Martin Torrijos did not save insurance, he destroyed the model of solidarity

Unfortunately, in our country, political campaigns, instead of sticking to reality, so that the voter can decide based on real facts, are designed to distort the figures of the candidates, giving them merits and qualities that they lack. An example of this is the way in which the former president’s political propaganda was developed Martin Erasto Torrijos Espino.

This campaign is based on the idea that Former president Torrijos Espino would save CSS in 2005, as he himself stated in an interview at the beginning of May where, speaking about social security, he pointed out that “we will have to save on it again”. Nothing could be further from the truth for anyone who has read Law 51 of December 27, 2005, which reformed the pension system.

This law, which separated into two parts CSS pension models, meant that since 2008, no new contributors can be registered in the solidarity subsystem, and the resources of this subsystem are allocated from the new mixed system that introduces individual accounts. This led to the breaking of the chain of solidarity that characterizes the solidarity model, which in turn led to the system running out of funds sooner or later. The cost of this policy was reflected in the huge transition cost, which according to the calculations at the time amounted to 145% of GDP, close to 0.25 871.9 million B/B at current prices. Nothing in the Law approves of Torrijos Espino ensured the financing of the said cost.

It should be noted that the statement that the model was on the verge of bankruptcy is false. First of all, given that the ratio of active contributors to pensioners in 2007 was 5.6. If this is reduced to around 1.5, it is due to the fact that Law 51 has made it impossible to enroll in the solidarity system for new contributors, especially those in economic upswing. Second, because the projections used an exchange rate misrepresentation of GDP. This can be seen in the document from OIT entitled Actuarial and financial assessment of the Social Security Fund (2003), qthis had a great influence on the design of Act 51, which assumed a rate of GDP growth of barely 3.5% per year, a figure that not only contradicts the rates recorded during the economic boom, but also the long-term growth rate of the Panamanian economy (close to 5.0% per year).

The promise to young people that the mixed subsystem with its component of individual accounts would open a safe path to decent pensions was also an absolute lie. Rather, in the document of the International Monetary Fund dated November 25, 2015 under the title “Panama: Possibilities of Pension Reform to Improve Sustainability and Equity”, it is clear that those who will be retired in the mixed system from 2050 and 2060 will receive pensions of only slightly more than 20.0% of their pre-retirement income. This is a very low replacement rate, which means miserable pensions.

It is no less true that Act 51 does little to prevent tax evasion social insurance by employers. Although this Article 230 declares it a criminal offense to deny quotas that are not refers to CSSArticle 231 practically forgives this offense if the employer and the institute agree on payment. If the former president thinks that this is how social welfare is saved, he better not do it.