Panama Goes On Strike Over Proposed Social Security Reforms

by Mike Godfrey, Tax-News.com, Washington

01 June 2005

The administration of President Martin Torrijos has announced new legislation which claims to make the social security system solvent for the next four decades. However, the proposals have not gone down well with the public and labor unions, leading to extensive strikes and organised street protests.

Arguing that the current social security system is on the brink of collapse - an argument rejected by many observers - the plan increases the retirement age to 65 years from 62 years for men, to 60 years from 57 years for women, and extends the minimum time required to pay into the fund in order to draw from it when retired to 25 years from 15 years. The changes will also require the self-employed and small business owners to contribute 13% of their gross income to the social security fund.

Much to the disappointment of the insurance and banking sector, the Torrijos administration has not seen fit to privatise the social security system. It has also ignored demands from labor unions to invest the remaining real estate assets of the former Panama Canal Zone into the fund.

The National Front for Social Security Defense has galvanised opposition to the proposals, and has organized indefinite stoppages and street protests. It has vowed to maintain the pressure on the government until the reforms are withdrawn from the National Assembly and submitted to a referendum.

Organisations representing private enterprise such as the Chamber of Commerce, Industry and Agriculture, the Panamanian Association of Enterprise Executives (APEDE) and the Panamanian Episcopal Conference (CEP) have also expressed concern, but are worried more that the ongoing strikes and street protests will damage the country's investment environment and lead to financial losses.

The Torrijos administration is claiming that the reforms will make the retirement fund solvent for at least 40 years. However, an analysis by the National Private Enterprise Council (CoNEP) has concluded that the reforms will fix the system for only 15 years.

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