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Bank President Criticizes Proposed Pension Hike

May 27, 2005

IN presenting his report on the firsttrimester of 2005, Central Bank presidentFrancisco de Paula Gutiérrez praised thePacheco administration and FinanceMinistry for keeping a tight hold of thegovernment’s purse strings, and criticizeda law under consideration in theLegislative Assembly to increase pensionpayments to retired teachers.According to Gutiérrez, not only doesthe government lack the funds to pay outincreased pension payments, but the law,approved in first debate earlier thismonth, is also unfair, since it would grantretirees payments that are disproportionateto the amount they contributed duringtheir working years.“It’s a question of justice,” Gutiérrezsaid of the proposed change. The billawaits review by the ConstitutionalChamber of the Supreme Court (Sala IV), asecond vote, and President Abel Pacheco’ssignature before it can become law.“There’s no math that supports it…the benefits given have no relation towhat (workers) are contributing,”Gutiérrez added.He described the results of a study bythe Superintendence of Pension Funds(SUPEN), which estimated the average lifeexpectancy of the 34,268 current retirededucators and then calculated how far thegovernment would have to place itself indebt were it to pay out its pension obligationsto those retirees today, without theproposed reforms. The answer: $4 billion.For Gutiérrez, it is not right toincrease this amount, especially when thestate workers in question should be contributing17-18% more from their paychecks,in his estimation, to receive theincreased pension payments the lawwould allow.The Finance Ministry estimates thatthe application of the law would costclose to ¢30 billion ($64 million).Finance Minister Federico Carrillo hasasked Pacheco to veto the law if the assemblyapproves it, but comments from Pachecolast week implied he would not do so.In his May 18 comments about economicdevelopments in 2005, Gutiérrezsaid the increased price of coffee on theinternational market has had a positiveeffect on export totals, but has increasedinflation as well, along with higher petroleumprices, which have hovered near $55per barrel so far this year. Inflation for thefirst three months of the year was 13.7%,compared to 11.3% during the same periodin 2004 and 10.3% in 2003.While exports are up only 0.4% overlast year’s first trimester totals, due in partto an 8% drop in free-zone activity,tourism revenues have shown 25.6%growth since last year, Gutiérrez said.“Tourism is basically paying ourincreased petroleum costs,” he said. “Theexternal sector is the motor of this economy…it keeps pulling us along.”

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