Most Neoliberal Country in the World

Last month, Chile’s assembly voted to legislate on the pension bill. But many on the Left say the version that’s currently being debated leaves out key changes and doesn’t address the root issues.

Rodrigo Rettig, a lawyer and member of the center-left Liberal Party, part of Boric’s Apruebo Dignidad governing coalition, worried that the “central part” of the reform — a 6 percent increase in monthly pension contributions, paid for by employers, half of which would go into a solidarity fund for the poorest pensioners — had been removed. “Attempting to install a welfare state in the most neoliberal country in the world has been a titanic task,” he said. “For Boric, having said that, the pension reform and the tax reform are the only two big marks that this government can leave.”

Jorge Heine, a former Chilean ambassador who served stints in China, India, and South Africa, agreed. “They’re doing what they can, but the opposition is very strong and they’re determined to avoid it,” he said. “It’s an emblematic issue for the government, and in some ways, it’s make-or-break.”

Pension reform was one of the key demands of the 2019 protests, which were brutally repressed by the right-wing government of the late president Sebastian Piñera, who died in a helicopter accident this February 6.

Despite popular uprisings dating back to 2016, none of the past three governments, including either Boric’s administration or the center-left government of Michelle Bachelet, have been able to pass significant pension reform, explained labor leader Luis Mesina. The founder of the “No +  AFP” (No More AFP) movement, Mesina tells Jacobin: “In the end, all three of them have been subjugated to the power of financial markets.”

The current system was created under military rule in 1981, when the pay-as-you-go public pension system was replaced by a privatized one. This was part of an onslaught of neoliberal measures that also included reforms to education and other social services. Hailed by right-wing figureheads from Margaret Thatcher to George W. Bush, who in 2003 looked to Chile as a model when trying to reform the US Social Security system, the system has put a lot of money in the pockets of foreign businesspeople, many of them in the United States, as well as the wealthiest Chileans. As the New York Times reported in 2016, three of Chile’s six largest private pension funds are run by foreign companies, managing $171 billion alone.

“Chilean and foreign capitalists are financing themselves on the humanity and the labor force of Chilean workers to expand their fortune outside the country,” Mesina said. “In a country as small as this, it allocates more than $90 billion abroad.”

In Chile, however, this capital-markets investment has not led to higher pensions. The replacement rate — the monthly pension actually received, as a proportion of the worker’s final month of salary — hovers around 20 percent. In 2016, center-left president Bachelet passed a bill to institute a Universal Guaranteed Pension (in Spanish, PGU), financed through various taxes, to subsidize the smallest pensions. Even with this crutch, pensions are often below the poverty line in one of Latin America’s most expensive countries.

“Essentially much of the world was hoodwinked by the system that was concocted under military dictatorship in far-off Chile,” former ambassador Heine told Jacobin. “And forty years later, when the results come in, we all realize it was a scam.”

Sisyphean Task

Low pensions disproportionately affect women, Patricia Lillo Reyes, sixty, a spokesperson for the No + AFP movement, explained. In Chile, women’s median pay is 12 percent lower than men’s for the same work. Women are also more likely to take larger periods of time to take care of children and to work in the informal economy. “It’s a system that condemns us on all sides,” she said.

Lillo said that she was disappointed with the current government’s proposal. “Boric and many others wore the No + AFP shirt” at protests, she said. “But today they’re part of the neoliberal system. They are doing what the Right tells them to do.”

In January, Chilean investigative news outlet CIPER reported that various members of Boric’s coalition met with, among other business leaders, the CEO of the AFP Cuprium. Mesina, too, felt like he had been sold out by the governing coalition. “This government is giving even more money to the AFPs, more than Piñera” he said. “That’s the irony.”

Many people Jacobin spoke with felt like reforming the pension system was akin to a Sisyphean battle against wealthy Chileans who hold the levers of economic and media power.

“Here in Chile, we only understand freedom from a neoliberal perspective and we don’t understand equality from a republican perspective,” Rettig, from the Liberal Party, said. “The responsibility for your pension is up to you.”

“These private pension schemes are the companies that finance right-wing politicians,” Heine added. “When you control $200 billion, you can imagine the amount of influence that you have on politicians.”

Clean Eastwood saleswoman Zuñiga sees fighting to restore public pensions as part of the unfinished project of bringing democracy back to Chile after the dictatorship. “Democracy never really arrived,” she said. “In reality it was a pseudo-democracy because we were never able to reclaim what we had lost in terms of social security.”

“That’s our calling now.”