WORKERS FREED!

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(No Transcript)
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WORKERS FREED!
Social Security Pension Funds West Africa
2013 Accra, Ghana 27 29th November 2013
Presented by Carlos A. Gomez
Warrior King Ghana Vision 2020
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Thus, Bismark destroyed the key human link
between effort and 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 Bismarks times, life expectancy was 48 years
and retirement age 70, set arbitrarily by Bismark
himself
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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
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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
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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
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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
SP 500 Nominal
Source Central Bank of Chile SP
Superintendency of Pension Fund Management
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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

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World Economic Freedom
Most free
2nd Quartile
3rd Quartile
Least free
Source Economic Freedom of the World, 2011
Report, Fraser Institute, 141 countries measured
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CHILE TOP 7 IN WORLD ECONOMIC FREEDOM
Source Economic Freedom of the World, 2011
Report, Fraser Institute, 141 countries measured
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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

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THE TRANSITION IT CAN BE DONE!
Fairness Guarantee current
retirees benefits (protect your
grandmothers 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
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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

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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
  workerss funds

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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

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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?

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30 YEARS, 30 COUNTRIES
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WORKERS FREED!