With a
presidential election sheduled for Sunday, polls are showing Socialist candidate Michelle Bachelet poised to become Chile's first woman President. And Social Security has become an important issue in the campaign.
Larry Rhoter reports in the NY Times:
The Chilean system of personalized accounts managed by private funds has inspired a score of other countries since the pioneer effort to create it here 25 years ago. It is endorsed by President Bush, who has called it "a great example" from which the United States can "take some lessons." Here at home, though, dissatisfaction with the system has emerged as one of the hot-button issues in the election, a runoff that will take place on Sunday.
So, how is the system holding up after 25 years? Read below...
Well, it seems that workers aren't getting much benefit from this "model" system, as the high costs and low benefits have led many to avoid paying into the system altogether. This hasn't been bad news for everyone, however.
According to a recent study here, Chile's pension funds, whose number has shrunk to 6 from more than 20 as competition has diminished, recorded an average annual profitability of more than 50 percent during a recent five-year period. Other studies, including one conducted by the World Bank, indicate that pension funds retain between a quarter and a third of workers' contributions in the form of commissions, insurance and other administrative fees.
Even the Conservative candidate has nothing kind to say about this system. Instead, he attempts a Bush-like strategy of pretending to favor reform.
But even advocates of an untrammeled free market, like Mr. Piñera, the conservative candidate, are jumping in with criticisms, to the surprise of some here. Mr. Piñera is the brother of José Piñera, the former labor minister who imposed the personal account system during the dictatorship of Gen. Augusto Pinochet. In addition, Sebastián Piñera is backed by the large business groups that control the pension funds and have benefited from the expansion of investment capital the funds have provided.
"Chile's social security system requires deep reforms in all sectors, because half of Chileans have no pension coverage, and of those who do, 40 percent are going to find it hard to reach the minimum level," Mr. Piñera said in a televised debate with Ms. Bachelet on Wednesday. "This has to be confronted now, and we agree with Michelle Bachelet and will, I hope, join forces behind this large undertaking."
And, what does the candidate's borther, one of the architect's of this mess, have to say about it?
José Piñera, who is co-chairman of the Project on Social Security Choice at the conservative Cato Institute, based in Washington, did not respond to e-mail requests for an interview to discuss the changes being proposed here.
Apparently he's too busy at his cushy job in Washington advising Republicans on how to "fix" our system the way he "fixed" Chile's under Pinochet. Thankfully, it looks as though Chile's voters aren't gullible enough to believe that there is no real difference between their candidates, on this issue or others.
Thanks to Mark Thoma for the link.