Threat to Chile’s Private Pension System Rattles City of London and Wall Street

July 24, 2020 (EIRNS)—In a vote being referred to as “historic,” Chile’s lower Chamber of Deputies voted up a constitutional amendment on July 23, which will allow citizens to withdraw up to 10% of their private pension accounts, known by the acronym AFP, providing them with additional funds in the midst of the coronavirus pandemic and related economic crisis. Particularly galling to neoliberal President Sebastián Piñera was the fact that 32 deputies belonging to his ruling, right-wing “Chile Vamos” coalition voted for the amendment. It now must be written into law.

While the 10% is not a huge figure, the fact that the amendment was passed at all, and affects what is considered to be the cornerstone of Chile’s University of Chicago-authored free-market system—forcibly imposed by the Pinochet dictatorship in 1981 by President Piñera’s own brother José—has caused major panic on Wall Street and the City of London. The City’s mouthpiece, The Economist, complained July 18 that even before this, Piñera had been forced to spend more money to address social demands during the pandemic, making him look “more like a European Christian Democrat than a laissez-faire liberal.” If the amendment is passed as a bill, this financial rag warns, it “would weaken a central institution of the Chilean model.” Exactly.

Bloomberg then admitted on July 21 that the private pension system had certainly left millions of Chileans “behind,” but nonetheless warned that if the amendment becomes law, citizens will be risking their future pensions—hardly a threat since most pensions aren’t enough to live on.

Piñera, with a 16% approval rating, is now faced with the choice of vetoing the new bill, sending it to the Constitutional Court to determine its constitutionality, or letting it stand. Either way, he’s in trouble. Upcoming is a national referendum on dumping the 1980 Pinochet Constitution, written by a follower of Carl Schmitt, which will almost certainly result in the writing of a new constitution—a further blow to the vaunted “Chilean model.”