While all contries say people have to work longer and older, Bolivia has lowered its retirement age from 65 to 58.
On Friday, the country passed the law which also nationalises the national pension system and extends coverage considerably to the poor.
So far men’s retirement age was 65 and women’s 60.
“We are fulfilling a promise with the Bolivian people. We are creating a pension system that includes everyone,” president Evo Morales (photo) said at the signing ceremony.
He was surrounded by members of the powerful Bolivian workers’ federation, which helped to draft the law.
The law will take effect in a year.
To three million people, 60 per cent of the population, the text also means the extension of their pensions. It concerns people who labour in the informal economy as everything from street vendors to bus drivers to peasant farmers.
“This is enormously important, possibly one of the greatest advances for lower- and middle-income people in South America in the last 15 years,” Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington, said.
But to critics the new law is overly ambitious and unsustainable, and could breed financial disaster.
Many other countries chose to follow a totally different path. Last month, France raised the minimum retirement age to 62, with full benefits not available until age 67. The country should be followed by several others in Europe.
In South America, Cuba has raised its retirement ages from 60 to 65 for men, and from 55 to 60 for women.
Average life expectancy
According to Mario Guillen, Bolivia’s deputy pensions minister, the country should not be compared to any other.
“A lot of Bolivian workers perform jobs that are eminently physical, not intellectual, and this means that at age 55 they don’t have the ability anymore to keep working,” he told The Associated Press press agency. “Yet we made them continue.”
The UN Department of Economic and Social Affairs’ Population Division said the average life expectancy in Bolivia is 68 years for women and 63 for men. It puts the global average at 68 for both sexes, while the global average is at 80 in western Europe and at 73 in Latin America.
Guillen also said that European governments raise retirement ages because there are more elderly people and birth rates fall, two things that do not exist in Bolivia. 10 million people live in the country, where per capita annual gross national income was $1,620 in 2008.
President Morales has been strongly backed by the labour federation, to whom lowering the retirement age has been a priority for a long time.
Pension funds were privatised thirteen years ago in Bolivia, following the collapse of the state-run system under a cloud of mismanagement and theft.
Now the country has two private pension funds, which cover 1.2 million private and public sector workers, and have been run by Zurich Financial Services and the BBVA bank. They manage $4.5 billion together.
Even though the reform doesn’t specify when the funds will be handed over, Luis Acre, the finance minister, said the government is talking with companies to step down in the coming year.