Deficit will rise absent labour reform in Argentina

Subject

The outlook for pension reform.

Significance

In 2016 Congress passed Law 27.260, which established measures to improve pensioners’ welfare, and set a three-year deadline to create a new pension system, which would be universal, comprehensive and sustainable, and maintain the current system’s pay-as-you-go feature. The pensions deficit represents a significant portion of the fiscal imbalance, so any policy to improve fiscal sustainability will require social security reform. However, the current pension system is considered unfair by most pensioners and active workers.

Impacts

• The social security reform will face opposition in Congress and resistance from public opinion.
• A strong result for the new Unidad Ciudadana party in the October elections could delay the reform.
• The large informal sector will militate against reducing the pensions deficit.