Bridging Political Polarization: Pension Reform in El Salvador

By Rocio Campos, International Budget Partnership— Mar 09, 2017

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Building consensus and using evidence to influence policy can be particularly challenging in contexts where political polarization has become entrenched. Decision makers and civil society alike can begin to retreat into ideological positions more concerned with brinkmanship than evidence-based policy. This can have a corrosive effect on public participation, as citizens are fed inaccurate information and become increasingly partisan. In turn, politicians and decision makers get more traction from promoting short term and reactive policies, ignoring long term implications and eschewing consensus.

Pension Reform in El Salvador
Credit: elsalvador.com

This was the scenario in El Salvador in 2014, when IBP started working with a diverse group of civil society organizations (CSOs) to examine the sustainability of social spending. Gripped by a fiscal crisis that threatened the government’s ability to fulfil pension obligations, the country was dominated by political polarization that was crippling meaningful reforms.

IBP and its partners used different tactics to influence the debate on pension reform in El Salvador. Importantly, along with producing evidence for decision makers, we worked to socialize basic facts about the reform with the wider public.

Navigating Political Polarization

Our initial strategy was to try to bridge the political divide. Together with our partners, we facilitated a forum that brought together government officials and civil society across the political spectrum. Relying on a World Bank pension expert as a sounding board to discuss critical aspects of pension systems, we designed the agenda to include different perspectives while keeping sight of the unifying issue: how to avoid a government default to fulfill pension obligations.

At the same time we knew that we needed to go beyond a narrow circle of policy makers and influencers to engage the wider public in this crucial debate. As in many countries, El Salvador is lacking in formal space for citizens to participate in budget decisions, so we set to engage with  different civil society organizations to build evidence and bring the issue to the fore.

To this end, we worked with Grupo Técnico de Sostenibilidad Fiscal (Technical Group for Fiscal Sustainability, or GTSF) with aim of prying open the government’s closed-door formulation of the pension reform proposal. Along with research on the costs and implications of different pension reform scenarios, led by Fundación Nacional para el Desarrollo (National Development Foundation, or FUNDE), we also helped the think tank Fundación Dr. Guillermo Manuel Ungo (the Dr. Guillermo Manuel Ungo Foundation, or FUNDAUNGO) to produce a brief showing how social dialogue can help legitimize public institutions. Both organized public events to share these insights with wider sectors of civil society and help shift the debate to be more evidence based and inclusive.

To bring in some fresh perspectives, FUNDAUNGO organized a conference on pension reform in Latin America, where experts from the University of Pittsburgh and the Chilean Presidential Commission on the Pension System engaged with officials from the finance ministry.

From Generating Evidence to Resisting an Inadequate Proposal

The executive finally sent a draft proposal for pension reform to the National Assembly in February 2016. They proposed a hybrid system in which existing savings would be moved to a public pillar and pensioners could make private contributions above the publicly funded amount. Despite lacking the inputs from civil society, many expected the proposal to be rubber stamped by legislature. Surprisingly, however, the Assembly decided to hold public hearings and invited civil society input.

CSOs brought a range perspectives to the hearings: the think tank Fundación Salvadoreña para el Desarrollo Económico y Social (Salvadoran Foundation for Economic and Social Development, or FUSADES) defended the private investment system and voiced concerns about the fiscal adjustment proposed; FUNDAUNGO noted the lack of coverage details and, following the Chilean example, insisted in having an open dialogue with workers; and FUNDE focused on revising the sustainability and equity of the system, whether hybrid or not.

At the same time consensus was emerging among international financial institutions that, while the proposal may alleviate some of the financial strain in the short term, it was unlikely to prove sustainable over the long term. Uneasiness about the proposal increased when a privately funded media campaign labelled it as the “robbery of the century,” suggesting that it was a government maneuver to more easily divert pension savings for other purposes. Facing broad pressure from all sides, the National Assembly rejected the proposal in May 2016.

Evidence played a large part in resisting the government’s pension proposal. While it did little to influence the executive, CSO research proved critical for taking full advantage of the public hearings and driving debates in the right direction. Yet evidence alone would not be enough to bridge the ideological divide nor to establish broader citizen participation. Given the wide range of perspectives, CSOs from across the political spectrum agreed that a broader social dialogue was needed.

Stoking Public Debate and Participation

We knew we needed to combat misinformation and socialize the debate if we were going to improve civil engagement around pensions. Iniciativa Social por la Democracia (Social Initiative for Democracy, or ISD), a grassroots organization with strong support at the local level, was an ideal partner for this.

Having completed a study on how pensions are financed in 16 municipalities, ISD launched a right to information and participation campaign targeted toward youth and local communities that was centered on pensions. They also secured a series on national radio and hosted a university roadshow where experts provided materials and answered pension-related questions. Concurrently FUSADES launched a video series explaining how pensions work and comparing the government’s reform proposal to the existing system and consolidated pension-related resources in an online repository.

Opening channels of dialogue and information to encourage informed participation proved just as important as the government taking on specific policy proposals.

The Impact of Our Work

The diverse entry points to influence the pension reform debate have yielded results. Salvadorians today can more easily access information on pensions and, according to opinion polls, are more aware of the link between pension funds and fiscal administration. Social movements of pensioners have begun to participate more and demand access to more specific information on pensions.

In response to ISD’s work, the government has committed to continue funding the Universal Pension Scheme. More broadly, Roberto Lorenzana, the Technical Planning Secretary of the Presidency, has publicly recognized the shortcomings in the implementation of the Universal Social Protection and Development Law and agreed to create a space for technical deliberations on development and social protection issues. He has also recently admitted that long term sustainability is an issue and agreed to work with the Inter-American Development Bank to improve the proposal and fiscal situation.

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