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WORKERS FREED!

Social Security & Pension Funds West Africa 2013 Accra, Ghana 27 & 29th November 2013. WORKERS FREED!. Presented by Carlos A. Gomez. Warrior King Ghana Vision 2020. Thus, Bismark destroyed the key human link between effort and reward.

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WORKERS FREED!

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  1. Social Security & Pension Funds West Africa 2013 • Accra, Ghana • 27 & 29th November 2013 WORKERS FREED! • Presented by Carlos A. Gomez • Warrior King • Ghana Vision 2020

  2. Thus, Bismark destroyed the key human link between effortand reward Today, workers citizens support the heavy weight of unfunded state obligations In 1889, German Chancellor Otto von Bismark, created the pay-as-you-go pension system …A State sponsored Ponzi scheme • In Bismark´s times, life expectancy was 48 years and retirement age 70, set arbitrarily by Bismark himself

  3. EU 25: LIFE EXPECTANCY INCREASES & FERTLITY RATE DROPS Life Expectancy years Fertlity rate • European trends are similar to the rest of the World • * 2.1 is the replacement rate just to maintain population constant • Source: European Commission, Oct 11, 2011

  4. In 60 years, active workers to pensioner ratio fell dramatically. And it will continue to fall… …adding still more state unfunded obligations on workers of the world • Source: 2010 OASDI (Old Age Survivors & Disability Insurance) Trustee Report, Social Security administration, USA

  5. EUROPE GOVERNMENTS: UNFUNDED OBLIGATIONS* (% of GDP) Real Debt of Europe The average EU country needs to have over 4 times (434 %) its current GDP in the bank today, earning interest, to fund current policies indefinitely *Difference between the projected cost of continuing current government programs (official + pensions + health + welfare) and net expected tax revenues • Source: Measuring the Unfunded Obligations of European Countries, Jagadeesh Gokhale, National Center for Policy Analysis , 2009

  6. Achievements of Private Pension Funds in Chile • In 32 years (1981-2013), the results are: Annual real return for Chilean workers retirement accounts was 8.7% Assets reached $ 170 Billion, 70% of GDP • 8.7% • 7.2% Chile PRAs Real S&P 500 Nominal • Source: Central Bank of Chile; S&P; Superintendency of Pension Fund Management

  7. CHILE : WORKERS WEALTH ACCUMULATED 70% GDP(US$ MILLIONS) • Largest wealth creation for Chilean workers in the History of Chile • Wealth Composition: • Contributions: 25% • Returns: 75%

  8. World Economic Freedom • Most free • 2nd Quartile • 3rd Quartile • Least free • Source: Economic Freedom of the World, 2011 Report, Fraser Institute, 141 countries measured

  9. CHILE TOP 7 IN WORLD ECONOMIC FREEDOM • Source: Economic Freedom of the World, 2011 Report, Fraser Institute, 141 countries measured

  10. CHILE 1981: CHANGE THE PARADIGM! • Every worker has a mandatory personal retirement account • Saves 10% (substituted a payroll tax) of his monthly wage and • Benefit from the extraordinary power of compound interest • At retirement: annuity for life, programmed withdrawal, or mix • “Retirement” is redefined to enhance personal choices (age, benefit level, inheritance) • System managed by competitive private management funds companies • Workers choose among 5 mutual funds, with highly diversified portfolios • Workers funds invested in 14,000 companies around the world • Role of government: market-friendly regulation, technical supervision, and safety net paid with general tax revenues • Zero payroll tax

  11. THE TRANSITION: IT CAN BE DONE! • Fairness:Guarantee current retirees benefits (“protect your • grandmother’s check”) • Choice:Voluntary opt out, with “recognition bond” • Responsibility:Close door of bankrupt system to new entrants • Fiscal challenge:No “economic cost” and need to devise a long term plan to finance transition • Leadership:Moral courage and use of social media (facebook, twitter) and traditional channels to speak the truth to citizens and explain this ‘common sense’ solution

  12. CHILE 1981-2013: KEY RESULTS • Empowered workers: 8.7% annual average real return for 32 years, multiple choices (incl. retirement age), ownership of capital, inheritance • Strengthen the economy: capital pool (US$ 170 billion; 70% of GDP), less unemployment, fiscal responsibility, and faster growth • Stabilize society: workers turned into small capitalists; political/cultural change and stability • Increase freedom: Chile ranks N° 7 in Economic Freedom of the World Report

  13. ECONOMIC DRIVERS FOR PENSION FUNDS • Economic Growth: • Zero import tariffs: buy at the lowest prices in world markets • Flat tax income rate • “Popular capitalism”: Privatize state-owned companies • 10% shares to all citizens • 41% shares bought by Pension Funds, Insurance Companies and private citizens, both local and foreign • Government to focus on the most poor: • Vouchers for education & health • Guarantor of Equal Opportunity. Equality is Unjust • Low inflation & fiscal balance • Fund Management Companies: • Strict separation between the Fund & Owners of the Management Fund Company • Owners of the Management Fund Company required by law to invest at least 10% of their capital in the Fund exactly in the same investments of the workers’s funds

  14. INVESTMENT OPTIONS: 2014 & BEYOND • Badly needed infrastructure projects: • Private concessions • Housing (government subsidies for the poor) • Power • Technology & Telecommunications • Digital economy • Shares & Bonds: diversification is the key • By industry • By asset class • By country • Education & Health

  15. ATLAS FREED • Latin America:10 (largest: Mexico) • CEE: 14 (largest: Poland) • Developed: Australia & Sweden • Asia: Hong Kong & India (only gov) • Africa: Nigeria. Ghana next? • Middle East: Egypt (2012) • W. Europe:Only parametric reforms • The Race:USA or China first?

  16. 30 YEARS, 30 COUNTRIES

  17. WORKERS FREED!

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