The Chilean Pension Fund Associations

By: Hugo Fazio and Manuel Riesco
New Left Review, May/June, 1997


The Impact of the AFPs on the Economy
The Ownership Structure of Chilean Companies
The Process of Concentration
The Excluded
The Workers' AFPs and the New Social Contract

Chile's system of privately managed pension funds, which has now grown to quite impressive global proportions, appears to be a technically astute —if not, of course, socially neutral—solution to the far-reaching crisis of state pensions. The man who originally devised it, Jose 'Pepe' Piniera, is the foremost of the 'Chicago Boy' economists, minister of labour under the Pinochet dictatorship and now advocate-general for the pensions system. Clearly he has reason to feel proud of its incredible success.

The current crisis affecting state management of the most diverse economic activities is an example of how broad socio-economic tendencies usually impose themselves on human beings—with the force of climatic cycles or street fashion, as mysterious as the ways of the Almighty. The pension reform in Chile, however, once had a rather more straightforward origin: the old system, with its hundred or more different schemes that never satisfied anyone, had reached the point of bankruptcy and it simply could not struggle on.

Once such new realities appear, however little they may be to our liking, we have no option but to try to understand their dynamic and subject them to critical analysis. At least this may help other countries to come up with less socially regressive variants—something we can already see, in fact, from items of legislation recently adopted in a number of developed countries. The same critique may further show that the realities in question are, as always, complex and contradictory and may well contain elements which go beyond their apparent parameters. In the words of the old popular saying, they may even prove to be a 'a blessing in disguise'.

The new Chilean pension system is sufficiently well known for a lengthy account to be unnecessary. Its essential feature is that the future pensions of Chilean workers will be financed out of a fixed part (10 per cent) of their gross pay, to be individually deposited in investment funds. These funds are managed by private companies known as Pension Fund Associations (Asociaciones de Fondos de Pensiones—or AFPS), which were specially created for this purpose and are strictly regulated by the State.

The efficiency of the system is assured by the fact that the depositor is free to choose and switch between rival AFPS. Daily information is provided on the performance of the pension funds, as well as on additional payments such as the around 2 per cent of gross pay currently charged as the AFP company's commission, and approximately 1 per cent for disability insurance negotiated by the AFP on the depositor's behalf. These two deductions, together with the 10 per cent accruing to the pension fund as such, make up the rough average of 13 per cent that Chilean wage earners are presently contributing to the AFP system.

It should be mentioned that a tightly regulated system of private health insurance, the so-called Health Security Institutions (ISAPRES) exists alongside the AFPS. Wage earners pay another 7 per cent of gross pay to the ISAPRE (Instituciones de Salud Previsional) of their choice, or a little more if they want access to a higher level of service.

A balance-sheet of the ISAPRE system does not fall within the scope of this article, but we should note that, although they are far from enjoying the success or the international appeal of the AFPS, they have generated from next to nothing private investment in health that affords quality care to higher-income sections of the population. With health, there is an alternative: namely, to contribute 7 per cent of income to FONASA (Fondo Nacional de Salud), the state-run National Health Fund, which also gives a basic level of care to people without any health coverage. More than 70 per cent of the population is treated within the public health system, most of whose medical and administrative personnel work with great dedication. But a chronic shortage of funds means that it has numerous shortcomings, and cannot offer a level of service comparable to that of a private plan.

Since 1981 every new employee in Chile has had to belong to an AFP. At first, existing employees could choose whether or not to join the new system but the government and the AFP companies were able to ensure that a majority signed up. The main incentive was that under the new system employers' contributions were directly added to gross pay and had the effect of raising it by 30 per cent. Since, as we have seen, the combined AFP and ISAPRE/FONASA deductions amounted to 20 per cent of gross earnings, the net result was a rise of nearly 10 per cent in takehome pay. The State has kept responsibility for the pensions of those who remain within the old system, the total liability being currently estimated at some 126 per cent of the country's GDP. At present, however, roughly five million workers—almost the entire labour force—belong to the AFP system. The most significant exception are members of the armed forces, who were careful not to allow the ups and downs of 'Pepe' Pinera's invention to be tried out on themselves.

The Impact of the AFPs on the Economy (go back to top)

The AFPs have had a major positive impact on the Chilean economy, although this appears mainly to be due to local peculiarities and cannot easily be extrapolated to other countries. Thus economists are in general agreement that the effects on national savings and the stock market are to be explained principally by the low starting base, as well as by other factors not present in more developed countries.

At any event, the AFP system has helped the savings rate in Chile to climb to approximately 30 per cent of GDP, one of the highest levels in the world. The funds accumulated in AFPs presently amount to just under $30 billion, almost half of the country's GDP. In Argentina a similar scheme is already managing $5.3 billion, two years after it was launched, while Mexico has just introduced one of its own which, it is hoped, will reach a figure of $25 billion within the next three years. Bolivia, Colombia and Peru also now have AFP systems, and Uruguay and Venezuela have announced plans to create one soon. It is estimated that by the year 2000 such schemes will manage funds totalling $200 billion throughout Latin America, half of it in Brazil. And by 2011 this is expected to have grown to $600 billion.

On the Chilean stock exchange, the AFPS keep their investments a little below the permitted upper limit of 30 per cent of the total pension fund—which is a rather conservative figure if one bears in mind that US investment funds, for example, have more than 60 per cent of their holdings in the form of stocks. Even so, the Chilean AFPS' stake of a little over $8 billion—roughly a sixth of the listed total value—makes them by far the largest investor in the national stock market. Being tightly regulated, they behave in a counter-cyclical manner which partly explains why the Chilean stock exchange, though down 15 per cent since Mexico's recent 'tequilazo' crash, has experienced a more gradual fall.

The profitability of each AFP-managed fund has been an important factor in winning members, so that no participating company has an interest in running risks in this respect. At the same time, the AFPS' own assets are on the line whenever the monthly profitability of the fund they manage is more than two percentage points lower than the average within the system. The combination of these factors has the result that AFP share portfolios are practically identical to one another and move up and down in the same rhythm. This has become known as the 'herd effect'.

The rest of the funds are invested in government bonds (42 per cent), in securities issued by Chilean finance institutions and companies (28 per cent), and in foreign holdings (0.5 per cent). In each case, the figures roughly coincide with the permitted upper limit, except that under the current regulations almost one tenth of the fund could be held in foreign investments. As we shall see, however, the impact of the AFPS on Chilean overseas investment is much greater than the figures for their direct investment would appear to indicate.

The recent fall in the value of AFP shareholdings is a major reason why the pension funds as a whole showed negative profitability of -2.5, per cent in 1995 and -3.5 per cent in 1996. This has sounded a note of realism in profit expectations. Yet it remains the case that, whereas the original plan envisaged growth of 4 per cent a year, the funds have actually soared by an annual inflation-adjusted average of rather more than 12 per cent.

The Ownership Structure of Chilean Companies (go back to top)

The development of the AFPs has significantly affected the ownership structure of Chilean companies, helping to create powerful new economic groups and to consolidate others. The early period was one of great turbulence in the Chilean economy, including the deep crisis of 1982-86 when GDP plummeted by some 20 per cent, a number of leading companies declared bankruptcy, and some 30 per cent of the labour force was unemployed.

In the resulting debt crisis, a consortium of foreign banks, egged on by the US government, among others, compelled the Pinochet regime to take responsibility for the external debt of companies that went to the wall. Two fax messages dating from early 1982, and now kept in the Central Bank of Chile, have since become quite famous. In the first of these, the Chilean government informs creditor banks of the bankruptcy of two leading economic groups of the time, whose accumulated external debt of nearly $6 billion accounted for a third or so of the country's total public and private external debt. The second fax is the reply from John Reed, then chairman of Citibank, on behalf of all the creditor banks, in which he points out that unless the Chilean government assumes responsibility it will suffer hellfire and damnation. The Pinochet government waited forty-eight hours before bowing to this diktat, and since then a kind of imperial tribute (which has little to do with economics) has been paid to the tune of 2 billion pesos a day—a figure similar to what lower-income Chileans (70 per cent of the population) spend on their daily necessities.

It was also during this period that a wave of privatization swept through the main public enterprises created in Chile between the 1945 and 1973—electricity supply and telephones, as well as steel, cement and cellulose. This gave Chile the same kind of international 'fame' that it is now receiving from the AFP experience. Economic crisis, debt burden and privatization: these three factors, together with the creation of the AFPs, were decisive in redrawing the 'map of extreme wealth' in Chile. As in Russia, it was often the functionaries responsible for privatization who became the millionaires controlling the country's principal corporations. For the first time, a number of Chileans appeared in the Forbes list of the world's billionaires, and Chile had the dubious honour of joining the 'top ten' countries with the most uneven distribution of wealth — coming in sixth, to be precise.

A brief history of Provida, the largest AFP by size of funds managed, will serve to illustrate these points. In 1995 an economic group called Infisa, which had not previously existed under that name and had former Pinochet ministers as both chief executive and vice-chairman, took control of Provida. By the end of 1996 it was handling a sum of $5,326 million, or 19.7 per cent of the total accumulated within the system. (The degree of concentration is further shown by the fact that the five largest AFPs—Provida, Cuprum, Habitat, Proteccion and Santa Maria—then controlled 71.1 per cent of the aggregate funds.)

Provida came into being in 1981, when the pension fund system was first set up. It was formed by the Cruzat-Larrain group, whose curious mixture of Opus Dei religious fundamentalism and wild commercial audacity twice brought it to the brink of insolvency—once in 1982, when it featured in the above-mentioned exchange of fax messages, and once more recently. In 1983 Provida passed under the control of the Pinochet government itself, which sold 40 per cent of the shares to BT Pacific Limited—that is, to the Bankers' Trust—in December 1985 and disposed of the rest through the mechanisms of 'people's capitalism' which, as in so many other cases, were essentially an instrument of financial centralization.

At the end of 1992, the Bankers' Trust in turn sold a controlling 42.47 per cent of its shares ($53.1 million) to Inecsa SA—a decision in which, of course, neither the depositors nor the 'people's capitalism' shareholders had any say at all. The chairman of BT Pacific, Juan Bilbao, reported before that his company had accumulated profits of nearly $90 million, to which the proceeds from the sell-off of Provida shares now have to be added. Altogether, the cumulative profits are many times higher than the initial outlay made by Bankers' Trust under the so-called Article XIX to acquire control of Provida and the National Life Assurance Consortium. (This provision made it possible to purchase companies by capitalizing promissory nores from the external debt, on terms that involved a sizeable government subsidy representing the difference between the face value of the notes and the 60 per cent of value at which they changed hands in the international market.)

Inecsa SA was set up for the specific purpose of acquiring Provida. Of the three main founding shareholders, the first was the Cintac company headed by one of Pinochet's former economics ministers, Sergio de Castro; the second was Alvaro Saich; and the third was the Abuhomor family. Sergio de Castro became the chairman of Provida, and subsequent control of the AFP remained in the hands of the Infisa holding company, in which Alvaro Saieh and the Abohomor group both had a stake.

Provida has a presence in a number of Latin American countries. In Mexico, it is associated with the Spanish Banco Vizcaya and the local Grupo Nacional Provincial (GNP) in the Profuturo fund-managing company that was set up with an investment of $60 million; it holds 24 per cent of the company's shares. GNP is the largest private welfare conglomerate in Mexico, with a market share of 20 per cent. In Colombia Provida has a presence alongside the Bogota and Occidente banks in the Porvenir fund-managing company, to which it contributes its special know-how. In Peru it owns 13 per cent of the Horizonte AFP, in which the Banmedica holding company has a 14 per cent stake. Provida's capital is largely made up of funds derived from the ADR mechanism in the United States. In December 1996 Provida was one of the largest ADR-placing companies to have a higher percentage of its stock-market assets abroad, rising at that date to 35.33 per cent.

The Process of Concentration (go back to top)

At the end of 1996, the Chilean AFP system was passing through a period of intense recomposition. Concentration was being strengthened as companies unable to survive the uneven competition dropped out of the picture. The growth in the number of fund managers, which appeared during the period of the Aylwin government as a nascent democratizatlon, has thus been reversed. The fourteen that existed at the beginning of the decade increased to as many as twenty-two in 1993, but had fallen back to thirteen by the end of 1996—almost the same number as when the system began in I98I. As part of this process, in 1995 Provida acquired the Libertador AFP, which had previously been controlled by the CAP holding company.

Table 1
The Number of AFPS 1981-96  
Year Number
1981 12
1988 14
1992 16
1993 22
1994 21
1995 15
1996 13
Source: Estrategia.  

There is another basic reason for the AFP recomposition now under way. Financial groups are preparing for the moment when the go-ahead is given for greater integration of banks with AFP managers and insurance companies. Some AFPS are already tied to or controlled by financial groups that also run banking institutions. Apart from the case of Infisa, there is the relationship between the Qualitas AFP and the OHCH holding company, the Luksic group and the Banco Central Hispanoamericano de Espafia. Another example is the Habitat AFP--the third largest by size of accumulated deposits where a strategic alliance has been formed between the Chilean Chamber of Construction and the mighty North American financial consortium Citicorp, resulting in a holding company, Inversiones Previsionales, which owns 67.9 per cent of its shares. Foreign financial interests are thus again increasing their presence within the system, just a few years after it was reduced through the sell-off of Bankers' Trust's stake in Provida. Citicorp is also active in the private welfare markets of Argentina, Peru Colombia and Uruguay.

A similar relationship exists between Security Holdings (which is controlled by the Sigdo Koppers group) and the Proteccidn AFP, between the Matte group in the BICE bank and the Summa AFP (where the Angelini group and the CGE conglomerate also have a strong equity presence), between Inversiones Penta (the largest single shareholder of the Bank of Chile) and the Cuprum AFP (which had become the country's second-largest fund manager by the end of 1996). Two further AFPs are controlled by foreign financial groups that have no bank in the country: Union by the American International Group, and Santa Maria by Aetna International.

Table 2
Financial Groups with a Banking Interest in AFPs    
Financial Group AFP shareholding (%)
Santander (Spain) Bansander 100
Inversiones Penta (Chile) Cuprum 45.94
Citicorp (USA) Habitat 38.94
Security Holdings (USA) Proteccion 30.42
Infisa (Chile) Provida 38.05
OH-CH (Chile-Spain) Qualitas 51.00
Matte (Chile) Summa 25.90
Aetna International Santa Maria 100
American International Group (USA) Union 100

This process of convergence between banks and AFPs is the main reason for the veritable trade war that has been raging in this market in Chile during the last three years. For it is the AFPS linked to banks which have been behaving most aggressively in the ongoing recomposition.

The investment of Chilean capital elsewhere in Latin America—a phenomenon that has grown to several billion dollars in a few years—has also been considerably boosted by the AFPs. We have already seen thar they directly invest a small part of their funds abroad, but their indirect involvement is much more significant. Thus AFPS have no less than a 25 per cent stake in Chilean electricity companies, and it is this sector which has been leading the foreign investment drive, especially to acquire homologous companies privatized in Argentina, Brazil and other Latin American countries.

The Excluded (go back to top)

From the wage earners' point of view, the new system provides a complicated picture, to say the least, of the pensions they can actually expect to receive when they retire. The main problem is that some 40 per cent of Chilean workers only formally belong to the system, because they do not pay contributions into an AFP, or anywhere else for that matter. As this happens most frequently in poorer sections of the population, it quite simply means that half of all low-paid Chilean workers do not enjoy the benefits, real or imaginary, of the much-acclaimed system of AFPS.

It is true that the system envisages a minimum state-guaranteed pension for members whose savings do not amount to very much. But the level of the minimum pension, 100 dollars a month, means that this huge section of the population cannot expect much more than the misery that has traditionally awaited the elderly poor in our societies.

Some of the workers who do not pay into the AFP system belong, however, to the quite large sector of what are known in Chile as 'people working on their own account'. This category includes what might, in other terminology, be called rural and urban petty-commodity production--that is, not only independent farmers, but also small-scale hauliers, craftworkers and professionals, owners of small workshops or companies, merchants and the like, together with their families and others working together with them. These 'independent workers', as they are officially known, are not obliged to pay into the AFP system and—as the present author can testify from his own experience—they regularly fail to do so.

Many agricultural day-labourers belong to the group of wage earners who belong to an AFP but do not pay contributions. Some 15 per cent of the labour force is currently made up of farm labourers, a sector that also includes independent peasants and family members working with them. Many labourers work in Chile's modern and highly export-oriented capitalist agriculture, producing fruit—especially the noble raw material for Chile's (pretty good) wine—vegetables and, significantly enough, timber. Often these enterprises hire on temporary contracts, and the fiction that they are 'workers on their own account' is used to include in their meagre wage the percentage intended for pension savings. Rarely, of course, do these workers pay the AFP contributions for which they are liable.

It should be noted here that, in comparison with developed countries, the bulk of the rural workforce quite accurately reflects the continuing backwardness of Chile's economic structure—that is, of its relations of production. Chile, of course, has not remained outside the general and in the last few decades truly massive drift of humanity from country to town. The proportion of rural workers was much larger in the late 1960s, when the agrarian reform under President Frei and especially President Allende began to liquidate the old latifundia and tenant relations. The Pinochet dictatorship, though returning expropriated land to its former owners, stopped at about a third of the area affected and did not reimpose tenancy relations—in fact, at least another third of the old latifundia became the property of former tenants, while the remainder passed into the hands of big corporations, especially in the forestry sector. As a result, many thousands of agricultural labourers found themselves driven from the countryside with its old social relations. This process, which sometimes took a violent form under Pinochet, has continued down to the present day. Between 1990 and 1995, for example, agricultural workers shrank from 20 to 15 per cent of the total labour force.

Apart from workers who pay no contribution at all, there is another large category who pay so little that they cannot expect to receive a pension much higher than the minimum guaranteed by the state. It is too early to say with certainty, because very few pensions are yet paid out under the new system, but some estimates indicate that 70 per cent of low-paid workers will end up with little or nothing more than the minimum. The Central Unica de Trabajadores (CUT), Chile's trade union federation, has recently denounced this situation.

The Workers' AFPs and the New Social Contract (go back to top)

It is of interest to give a brief account of the workers' AFPS in Chile. Right from the beginning, the start-up requirements for an AFP were set quite low, so that a number of workers' collectives tried with greater or lesser success to form their own. The first democratic government, headed by President Aylwin, even encouraged the formation of workers' AFPS. The teachers' unions, as well as the banking workers, electricians and miners, were among those who took part in one way or another.

For a time, one of the authors was a board member of the Futuro AFP, owned by the banking unions, and was able to appreciate some of the risks and limitations, as well as the benefits, of this type of trade-union business venture. Although Futuro remained one of the smallest AFPs, it still managed a pension fund worth more than 100 million dollars. After some eight years of reasonably profitable operations, the trade war in this market—combined with frictions in the banking union leadership and serious errors of management—made it necessary to merge Futuro with the Magister AFP owned by the larger teachers' union. The copper workers also came into the AFP at this time. Of course, nothing guarantees that the workers' AFPs— of which Magister is the most important—will be able to keep their heads above water in this market, but the experience so far seems to have been generally positive.

The Chilean AFP has been analyzed as a by-product of the stifled class struggle and contest for hegemony that ensued in the aftermath of the coup of September 1973. Contrary to what is sometimes thought, the Pinochet regime did not simply cancel all the major measures of the previous democratic governments: it conserved the nationalization of the copper mines, making sure to attach a portion of copper revenues to the military budget. As has been mentioned above, the agrarian reform was pushed in the direction of capitalist agriculture, not a return to traditional latifundia. The introduction of the AFPS has been interpreted as a more innovative attempt to buttress the prevailing order, one that could be compared with Bismarck's launching of state pensions in the last century, at a time when the German state was attempting to secure the allegiance of the mass of the population and meet the ideological challenge of the workers' movement. In fact, something of the sort was always in the mind of 'Pepe' Piniera and his fellow 'Chicago Boys', and has been explicitly formulated as such by them. In the Chilean case, the AFPS have probably promoted acceptance of an incompletely democratized state and inegalitarian capitalist order. Sometimes the identification with this would-be popular capitalism takes caricatural form. The police, for example, have discovered to their amazement that quite a few drivers seen using that symbol of the new Chilean jaguar, the cellular telephone, are actually holding a toy. Nor is it uncommon in the Santiago metro to hear worried conversations about the profitability of some pension fund or other, between people who unfortunately will never have the slightest real reason to worry about such matters.

In general, however, the AFPS have brought widespread experience of the market and in a sense even of property ownership. Together with orher experiences such as Pinochet's experiments with 'people's capitalism', which briefly offered share ownership to tens of thousands of Chileans, this is neither trivial nor necessarily altogether negative. In developed countries that have had an extensive market economy for more than a century, it may be hard to imagine the enormous suspicion of the market that most of the population feel in places such as Chile. Not the least of the roots for this are the age-old layers of the peasant soul, always close at hand. While scepticism concerning the 'free market' is very healthy, it is disabled when accompanied by superstitious awe of market forces rather than a determination to assert social priorities.

The ideologists and evangelists of capitalism, such as 'Pepe' Pinera, naturally paint the prospect ahead in the brightest of colours. But a more sober vision may also be possible if, after all the collapses that have taken place, we conclude that the road towards the overcoming of capitalism may well be that of the socialized market. Would that the transparency of human labour made it possible to return to the old direct exchange of labour, and therefore to overcome the market with all its sores and fetishes! But, while we are awaiting the attainment of such transparency, humanity probably cannot do without the market, value, prices, money, property, and so forth. On the other hand, it is perfectly conceivable that humanity could very well do without capitalist property and the exploitation of others.

It may be of interest to consider the AFP phenomenon in the light of the new capitalist 'social compromise' on pensions, the different forms of which were explored by Richard Minns. It really does seem that, since the 1960s, the bourgeoisie of the developed countries has generally started to share the ownership of capital with wage earners, reserving for itself the actual management of capital. As Minns observed, a notable mechanism of employee ownership has become the pension funds, which in countries such as Britain or the United States already own some 30 per cent of companies. In the Chilean case, as we have seen, AFP-managed pension funds own a sixth or so of company share values quoted on the stock exchange.

Another tendency in this direction may be the workers' direct ownership of shares in their company—which amounts to some 8 per cent of total share ownership in the United States. The best-known example is the large private airline, United Airlines, 51 per cent of whose shares have recently been acquired by its workforce. But in fact United Airlines, with its 75,000 employees, comes only sixth in the list of the hundred largest US companies of this type. Some I 5 million workers and more than 10,000 companies participate in such schemes in the United States, where legislation encourages them by making corporate donations taxdeductible for the purposes of employee share ownership.

The various forms of employee ownership can be complementary to one another, for some pension funds are invested in the shares of the workers' own company. In the well-known case of Gillette, for instance, 96 per cent of its workers' retirement funds are invested in the company's own shares. Such forms of ownership vary widely throughout the world, but the most interesting appear to be in the most developed countries— including Australia, New Zealand and Sweden. Something similar may be occurring with relevant legislation that presents some progressive aspects in countries as different as Singapore and Jamaica. In the case of Singapore, the Central Provident Fund is run by a public body and, since it avoids the intense commercial competition of the Chilean AFPs, the administrative charges incurred are much lower. The largest in scale are in the ex-socialist countries, especially Russia, but there workers' ownership has the features not of a transition from capitalism to a higher social system, but rather—as in the case of Pinochet's 'people's capitalism'—a transition from state ownership to capitalist ownership proper.

In only very few cases can it be said that a workers' stake in their company has led to a real change in the relations of production. As with fashionable theories of stakeholder management, in which workers' 'empowerment' is a lever to greater efficiency, the mass of the population can be simply sucked into the operations of an otherwise seemingly unchanged capitalist order. Thus a 'core' group of owner-employees may be privileged as against those outside the magic circle of employee-ownership. Alternatively employee funds may be used to promote down-sizing or to cash in on ecologically dangerous processes. Frequently the supposed employee 'owners' have no collective or individual say over the uses to which 'their' funds are put. Yet the new arrangements do arouse worker expectations and confer latent powers which may gradually become the object of trade and popular campaigns, seeking to use pension fund property to promote socially-responsible goals. It is very much in the power of the public authorities to lay down regulations governing the investment of pension funds, and to confer different tax advantages on different uses of the funds. In Chile at the present time there is some pressure to extend the scope of the schemes, to give wage earners a greaters say in investment decisions, and to tighten sanctions against employers who evade making proper contributions on behalf of their employees. It has also been proposed to reduce the frequency with which policy holders can change from one fund to another, in the hope that this will minimize wasteful competition, and also to change the minimum and maximum proportions of funds that must be invested in public bonds and in domestic securities. In fact what is emerging here is a new instrument of public policy, with different social actors coming forward with their own proposals, just as they do when other aspects of social and monetary policy are at stake.

While some foreign observers tout the Chilean example as a perfect and finished model, many Chilean employees are looking for qualitative transformations in its modus operandi aimed at promoting social goals and spreading benefits more evenly.

The AFP system has had a major effect on the Chilean economy and has strengthened a number of economic groups operating within it. It also offers a third of wage earners better health provision and (probably) better pensions than they used to have before. Nevertheless, the immense majority of workers—those who have suffered all the rigours of the Chilean 'model'—do not have too much reason to rejoice over the invention that has made 'Pepe' Pinera world-famous.

Translated by Patrick Camiller

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