Guillermo Lasso warns that Ecuador’s Social Security system (IESS) is going broke and will soon be unable to pay pensions and cover health care costs for its members. His opponent in the April 2 presidential runoff election, Lenin Moreno, responds that the government will always guarantee the system’s financial health and that Lasso’s charges amount to nothing more than fear-mongering.
Lasso’s charges are based on a 2015 government decision to end its contribution to IESS that covered 40% of the system’s expenses, and a later decision to write off a $2.5 billion debt it owed IESS.
As a result of those decisions, IESS has dipped into reserves for the past two years to cover a financial shortfall. In 2016, the shortfall amounted to $1.6 billion.
Based on actuarial tables used by Lasso, IESS will become insolvent in 2026.
In addition to its primary role of paying pensions to retired members, IESS also provides health care and offers low-interest housing loans through its affiliate BIESS. For more about IESS health care, click here.
“The system has been robbed by the government,” Lasso says. “It was desperate for money because of its fiscal mismanagement and IESS was the cookie jar it found to rob.” Lasso is supported by the country’s largest retiree union which protested last week in Quito demanding that the government reinstate the 40% contribution and pay its debt.
Moreno and the government maintain that support of IESS is part of the public trust that will always be honored. “We will never allow the system to fail and we will never let down its members who have paid into it over the years,” he says. “Supporting IESS is this government’s first and most important commitment.”
If he is elected, Lasso says he will reinstate the 40% government contribution and pay the $2.6 billion debt. “The millions of Ecuadorians who contribute to Social Security must be assured that the system will be secure when they retire and that their pensions will paid on time and in full,” he says. “I will end the greedy Correismo that has an endless appetite for other people’s money.”
Two weeks ago, Lasso claimed that the IESS health care program was being mismanaged and was in financial trouble. “It might be necessary to increase members’ contributions but I will guarantee that the program will be fiscally sound.”