To build up primary-care centers in remote areas of Colombia, a clear need, it is not necessary to sacrifice the so-called health provider entities, which work well in the urban centers, where 80% of Colombians live. Furthermore, to give monthly transfers to 2.3 million poor elderly people, a noble and urgent goal, it’s not necessary to destroy the individual accounts pension system and its administrators.
The October 29th mayoral and gubernatorial elections will present a political test for the Petro administration. Political observers and allegedly Petro and his acolytes themselves take for granted a defeat of the Pacto Histórico, the coalition party that prevailed in the presidential elections of May and June 2022. In Bogota, Juan Daniel Oviedo and Carlos Fernando Galán (of the center-left Nuevo Liberalismo) surpass Gustavo Bolívar, a former senator and Petro’s closest supporter and political ally. It is of course too early to tell, since the big national and municipal governments’ political machinery, currently controlled by Pacto Histórico and the Greens, respectively, has not yet revved up.
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