More than one million Costa Ricans—almost 20 percent of the country’s population—live in poverty while almost ten thousand receive “luxury pensions.” This privileged group, dubbed “Ticos Con Coronas” (or “Costa Ricans with Crowns”), receive an average monthly pension of US$4,495, with some receiving as much as US$24,000 per month. The traditional Social Security regime is capped at US$2,700 per month, with an average monthly pension of less than US$600. For non-contributory individuals living below the poverty line, the cap is US$140. These luxury pensions, paid by taxpayers and currently grossing over 2 percent of the national GDP, have rattled the Costa Rican economy, and have created a class divide between the small and privileged “Ticos Con Coronas” pensioners and everyone else.
Article 73 of the Costa Rican Constitution states that the autonomous Costa Rican Social Security Fund is responsible for the administration and oversight of social securities. However, according to IDEAS Labs, the Costa Rican Congress ignored Article 73 and approved 16 luxury pension regimes that coexist with the Costa Rican Social Security Fund’s pension regime for the non-privileged.
IDEAS Labs first addressed the issue in 2017, rolling out a massive public education initiative to catch the attention of a variety of audiences, from the public to policymakers to Supreme Court justices. Direct letters, videos, social media campaigns, public petitions, infographics, public VIP endorsement, technical support from the Superintendent of Pensions and the National Director of Pensions, and coalition building with civil society organizations were just a few of the essential tools used during the #TicosConCoronas campaign to highlight the economic ramifications, as well as the immorality of some of the luxury pensions. The pension issue has been covered by over 107 media outlets in 2020 alone.
“During the past few decades, political, academic, business, and union leaders have hijacked the lawmaking powers in order to pervert the laws and create immoral benefits in the form of ‘luxury pensions’ and ‘luxury salaries and benefits’ for public sector employees,” said Luis E. Loria, founding president of IDEAS Labs, in 2018. “According to public figures, in 2017, the privileges of ‘Ticos con Coronas’ amounted to 8.4 percent of GDP, in a country with a fiscal deficit of 6 percent of GDP.”
IDEAS Labs positioned the luxury pension scheme as a top priority in the national debate during the two rounds of the presidential election in early 2018. It quickly became a hot-button issue thanks to the public awareness campaign that IDEAS Labs ran, which inspired over 46,000 Costa Ricans to sign their change.org petition, almost 1 percent of the Costa Rican population of 5 million.
“At IDEAS Labs, we feel very honored for being selected as a finalist for the prestigious Templeton Freedom Award,” said Loria. “During the past seven years, our work has been inspired by the courage, talent, and innovation of hundreds of freedom fighters around the world connected through Atlas Network. Today, we must scale up our efforts to face the increasing challenges to Freedom and, thanks to your support, we are ready to do it.”
While the World Bank had been advocating for pension reform in the country for decades with no success, thanks to the work of IDEAS Labs, ten measures aimed at eliminating or reducing luxury pensions were presented to Congress by five major political parties, and a public employment reform package was presented by the government. One of the proposals was approved unanimously by the Legislature and was signed into law on December 5, 2019, significantly reducing luxury pensions for 4,000 Ticos con Coronas. The total annual special contribution (equivalent to a tax) of about 4,100 public sector pension beneficiaries was raised from US$9.2 million to US$30.5 million, thanks to the reform. IDEAS Labs believes that the public spending cuts will have a direct impact on the reduction of the size of government, government expenditures, public debt, and interest rates.
“IDEAS Labs exposed the costs—and the immorality—of a luxury pension scheme that allowed the politically connected to live opulently at the expense of ordinary citizens,” said Atlas Network CEO Brad Lips. “By rallying their fellow Costa Ricans to address this injustice, IDEAS Labs has shown how think tanks can work for the broad public interest in having equality before the law for all.”
On January 8, 2020, Costa Rican President Carlos Alvarado publicly announced that he would renounce the luxury pension he was set to receive at the end of his term in 2022. Despite this, IDEAS Labs’ fight against the injustice of luxury pensions is not over. The organization is expanding its efforts by creating the #TicosConCorona Privilege Observatory. The Observatory obtains detailed information of beneficiaries of luxury pensions from both the Superintendence of Pensions and the National Pensions Bureau and publishes it to increase transparency. As of July 2020, the organization published more than 75 individual cases, including former Presidents of the Republic, former Congressmen, leading intellectuals, and political leaders.
IDEAS Labs is responsible for creating a climate of opinion that has pressured politicians to respond to the voice of the people and major reform has followed.
IDEAS Labs’ “Ticos Con Corona” campaign won the 2020 Latin America Liberty Award and is a finalist for the 2020 Templeton Freedom Award.
About Atlas Network’s 2020 Templeton Freedom Award:
Awarded annually since 2004, Atlas Network’s Templeton Freedom Award is named for the late investor and philanthropist Sir John Templeton. This prestigious prize honors Sir John’s legacy by recognizing Atlas Network’s partner organizations for exceptional and innovative contributions to the understanding of free enterprise and the advancement of public policies that encourage prosperity, innovation, and human fulfillment. The Templeton Freedom Award is generously supported by Templeton Religion Trust and will be presented during Atlas Network’s Freedom Dinner on Nov. 12. The winning organization will receive a $100,000 prize, and five additional finalists will receive $20,000 prizes. The finalists for the 2020 Templeton Freedom Award are:
- The Center for Indonesian Policy Studies, based in Jakarta, Indonesia, for their Affordable Food for the Poor project
- The Centre for Public Policy Research, based in Kochi, India, for their labor market liberalization project
- The Fraser Institute, based in Vancouver, Canada, for their Alberta Prosperity Initiative
- IDEAS Labs, based in San José, Costa Rica, for their “Ticos Con Coronas” campaign
- The Mercatus Center at George Mason University, based in Arlington, Va., for their Equity Initiative for American Healthcare
- The Property and Environment Research Center, based in Bozeman, Mont., for their Recovering Endangered Species project
The Templeton Freedom Award is generously sponsored by Templeton Religion Trust.
About IDEAS Labs:
The mission of IDEAS Labs is to promote the strategic use of knowledge to design free market–oriented solutions for local, national, and regional problems, and promote more effective collaboration and discussion forums to achieve the successful implementation of those solutions in Latin America.
About Atlas Network:
Atlas Network increases opportunity and prosperity by strengthening a global network of independent civil society organizations that promote individual freedom and remove barriers to human flourishing.
