Chile: Right parties reformed the pension system «to their own taste»
January 26, 2008
From the point of view of a Chilean worker, private pension funds turned out to be a total failure: for many years they were taking away a considerable part of the salary, and finally were unable to provide half of its clients even the very minimum pension!
As it is known, the present pension system was introduced in Chile at the beginning of 80s, when at gun point of the military regime they started to modernise the national economy as per neo-liberal tracers.
Previous pension system based on cooperation of triunity worker-employer-state, was totally rejected with participation of the state in the economic life of the country. The Chileans had to face the «choice»: either to get registered in one of the private pension funds and remit part of their salary there to save for future pension, or — find themselves without any pension at all in old age.
Theoreticians pictured perfect perspectives: the clients of private funds would get not less than 75% of their salary, and with more favourable conditions — even more than the salary! But not everybody could be part of that «fairy tale»: private funds accepted only those who had permanent employment and handsome salary. Employees of informal sector, small undertakers and specially women who had to break employment due to pregnancy and child care, turned out to be outside the advertised pension system. They had to rely only on themselves and to modest «social assistance» of the state at the rate of 40 thousand peso that were paid only to the most needy.
In the result, after a quarter of the century of existence of the Private pension funds system, about 80% of the people of the retirement age and 90% of those who were over 70 years old, found themselves at miserable upkeep of various state structures, which rendered them «social assistance».
It is quite clear that as soon as the democracy was established in the country, Chileans started to demand the reform of the pension system or even the return to the «pre-Pinochet» system of accumulation of pensions, which was not perfect, but still provided a worthy life at old age.
Finally it's happened! 27 years after operation of Private pension funds, the Chilean government managed the parliamentarians to carry out a serious reform pension provision system. President of Chile Michelle Bachelet being a representative of a socialist party, was proudly saying that the state returned back its role of defender of rights of the most miserable and created the conditions for more confident life of all citizens without fear for their future.
In mid-January 2008 the parliament where the supporters of Bachelet recently have lost the majority, unanimously adopted the draft of the pension reform in Chile. From now on the state is allowed to contribute into provision of citizens with guaranteed minimum pension. Private funds remain operating, but they are made to expand their clientele and include all employees starting from the age of 25 and irrespective of their activity and size of the salary. The state undertakes to pay the remainder to those who during the period of depositing to private fund failed to «save» for the minimum pension.
As of 1 July 2008, the minimum pension goes up to 60 thousand peso (about 120 dollars). One year after it will be increased to 75 thousand peso (150 dollars) with provision for further increase to 350 dollars during the following years.
So, those who were members of the pension fund and failed to «save» to such a pension, will automatically get remainder from the state treasury. Women of 65 will start to get additional payment for every live-born child.
Thus, the state will spend 2 billion dollars for improvement of economic condition of more than 800 thousand citizens.
At the same time the state authorities increase their control over the activity of funds and guarantee that will stimulate competition between them which is absent today and lets the funds increase the mandatory installments from 10 to 30% of the salary! Henceforth the installment shall not exceed 13% of the salary.
As before the funds are allowed to dispose of the means of citizens, invest them in shares and bonds both in Chile and abroad.
Minister of labour Osvaldo Andrade stressed that this reform recognised the right of citizens for pension. Earlier their pension provision depended on how bad or how good or how bad they succeeded in life. Now it puts into dependence on citizens. The politics of the present government proceeds from, first of all, taking into account the rights of citizens.
Michelle Bachelet diplomatically stated that the reform turned to be possible due to support of all political forces of the country, including the right opposition. However, the unanimous decision of the parliamentarians still excluded a very important item from the reform, on which the government insisted: establishing of a State pension fund that could enable it to participate in pension provision of the citizens more actively.
But the private business does not need the state as so weighty a competitor. It is quite evident that the parliamentary majority, representing the right parties and protecting vital interests of large companies, rejected this idea.
According to some experts from the left opposition, the government of Concertacion again deviated from the chance to carry out the principal reform of the pension system. They pay attention to the fact that only representatives of large companies, ideologists of neo-liberal economy, were included in the commission for preparation of the reform. Workers, as such, did not have their representatives, and this is under the government that is often called socialist!
As before, the citizens are deprived of the freedom to choose between the private and state systems of pension provisions. Actually, the reform binds major part of the citizens either to assist the enrichment of private funds or be satisfied with minimum state pension, that, as was mentioned above, as of July 1 will constitue 60 thousand peso (that is 4 dollars a day in the country, where average housing rent is 6 dollars a day!)
It is unlikely, that the reform that was expected by the Chileans, will improve their economic condition. Experts of the left wing think that it is impossible without structural changes in the economy and give such figures: only 30% of workplaces in Chile are considered to be «worthy» 80% of Chileans get a monthly salary not exceeding 300 thousand peso (600 dollars). Absence of control from the state that allows the employer to avoid from payments to pension of his employees is added to the picture.
When leader of banks clerks Luis Mena learned about the results of the discussion regarding the reform of the pension system, concluded that the government and political parties do not have the determination to establish the just social provision for satisfaction of all layers of the society. The reform is carried out in the interests of transnational companies standing behind the Private pension funds and command them. It proves once again that the «socialist» Bachelet and her government acts in the interests of capital and majority, increasing the gap between the poor and rich: 5% of the richest part of the society has income 220 times more than 5% of the poorest.
It is because of this the tension of social protests in the country becomes more and more acute. It is getting more and more difficult for the ruling circles of Chile to stand for «model image» of their country at the international arena. Pensioners, vainly appealing to kindness and justice, are one of the numerous proofs of failure of the advertised «Chilean model» of economic development. In Russia they seem to begin to understand it.