The reforms approved two days ago by the Nicaraguan Institute of Social Security have caused confrontations and violence in the streets, between citizens and police groups.
The changes, approved by presidential decree, include the increase in the contribution made by workers as well as employers to the scheme, the reduction of future pensions and a 5% tax on pensions to avoid the bankruptcy of the regime.
The quota for workers will increase from 6.25 to 7% and will deduct 5% of pension amount for medical care of retirees.
The Higher Council for Private Enterprise (Cosep), a government ally in the last 11 years, rejected the project. The Nicaraguan Foundation for Economic and Social Development (Funides) warned in turn that the reform will cause layoffs and more unemployment and projects that some 200 million dollars will stop circulating in the economy, which will result in a slowdown in consumption and greater informality.
Funides, a think tank of economic and social policies, accused the Nicaraguan Institute of Social Security (INSS) of assuming legislative functions by modifying the contributions it receives.
The president of the INSS, Roberto López, justified that the measure is necessary to give the institution financial sustainability for a period of 10 years, after which a new adjustment will be required.
The International Monetary Fund (IMF) recommended to the government to carry out reforms to that entity, such as increasing the retirement age and the quoted weeks, but the government and related unions oppose this.