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Ecuador: Creation of New Social Security Bank

A draft law to create the Bank of the Ecuadorian Social Security Institute (IESS) was signed into law (pdf doc) this past week. The project was approved with 41 votes in favor, six against, three blanks and seven abstentions. With a level of unemployment of 7.3% and underemployment of 48.8%, there are still questions about the rate of contributions towards the Ecuadorian Social Security system.

The new bank backed by President Rafael Correa is facing resistance from the opposition, who are afraid that the workers’ contributions are at risk during this troubled economic climate. However, Correa dismissed these concerns [es] by explaining that the new Bank is a historic step in the country since the funds were removed from those who had been using it for personal benefit and now the Bank's operations will be social and collaborative in nature, as he explains in the video below. The Bank will be run by five members: The IESS Chairman, a representative of the Executive branch chosen by the Board of IESS from a list submitted by the President, a representative of the affiliates, one member of retirees elected through a national competition organized by the National Council of Civic Participation, and a member from the employers.

Official announcement creating the Social Security Affiliates Bank from the Ecuador President's YouTube Channel

There is no question that the system needs reform since there were complaints the retirees had lost the benefit of the yearly retirement bonus and about unclear language in employer payment responsibilities [es].

However, even when many agree with President Correa and support reforms that nobody can or wanted to do to the IESS, still some complain for example that retired people has lost a bonus, retiree had conquered in celebration of their national day. Other people in Guayaquil are still confused whether the IESS or the employer should pay the 12 weeks license in accordance to birthday benefits. Law says employers now have to pay in full those benefits, not the old practice where IESS used to pay the 70% and the difference was covered by employers.

Ecuador Rising [es] is hopeful on what this new law will mean for retirees in the country and writes, “There are many cases of retired people that despite having contributed for over 40 years have lower pensions than the minimum salary, and with this law, they will not experience the same situation.”

Dejalo Ser [es] echoes a article appeared in El Universo where his author speaks about the Bancorrea the nickname given (Correa's Bank) and wonders about the oversight of the Bank regardless of his claims that there will be more control:

Bancorrea no rendirá cuentas a nadie sino al Presidente de la República, que controlará un directorio de solo tres miembros. Ni los hermanos Isaías, que también son tres, se atrevieron a tanto.

Correa's bank will not be accountable to anyone but the President of the Republic, who will monitor a directory of only three members. Neither the brothers Isaias (family of troubled bankers), who also numbered three dared so much.

While in a roundup, La Alharaca [es] lets her readers notice the opinion of recognized politicians like former Vice-President León Roldós, who is credited to say:

El incremento de los años de aportación para recibir una pensión de $ 218 es “un asalto a los fondos del IESS”, y además afecta a los derechos establecidos en la Ley del IESS, donde se señala que para calcular las pensiones se toman en cuenta los sueldos de los cinco años mejor remunerados.

The increase in the number of years of contribution to receive a pension of USD 218 is “an assault to the funds of the IESS,” and also affects the established rights in the IESS Law, which states that in calculating the pension it must be taken into account salaries of five best paid years.

Yet some bloggers like Fatima Efigenia thinks that not all is so bad in the reforms in the Ecuadorian Social Security, and stresses that Ecuadorians should be grateful with government, but hopes that a similar thing does not happen now that the funds are back in the hands of a few:

Antaño, cuando la partidocracia salía en las noches neoliberales de luna llena a comer niños, el estado acostumbraba a meterle la mano a los bolsillos del IESS (o sea, a los bolsillos de los afiliados) para saciar su avaricia. Esto equivalía más o menos a romper el chanchito del hijo para comprar cerveza. Correa puso fin a ese robo execrable y pagó la deuda que el estado mantenía con el IESS. Sin embargo, menos de un año después, juega al agarra lo que puedas con nuestros fondos, para saciar la voracidad del Estado.

In the past, when the political parties went out on full-moon neoliberal nights to eat children, the state used to put its hand into the IESS pockets (or in the pockets of its members) to satisfy its greed. This is more or less equivalent to breaking the piggy bank of your son to buy beer. Correa ended this heinous theft and paid the debt that the state had with the IESS. However, less than a year later, plays ‘grab what you can’ with our money, to satisfy the greed of the state.

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