María Elena Rodríguez, 54, makes a living selling fruit at a street stand in San Salvador. She forms part of El Salvador’s informal economy, where workers are not covered by the pension system and women are a majority. Credit: Edgardo Ayala/IPS

By Edgardo Ayala
SAN SALVADOR, Feb 17 2016 (IPS)

El Salvador is debating reforms of the country’s privatised pension system, which could introduce changes so that it will no longer discriminate against women.

“The pension system has a male-centred, patriarchal focus that fails to take into account the specific differences that women face in the world,” said Marta Zaldaña, secretary general of the Federation of Independent Associations and Unions of El Salvador (FEASIES).

The head of FEASIES, which groups more than 20 trade unions, told IPS that one example of the sexist treatment received by women is the 115,000 domestic workers who are completely outside the system, with no right to a pension or even the minimum wage, or any other kind of protection or regulation.

People working in the informal sector of the economy, 65 percent of whom are women, do not pay into the system and will have no right to a retirement pension, economist Julia Evelin Martínez, a researcher at the José Simeón Cañas Central American University School of Economy, told IPS.“The reform should be an opportunity to redesign the pension system from the very foundations, in order for it to offer equal benefits to men and women.” -- Julia Evelin Martínez

The system was designed “based on the labour experiences and lives of men,” she said.

María Elena Rodríguez, 54, a street vendor who sells fruit at a stand on a San Salvador street, said the outlook for her old age is grim.

“I don’t have any coverage, I pray that the lord will give me the strength to work until I’m 65, and then I’ll ask my children to put me in an old-age home, because I don’t have any pension, I have nothing,” Rodríguez told IPS as she sold papaya slices to passersby.

She has three children, but says she doesn’t “want to be a burden for anyone,” adding that after a life of hard work, she should have the right to an old age without worries.

Lawmakers did not create rules enabling people in the informal sector of the economy to be covered by the system, which only applies to formally employed wage-earners.

With contributions by their employers, those covered by the system pay 13 percent of their wages into individual accounts managed by the pension fund administrators (AFPs), which take a 2.2 percent commission and invest the money.

Since late 2015, the government, the business community, academics and social organisations have been discussing what to do with the pension system which, since it was privatised in 1998, has neither expanded coverage nor improved pensions, as promised.

According to official figures, as of November 2015, 2.7 million people were enrolled in the pension savings system (SAP), in this country of 6.3 million people with an economically active population (EAP) of 2.8 million.

But 65.7 percent of the EAP works in the informal sector, while only 24.7 percent actually pays into the system, despite the fact that nearly everyone is formally enrolled, because at some point they registered and their names are still in the system.

That means only one out of four people in the EAP will have coverage when they retire, and many of these will draw very small pensions.

The debate is currently focused on how to improve returns in the pension funds, which were worth a total of 7.3 billion dollars in November. If the returns increase, pensions will grow.

Around 58 percent of that total is invested in pension investment certificates issued by the state, with low interest rates between 1.4 and three percent. Legally, El Salvador’s AFPs cannot invest in the international stock market, where the returns are higher, although the risks are too.

The government of left-wing President Salvador Sánchez Cerén wants to go even further, proposing a reform to create a mixed system that would include the private pension fund administrators – an idea that is opposed by the business community and the right-wing opposition.

Little information about the proposed reform has come out. But the government is reportedly proposing that workers who earn less than 484 dollars a month would be covered by a public system, and the rest by a mixed one.

In this debate, “we want to incorporate a gender perspective in the pensions system,” said Zaldaña, who also belongs to a group fighting for decent jobs for women, the CEDM.

The government acknowledges that women face unequal conditions. They retire at the age of 55, compared to 60 for men, which means they pay less into their accounts, and thus receive lower pensions when they retire.

To that is added the fact that they earn 15 percent less than men on average, even though on average women have more years of formal schooling, according to the United Nations Development Programme (UNDP) Human Development Report 2015.

The lower their wages, the less they pay into their individual accounts, under the current system.

“The problem is that culturally the population still has no awareness about the inequality in wages,” a public employee in a government office, Johana Peña, told IPS.

Roberto Lorenzana, the president’s secretary on technical questions, said in remarks to the government online news outlet Transparencia Activa that the gender imbalance is “a problem that we need to address” in any future reform.

He said the government’s position on this has points in common with that of the Salvadoran Association of Pension Fund Administrators (ASAFONDOS), which represents the country’s two AFPs.

However, it is unclear as to what changes are proposed to move in that direction, and Lorenzana and René Novellino, executive director of ASAFONDOS, did not respond to requests from IPS for an interview to discuss the issue.

Martínez, the researcher, believes the debate should look at the foundations of a system that is unfair to women – a problem that she said is not only seen in private systems.

“The reform should be an opportunity to redesign the pension system from the very foundations, in order for it to offer equal benefits to men and women,” she said.

The economist pointed out, for example, that women with formal jobs stop paying into the system during their four months of maternity leave. If they have an average of three children, they will have stopped paying towards their retirement for an entire year.

That time lost is added to the five years that they do not pay into the system as they retire earlier than men.

“This creates a distortion, a gap, a discontinuity, which is reflected in their labour history,” said Martínez.

Zaldaña, the head of FEASIES, said these gap periods should be counted as time worked, and the state should contribute the funds to make up for that lost time. This proposal has been presented to Lorenzana, she said.

A similar reform was implemented in July 2009 in Chile, where the government offers a bonus per child to each female worker.

The economist Martínez is pleased that the trade union movement is pushing for these changes, while she lamented that women’s rights groups in El Salvador have not taken up the battle.

Meanwhile, Rodríguez said, without slowing down in her sales of fruit to her customers, that she scrapes by “with the few cents that I make from my fruit stand, but I don’t know what I’ll do when I’m old.”

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

President Barack Obama doubled down on a new push for infrastructure investment in a major speech Friday, highlighting roads, ports and bridges that many say have suffered from decades of insufficient upkeep.

“When the American Society of [Civil] Engineers put out their 2013 report card on our national infrastructure, they gave it the best overall grade in 12 years … the bad news is we went from a D to a D+,” President Obama said, speaking at a port in Miami.

“We still have all kinds of deferred maintenance. We still have too many ports that aren’t equipped for today’s world commerce. We’ve still got too many rail lines that are too slow and clogged up. We’ve still got too many roads that are in disrepair, too many bridges that aren’t safe.”

The American Society of Civil Engineers (ASCE) annual report the president referenced was released earlier this month and has spurred a debate over infrastructure and spending in Washington and beyond.

“We know that investing in infrastructure is essential to support healthy, vibrant communities. Infrastructure is also critical for long-term economic growth, increasing GDP, employment, household income, and exports. The reverse is also true – without prioritizing our nation’s infrastructure needs, deteriorating conditions can become a drag on the economy,” the report states.

On Friday, President Obama outlined a new plan that, he said, would seek to attract private investment for public infrastructure, while also creating new bonds and offering more loans for similar projects.

1.3 trillion dollars needed

A think-tank in Washington has one idea for leveraging private investment toward infrastructure: encourage the investment of labour union pension funds in infrastructure projects.

“Couple [our poor state of infrastructure] with pension funds, which are long-term, patient investors, with stable, risk-adjusted returns, and this fits well with our fiduciary duty,” Dan Pedrotty, managing director of benefits and pensions at the American Federation of Teachers, said Thursday at the release of a report on the topic at the Center for American Progress (CAP).

Pension funds present a viable alternative to traditional public financing because their large-scale assets and long-term nature give them the ability to put up a large amount of capital and see projects through to their payoff—obstacles typically thought to be too large for any investor except the federal government.

The report also suggests the time is ripe, both economically and politically, for this kind of change.

“We will need an extra 1.3 trillion dollars in infrastructure investments over the next 10 years,” Donna Cooper, co-author of the report and a senior fellow at the Center for American Progress, said Thursday. She was referring in part to the recent American Society of Civil Engineers report.

“There is [also] an unemployment rate of 14 percent in construction … and a reduction in construction investment.”

The report focused on the business interests of investors, but also the unique benefits the plan can generate for the labour unions themselves.

For example, a paper from the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) that outlines its infrastructure investment standards says it encourages pension funds to “invest in infrastructure projects that utilize union construction labor and protect the jobs, collective bargaining rights and working conditions of current employees.”

And as with any policy discussion in Washington right now, the overall mood of fiscal constraint lends the plan particular appeal.

“Putting existing money to use is certainly much more politically popular than spending new money,” Baruch Feigenbaum at the Reason Foundation, a free-market-oriented think tank, told IPS.

Supplementing government money with private investment from pension funds could also free up scarce government grants, the new report states, to go to projects “where user fees or other dedicated revenues are not likely to be sufficient to repay investors”.

Charting a way forward

Going forward, the report highlights structural changes that should be made to facilitate greater union pension fund investment in infrastructure.

Those proposals included the establishment of a national infrastructure bank with experts “who have the background and expertise to build working relationships with pension funds” and bringing back taxable bonds like Build America Bonds, which provided more of a federal subsidy to state and local governments than traditional bonds.

Obama’s speech on Friday went on to propose such an infrastructure bank and introduced America Fast Forward Bonds modeled on the success of the earlier Build America Bonds.

Much of the discussion on Thursday also focused on models that the U.S. could use in designing such a shift.

In 2012, for instance, as part of a strategy to strengthen the UK’s Manchester Airports Group (MAG), a Melbourne-based pension fund manager, Industry Funds Management (IFM), bought a 35-percent stake in the group. The additional capital allowed MAG to buy another airport and plan a large-scale renewal project to balance out the airport market share that Heathrow Airport Holdings had come to gobble up over the years.

The deal resulted in a 10-percent increase in employment and a 26-percent increase in underlying operating profit.

But smaller-scale models also exist in some U.S. cities already, like Chicago, which established the Chicago Infrastructure Trust in 2013 that functions much like the infrastructure bank suggested by the report and proposed by President Obama Friday.

The trust’s six board members are tasked with reaching out to private investors and developing financing strategies for different public works projects.

“Hopefully those local projects can spur on the federal government,” Pedrotty said Thursday.