La descapitalización de los institutos de jubilaciones en el Uruguay: el empapelamiento de las cajas. 1943-1967

The Uruguayan pension system has been recorded as one of the most advanced in the region, being a pillar of the protection policies of the country. However, the financial crisis of the system and the discussions about the cost of social security has been a constant in the national debate. In this analyze the process of capitalization of pension funds in Uruguay during the period of 1943 and 1967, by the process known as "empapelamiento" (or “wallpapering”). This episode contributed, together with other causes (aging population, the falling real purchasing power of wages, deterioration of the quality of employment, etc.) in the reforms of 1979 and 1996. In addition, it’s an important process due to the role of the State to accelerate the underfunding and its impact on fiscal sustainability of the Central Government, during the period of consolidation and rise of the welfare system that characterized this period of the industrialization by substitution of imports. It is known as "empapelamiento" (or “wallpapering”) the mechanism by which the State placed a high percentage of Public Debt with fixed interest rate on pension funds. The problem arises in the mid-fifties when the economy enters an inflationary process. In this scenario the general rise in prices, the Public Debt not indexed and limited investment option permitted by law, led to the evaporation of savings in few years. That meant that afterwards during the seventies the public social security system will be deficient and became a heavy burden for the State finances.