Throughout a person's life, a large part of it is allocated to work in order to generate sufficient income to have a decent standard of living. A non-negligible part of that income is used to finance their retirement. That is, generating a source of income for the passive stage of your life.

Currently in Argentina only the pay-as-you-go system is used, this consists of current workers allocating funds with which retirements are covered. However, in the country until 2008 there was a dual regime: distribution and capitalization. The funds that were generated until that year went to form a fund, which ANSES managed.

This report will address the history, composition and operation of the Sustainability Guarantee Fund, which is a government agency whose purpose is the administration of a large part of the pension funds. The idea of ​​the work is to provide an explanation of why the fund emerged, its characteristics, evolution and magnitude, and the different dilemmas that its use entails in light of the current situation, and above all, after the signing of the agreement between Argentina and the IMF in June of this year.

The administration of the FGS has as target achieve direct and indirect returns, generated by the investments and application of the fund's resources, specifically, the mission of the FGS is to preserve the value of the fund's assets, seeking the profitability of its resources.

 

Historical evolution

In the first year of operation, in 2007, the FGS did not have contributions from the nationalized AFJP system. Therefore, at the end of November 2008, the funds totaled $17.847 million pesos. This situation changes abruptly on December 5, 2008 when the AFJP funds, which account for approximately $80.209 million, are integrated.

La evolution of the fund's valuation, can be seen in Table 1. As can be seen, the fund's price grows year after year in nominal terms. Note that the capitalization of the fund operates through two channels: the accumulated profitability, and the capital contributions by the Treasury.

In order to obtain a more accurate diagnosis of the management of the FGS, the last two columns of the table show - firstly - the interannual variation of the nominal value of the fund net of the capital contributions made by the Treasury. For its part, the last column shows the profitability of the fund net of capital contributions and discounting the influence of generalized price variation.

According to the above, 2011 is the year with the worst performance on record, with a capital contribution of $6.075 million (the maximum in the series) and a drop in real valuation of 14,1% year-on-year.

If the evolution of the fund's performance in real terms, taking December 2009 as the base year, that is, when the funds from the AFJP are already integrated; Until December 2017 (which is the last data available for a full year), the value of the FGS registers a real growth of 2,85% over the course of 8 years, excluding any capital contribution made by the Treasury from the estimate.

On the other hand, Table 2 shows the composition of the fund in recent years. In it, the strong presence that the FGS has in financing the National Public Sector is observed.¹ . In the case of Public Securities, although the participation has been reducing from the registered proportion of 62,4% in December 2013, to 56,6% in March 2018; It is still above half the value of the FGS. As a counterpart to this decrease, the shares have reached a participation of approximately 2017% of the fund at the end of 20. Finally, we cannot fail to note the presence of a new item that has begun to operate since 2016, loans to the provinces.

The FGS is a Reserve fund administered by the ANSES that has assets of specific allocation. It is made up of financial assets of various types such as public securities, shares of corporations, fixed terms, negotiable obligations, common investment funds, financial trusts, mortgage bonds, loans to provinces and to SIPA beneficiaries.

As for the investment They are distributed in various productive projects, generally referring to the financing of housing construction or investment in sources of energy and natural resources.

La joint The current economic situation of the country is influenced by the agreement with the International Monetary Fund (IMF) with which a 3-year disbursement of 50.000 million dollars was established, conditioned by certain clauses related to the fulfillment of pre-established goals that enable the gradual disbursement of available funds, with quarterly reviews to be evaluated from June 2018 onwards.

Importance

Who usually manage funds third parties have the objective and responsibility of using them efficiently, that is, of not spending them on consumption but on profitable investments in order not to decapitalize it. In pension systems that constantly accumulate income, this premise is fundamental and the discussion regarding the actions of the administrators in charge of managing workers' contributions (whether the state itself or private institutions) is not minor.

A well-made investment in productive and profitable projects begins a virtuous circle in the domestic economy and can produce greater economic growth and, as a consequence, greater employment. Of course, and as mentioned above, the impact of the effect depends not only on its direction, but also on the magnitude of resources that are made available for these purposes.

On next report An attempt is made to explain everything related to the operation of the Sustainability Guarantee Fund and a brief analysis of how its profitability has evolved since its creation in 2007, since ultimately our future retirement will largely depend on it.

1 – It should be noted that, under the capitalization regime, the AFJPs were also required by law to keep in existence a significant part of their portfolio in Public Securities.