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Andras Uthoff and Chile project Vamos in pension reform: «Where do the people who wrote this proposal live?

PhD in Economics from the University of California (Berkeley, United States), Andras uthoffaddressed this Monday the proposal of Chile Vamos for the pension reform that it will officially present tomorrow and in which it is proposed that the 6% extra contribution go entirely to individual capitalization.

“Where the people who wrote this proposal live. It seems that they do not live in this country,” said the economist from the University of Chile in the program of The Radio Showcase, “Al Pan Pan”.

Uthoff believes that Chile Vamos seeks to maintain the current system, which in his opinion is extreme in this matter and criticized the fact that the opposition coalition was not present at the panel of experts convened by the government on this issue.

government reform

Uthoff stressed that a model must be built or designed that is in tune with current reality, “We have an ideal (current) model if one has good profitability and good prices, but the vast majority – which is more than 80% – do not achieves,” said the economist.

When delving into the construction of a pension model, the former World Bank official insisted that it is not appropriate to adjust reality to a model, because that is going to take a long time, that the idea is to build one that can really account for the problems: pension gaps, low productivity, informality and all that has to be included in the system. I think this proposal does that.”

He clarified that it is a complex proposal (that of the Executive), but it reflects an attempt not to go to extremes and seeks to adjust to reality, as recommended by the OECD.

Criticism of Chile Vamos

The former member of the Bravo Commission commented that the Chile Vamos proposal -in his opinion- comes from the people who defend the interests of a business niche that was created with the arrival of the private sector in social security.

“I have been very categorical in this, since the private sector and the market got involved in the social security industry through the ISAPRES and the AFPs, this is a good business niche and the employment opportunities are very good for a lot of professionals. I think they designed this Chile Vamos system with that in mind,” he said in this regard.

In addition, he added that “they are not really defending the interests of the citizenry, they are defending the interests of a business niche,” Uthoff points out.

Sayings of the president of the AFP Association

Within the proposal of Chile Vamos, an increase in the Universal Guaranteed Pension (PGU) is indicated “which translates into relief for people with fewer resources, but it does not serve to implement solidarity within the system and with that it does not avoid the inequalities that exist in the labor market”.

To solve that, Uthoff maintained that “you need contributory solidarity and that is done in a second pillar in the OECD models, which is a pillar of social security and as a complement, mandatory and voluntary capitalization is used.”

The president of the AFP Association, Paulina Yazigiargued in March of this year that the Government’s project on pensions “is not sustainable” and that “it poses risks that are not being considered today”, since it is eliminating “the principles that people value most, which are ownership of their savings, inheritance and, most importantly, having a real choice of who manages the pension savings.

In addition, he commented that an expert present in the different commissions on government reform indicated that the biggest problem Chile has is that the generation that has the current lousy pensions has already withdrawn from the labor market, so they cannot save more in the current system “and the only way to improve pensions is through a sort of distribution”.

The economist clarified that the Government’s proposal on the solidarity contribution “is good”, since it is a contribution from the employer, who would contribute to social security in Chile and not for that of a particular worker, “I think it is not bad that that is what is identified as solidarity”.

In this regard, Uthoff assured that when carrying out the projection exercise of the project proposed by the Government to find out if it is effective or not, the system demonstrated that it is effective.

“About 70% will go to the worker and 30% goes to solidarity, consequently, it is false that the worker will not receive anything. In addition, it must be recognized that many workers spend part of their lives in the informal sector, that they may have bad periods and therefore this system is going to help them,” he added.

culture battle

When asked about the preference of people to keep their money in private capitalizations and to stay against the Government’s proposal, Andras Uthoff stressed the importance of informing the public.

“We have been in an individualistic meritocratic thing for more than 40 years, but it is not generating social peace. I say it clearly, we need social peace and that is what social security is for. Social security is for us to help each other and let’s not scratch each one with their own nails. That’s what needs to be changed in culture,” he concluded.

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Source: Elmostrador





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