“Creating non-contributory pension systems and strengthening those already existing in the countries of the region can decisively contribute to the civilizational objective of eradicating poverty in old age, as well as significantly reducing inequalities and guaranteeing protected income levels at this stage of life. life,” says the book Non-contributory pension systems in Latin America and the Caribbean: advancing solidarity with sustainabilitylaunched by the Economic Commission for Latin America and the Caribbean (ECLAC) during a parallel event organized jointly with the German Cooperation at the Fourth Regional Seminar on Social Development held in Santiago, Chile.
According to the publication, non-contributory pension systems (SPNC) have considerably increased their coverage in Latin America and the Caribbean: they went from covering only 3.4% of the population aged 65 and over in 2000, that is, just over a million people, to cover 31% of this population in 2022, almost 20 million people. In 2022, only five countries in the region lacked these types of systems.
This impressive increase in coverage, according to the research, was achieved with a limited increase in public spending, which went from 0.15% of GDP in 2000 to 0.42% of GDP in 2021.
What explains the upward trend in the coverage of non-contributory pension systems? Firstly, the research says, “the expansion of the SPNC must be understood within the framework of strengthening social protection systems in the region”, aimed, to a large extent, at eradicating poverty and reducing enormous inequalities (including gender inequality) present in Latin America and the Caribbean. The deficits in contributory pension systems, the high labor informality that characterizes the region and the accelerated aging of the population have also had a decisive influence.
The book addresses seven case studies of countries with different levels of coverage and development in their NCPS: In Bolivia, Chile and Mexico there are non-contributory pension systems with a universal purpose; Argentina and Peru show medium-low coverage, while the Dominican Republic has a SPNC with low coverage. In the case of Honduras, the book addresses scenarios that would allow its creation.
Between 2000 and 2022, the participation of non-contributory pensioners in the total number of pensioners aged 65 and over in Latin America and the Caribbean went from 6.6% to 41.8%.
During the launch event, José Manuel Salazar-Xirinachs, Executive Secretary of ECLAC, explained that this is the first book published by this United Nations regional organization that is dedicated exclusively to the study of non-contributory pension systems in the region.
These systems, said the highest authority of ECLAC, constitute a basic instrument to achieve universal, comprehensive, sustainable and resilient social protection systems. “In fact, in the 21st century, non-contributory pension systems have become the cornerstone of social protection systems in Latin America and the Caribbean,” she stressed.
The increase in coverage of non-contributory pension systems contrasts, explains ECLAC, with the reality of contributory pension systems, which have significant deficits due to the high levels of informality and low contribution levels that the region presents. The book highlights that the low coverage of contributory systems in lower-income sectors shows the need to advance in comprehensive systems, with strengthened contributory and non-contributory systems.
The study highlights that the SPNC have become a priority strategy for the eradication of extreme poverty and poverty in old age. Between 2001 and 2022, poverty among people over 65 years of age was reduced by almost half, from 29% to 15%. In fact, there was more success in reducing poverty in old age than poverty in general, despite the aging process of the population. It also highlights its contribution to the reduction of gender inequalities through the inclusion of older women in pension systems, among other contributions.
A challenge to advance the eradication of poverty in old age is the financial sustainability of non-contributory pension systems, considering the accelerated aging of the region’s population. According to the research, Latin America and the Caribbean will age at the same levels as Europe, but in half the time.
If spending on the SPNC is increased annually between 0.07% and 0.1% of GDP in the next 10 years, the equivalent level of spending would be reached to eradicate poverty in old age in 2035, even in a coverage scenario and increasing value, assures ECLAC, which imposes a technical, institutional, financial and political economy challenge.
In this sense, José Manuel Salazar-Xirinachs indicated that “the strengthening of non-contributory pension systems and their better coordination with contributory systems can help improve public confidence in institutions, the Welfare State and social pacts”, being the basis of a new social-fiscal pact that allows progress in solidarity with sustainability.
The publication, edited by Alberto Arenas de Mesa, Director of the Social Development Division of ECLAC, and Claudia Robles, Social Affairs Officer in the same Division, was prepared within the framework of the ECLAC-BMZ/giz Project “Transformative reactivation: “Overcoming the consequences of the COVID-19 pandemic in Latin America and the Caribbean.”
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