On Social Security the IMF Has Little to Tell Us and a Lot to Be Told
This expert on social security explains the
details of Nicaragua’s Social Security system
and the reform that is urgently needed
to bring the system in line with reality.
Manuel Israel Ruiz Arias
Everything that has to do with the subject of social security is highly sensitive for any society because it’s about life; it’s of interest to all human beings from when they’re in the womb until they die. Faced with the many insecurities life presents us, social security offers some certainties that improve our quality of life. Because of this no Nicaraguan can think the issue doesn’t affect them. I’ve been passionate about this subject ever since 1974 when I started working in social security and since then I ‘hitched’ myself to this problem and can say social security became something of a second wife to me from that day on.
Before it came into being in the form it now has on every State’s agenda, social security appeared in the sacred books of all major religions. Protecting “orphans and widows,” as the Bible teaches us, and by implication supporting all those who are destitute, is a sign of the importance of this social commitment. These days all modern countries have established the right to social security in their Constitution, Nicaragua included. Various articles in our Constitution refer to social security issues, which we shouldn’t limit solely to the benefits or pensions received by those covered, as sometimes happens in Nicaragua. This issue should be approached in a more integral way. Education, not just reading and writing, is social security. Employment, a decent job, is social security. A house is social security. Health is social security. Recreation is social security too. And, naturally, so are all social security schemes.
Social Security: Jean Jacques Rousseau observed two sorts of inequalities in the world: natural ones since some are born healthy and others sick, some with disabilities and others without problems; and historical ones, because very few have a lot and a lot have very little. Social security systems the world over try to address both inequalities, although those born naturally healthy and those who historically have a lot are accustomed to considering social security as something trivial.
One way to address inequalities
In 1819 Simón Bolívar stated: “The most perfect system of government is that which produces the greatest amount of happiness possible, the greatest amount of political stability and the greatest amount of social security.” Bolívar was the first to introduce the concept of social security. In 1883, given the belligerence of many workers’ struggles in Europe, the German ruler Otto Von Bismarck was the first statesman forced to implement social security in his country. I say forced because he did it stating that “it’s cheaper for me to invest in social security than to face the cost of a revolution.” He had probably reflected on the high costs of the French Revolution the previous century.
What we know today as social security was born on that date at the end of the 19th century. Nicaragua legally established its social security system in 1955 and 1956, inspired by the German laws of 1883, 1884 and 1889, copying the German model and something of the English model.
Social Security in Nicaragua:The law creating the Nicaraguan Social Security Institute (INSS) dates from 1955, during the Somoza regime; it was regulated in 1956 and started operating on February 10, 1957. Between 1957 and 1979, social security was geographically very restricted and functionally limited, based essentially on labor relations. It existed in Managua; San Rafael del Sur and Tipitapa: in León, only in the city; and in Chinandega only in the urban area, the municipalities of Chichigalpa, around the San Antonio sugar refinery, and Puerto Corinto. It also existed in the mining triangle municipalities of Siuna, Bonanza and Rosita. Nowhere else. Due to its limited form, barely 120,000 people were covered (only 10% of them women) and the insurance only covered 9,000 pensions. After 25 years the system was characterized by zero growth.
From Somocismo to Sandinismo
During the revolutionary government of the 1980s, we were lucky to have Reinaldo Antonio Téfel, a director with a profound vision and social sensibility, at the head of Social Security. The first thing we did to transform the system was to humanize it, turning the officials into true public servants. When he took up his position on July 23, 1979, Téfel said that “under somocismo they would look for the slightest detail to withhold benefits. Now we must look for the slightest detail to grant them.” We spread out over the whole country: first the Pacific Coast, then the North… In five years we had covered the whole country. We also increased services integrally. In 1982 Social Security was merged with Social Welfare and what was called the INSSBI [Institute of Social Security and Welfare] was born, inspired in the Universal Declaration of Human Rights and the principles of the Pan-American Health Organization, which understand social security not just as pensions but as an integral service for improving people’s quality of life.
As a result of this vision, we developed many social programs from 1982 on, all of them harshly attacked by those who opposed the revolution. There were many different sorts of programs: subsidized outings for workers who could go relax at the Miramar and El Velero beaches and at the Apoyo volcanic lake; children’s diners; university grants for blind people; training prostitutes in optometry so they could do eye tests on subsistence farmers in rural areas nationwide and provide subsidized glasses to those who needed them, thus extending social security to the countryside and benefiting prostitutes with an alternative job; Child Development Centers to support working mothers; leisure centers for the elderly…
And from Sandinismo I have to confess with great sadness that many of these programs were roled back after 1990. During Violeta Chamorro’s government, Simeón Rizo administered INSS, causing great destruction. But in my view it wasn’t the worst administration; the worst was that of Martín Aguado, during Alemán’s government.
During Rizo’s administration they tried to privatize the social security system. Although this attempt failed, they did manage to privatize the system’s health care with the creation of social security medical companies. Rizo designed, organized and financed them and today there are 52 throughout the country covering some 500,000 workers. I consider these companies to be our system’s most perverse aspect.
There was significant deterioration during the Chamorro government. Social security abandoned the countryside, leaving farm workers in the lurch; the 75,000 workers we affiliated in the 1980’s fell to 3,000, a low level that persists even now. And the campaign we had begun in April 1979 to get domestic workers affiliated to social security also fell apart starting in 1990, although during the Bolaños government the initiative was re-launched and they managed to insure some 5,000.
Several decrees were also revised during the Chamorro govern¬ment: article 44, which provided Minimum Life Pensions for people with disabilities as long as they had paid at least a third of the required payments; article 56, which dealt with old age pensions; and article 114, which had benefited people who requested their pension before 1982. Coverage of the economically active population was also cut back during those years so that by 2006 it was back to what we had achieved 20 years earlier, in 1986. Furthermore, social programs were dropped, child development centers were closed down and El Velero fell into decay… There was a clear rollback of social security, a reduction in social benefits and cancellation of social programs. Social Security was gutted.
Social changes have forced changes in social security systems throughout the world. All social security systems in Europe have been drastically revised. Some countries in Latin America—Chile, El Salvador, Mexico and the Dominican Republic—have completely privatized their systems, while others including Colombia and Peru have parallel private and public system. Still others—Costa Rica, Argentina, Uruguay and Panama—have a reformed public system in which there is private participation.
Nicaragua is among some 20 Latin American countries that maintain a public system where the private sector participates only marginally and the State maintains control, due to the conviction that this model most favors the people. Nicaragua shares this model with other countries such as Brazil, Cuba, Guatemala, Honduras, Haiti, Venezuela (even before Chávez) and Bolivia, where it had been privatized but was returned to public service after Evo Morales took office as President.
Since the new FSLN government Although traces of the previous rollback remain, progress has been made, albeit slowly, in two areas since 2007, when Daniel Ortega became President in Nicaragua: increasing coverage and trying to rescue lost rights. In this sense I think we can talk about a continuous line through the Alemán, Bolaños and Ortega governments, because coverage is still limited and while rights, especially those relating to health, have been rescued and pensions adjusted, the rights of some widows, old age pensioners and war victims continue to be violated.
Currently three social security sub-systems function in Nicaragua. One is the IPSM (Military Social Prevision Institute), created in the 1990s and designed exclusively for members of the armed forces. It isn’t a parallel system; there are similar institutions all over Latin America. Another sub-system is the ISSDHU (Institute of Social Security and Human Development) created de facto in 1979 and legalized in the 1990s to cover members of the Government Ministry (police, firefighters, prison officers, state security and the migration dept.). The sub-system we know best of all is the Nicaraguan Social Security Institute (back to its old acronym INSS) to which the rest of us in society belong.
The law creating the INSS envisaged three types of coverage. Now there are five. We started with health insurance (for illness and maternity); a disability, death and old age pension insurance; and work-related risk insurance. Later the social services program and war victims program were added. Let’s look at each of the five programs the INSS currently administers.
Sickness and maternity benefits: Of the 530,000 current contributors to the INSS, some 500,000 are covered by its scheme, which also covers their wives and children. Workers pay 2.25% of their salary and the employer pays 6%. In return, after only two months of contributions, they have the right to medical care and surgical operations, and they are entitled to time off if they have some problem working because of illness, for which they receive 60% of their salary for up to a year.
Here the main problem is the social security medical companies, known as EMPs, that Rizo’s administration created in 1993, providing medical atention only to insured people, thus violating the Constitution and relevant legislation. Given that they are private companies, created exclusively as profit-making enterprises whose greatest profit is in inverse proportion to the rights of the insured, they contain elements one could consider perverse. The spirit of the public servant is absent, making those insured feel they are asking for favors, not demanding a right. Among other indignities I observe are delays by medical specialists—naturally, they are the most expensive—in granting an appointment to those insured, the few medicines offered to the insured and doctors’ reluctance to issue sick leave to those with problems.
During Bolaños’ government, only some illnesses qualified for sick leave. These days all illnesses are included, without exception. As of April 2008, INSS pays the benefits, not the companies, now called Service Provider Institutions (IPS).
Other aspects of these institutions should also be revised. For example, if an IPS performs a wrongful medical practice, INSS fines them and the company pays, but the money isn’t used to compensate the insured person affected; it goes to the coffers of INSS.
According to policies implemented since these private medical companies were created, INSS currently transfers 330 córdobas (around US$15) a month to them for each person insured. This represents around US$90 million a year, which is rather a lot of money for a country like ours.
Maternity insurance has improved notably over the years, considering that pregnancy, birth and breastfeeding deserve maximum care. If the woman giving birth is single, without a partner, the law establishes that INSS gives her 60% of her best salary and her employer is obliged to subsidize the other 40%. If she gives birth to twins or triplets, her children have the right to the milk they need for two years, not just six months as when it’s a single child. In both cases, social security will cover this woman’s infants from birth till they’re twelve years old. At that age, they pass from the world of social security to the world of the Ministry of Health.
I always say of our Social Security Law that “you can smell the beans and tortilla” because the social sensibility and determination to provide solutions according to our socio-cultural reality is obvious. For example, in 1982 we legislated that if a man had been separated from his wife for five years and had another partner, this other partner had the right to all the same benefits as his wife. It’s an idiosyncrasy of our legislation. In other legislations this second partner isn’t recognized as a beneficiary of the man’s social security.
Disability, death and old age insurance: Currently INSS provides pensions for disability, old age, widows, orphans and work-related risks to approximately 86,000 people. These pensions cover 13 months and INSS pays out around US$143 million for them every year. Disability, death and old age benefits are financed by a 4% contribution from the worker’s income and 11% from the employer, based on that income.
Any illness can bring disability and/or death. INSS guarantees a disability and death pension to those who have contributed for a minimum of 150 weeks during a 312-week period prior to the date of disability, as long as they’re under 60 years old, with the size of the pension depending on the number of years they’ve contributed. The widow receives 50% of the disability or old-age pension her husband would have received and his child or children 25%, shared out proportionally in the case of several offspring. If the widow is over 45 years old at the moment of the man’s death, she receives the pension for the rest of her life and the offspring until age 15, or until 21 if in school, because the law was designed to encourage schooling, unless the child or children are disabled, in which case the pension is lifelong. If the widow dies as well, the pension to the children increases from 25% to 50. Among the revisions that must necessarily be made to Social Security, a pending discussion is whether a widower should receive a pension when his partner dies similar to what a widow receives.
The smallest old age pension the INSS currently awards to eligible workers is C$ 2,400 (around US$110) a month and the biggest is US$1,500.
Pensions are always tied to the salary on which the worker’s contributions were based. Because of this it’s very important to contribute correctly: based on the entire salary. Doing this is an investment for the future; it’s like a heritage that guarantees that social security’s “protecting hand” will be more generous when old age arrives. To improve the pension of the person insured, pensions in our system always take into account salary increases during the last three years to calculate the death or disability pension and during the last five years for the old age pension. But it does sometimes happen that workers ask their employer to pay their contributions based on a lower salary than the one they receive because of short-term considerations. They prefer the short-term benefit of the salary to the long-term one of the future pension. This is called relative evasion.
There are also employers who don’t register their workers, either for their own reasons or because the workers ask them not to, so they can receive their whole salary with no deductions. This is called absolute evasion. This short-term view can be fatal in the medium and long run because the pension they receive on retiring is based on the contributions made when they were working.
There are ten types of old-age pensions in INSS, of which I shall refer to only two. The ordinary pension is the one people get when they start contributing at under 45 years old. After 14.5 years of contributions they can draw this type of pension upon reaching 60; it goes on increasing according to the number of weeks contributed. The more weeks’ contributions, the larger the pension is.
The basic pension is the one people get when they start contributing at over 45 years old. For these pensions it’s necessary to contribute for five years and retirement age is 60 or older. Their minimum pension is equivalent to 43% of their reported salary, with the failsafe that the amount cannot be less than 100% of the salary of a worker in the manufacturing industry. This procedure deserves to be revised because we are currently seeing that many people with decision-making power, especially politicians, are “taking advantage” of this basic pension and placing friends, relatives or people loyal to them in highly paid posts as a political favor, so they can retire after five years and get the maximum pension of US$1,500 a month.
Work-related risk insurance. Work-related risk insurance has existed since 1959. It seeks to protect workers from the moment they set off to work until they come home at night. The employer pays 1.5% to protect their workers from such risks. Depending on the accident, it covers the worker for up to 18 months off work. If the worker ends up disabled he/she also receives a pension and on reaching old age has the right to two pensions: for disability and for old age.
The work accident can be one of three sorts and must be reported in order for the worker to claim benefits. If it’s a “white” accident, an unreported one with no apparent symptoms, INSS won’t consider it a work-related illness or accident even though health problems appear later on. The same is true if it’s a non-serious and unreported “red” accident (because there’s blood). If the accident is “black,” which means mortal, it’s almost always reported in practice and the family of the insured person, including close family members beyond the wife and children, are covered by the insurance.
All 530,000 current INSS members are protected if they have an accident at work. In Nicaragua an estimated 25,000 to 26,000 people suffer a work-related accident annually, some with mortal consequences or resulting in partial or total disability. This means that there are three or four workplace accidents every two hours on average, a worrying figure that neither economists nor politicians ever take into account. Studies also reveal that most accidents happen to men and that Mondays and Tuesdays are the days an accident is most likely to occur, probably due to the weekend’s alcohol abuse.
Social services program. The Chamorro government began abandoning all these programs as early as April 1990. The only one that remains today is a small old people’s center and some other services. I had the good fortune in the 1980s to manage many care centers for pensioners and can attest that the aim was to raise their standard of living. We weren’t content merely to give them a pension. When we revise the current social security system, getting these social services back again is a debt we must pay.
War victims program. This program currently covers 22,000 war victims to whom INSS pays out an annual US$16 million in pensions. It has been an ongoing target of politically inspired attacks from certain social sectors, the result of discord sown during Rizo’s administration. It was irresponsibly declared that pensions paid to war victims would damage the regular beneficiaries, that care of war victims caused deficient medical care for pensioners and meant that beneficiaries’ pensions wouldn’t be readjusted. Even now you still hear these same complaints in the queues of people waiting to draw their pensions.
It’s all a fallacy. The State contributes no money to pensions given to war victims. The US$16 million for their care comes from a law we passed in 1984 that stipulates that employers, both public and private, must pay INSS 1.5% to finance war victims. Under this scheme INSS raises something over C$35 million a month and pays out C$32 million a month to cover their pensions. The social surplus—some C$2 million after deducting administrative costs—is put towards medical care for 46,000 old-age pensioners out of a total of 86,000 pensioned for disability, death and old age. In other words, war victims don’t reduce INSS finances, which according to official figures currently stand at between US$50 and 75 million, by so much as a cent. Rather than being a burden on social security, the reverse is true: they are collaborating in solidarity with the old age pensioners.
Reforms are neededINSS has had an annual surplus over the last 20 years. It’s financially healthy, although with some strain on contributions for work-related risk insurance. But the changes our society has undergone demand reform and if it isn’t done soon, INSS will no longer be healthy in a few years. .
I’ve made a diagnosis of 24 “ailments” in our system in need of the “medication” of reform. If I had to say which I consider the most serious, I would say that the first relates to the rule of law.
Legal tidying up. We currently have 27 laws, 50 decrees, 12 agreements and 400 resolutions pertaining to Social Security. This excess legislation is confusing and people either don’t know the laws or have never even heard them mentioned. So much dispersion—I call it “legal diaspora”—opens the way to discretion by authorities and makes it very hard for workers to know their rights in order to assert them. I think the first thing the revision needs to do is to bring together this diaspora, merging all the laws under one legal framework in line with the Constitution, getting rid of so much dispersion so that people have one unique reference point around which to exercise their rights. Thus the first reform should be the judicial tidying up. I believe the will currently exists to bring order to the law.
Extending coverage. The second serious problem that a revision must take into account is coverage. To understand how unjust our system is after 53 years of operation, we can refer to 2009 data in “Nicaragua in Figures,” published by the Central Bank. According to this information we are a country of unemployed. The working-age population consists of 4,408,000 people but only 2,283,000 of them figure in the economically active population (PEA). And of those who are working, also according to official figures, only 530,000 are affiliated to social security, barely 24% of the active work force. That means that 76% of the work force is vulnerable: 1,753,000 people facing insecurity. Of those covered, 56% are men, a proportion that will change in favor of women in about five years.
In Costa Rica, 76% of the workforce is already covered by social security and in Panama it’s 70%. In a recent conversation about Nicaragua’s low coverage with Carmelo Mesa-Lago, a lecturer at the University of Pittsburgh and a World Bank and European Union consultant who is probably the greatest world expert in social security issues, he told me that relatively soon, according to the trends observed in Nicaragua, benefits will only cover 19% of the working population.
The reform should broaden coverage, answering an enormous accumulated social debt. Our system is designed for the working class, but that’s not enough. We have to find a way to extend coverage to rural workers, domestic workers, university and high school students, market women, those in prison, informal street venders... These people are the lion’s share of the vulnerable 76% today.
Employers say it’s very complicated to try to sign up rural workers, many of whom are seasonal migrants. They also say it’s not easy to affiliate domestic workers. Well then, that’s another one of the ailments. The system will have to be changed to make it easier to join.
Readjust pensions and close evasion gaps. The reform must readjust pensions based on the salary increase of those insured to bring it closer to reality, even knowing that pensions in Nicaragua are miserable because the salaries they’re tied to are usually miserable too. Both the number of pensions and the amount of absolute and relative evasion need to be reviewed to avoid employers not affiliating their workers.
Guarantee investment transparency and control. On the understanding that INSS has the legal right and responsibility to dedicate its technical reserves to social investment, the reform should guarantee the transparency of these investments and their institutionality to avoid any discretional use of these funds. These investments should be effectively controlled.
Work-related risk insurance. We also believe it’s necessary to revise the contribution rate on the professional-risks insurance, fixed at 1.5% since 1959. It should rise to 2.5% as of next year.
A social security Ombudsperson and depoliticized INSS hiring. We also support the creation of a Social Security Ombudsperson’s Office, like the one existing in other countries to defend the interests of the insured. We further believe that top INSS authorities should be appointed not by the President of the Republic but by the National Assembly from candidates proposed by workers, pensioners and employees. And INSS workers, currently subjected to labor insecurity and appointed according to political criteria, should be hired according to professional merit and guaranteed stability.
Compact the range of old-age pensions. The reform must reduce the wide range of old-age pensions: of the ten existing types only three should remain. It’s also necessary to increase the age for calculating retirement pensions, raising it from 55 to 58 for women and from 60 to 63 for men.
Roll back the privatization of health services. The reform should invert the proportion of health services for sickness and maternity: if today 80% are private services and 20% public, 80% should be public and 20% private.
Have an external supervisory body and cut INSS administrative costs. It’s important to have an external body to control administration of the INSS, with the creation of a social security supervisory body which ought to put INSS’ public debt in order. INSS’ administrative costs, currently 7-8% of its budget, should be cut to 5-6% relative to the previous year’s income. The non-contributory pension system should be incorporated into the National Budget.
Attempts to privatizeAs of 1990, when the government began signing Letters of Intent with the International Monetary Fund (IMF), neoliberal government officials started saying it was necessary to revise “the pension system,” using Chile’s privatization of its system in 1981 as a reference. In Nicaragua there have been two attempts at privatizing social security.
Nicaragua’s “pension system”
From 1957 till now our system has been a public one. Systems privatized by structural reforms such as those in Chile and El Salvador base their pensions on a savings system: the savings that workers deposit to guarantee a more or less favorable pension. In Nicaragua this would be a disaster because most Nicaraguans don’t have the capacity to save in this sort of system and would never have insurance or a pension.
The second attempt at privatization occurred during Bolaños’ government. This time the attempt got further because the private Pension Funds Administrators, the famous AFPs, had been set up. Officials and politicians defended privatization to the hilt. At that time I was in meetings with the IMF on many occasions, both in Nicaragua and in Washington, invited by the World Bank. There I saw attitudes that made me sad. I remember hearing a Nicaraguan official beg the World Bank officials: “You need to make greater demands of us so we achieve privatization.” The only way I can explain these attitudes is that some officials, when they reach high-level posts, hope that the IMF and World Bank will take them on as employees once they leave government.
This second attempt at privatizing social security was part of the inundation of neoliberal policies. The IMF regarded it highly because their model was Pinochet’s Chile in those years. It must be said of Bolaños’ government that it didn’t fall into this trap. We have then-INSS head Eda Callejas and Treasury Minister Silvio de Franco to thank for stopping privatization. These two people confronted those plans and the system honestly. Callejas had the leading voice within the government and President Bolaños appointed a commission in which I took part, in which we were able to explain the enormous damage privatization would do to the country. That year I wrote “Ten reasons against privatizing the INSS.” These days I should write “24 reasons for reforming INSS.”
In matters of social security I think the IMF and the World Bank have little to tell us and a lot to learn from us. They both have to be told how wrong they got things in Nicaragua. They need reminding that a few years ago they loaned US$20 million to reform pensions through privatization and it went nowhere. Today that money is part of the debt we all pay as Nicaraguans.
The IMF is insisting on reform, I insist that social security reform is a sovereign matter and we Nicaraguans must show the way, not the Monetary Fund or the World Bank. But nor should we argue that the IMF or the Bank are imposing reform on us, because that’s not true. We must shoulder our responsibilities and discuss what we want and how we want it.
but not privatization
The IMF is demanding reform because it has calculated that without it, the State will have to assume huge costs within 10 to 15 years that will destabilize the economy. And it’s right to be worried. It’s insisting on reform but not privatization. And it’s not saying what sort of reform either. It and the World Bank are only demanding “social security reform” to defend INSS’ financial capacity. But neither of them is saying what model to implement or what needs reforming.
I don’t know if they will reveal more behind closed doors, but so far I’ve read nothing about them getting down to specific details like saying the pension age has to rise from 60 to 65 years or how many weeks one has to pay contributions or what has to be reformed. What these institutions are demanding now is transparency and institutionality in investments made by INSS with its technical reserves. And they’re right, because while INSS’ investments are legal, “how” it’s done is currently a mystery. It has to be said that there’s little transparency.
Is social security headed for bankruptcy? If we undertake a responsible reform social security won’t go bankrupt. I can recall more difficult moments than this one. In 1979 when the revolution triumphed, INSS didn’t have five cents to pay its staff, much less to pay pensions. We inherited the terrible mismanagement that had existed during Somoza’s government. I have letters proving that INSS transferred a million córdobas a month to Somoza’s Liberal Party. So we got a loan from the Central Bank and forged ahead. At the end of the 1980s we again went through a very tough moment because we had very few funds due to the incredibly high inflation during those years.
We now have reserves of C$11.4 million. But is it enough? One must always bear in mind that our social security system is that of a poor country and moves in a poor economy. We can’t isolate social security from the economic context in which we live. Nicaragua has much to do to improve its economy, and the social security system as such also has much to do to improve its own. If its coverage improves, its economy will improve. But even this won’t be enough. The entire system must be reviewed. And of course, if we don’t change anything, which would be totally irresponsible, the system will collapse.
What will the demographic Social reality, social changes, nature itself demand this reform of us. The economist Adolfo Acevedo is urging us to pay attention to the fact that Nicaragua is entering a stage known as the “demographic dividend,” due to the significant decrease in the birth rate and increase in life expectancy This means that in the next 20 to 30 years the percentage of the working-age population will increase and the dependent child population will decrease. After these 30 years the proportion of people growing old and retiring will start to rise. Therefore, we must take advantage of this opportunity to reform the social security system and sign up these working-age youngsters and prepare ourselves for a more prolonged old age with a better quality of life, since this will mean that social security will be paying old-age pensions for more years. Faced with this reality, it would be irresponsible of us to do nothing and reform nothing.
dividend mean to social security?
The current government has made it clear: social security isn’t going to be privatized. I believe there’s a generalized clarity that privatization isn’t right for Nicaraguan reality, that it isn’t viable. Furthermore it’s unconstitutional. I don’t see any sign that any sector in power wants to privatize social security again. But even if it did, we would be there to fight against it. Yours truly will always defend the public system, because it’s what guarantees us effectiveness, as we can see in Brazil, in Cuba and in Venezuela… These examples show us that the best system is a public one, wholly reformed, with minimal private sector participation, for example as happens in Guatemala where private companies administer workers’ parks, beach resorts and the like, and do it very well, but they don’t administer pensions.
I value our system’s virtues. I believe it’s a highly generous system and the best way to defend it is to improve it. It’s not generosity that could break the system; it’s reality. For example, mobility within the social security system is extremely high. Only 30,000 of the 100,000 new workers who start contributing to social security every year are still there at the end of the year, which means they won’t receive a pension. Emigration and high labor instability explain this mobility. Social security reform is needed because society is dynamic, forms of employment and ways of life change and society itself changes. A social security system is in constant change, just like society.
When and how to engage the debateI think that reform should wait until after the November 2011 elections, to avoid it being contaminated by the electoral environment. But I also believe the national debate about it must start now, right this moment. We’re already making progress, with forums, messages, and also with this article in envío. We must start the debate in what remains of 2010 and take advantage of the whole of next year so that in 2012 a new National Assembly can pass the reform. Leaving even the debate until after the elections means a significant delay that could have serious conse¬quences for the country.
I also believe that a team should be in charge of these debates, and that its leader must be a person accepted by the whole of society, not someone imposed. This reform requires a lot of talent, a lot of wisdom, and I would say abundant humility, to make it the most inclusive debate possible. No one should be excluded for any reason. A law imposed by a few people will end in failure, which would be very harmful for Nicaragua.
While reforms are necessary to make the system work better, there is no need for an apocalyptic view of our social security system’s situation. Reform isn’t needed because of pressure or according to predetermined or imposed norms. Nor is immediate reform necessary. With responsible reforms, INSS will be assured sustainability for the next 50 years. The most crucial thing is to understand that social security reform is so important that it requires national consensus born of national debate and reflection. The insured, workers, employers and universities must all take part in this endeavor. All society must participate: contributors, pensioners and war victims… Counting all beneficiaries of social security, practically 1.5 million Nicaraguans are connected to INSS. All of them must take part in this reform so it will be the most abiding one possible, and will be socially acceptable and financially viable. And so it will be a reform in which the State continues to play a leading role.
Manuel Israel Ruiz Arias has worked for 36 years as a public official in social security, an adviser to various governments and a researcher on the subject.