Argentina: ‘Divisive' Pension System Reform Enacted

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By David Haskel

Argentina implemented a controversial pension reform Dec. 28 that a week earlier triggered mass nationwide protests, including violent clashes with the police outside the Congress building where lawmakers endorsed the reform following a 17-hour debate.

The Retirement Mobility Index (Law No. 27426) implemented changes in the way pensions and social welfare benefits are calculated. While the government insists that over time the changes will be beneficial for pensioners, the move prompted massive protests by angry, distrustful crowds that left dozens of injured—mostly policemen pelted with stones—and arrested.

The new legislation, approved by Congress in a 127-117 vote a month after it cleared the Senate, introduced changes to the adjustment formula for retirement plans, using a mixed system that tracks both inflation and a wage index produced by the Labor Ministry on a 70-30 percent basis.

Ombudsman Calls Changes ‘Regressive'

Much of the debate revolved around complaints that pensioners would suffer a short-term loss in their wages due to the changes in calculation, and to assuage protests, President Mauricio Macri's two-year-old administration added an eleventh-hour bonus of between 375 pesos and 700 pesos ($20-$37) for pensioners.

The law also gives workers, who by law must retire at 65, the option to continue to work for five more years.

Wage and pension adjustment formulas have traditionally been a major bone of contention in a country long used to double-digit inflation.

Calling the current changes regressive, Guido Lorenzino, ombudsman for the Buenos Aires Province, by far the largest and most populated jurisdiction in Argentina, challenged the law both in local courts and before the Inter-American Human Rights Commission.

The reform will reduce pension benefits, which goes against principles established in Argentina's Constitution and international treaties that the country has endorsed, according to Lorenzino.

President's Popularity Nosedives

While passage of the law was a major victory for Macri and his plan to reduce the fiscal deficit in Latin America's second largest economy, the president paid a high political price, giving critics extra ammunition to sustain their characterization of the president, a wealthy businessman, as a market-loving aristocrat with little regard for working people's needs.

According to an opinion poll released Dec. 28 by Ricardo Rouvier & Asociados, the conflict surrounding the reform cut Macri's approval rating from 54.1 percent to 48.8 percent and raised his disapproval rating from 42.7 percent to 47.9 percent. Nearly two out of every three respondents blamed the political opposition and unions for the street violence, however, and less than a third the government and the police.

To contact the reporter on this story: David Haskel in Buenos Aires at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

Text of Law No. 27426 is available in Spanish here.

For more information on Argentine HR law and regulation, see the Argentina primer.

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