The Government of Luis Arce finalized the takeover of the Bolivian pension system, thus destroying the guarantee for property rights.
Thousands of affiliates are expressing their discontent throughout the country due to the deliberate assault on their personal contributions.
Rights are deteriorating more and more in Bolivia.
Luis Arce’s regime consummated the takeover of the individual capitalization system in the country.
The State, through the “Gestora Pública de la Seguridad Social de Largo Plazo,” assumed total and definitive control over all private Pension Fund Administrators (AFP).
All AFPs closed their doors and stopped operating immediately as of last Friday.
The Government obtained a new “cash” to have fresh resources to solve the fiscal deficit without the need to issue money or place new sovereign bonds.
This is because the social security contributions are no longer destined to the personal savings of the affiliates but to maintain the current pensions and retirement benefits.
Consequently, this leaves a surplus of resources for the State.
The regime’s official propaganda claims that the decision was taken to “protect Bolivians’ pensions in the long term” and that the amounts received by savers will be revitalized since they will no longer have to pay the commissions established by the AFPs.
But none of this corresponds to reality.
The Government decided to impound due to the peso crisis and the exchange run unleashed throughout the country.
With a primary fiscal deficit that still represents 5.6% of GDP (and more than 7% with interest on debt), the Government used monetary issuance and indebtedness to finance it.
At the same time, the Central Bank maintained a fixed exchange rate regime financed with international reserves to discipline inflation expectations and favor the demand for pesos, neutralizing a substantial part of the effect of unbacked issuance.
But when the reserves were about to collapse (and in fact, the Central Bank stopped reporting statistics in this regard), the exchange rate parity was threatened, and with it, the possibility of continuing to finance a substantial part of the deficit with issuance.
It was decided to nationalize the pension system and have many genuine funds available to continue the fiscal waste.
Secondly, it should be taken into account that the PFAs only charged up to 1.31% in commissions, so the revaluation announced by the authorities is not significant.
On the other hand, it is significant that members lose their savings and will be forced to accept the parameters set by the state pay-as-you-go system, regardless of how much they contributed.
The decision of the Socialist Government provoked a deep rejection by thousands of people who feel cheated and who, from one day to the next, see their efforts completely eroded after years of contributions for their retirement.
The Bolivian economy will also have to face a strong retraction of domestic credit in local currency. As in Chile and other countries, the PFAs played an important link between savings and credit in pesos, allowing the development of a nascent capital market since the mid-1990s.
Without this system, the most important credit channel in the country’s history will be lost.
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