Pressured by the recent massive protests rejecting the private system of pensions, inherited from the Pinochet dictatorship, Chile's President Michelle Bachelet announced Tuesday that her administration will be working on a reform.
“Citizens reminded us once again that we are facing a huge challenge: to make sure that the pensions are fair and they recognize the dignity and labor efforts of people,” she told reporters.
She was referring to the massive protests that took place in over 40 cities Sunday, with over 150,000 people—according to the organizers—protesting in the capital.
Luis Mesina, the spokesperson for the main group that organized the march, called “No+AFP,” or “No More Funds Administrators of Pensions," said that Chileans had lost patience and tried to “draw the attention of authorities as they have been so insensitive to such a heartfelt demand.”
In 1980, when military dictator Augusto Pinochet was in power, Chile was one of the first countries to experiment with the privatization of social security, a model that was later extended to many other Latin American countries, including Argentina and Peru.
According to this system, Chilean workers are expected to deposit 10 percent of their monthly wage, plus an administrative fee, in individual bank accounts managed by private funds, which are supposed to be reinvested in the economy. The final amount of monthly pensions then depend on the funds' 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.
While the economic “Miracle of Chile” in the 1980s was allegedly due to this system, the situation has since changed. Many of the 10 million workers, affiliated to the AFP, are not satisfied with the amount of their pension—an average of US$300 per month.
On top of that, their discontent was fed by rumors that hedge funds continue to make profits, according to a report by Chile's Fundacion Sol on labor issues, AFP's earnings during the first nine months of 2015 increased by 71.4 percent, compared to earnings in 2014.