CHILE: Bachelet Responds to Mass Protest over AFP

After weeks of unrest across Chile over the protracted issue of the role of the Association of Administrative Pension Funds of Chile (AFP), President Bachelet has responded with new proposals to reform the pensions system.

The “No+AFP” (No More AFP) campaign culminated last Wednesday when around 750,000 gathered in major cities across Chile to rally for pension reform. Armed with copper pots, pans and wooden ladles to bang them with, protesters marched in their thousands against the largely privatised pension system.

Chile’s AFP system as it stands is a collection of 6 private sector pension funds that are in control of the investment of workers’ monthly pension payments and, with government subsidies, the payment of pensions for retirees. The AFP’s many critics have long declared the pension system to be at best an ineffective, outdated framework and at worst an unjust prop for corporate and wealthy interest.

As the OECD index articulates “Chile has a well-developed system of individual pension accounts, yet the average pension is only 15% of average earnings.” This means the average pension is the equivalent to 300 USD a month, though many pensioners earn less than 240 USD, leaving them to get by in an economy whose accepted minimum wage is around 380 USD.

This has partially been put down to the outdated nature of the system, as political commentator Pablo Toche writes “The AFP was created for a labour market that no longer exists and that, in reality, will exist less and less”.

A system that favours stable employment over the growing self-employed demographic. While this can be put down to inefficiency, Toche persists that the AFP also inevitably favours the wealthy who can find consistent work and continually pay into their pension scheme throughout their career. Young professionals and sporadic workers are left in the dark over their economic futures after employment.

Others declare that further ideological factors are at play. According to the ‘Unidad de Data de El Mostrador’, “one in every five Chilean pesos received by banks in deposits and bonuses are financed by the AFP”, thereby giving evidence to suggest that the system, devised in the Pinochet era, still serves to strengthen capital markets rather than aiding retirees. A further hangover policy from the military dictatorship is the exemption of the armed forces and police from the AFP system, these state security roles enjoy a healthier pension plan.

Piecemeal reform has been taking place since 2008, when Bachelet introduced a flat monthly benefit to the poorest 60% of long term residents over 65. However, the slow piecemeal approach is seen as insufficient for protesters, who in the last months have been demanding more fundamental change. Namely the end of private sector interest in pensions and the introduction of a public-controlled social security system.

“Aporte Tripartito” is a phrase often pronounced as the answer to the void that protesters hope AFP will leave in the pension system. ‘Tripartite contribution’ would consist of financial input from employers, the state and workers that would fund a less corporate, more democratic system of pensions.

In her response to the protests, Bachelet echoed a few of these ideas. Speaking on Tuesday, she proposed a 5% increase to the current 10% that workers pay towards their pensions, this new 5% would be fully financed by employers, which would give companies a duty to support their employees’ pensions. “This increase in contributions will allow us to build the foundation for collective savings with solidarity. Part of it will enable raising current pensions and the other part will be used to ensure more equity in future pensions,” Bachelet said. ‘La Mandataria’ further suggested that there would be greater transparency in the investment decisions of the AFP, allowing workers to see where their pension payments are going.

But protesters still fear that the strong corporate interest behind the current AFP system will resist reform, resulting in the same Pinochet-esque pension chassis, just with a new outer-bodywork. And indeed, intertwined with the proposals of activists, Bachelet’s speech also pandered to the proposals of the AFP, whose main representative Francisco Pérez Mackenna has suggested that increasing the age of retirement and demanding that the self-employed pay into the pension system are more vital than overturning the AFP.

Bachelet walks the political tight-rope, attempting to creep past a period that has seen her popularity rating drop to the lowest she has experienced as President. With further protests of clanging copper pots and pans yet to be held on the 21st August, activists will continue calling for a pensions system that greater resembles their nationalised copper industry.