Pablo Mieres, Uruguay’s Labor and Social Security Minister, issued a warning on Wednesday.
He said the country’s social security system could collapse if a referendum goes through. The PIT-CNT labor union is behind this push.
They want to change the system by lowering the retirement age from 65 to 60. This move would reverse a recent decision by President Luis Lacalle Pou.
The referendum is planned for October. It proposes matching minimum pensions with the minimum wage.
It also wants to end the private pension system. This would be a big shift from the current mixed approach.
Mieres explained the dangers. He said the referendum could make the deficit shoot up to 8% of GDP.
This would put a heavy financial strain on the country. Workers would feel the pinch in their wallets.
Inflation could rise. Jobs might decrease, and buying power could drop. Contributions from workers would need to jump to 30%.
Mieres also spoke against ending private pension funds (AFAPs). He believes this move would harm Uruguayans. It would take away savings and ruin capital built over years.
This capital is vital for attracting investment and keeping borrowing costs low.
The PIT-CNT, with some support from the leftist Broad Front (FA), denies they would confiscate funds. They promise to pay out private pensions.
To get the referendum going, they need 25% of voters to sign on.
President Lacalle Pou stands by the reform. He says it’s about solidarity. He argues that it will actually boost pensions for those earning the least.
This referendum matters because it could change financial futures for many. It connects to broader debates on pension reforms and economic stability.