business

You can’t listen to Panamanian radio, and can hardly watch TV or read the local newspapers, without being told one simple thing by the Torrijos administration. The ads, and the arguments by administration spokespeople, simply and bluntly state that every day more people retire and draw benefits from the Social Security Fund (CSS), and meanwhile fewer and fewer working people are paying into the system.

The message comes through loud and clear through the static from left and right. (The former noise is about how working people will accept neither the burden of solving a crisis that is allegedly overblown nor any more raids on the fund by either the government or especially the private sector. The latter noise is about how the only way out is privatization.)

Nevertheless, the National Assembly’s special sessions came and went without considering the originally contemplated CSS reform package and now the legislature is into its regular sessions without a specific proposal before it. That probably has everything to do with an attitude circulating in society that may be best shown by the result of a survey done by Dichter & Neira for La Prensa: more than one-third of all Panamanians are disposed to take to the streets in the event of social security changes that they oppose.

There won’t be much opposition if the Torrijos administration tidies up certain drains on CSS resources like restrictions that prevent the retirement fund from earning anything close to market interest on its investments and a corrupt and costly medicine and hospital equipment purchasing system. There will surely be a crackdown against evasion, after which it will likely be found that most of the arrears owed to the CSS are uncollectable and in many cases represent imputed deductions from non-existent paychecks that closed businesses never issued. The health care system may be put in order without a lot of pain.

But it’s the pension fund that’s bleeding and will bleed to death if there is no infusion of assets or income.

To be sure, a prosperous economy would in itself solve most of the problems by growing the formal economy and its contributions to the CSS. But getting to that point would be a gradual process, and the retirement fund is shedding copious amounts of red ink right now.

The left wants to plug the gap by placing all the unsold real estate from the former Canal Zone into the fund, which the Torrijos administration is very unlikely to do. The banking and insurance industries want the government to hand them the pension fund to manage for hefty fees, which the Torrijos administration is also very unlikely to do. Any substantial increase in payroll deductions or business taxes would surely drive a lot of small businesses to either close their doors or go underground into the growing informal economy, which would cause more problems for the CSS than it would solve.

The remaining alternatives include reductions in future benefits, increases in contributions or a combination thereof. Torrijos has yet to announce any changes, but the speculation on the street centers on raising the retirement age and on increasing the years of contributions needed to qualify for retirement from the current 15.

Any of that would bring the usual suspects out on the streets to block major thoroughfares and do battle with riot police. If Torrijos fails to convince people that the distasteful measures he chooses are both necessary and fair, the radicals would likely be joined by many others and the country would likely be plunged into another political crisis.

Which is why we’re hearing all those ads with a very simple message these days.




Also in this section:
Simple message, no details in Torrijos Seguro appeal
Petaquilla may have insider trading, securities fraud problems in Canada
EXPOCOMER takes itself out of the limelight
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