Santiago, July 24. Photo: EFE.
Pressured by the recent large protests rejecting the private system of pensions inherited from the Pinochet dictatorship, Chile's President Michelle Bachelet announced on July 26 that her administration would reform the system.
“Citizens reminded us once again that we are facing a huge challenge: to make sure that the pensions are fair and they recognise the dignity and labour efforts of people,” she told reporters.
Huge protests took place in more than 40 cities on July 24. Organisers said more than 150,000 people marched in the capital, Santiago.
Luis Mesina, the spokesperson for No More Funds Administrators of Pensions, the main group that organised the march, said that Chileans had protested to “draw the attention of authorities as they have been so insensitive to such a heartfelt demand”.
In 1980, when Pinochet was in power, Chile was one of the first countries to experiment with privatising social security. It established a model that was later extended to other Latin American countries.
Under this system, Chilean workers are expected to deposit 10% of their monthly wage, plus an administrative fee, in individual bank accounts managed by private funds — so-called Pension Fund Administrators (AFPs). These funds are supposed to be reinvested in the economy.
The final amount of monthly pensions accumulated by workers then depends on the AFPs' return on capital and on the fluctuating stock market.
This system was promoted by the so-called Chicago Boys —economists trained in the United States who implemented Chile's neoliberal economic model during the military government from 1973 to 1990.
Chile's “economic miracle” in the 1980s was allegedly due to this system, but the situation has since changed. Many of the 10 million workers affiliated to this system are not satisfied with the amount of their pension — an average of US$300 per month.
On top of that, their discontent is fed by rumours that hedge funds continue to make profits. According to one report, AFP earnings during the first nine months of last year rose by 71.4%, compared to earnings in 2014.
[Reprinted from TeleSUR English.]
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