The Political Economy of Pension Re-Reform in Chile and Argentina: Toward More Inclusive Protection
This paper argues that reforms implemented in 2008, the re-nationalization of the private pension funds in Argentina and the introduction of a social pension in Chile have moved both countries toward greater social inclusion in old-age protection. In the case of Chile this was achieved in 2008 after extensive public debate and consultation processes. The non-contributory Sistema de Pensiones Solidarias (SPS) replaced the former minimum pension guarantee (which required 20 contribution years) and the means-tested social pension which also had a cap on the maximum number of transfers. The new solidarity pension is granted to elderly who are not eligible for other pensions, aged 65 and older, and have resided in the country for the last 20 years. Benefit coverage will be extended gradually to 60 per cent of the poorest elderly by 2012, reaching an estimated 1.3 million beneficiaries with a monthly benefit of USD 145. A broad agreement among specialists about the main problems and challenges of the private pension system and the strong fiscal position of the country have been identified as the main factors leading to a successful reform, which also included several parametric changes with regard to fund investment, gender equality and improved coverage of the contributory scheme.
In Argentina, after years of criticism and parametric reforms of the private pension fund system which had replaced the pay-as-you-go (PAYG) system in 1994 as part of a neoliberal reform agenda, the re-nationalization of private pension funds was implemented by the administration of Cristina Fernández de Kirchner at the outset of the global financial crisis in 2008. The actual absorption of pension savings accumulated in individual accounts by the national social security administration had been preceded by several reform measures, leading to a significant expansion of coverage of non- and semi-contributory pension benefits. The reform was criticized as a top-down decision, which missed the opportunity to create a broad-based consensus on the new pension system.
Alongside a strong discourse on coverage expansion and greater inclusion, financial and financing issues played a key role in both reforms. In Chile, a reform that was meant to guarantee the long-term financial and social sustainability of the private pension system was made politically possible because of increased revenues from mineral rents and declining transition costs related to pension privatization in 1981; in Argentina, the reform was a response to the perceived present and future fiscal costs of a privatized pension system and the immediate benefit of channelling accumulated funds into public coffers when these were needed for economic stimulus measures as a response to the global crisis.