1703668232 The Boric government is trying to push forward pension reform

The Boric government is trying to push forward pension reform with a new confrontation with the Chilean right

After the constitutional debate in Chile ended, the left-wing government of Gabriel Boric has resumed the discussion on the pension reform, which it had put on hold in mid-October so as not to contaminate the project with the campaign of supporters and opponents. which He ultimately triumphed by 55% to 44%. That was what the ruling party was looking for.

On Thursday, December 21, four days after rejecting the proposed constitution, the government attacked its star project with a series of references. These point to one of the contents on which there were the greatest differences with the opposition: the objective of the additional contribution of 6% charged by the employer, which increases the percentage of pension savings per employee to 16% of his salary.

The executive's new proposal aims to allocate three percentage points for social security, another two for each worker's individual capitalization accounts and 1% for strengthening women's employment and formal employment. The government pointed out that the change (in September it had bet that 4% would go to a solidarity fund and 2% to individual accounts) would weaken resistance. But far from converging the positions, the signs have hit the wall of the right. “It is an unusual, regrettable and outrageous finding that, given yesterday's result (December 17 referendum), the government intends to promote bad reforms or give them new impetus,” said Pablo Macaya, president of UDI, a party of the traditional law after learning of the executive's proposal.

Boric will speak about the agreement on pension reform at the inauguration of the Bicentenary Cable Car on December 20.Boric will speak about the agreement on pension reform at the inauguration of the Bicentennial Cable Car on December 20. PRESIDENTIALITY OF CHILE (EFE)

The reform of Chile's pension system, aimed at improving the low pensions of people of retirement age, is a debate that has been going on for more than a decade without finding a solution. The inflexible positions on both sides of the political spectrum have prevented agreement on one of Chileans' main concerns.

However, over time the positions move closer together. This Tuesday, the UDI and Renovación Nacional (RN), another traditional right-wing party, gave signals to the executive branch to open up to dialogue. The opening is interpreted as a change of strategy by the opposition in view of the realization that citizens punish a lack of agreements. But also to differentiate itself from the Republican Party, which represents more extreme positions and is the main loser after rejecting the constitutional proposal drawn up with the majority of this political force's advisors.

“After the referendum, it became clear to everyone that the extremes today lie outside Chilean politics. We cannot maintain extreme positions, we must look for agreements. The two referendums have shown that the extremes have failed and that the time for moderation has come,” said the leader of the RN party, Frank Sauerbaum, to the newspaper La Tercera.

Meanwhile, Juan Antonio Coloma (UDI), President of the Senate, explained that “in the public sphere, we must understand not only now but always the moment when the country needs a good understanding, which is not the same as an agreement” .

Few lights to move forward

However, from the experts' point of view, the government's approach of giving indications without any firm agreements or ongoing negotiations is risky and offers little guarantee of real progress on pension reform.

Alejandro Micco, former undersecretary of the Treasury in Michelle Bachelet's second government (2014-2018), is not optimistic. “I see what has been entered now [al Parlamento], unless they just did it to get the discussion going again, are indications of water. “I don’t really understand the government’s way of negotiating. It’s strange to initiate it without the necessary voices,” he says.

The economist adds that the new proposal “as proposed does not offer much hope for progress.” “If the vast majority of 6% does not go to individual accounts, it will be very difficult to break through the positions of the right and also some people in the center.” The part that goes to the Solidarity Fund must be much more limited,” he explains.

Micco also criticizes the fact that the executive has earmarked 1% to finance general daycare centers in order to encourage greater participation of women in the formal labor market. “The introduction of this issue of childcare, which is a good policy but entangles the pension issue, has no great merit,” he says.

Academic Julio Riutort, from the Faculty of Economics at Adolfo Ibáñez University, agrees, pointing out that the 1% allocation for daycare centers is “confusing tools to solve the problem.” “If there are problems with the integration of women into the labor market, it is inappropriate to solve them indirectly by increasing savings costs for formal workers,” she says.

A pensioner goes to a community pot in La Pintana in January 2022.A pensioner goes to a community pot in La Pintana in January 2022. Cristian Soto Quiroz

Regarding the 2% for the private account and 3% for the social security, Riutort notes that “there is a kind of non-updating of the diagnosis”. The scientist considers that the Universal Guaranteed Pension (PGU), introduced at the end of the government of Sebastián Piñera (2018-2022) and financed by general taxes, has led to a significant change in the pensions of people with lower incomes and fewer savings, and Although even today the focus should be someone else. “The government project has a proportion where a relative majority contributes regularly and where many people do not contribute. If we insist that the problem of people with low contributions will be solved by creating a disincentive for formal work for those who make an additional contribution to compensate for the initial contributions,” he says.

For María José Zaldívar, former Minister of Labor in the second government of Sebastián Piñera (2018-2022), the most worrying thing about the executive's statements is that it does not care about the low pensions of the Chilean middle class.

The lawyer points out that the pensions of people with lower incomes under the PGU already correspond to the replacement rates (the size of the pension compared to the average salary of a person before retirement) for which they contributed, and in some cases even go beyond that. “In the middle class, few have access to the PGU, especially if they have contributed for many years, and with this project we are not moving those who also need to finance this reform, namely people with middle and high incomes,” he explained.

“A middle-income man with a high contribution rate will receive a maximum of 1.8% of the additional 6%, because if he has contributed for many years, he will not receive any of the 3% social security, so there is no incentive.” quote. It is a terrible business that affects those who need to be included in the system the most,” he explains by example.

However, since the Boric government introduced the pension reform in November 2022, the right side has taken the view that 6% should be allocated to individual capitalization, and although RN is open to a percentage going to solidarity, polls say the opposite . According to the latest poll by Plaza Pública Cadem this week, 57% of Chileans want these additional savings to be invested entirely in personal accounts.