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FIAP > Destacados Boletines > The 14th FIAP-Asofondos 2021 International Congress was a huge success, with top level speakers
22 June, 2021

The 14th FIAP-Asofondos 2021 International Congress was a huge success, with top level speakers

The fourteenth version of the FIAP-ASOFONDOS International Congress was held on June 1, 2 and 3, this time in virtual format, due to the sanitary constraints in the country. It was a huge success, with top-level speakers.

The Congress was opened by the Chairman of the Board of Directors of Asofondos, Miguel Largacha, who highlighted the importance of the savings owned by 20 million Colombian workers, which under these circumstances are a great asset for promoting economic reactivation. For example, he pointed out that resources for more than COP 20 trillion (approx. USD 5.5 million) invested in renewable energy projects and road, gas and energy infrastructure, equivalent to 2% of GDP, have enabled the promotion of construction and the generation of employment in the country.

The President of FIAP, Guillermo Arthur, in turn, agreed on the importance of protecting savings, and rejected the decisions of countries such as Chile and Peru, where partial withdrawals of pension funds have been approved. These withdrawals will dramatically affect the future pensions of workers, to the extent that, according to estimates, 5 million workers in Chile and 6 million in Peru, have zero balances in their accounts, while future pensions will drop between 25 and 30%, Arthur revealed. He explained that, despite the prosperity that our region has enjoyed as a result of the application of policies based on free initiative, a populist wave is shaking the continent, offering a return to failed policies, to which the pension system is not exempt. According to Arthur, the evidence shows that the PAYGO systems failed for demographic reasons, and did not deliver on their promise to provide defined benefits. Nobody mentions that more than 70 countries with PAYGO systems had to increase contribution percentages in the last 25 years, nor that more than 60 countries had to increase the retirement age and reduce pension amounts.

He added that little is known about the levels of indebtedness in which many countries have incurred to finance pensions, with amounts exceeding several times their GDPs. He concluded his presentation by stating that most countries with PAYGO systems have already incorporated individually funded mechanisms to finance their pensions. Arthur called for rationality to defeat this wave of populism, stating that “the danger of populism is that it is a hoax, the results of which tend to unravel later on, sometimes in the next generation.”

Later, in another of the congressional panels, one of the most recognized authorities in pension research worldwide, Olivia Mitchell, executive director of the Wharton Pension Research Council, addressed the risks that pension systems face globally, and gave a series of recommendations. The expert identified low savings, informality, and political factors as some of the main risks for pension systems. “There can be expropriations and a lack of transparency when governments control pension assets and they are not transparent; sometimes there is even fraud and public mistrust, warned the expert, who also highlighted the importance of maintaining “stable monetary and fiscal policies, although in times of pandemic it has been difficult.”

Regarding greater longevity, one of the greatest risks for pension systems worldwide, Mitchell revealed that several studies show that “there is substantial capacity for working longer, since there is up to 64% probability of living to 94 for one of the members of a couple, which justifies the need for life annuities to live well.” Mitchell assured the audience that PAYGO systems face insolvency due to greater worker longevity and low fertility rates. “The main victims will be the following generations.”

Other experts participating in the discussion agreed on these points. In addition to Mitchell’s points, Carlos Noriega, former director of pensions for the Mexican Treasury, identified some gender gaps, since “women have lower salaries, higher turnover, more informality.” Alejandra Cox, Chair of the Chilean Association of AFPs, in turn, said that in her country, the effects of changes towards new forms of work, due to technology, have had a significant impact, and pointed out that many people have become independent “and do not adequately incorporate into social security.” In Chile it is not mandatory by law and it is not part of the culture of the people.”

Moreover, Santiago Montenegro, the Chairman of Asofondos, drew attention to population aging, pointing out that today there are half of the young people there were 50 years ago for each senior citizen (only 5.4 to 1), and “if we add informality to the equation, that ratio today is not 5.4, but only 1.9 formal active workers for each pensioner. By mid-century it will only be 1 to 1.”

The analysts concluded that it is essential to introduce new regulations and conditions in accordance with the new labor realities, in order to include new workers in the labor market; make greater efforts to save, both in amounts and time, and incorporate new instruments to that end; improve financial education and design policies focused on the care of the elderly to guarantee their well-being in this stage, among others.

Should you wish to review the complete presentations of all the experts who attended this Congress, please check the following link:


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