The Government approved a new source of financing for Renta Dignidad. These are the profits generated by the Public Pension Manager. Until now, the benefit is paid with 30% of the resources received from the Direct Tax on Hydrocarbons (IDH) from prefectures, municipalities, the Indigenous Fund and the General Treasury of the Nation (TGN).
Pursuant to Supreme Decree 4716, approved on May 11, 2022, the profits generated by the Manager for administration activities will be used to meet obligations with the TGN and may be transferred to the Solidarity Fund and the Universal Income Fund. of old age
Financial analyst Jaime Dunn said that the Dignity Income had as its main support or mainstay for its success the high price of raw materials, it is fed with 30% of the IDH of prefectures, municipalities and the Indigenous Fund, but for several years these sectors are claiming low income. So, he considers that the Government, instead of tightening its belts, does not want the benefit to be reduced and is now looking for other alternatives.
The sources of income from the Renta Dignidad have been deteriorating, according to Dunn, and he says that “as it is a gift, it was successful.” The number of beneficiaries increased from 752,338 people in 2008 to 1,131,094 in 2021, according to data from the Vice Ministry of Pensions.
The analyst says that part of the failure of the system is that the resources for long-term financing are not guaranteed.
The Ministry of Economy and Public Finance was consulted about the scope of decree 4716 and how much the income of state companies was reduced, but it did not answer until the closing of this edition.
In the opinion of the pension expert, Alberto Bonadona, resources are being sought to pay the Dignity Income because it has become the way in which the Pension System can have 97% coverage.
He considers that the boom in raw materials fell and with it the profits of state companies, that is why now the Manager is used, which today is in charge of paying the Dignity Income and Funeral Expenses, work for which he receives a commission from part of the Pension Fund Administrators (AFP).
Bonadona believes that the payment to the rentiers will be sustainable if good contracts are achieved for lithium carbonate, which now exceeds US$70,000 a ton, and that “otherwise the situation is uncertain in the immediate future.”
The perception of the economist Mauricio Ríos García is more pessimistic. “The Government’s economic model does not work neither in the second great boom in raw materials, nor with the price of oil again at $140. Before, with capitalization, it was the profitability of the capitalized companies that financed the payment of the Bonosol, but today they intend to socialize the State’s losses with “solidarity contributions” from the private sector. This model was destined to fail, fundamentally because it spends too much”, he maintained.
Likewise, he questioned the subsidies on which deficit or bankrupt state companies live, which finance another part of the Dignity Income. “They are making fun of the population that does not see any economic recovery,” he added.
The partial transfer
The Public Pension Manager has until September 2022 to partially take charge of the Contributory and Semi-contributory Regimes (the pension funds managed by the AFPs), and fully until May 2023, according to Supreme Decree 4585 of September 2020. 2021. Then, from June of next year, the AFP Futuro and BBVA would stop operating.
The rule also established that until January 2022 “four months after the publication of this Supreme Decree (the Pension Authority) will issue the corresponding regulation for the transfer of the SIP between the Public Manager of Long-Term Social Security and the AFPs” .
Thus, the State will take charge of the US$ 20,896 million that are now administered by the pension funds of 2.4 million insured persons. The Public Manager has 200 employees.
