Presentation on theme: "Report on the Actual Situation of the Pension Funds in Venezuela Madrid, April 12, 2000."— Presentation transcript:
Report on the Actual Situation of the Pension Funds in Venezuela Madrid, April 12, 2000
Context I.-Demographics and Macroeconomic Indicators II.- Reforms to the Pension System III.-Concerned Groups IV.-Mercantil Financial Services (MSF)
I.- Demographics and Macroeconomic Indicators
Source: O.C.E.I., 12/31/99 I.- Demographics and Macroeconomic Indicators Population 23,769,087 Active Population 10,206,259 Active Population 10,206,259 Informal Sector 4,701,360 Formal Sector 4,125,587 Unemployment 1,379,312 Private 68% Macroeconomic 1999 GNP(% Var)(7,2) Inflation 20,0% Loan Rate 27,8% Saving Rate15,7% Monthly Salary (Average)330 US$ Govt. 32% Men 64% Men 64% Women 36% Women 36% Average Age 26 yrs. Average Age 26 yrs.
II.- Reforms to the Pension System
II.- Social Security Social Security Distribution System (Mandatory) Social Security Distribution System (Mandatory) CONAVI Dwellings 3% CONAVI Dwellings 3% I.V.S.S. 17% I.V.S.S. 17% INCRET Recreation INCRET Recreation INCE Job Training 2% INCE Job Training 2% Health Pensions Members 6,945,267 Paying Members 2,118,008 Source: IVSS 12/31/99 Forced Unemployment Forced Unemployment
% Paying Members vs. Occupied Population Number of Paying Members per Each Retired Source: IVSS, Ministry of Labor and Our Calculations The different variables, such as demography and a less dynamic and informal market, have coincided and created a major financial load on the actual paying members, generating an unviable and unsustainable system in time II.- Social Security
Retirees of I.V.S.S. and Public Administration Population Over 60 yrs. old 964,000 persons without pensions Sources: IVSS, OCEI, Ministry of Labor, Our Research The volatility and the increase on Current Expenditure as well as the financing of other Social Security Benefits has caused a constant reduction on Pensions and lower coverages. Number of Persons Monthy Pensions in US$ (Constant 1984) US$ 629,000 II.- Social Security
Net Government Expenditure as % of the GNP IVSS -Public Administration - Non Paying Members % of GNP II.- Social Security Payments to Retirees, Non Paying Members Payments to Retirees, Public Administration Payments to Retirees, IVSS
Today we have a unique opportunity to come-up with “The Reform” due to the fact that the population pyramid is turning up side down. It will be more difficult to reform in the future. II.-Unique Opportunity Age % % %
December 1997 October 1998 October 1999 December 1999 June 2000 Approval of the Integral Social Security Organic Law. Approval of the Pension Law Sub-System. To be enforced on Oct (affiliation) By way of a Special Power Law, President Chávez postponed to the year 2001 the enforcement of the Law. On Article 86 the New National Constitution provides for the creation of a Social Security Organic Law enacted by the National Assembly. National Assembly (Congreso Nacional) to be installed. –Study and analysis of the Social Security Law within the 60 most priority laws. II.- Social Security Background
II.- Present Situation Estimated date “Scenario 1” July - August International bid for the SEREISSI and Superintendency August Superintendency Start-up July Law approval November-December Authorization Prerequisites for AFP January Starting Affiliation March Starting dues
Octuber International bid for the SEREISSI and Superintendency May Starting Affiliation November Superintendency Start-up September-October Law approval II.- Present Situation Estimated date “Scenario 2” March Authorization Prerequisites for AFP August Starting dues
Mandatory Contribution Mixed System Shared Government Administration Private Administration Accounts Contibution between 2% - 3% Contibution between 11% - 12% Intergenerational Solidarity In order to complement the Minimal Pension Capitalization Individual In order to pay: Retirement Pension Disability Survivorship II.- Characteristics of the Proposed System Systems
MercantilMercantil (Vzla) Provincial Grupo BBV-Argentaria (Spain) -Polar (Vzla) Banco VenezuelaGrupo Santander (Spain) CitibankCitibank (USA) - Banco Caracas (Vzla) Banco UniónGrupo Unión (Vzla) BanescoBanesco (Vzla) Nuevo MundoGrupo Pacific (Chile) Adriática de SegurosGrupo Allianz (Germany) Aporta AFPAporta (Chile) - Seguros La Previsora (Vzla) Seguros Sud América (1) Grupo Zurich (1) Only as insurance provider to the pension system.
IV.-Mercantil Financial Services M.S.F.
M S F Main Investment Bank in the Country. Commercebank Merinvest Seguros Mercantil Banco Mercantil Inversora Maracima Storage Co. ServibienMentrasa Universal Bank Agencies Miami, New York and Curacao. Pioneer and Leader in Trust Services, Leader in Low Income Housing Law Loans 298 Agencies Early on 1998, 49.9% of the Insurance Company was sold to Ætna IV.- Mercantil Financial Services Banco Mercantil Colombia Banco Mercantil Switzerland First Latin American Bank to obtain permit as a Commercial Bank in Switzerland. Mercantil has been present in Zurich, Switzerland for 12 years. U.S.Financial Institution. Specialized in Retail Banking, Mortgages and International Trade. Financial Institution specialized in International Trade, mainly bilateral between the two countries.
New York Ciudad de México Lima Venezuela Sao Paulo Miami Zurich Manaos Sao Paulo Londres Curaçao Bogota IV.- Mercantil Financial Services