Juan Carlos Silva, 81, says Argentina’s government wants retirees like him to die off before it has to raise their pensions.
Mr. Silva is one of hundreds of thousands of retirees suing the Argentine state over their meagre retirement benefits, which have failed to keep pace with inflation.
At stake in the escalating legal battle is whether the government can keep siphoning money from the ANSES state pension agency.
President Cristina Fernandez’s government has used ANSES to fund everything from laptops for schoolchildren to the Treasury itself after she nationalized the pension system in 2008.
Critics say the largesse comes at the expense of the pensioners for whom the system was created.
If the Supreme Court orders bigger benefits for millions of retirees, the government’s primary budget surplus would vanish. Officials would have to risk riling voters with spending cuts or try to return to international debt markets after a nearly decade-long standoff with investors.
The government’s warnings are more dire. It says such a ruling could drain state finances just 10 years after the country’s devastating economic crisis.
The court, widely regarded as independent, has in the past issued a number of rulings in favour of pensioners. Some observers see it ordering an adjustment to pensions that would not be too catastrophic for the state.
The potentially historic decision is unlikely before October’s election in which Ms. Fernandez is likely to run. But for pensioners like Mr. Silva, it cannot come soon enough.
“I first filed suit six years ago and I don’t know when I’ll collect. Thankfully I have some savings, but with 25 per cent inflation, in two or three years, I may not have much left,” said Mr. Silva, a former accountant. “They appeal to stretch the process out until people die off.”
The Argentine justice system is literally collapsing under the weight of legal cases filed against ANSES. Piles of lawsuits threatened to cave in ceilings at the social security tribunals last year, prompting a three-week recess.
Centre-left leader Ms. Fernandez prides herself on having expanded pension coverage to include about 2 million more Argentines. She and her late husband and predecessor, Nestor Kirchner, also sharply raised the base pension.
The ANSES is flush with cash thanks to swift economic growth and strong gains in local markets since the global financial crisis. The agency’s rainy-day investment fund is up about 85 per cent to some 183-billion pesos ($43-billion U.S.), since December, 2008, when the state took over private pensions.
But the affluence has its limits.
Economists say the government uses the ANSES as a cash cow, selling debt directly to the agency to avoid higher market rates and calculating its earnings as income to bolster the primary budget surplus.
The ANSES transferred 8.6-billion pesos to the Treasury in 2010, accounting for about one-third of the government’s primary budget surplus that year, government data shows.
The country’s highest court could order the government to raise payments to pensioners whose benefits stagnated in the early 1990s and again between 2002 and early 2009, when a new formula for readjusting payments went into effect.
This could cost the state around 16-billion pesos a year, plus an undetermined additional amount for retroactive debts, according to congressional calculations.
“If the court forces the government to make all these payments, the government would need more and more financing each year to balance its accounts,” said Guillermo Giussi, an economist at Economia & Regiones consulting firm, which forecasts the 2011 primary surplus at 15-billion pesos.
“They’d either have to return to a process of increasing indebtedness or cut spending,” he said.
