Social security in Ecuador has no resources for unemployment insurance

Humanitarian Law reduces the time to access this benefit.

The lack of liquidity to assume the payment of unemployment insurance worries Social Security, especially when the terms to request this benefit were shortened.

The Humanitarian Law establishes that during April, May, June and July 2020, people who have lost their jobs will be able to access the insurance benefit. This is financed with contributions made by employers corresponding to 1% of the remuneration of each worker in a dependent relationship.

To date, unemployment insurance has accumulated some USD 515 million that are invested in the IESS Bank (BIESS). 53% was invested in unsecured and mortgage loans. 47%, on the other hand, in government bonds.

However, divesting unemployment insurance resources requires at least two months.

The scenario is complicated for the Ecuadorian Social Security Institute (IESS), because the requests will increase until July.

One of the options to meet this commitment is to sell instruments, such as government bonds to obtain the necessary liquidity, as well as use part of the liquid USD 485.4 million, out of a total of USD 20,463 million, which it has in its portfolio of investments.

According to the IESS, between January and May, employers’ contribution to unemployment insurance was USD 100.3 million, 11.7% less than during the same period last year.

In addition, the IESS paid USD 12.7 million to 11,003 beneficiaries for unemployment insurance between January and May of this year. While in the same period last year, the IESS disbursed USD 8.5 million for this concept for 8,985 beneficiaries.

Between January and May of this year, the number of people who took up unemployment insurance grew 18.3% compared to the same period in 2019. This is partially due to the termination of employment contracts during the health emergency.

The president of the IESS Board of Directors, Jorge Wated, reported that 245,000 people have lost their jobs this year, therefore they have stopped contributing to Social Security.

The IESS projects that, until the end of December 2020, there will be a reduction of 500,000 members.

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