The private pension system (AFP) has been the heart of the Chilean economic model forged during the last military dictatorship | Only 26% of society supports the young president who took power on March 11
“We have no right to keep making them wait“. With a popularity of just 26% in less than nine months in office, President Gabriel Boric also feels that time is against him. For this reason, he has taken his boldest political step by announcing a project of reforms of the private pension system which was designed during dictatorship of the general Augusto Pinochet (1973-90) and is considered the matrix of the economic model that the social outburst of 2019 put under question.
borik was weakened after a popular consultation rejected the Constitution with which it sought to channel the unrest of 2019. The young president of lefts tries to retake the political initiative in adversity conditions. It has first launched the proposal for a tax reform. Last Wednesday he decided to face one of the great demands of society. The pension system, known as the AFP, has been, since the eighties of the last century, a business of proportions. It is estimated that it manages some 180,000 million dollars that have their origin in the mandatory individual capitalization. This is equivalent to more than half of Chile’s GDP.
borik assured that “the AFPs, in this reform, are finished”. The Government wants to create a mixed model, with a strong state role. “It is the first time that the AFPs are really touched”said Juan Ignacio Latorre, senator and president of the Democratic Revolution (RD), one of the parties in the official coalition, about the pension reform proposal. From now on, “there will be new private investment managers with the exclusive purpose of investing pension funds.” But, at the same time, “a public alternative will be promoted, which will allow competition to be promoted with the entry of new actors & rdquor ;.
?? A comprehensive and robust proposal to improve current and future pensions. With a mixed social security system that safeguards your savings and gives you the freedom to choose who invests your 10%.
they come #BestPensions for ??? https://t.co/HJdR3aSYMl– Jeannette Jara Román (@jeannette_jara) November 3, 2022
The keys
The Executive’s project contemplates that workers contribute 10.5% of their salary to inheritable individual accounts. They will be able to choose between private investors or have their money managed by a Public body. “The system will provide freedom to choose who will invest your pension funds & rdquor ;, assured Boric. At the same time, a Universal Guaranteed Pension (PGU) that will be financed with general taxes. The third pillar of this initiative is social insurance, financed through a contribution that will be paid by employers.
The initiative must go through the Congress, where the left does not have a majority. “This reform was born dead. They do not have enough votes & rdquor ;, said the right-wing deputy, Agustín Romero. “We will see who is going to continue defending the AFP business,” Latorre said about the mixed system. “Chile has to change and change for the better, for those two million Chileans who receive a basic pension that is below the poverty line. Chile also requires a tax reform that ensures the resources to implement this public policy & rdquor ;, said the socialist senator, Gastón Saavedra. What the government wants is improve almost 100% pensions that are mostly below the minimum wage, about 280 dollars.
“It is a solid project and it will continue to be nourished by proposals, such as that of the No More AFP coordinator. We call on the right to also make a proposal, which we have not yet seen, and which focuses on improving current and future pensions, in instead of defending the AFPs,” he asked borik.
reactions
As expected, the private sector has reacted negatively. AFP Cuprum sent a massive email to its affiliates in which it harshly criticized the initiative. “They are worried because they are running out of business“, responded the Minister of Labor, Jeannette Jara. The AFPs, she said, “have exercised a monopoly, not only in the management of funds, but also in support and account administration tasks.”
Like what happened during the writing of the failed Magna Cartasocial networks began to become a space for reviling the project. ‘With my money No’, is the slogan launched by the Popular Initiative for Standards with the support of 60,852 signatures. “The government is not listening to the workers and it is very similar to what happened with the Constitutional Convention,” said one of the promoters of this new rejection, Francisco Orrego.