Pension System Reforms in Argentina
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View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Open Digital Archive at Oslo and Akershus University College Silvia I. Reyna Rickert ________________________________ Pension System Reforms in Argentina Why the U-Turn? Oslo and Akershus University College of Applied Sciences, Faculty of Social Sciences Abstract The 2008 Argentine pension reform represented a new change of paradigm in the country’s pension policy. It encompassed the elimination of the fully funded, defined contribution (DC), private tier of the so-called Integrated Retirement and Pensions System (SIJP) – a two- tiered arrangement implemented in 1994 and inspired by the World Bank’s recommendations contained in the work Averting the Old Age Crisis (World Bank 1994). And the shift back to a publicly managed, single-tiered pension system provided in a pay-as-you-go defined benefit (PAYG-DB) basis: the Argentine Integrated Retirement System (SIPA). In order to finally explain these events, in this thesis I present a detailed account of the events that took place in 2008, divided into six chapters. The first chapter introduces the topic, its background and the research question: Why did Argentina change its pension system back to a one-tiered, pay as you go DB system in 2008? The second explains the appropriateness of the research strategy and the design chosen for this study. In the third chapter, the reader is introduced to the events under analysis and the possible explanations or “suspects” to be explored upon. The fourth chapter provides the framework and settings to understand Argentina’s policy making process. Chapter five brings in with detail the sequence of decisions that resulted in the shift back to a pay-as-you-go DB public pension design in Argentina, connecting them with that group of “suspects” (11 hypotheses) that may explain why it happened. Finally, chapter six rounds up and analyses the findings and closes with the final conclusions and recommendation for further investigation. To briefly summarize some of the findings that made possible this shift back to pay-as-you- go: (a) the effect that changes in public representations of social problems have over the sustainability of their associated social arrangements. (b) The transformations in the private- public mix that have been happening in Argentine society since 2003, and the development of a different understanding of role of the State. (c) The multidimensional feature of social policy – and in particular pension policy – and the way the various dimensions are prioritized and discussed upon during the policy formulation process, leading to a certain “consensual” understanding of what the problem is and how it should be solved. (d) The impact that certain aspects of political cultures – such as the presence of machine politics or ideology – may have over policy and the process of policy change, influencing arguments and final outcomes. (e) The shaping role of institutions and electoral results in the whole policy making process. (f) The new map of international relationships, in particular with the IMF and the World 2 Bank. (g) And how local and international contexts create certain settings that can affect the views of all actors involved. Key words: Argentina, pension policy, reform, pay-as-you-go, fully funded, World Bank, Argentine Integrated Retirement System (SIPA), Integrated Retirement and Pensions System (SIJP), defined contributions, defined benefits, policy process. Oslo and Akershus University College Oslo 2012 3 Table of Contents Acknowledgments .................................................................................................................... 5 1 Introduction ........................................................................................................................... 6 1.1 Background ....................................................................................................................6 1.2 Research Focus and Questions .......................................................................................9 2 Methodology .......................................................................................................................... 9 2.1 Design ............................................................................................................................9 2.2 Data Sources and Data Collection ...............................................................................10 2.3 Limitations and Assumptions ......................................................................................12 3 What Happened? Searching for possible explanations ................................................... 13 3.1 Pension Reforms and Risks .........................................................................................13 3.2 Outline of the Events ...................................................................................................16 3.3 Why Did The Shift Back Take Place? .........................................................................18 3.3.1 Factors weakening those opposing the U-turn .....................................................18 3.3.2 Factors strengthening those advocating for the U-turn ........................................22 4 A Closer Look into Argentina’s Policy Making Process ................................................. 25 4.1 The Argentine Legislative Process ..............................................................................25 4.2 Political Institutions and Parties...................................................................................26 5 The Sequence of Decisions that Resulted in the U-Turn ................................................. 31 5.1 The Proposal and the Constitutional Arguments .........................................................31 5.2 House of Representatives .............................................................................................34 5.3 Senate ...........................................................................................................................40 5.4 Executive’s Promulgation and Publication in the Official Gazette .............................48 5.5 In The Meantime in The Outside .................................................................................49 6 Discussion, Conclusions and Recommendations .............................................................. 52 6.1 Discussion: Analyzing the Clues .................................................................................52 6.2 Conclusions and Recommendations ............................................................................61 Sources .................................................................................................................................... 64 Appendices .............................................................................................................................. 75 4 Acknowledgments This thesis represents the end of an exciting, but not less challenging, journey that started three years ago when I was invited to come to Oslo for a short stay of around three months. That stay has now become two and a half years. I look behind. I see my personal and academic development and how much I have changed and grown as a person during this time, and I smile. The accomplishments are simply invaluable. The Master Programme in International Social Welfare and Health Policy has given me the opportunity to experience and understand the world from a different perspective, and to meet people who have taught me a different way. For this I am grateful. I would like to start by thanking Oslo and Akershus University College of Applied Sciences and those who made it possible for me to come to Oslo, Ivar Lødemel, Stuart Arthur Deakin and Anne M. Møgster. And thanks to Einar Øverbye, my supervisor, for his intellectual, academic and professional guidance, and his support and motivation during this path. With all my heart I thank my parents, Ernesto I. Reyna Morgan and Silvia I. Rickert, and all my family for their love and constant support. This thesis is dedicated to you! And to my friends in Argentina, in Norway and around the world, thank you for being there for me in the ways you knew the best. This experience would not have been so fruitful if it had not been for each and every one of you. To all of you I would like to offer these lines of a song I like really much and that so well express my inspiration when executing this paper: Pero no cambia mi amor (But my love doesn't change) Por más lejos que me encuentre (no matter how far away I find myself) Ni el recuerdo ni el dolor (neither the memory nor the pain) De mi pueblo y de mi gente (of my country and my people) Lo que cambió ayer (What changed yesterday) Tendrá que cambiar mañana (will have to change tomorrow) Así como cambio yo (Just as I change) En esta tierra lejana (in this foreign land) Cambia, todo cambia (Changes, everything changes ) Artist: Mercedes Sosa Song: Todo cambia (Everything changes) Oslo, September 15, 2012 Silvia I. Reyna Rickert 5 1 Introduction 1.1 Background The discussion around old age care often refers to the economic sustainability of the pension system that provides it. However, endurance is not the only important concern. Various authors are also worried about the existence of persistent old age poverty together with already high levels of pension expenditure that are further increasing. Simultaneously, governments have to deal with the pressures of economic