Pioneer, Chile tries to repair its retirement system – Economy

Pioneer of Savings Plans Chile became a target of criticism when the first generation of workers of this model began to retire in the 2000s.

With a large number of workers. Informal, which never spared its pensions, Chile began to have thousands of old people without any source of income. The problem has led the government of Michelle Bachelet to create a pillar of solidarity in 2008, which guarantees a minimum income, even to those who have never contributed. Resolved, the country now faces another problem: the low value of retiree benefits.

According to a survey of the Inter-American Development Bank (IDB), Chileans who retire receive the equivalent of 38% of salary since their period of professional activity. In Brazil, for those who retire according to age, the percentage is 80%.

In addition to the increase in life expectancy, pension administration problems explain the current problem of social security. The economist Flávio Ataliba, who has contributed to the development of the hybrid proposal of former candidate Ciro Gomes, explains that the financial investments made by pension managers in Chile have been widely dispersed. In the face of low yields, the management fees billed by these managers began to weigh more, sometimes reaching 20%.

The economist Paulo Tafner – who developed a hybrid system proposal for Brazil with former Central Bank president Arminio Fraga – pointed out that the concentration on the retiree market also undermined the Chilean system because it allowed higher levels of administration. "It is a problem of economic regulation.For this reason, we propose to create a public administration in order to lower rates and create competition."

The economist also notes that the system of Chilean capitalization was an innovative experience, although many highlight only the bad aspects. "It is necessary to remember that, despite the many problems, the country has only begun to develop sustainably that after the adoption of the reform."

In an attempt to resolve the current deadlock in social security in Chile, the center-right government of Sebastián Piñera is proposing to Congress that companies come to collaborate on retirements. Today, only the worker is responsible for contributing, with 10% of his salary. Piñera's proposal is that employers receive an additional 4%.

Following in Chile's footsteps, Mexico will soon be facing problems of low pensions. The country has adopted a model similar to that of Chile, with a capitalization of nearly 100%, but contribution rates lower than those of South America, in addition to high administrative rates.