ILO highlights labor informality risk for LatAm pensions

An International Labour Organization (ILO) official has highlighted the threat posed by labor informality to pension sustainability in Latin America.

Fabio Bertranou, director of the ILO office for the Southern Cone, said one in two workers in Latin America are not officially registered and do not make social security contributions, news agency AFP reported.

"The challenge of the [pensions] system is that there is a lot of informality," Bertranou was quoted as saying during an ILO conference in Panama, where ILO members approved the so-called Panama Declaration, which calls on social partners to work together for the future of work in the region.

Factors such as the recent economic slowdown have likely eased the pace of labor formalization seen over the past decade in Latin America, he said.

"It is vital to work on formalization, not just because it is good for productivity and rights, but also because it is good for sustainability of social protection," Bertranou was quoted as saying.

He said that resolving the issue of labour informality in the region was a lengthy process that would take at least a decade.

An ILO report titled Labour Outlook: Present and future of social protection in Latin America and the Caribbean shows that pension systems face various challenges in the areas of people covered, benefit levels and sustainability.

"We are talking about some 145mn workers who do not contribute in a region with an ageing population, which could impact their future and that of their families," ILO regional director for Latin America and the Caribbean, José Manuel Salazar-Xirinachs, said in July, when the report was presented in Mexico City.

Salazar said that "social protection is a fundamental component of economic and social development, which is key to the fight against poverty and inequality."

AT A GLANCE: PENSION REFORM IN LATIN AMERICA

Pension reform is a major issue in Latin America, where the focus in countries with large pay-as-you-go systems is on reducing the burden on state coffers.

- Brazil has tried - and failed - to push through changes.

- Argentina has tweaked the way pensions are calculated and further reform is seen as necessary.

- Chile is due this year to introduce a reform bill that should see employers start to contribute to their employees' individual pension savings pots.

- Pension reform is seen as necessary in Colombia, Paraguay and Uruguay, among others.

- The IMF has urged Peru to revoke its controversial pension freedom law and make other changes.

- President-elect Andrés Manuel López Obrador of Mexico has promised to unveil a plan to expand a universal pension program for elderly citizens established in Mexico City at a nationwide level. Despite raising serious concerns over how he plans to pay for such a program, any proposal to modify the nation's retirement system opens the door to a broader overhaul urged by multiple voices in the public and private sectors.

- Nicaragua scrapped social security and pension reform plans following violence and protests.

- A key lawmaker in the Dominican Republic has called on President Danilo Medina to submit a social security overhaul bill with millions of young workers at risk of receiving unsatisfactory pension benefits upon retirement under the current system.