In addition to emphasizing the need to reduce subsidies for energy and transportation to reduce the revenue deficit, the agreement with the IMF included spending by provincial and public companies and cautioned about the “intergenerational” distribution of spending. In particular, the fund’s technicians believe that the government spends too much on the pension system (that is, on pensions and other benefits for the elderly) and too little on the care of minorities.
Expenditure on the pension system, he points out, consumes 40% of the total expenditure, as opposed to only 5% for social assistance, and 54% among the under-14s are poor, only 14% among the elderly.
Page 46 of the Staff Report states that “Box 8” In addition to 40% of federal spending, social security costs account for 12% of provincial spending. Taken together, these expenditures are close to 10% of GDP, “more than the average of the OECD (Organization for Economic Co-operation and Development, a kind of study and statistics of rich countries) and more than double the average of other Latin American countries and rising.”, Specifies the IMF. That “high cost,” he says, “is due to the level of extensive coverage and generous facilities.” The proportion of retirees and pensioners over the population over the age of 65, he continues, continues to be inadequate contributions to the contributing system due to “relatively low retirement age, pension suspension that has added individuals”, compared to 109% in OECD countries, 140%. (Which now covers 30% of pension expenditure) and “replacement rate” (i.e. average percentage of pension in wages) 90%, in contrast to 58% in OECD and special “liberal” regime, including at provincial level.
High coverage, “liberal” rule and suspension
Even earlier, in section A of the Staff Report, on financial policies, after reviewing the subsidy issues, in the mentioned part of the expenditure (most importantly, in the opinion of the Minister of Funds and Economy, Martin Guzman), Technologists point out that pension spending has fluctuated between 8.5% and 9.5% of GDP since 2015, “reflecting a combination of high coverage, general rule and liberal special rule and non-contributory pension (provisional suspension)”.
In the medium and long term, he continues, pension spending will increase by 1.5 points more than GDP, and although the agreement does not consider a “parametric” reform of the system, “The authority is committed to conducting and publishing a study on the equity and sustainability of the system, which includes options that reform special regimes and encourage people to work for more years.” The government, they remember, must present this study before the end of the year. And they suggest avoiding “discretionary increases (in pension spending)” because “they will weaken financial goals and the stability of the system”.
In contrast, the document points out that in social assistance, which increased sharply during the epidemic, the government is “trying to rationalize and redirect migration and encourage the participation of women and low-skilled workers in the labor market.” The statement coincided with the government’s decision not to increase the number of social programs, which in recent weeks have led to blockades and increased mobilization by Picketro organizations towards the Ministry of Social Development.
“Broad and fragmented”
According to the IMF, an assessment of the “broad and fragmented social security program” is needed to improve the accuracy and efficiency of government assistance, a promise that the government has promised to fulfill this year as well. The technicians say the agreement with Argentina includes setting up a “floor” of assistance, focusing on good and precise management of programs such as AUH, food cards and progress plans for school scholarships.
“Special attention”, emphasizing the firm, must, of course, be directed towards “intergenerational equity of expenditure”. There, he noted that about 40% of the country’s federal spending is aimed at pensions and retirement, compared to only 5%, which goes to social assistance programs such as AUH, elementary cards and progressive scholarships. These differences, combined with the fund’s technicians, will partly explain the “very important” differences that “54% of children under the age of 14 live in poverty, compared to 14% of adults.” Therefore, they conclude Restructuring spending, even at the provincial level, where the lion’s share is spent on education and health, is important in ensuring that young people are equipped with skills and human capital to contribute to Argentina’s economic development.
In a way, the document suggests a redistribution of poverty, although neither the government nor the funds allow themselves to be called indecent.