Recent breakthroughs in Venezuela on rules reforming worker's severance payments could set the stage for broader social security reform.
In March, the country's government, labor and business sectors agreed on draft legislation concerning severance for fired or laid-off workers. Congressional approval is expected.
And once that approval is secured, Venezuela is likely to address other social security system components, possibly including pensions, health care, and workman's compensation.
Siobhan Manning, Latin America analyst with Santander Investment, said no official statements have been made about pension reform so far. But "logically, one would expect that to happen, given the wave of pension privatizations that have occurred in Latin America," she said.
In fact, timing will be important. Activity on additional social security reforms - of which pensions could be the next considered - would have to occur fairly soon to be successful. Unless firmed up by mid-1998, further social security reform could become stalled by political campaigning for the December 1998 elections, Ms. Manning noted.
But for now, the agreement on severance reform was a good start. A Santander report called the accord "the first major social security agreement struck among the government, labor and business, and the first broad consensus in recent Venezuelan history."
According to Santander's Ms. Manning, the new program would create a system both cheaper and less time-consuming for employers. It calls for a certain amount of each worker's salary to be deposited in a severance fund. Monthly payments made to workers' accounts would create a system that would be capitalized.