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Business & Economy Briefs

Outlines of a new Seguro Social law take shape

by Eric Jackson, largely from other media

With the militant left/labor FRENADESO umbrella group out of the talks, the basic outlines of the Torrijos administration's plan for a new social security reform package to replace the deeply unpopular Law 17 are emerging. Though the changes are bound to be unpopular with many sectors of society, the most inflammatory aspects of the law that the PRD-Partido Popular alliance jammed through the legislature in the middle of the night last May have been softened and it appears that the coalition that went on strike for a month afterward is not in a position to resume that sort of confrontation.

Under Law 17, the minimum age for full retirement was to have been raised but it appears that under the new proposal it will remain at 57 for women and 62 for men. But the years of contributions needed to qualify for retirement will be raised: Law 17 would have increased it from 15 years (180 monthly contributions) to 25 years (300 months), but the remaining rump of the national dialogue has agreed on 240 payments, or 20 years.

Under Law 17, the Torrijos administration had promised no privatization but in a late night maneuver mandated private management of some half-billion dollars of the Seguro Social retirement fund. Private management has been a key aim of the banking and insurance industry, most prominently the Progreso and ProFuturo consortia whose dignitaries read like a who's who list of the Creole aristocracy and other politically connected families, including relatives of the leaders of the current government. The dialogue's results will increase this privatization by creating a mixed system of a public retirement fund under partial private management and a system of individual retirement accounts entirely in the hands of private companies.

As with Law 17, paycheck deductions and employer contributions for social security will go up, from the current 9.5 percent of payroll now to 13.5 percent by 2013.

One of FRENADESO's key demands was the investment of large public assets into the Social Security Fund (CSS, by its Spanish initials). This was rejected out of hand in the proceedings that led to Law 17 --- the labor/left coalition wanted a big part of what remains in public hands of the former Canal Zone put into the CSS, but the real estate, banking and construction interests which are crucial PRD contributors have essentially claimed dibs on those properties. Now the government say that it will invest more than $7 billion into the CSS over 47 years, and at first blush that would look like a concession to the sort of thing that the strikers were demanding. However, only $150 million of this investment would be during the Torrijos administration and the source of the money isn't clearly specified. Consider this an unfunded mandate that will be the problem of future administrations.

Another cause that was taken up in his time in office by former CSS director Juan Jované, now one of the leaders of FRENADESO, appears on the surface to have been adopted by the remaining dialogue participants. Dr. Jované was a staunch advocate of older persons retiring from the work force when they became eligible for pensions, thus arguably opening up jobs for younger people. He tried to enforce this philosophy by taking the position that those retirees who took jobs would lose their retirement benefits while working, but this policy was struck down by the courts. One of the provisions agreed to by the dialogue participants is a window of eligibility to apply for retirement benefits, between ages 55 and 70 for women and 60 and 70 for men. What it would mean would be that a person who paid into Seguro Social for many decades and decided to work until age 75 would be penalized for that decision, losing benefits which she or he had earned for taking the “wrong” stand on an inter-generational controversy.

The dialogue proposal also slights some people on the other end of the generational divide. Younger workers who become disabled will in many cases be thrown out on the streets with no possibility of pensions under the dialogue plan. Those who are under age 30 would have to have at least three years of monthly contributions into CSS to qualify for disability benefits, and six months worth of contributions would have to have been made within the year preceding the award of a disability pension. A seven-month bureaucratic delay in processing a disability pension application, or having finished high school before joining the work force, would thus forever bar benefits for the 20-year-old construction worker who falls from an unsafe scaffold and becomes a quadriplegic.

Pension benefits would go up, just slightly, starting in 2008. Here again, we have a basically unfunded future commitment that the Torrijos administration will lay into the laps of its successors.

FRENADESO is moving with its ragtag grass roots publicity campaigns to denounce the emerging deal, and though President Torrijos has recovered the public support that he lost earlier this year due to unpopular tax and social security reforms, the labor/left alliance is likely to have some success arousing public opposition to the dialogue results. However, the nurses who went on strike alongside FRENADESO are still in the dialogue, the teachers' unions that walked out are now divided about what to do and both strike funds and energy levels that existed in May and June are still largely depleted. Thus look for some protest marches and maybe some street blockages --- FRENADESO will be marching on November 24, for example --- but it's likely that the overwhelming majority of Panama's working people will have unflattering things to say about those who stayed in the dialogue (including moderate and PRD-aligned labor leaders) but still go about their business as usual.



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