Bachelet Bail-Out for Pinochet Pension Plan

President Michelle Bachelet just signed in the relief package for victims of Chile's private pension system, calling the initiative "one of the most important social reforms in decades."

Sadly, she's probably right.

But the net result of this US$2 billion annual cash infusion to pad the dismal retirement pensions of Chile's lowest wage earners seems more like a slimy populist gesture amounting to little more than a backhanded slap in the face for Chile's poor. As the AP reports:

Monthly pensions will start at about $125 and will rise next year to $158. That will boost pensioners above the urban poverty level of $95.

Yes, it is true. If you make more than $95 per month in Chile, you are not considered poor. (How else could Chile have already pushed its poverty level down to 13%? Even The Economist, in a patronizing elegiac to Chile's so-called progress, had to note that by European standards 27% of Chileans would be poor).

So this pension reform will most likely take a huge bite out of perceived poverty in Chile. Perception is everything. But what can an elderly person - even without medical expenses - do with 158 bucks a month?

Let's see, when I first moved to Chile I got a fantastic deal sleeping in a closet in downtown Santiago for $160. That means that if some old lady depending on Bachelet's "reforms" got the deal I did, she'd have to wait a year and still be two bucks short on rent.

Not to mention utilities. And food. But old people don't need to eat.

However, all this doesn't stop a starry-eyed FOB like Joel from smugly reprinting the International Herald Tribune's absurd and omission-packed praise for Chile's pension "reform".

Seemingly incapable of any original analysis, Joel does his small part to elaborate on the "miracle" of Chile, demonstrating his advanced computational knowledge by cutting and pasting the following paragraph and even bolding (me too!) some of it:

The private funds earned an average 10 percent return since their start, ensuring that typical workers who contributed since 1981 now collect about 85 percent of their final wage upon retirement. That’s more than double the average 40 percent paid to full-career, middle-income Social Security recipients in the United States, according to a study by James last year.

Double the USA? No way! That's it - we're moving to Chee-lay!

For Christ's sake, Joel. It doesn't matter that retired Chileans make 85% of their shit Chilean wages or 200%. Given a choice, I would take 40% of a US wage anyday. So would you.

And don't give me this "cost of living" crap. Don't tell me that 2x the pension percentage goes twice as far as the USA, so that somehow Chileans are getting a good deal with .85 cents to the dollar - on $1/hour wages! Santiago is the costliest city in South America and scores of expenses here cost as much or more than the USA. Internet. Food. Entertainment. Public Transportation. Gasoline. You name it, dude. And even rent - currently I'm in a studio apartment paying only $150 less than I could for the same-sized place in California's Bay Area. Just to put things in perspective. (UPDATE 3/13: Rent just went up I'm only paying $70 less).

Anyway, this pension reform idea is nothing new. Actually, it was supposed to be passed in 2007. I wrote about Chile's private pension "reform" back in November of last year. That's when subcomandante Claude released his third Political Irony video: Chileans Should Die by 60. True then, true now.

In that post I also point out the New York Times editorial from 2006 that points out the horrors of Chile's private pension system, one that president George W. Bush lauded as a beacon of exemplariness for his miserably failed effort to privatize social security. (The fact that other countries copied Chile's broken system doesn't make it right. The US, for the time being, has been spared such an ignominious fate).

Read the editorial now, Joel. And now read this excerpt from Marc Cooper's LA Times Bestseller Pinochet and Me: A Chilean Anti-Memoir. (You can read the whole chapter online here). In it, he reports the perspective of a 35-year-old Chilean woman named Cecilia, despite her leftist upbringing, is reduced to making a living by selling these private pension plans:

She explains in surreal detail the corruption and unfairness of Chile's privatized Social Security system. Thanks to "pension reform" imposed by Pinochet in 1981, all workers in Chile, whether employed or self-employed, must contribute a percentage of their income every month to a private retirement fund managed by one of a half-dozen investment companies known as A.F.P.s. Unlike in the United States, where both worker and employer pay 7.5 percent each into Social Security through payroll deductions, Chilean employers no longer make any contribution at all toward worker pensions. They retain, however, the right to withhold employee contributions from workers' paychecks, and news stories are legion of this or that company that "forgets" for months and sometimes years to deposit workers' funds into A.F.P.s. And because so many Chileans are self- or marginally employed, almost half the fund-holders don't keep their own required contributions up-to-date. An equal number have been revealed to have less than a $1,000 balance-hardly enough to support retirement.

As if it wasn't already abundantly clear, the Bachelet bail-out is yet another admission that the Chilean private pension system is completely broken. And like I said, this relief package called "reform" is really the least Chile's government could do for a populace victimized by this defunct system that Pinochet started and left wing governments have been all too happy to maintain.

It is absurd that the media nevertheless manages to spin this "reform" as somehow a testament both to Pinochet's economically sound legacy and to Chile's continued progress. A far more accurate description goes like this: Pinochet smashed the system into smitherings, and now "socialist" Bachelet has managed a to patch it together with a shameful farce, a disaster relief plan pushed on Chile with the progressive patina of systemic "reform". But like I said, perception is everything. Just as Bachelet sang the praises of a "reduction" in Chile's poor, she'll no doubt rest well on these threadbare laurels of pension reform.

UPDATE (3/14): I really recommend you read the comment string below. One of my beloved whack-job commenters graced us with the pernicious misinformation that by 2012, the minimum pension for those affected by the Bachelet bailout would be a monthly Ch$255,000 (about US$590 by today's exchange rate). Truth is it's just the opposite. Ch$255,000 is the maximum. Worth noting that I recently spoke with a 67-year-old retired copper miner whose monthly pension is currently Ch$260,000. Yes, he's driving a cab to make ends meet. Ch$260,000 gets you nowhere if you live in Santiago.

So without further ado I give you Chilean privatized social security after the Bachelet Bail-out in all its graphic glory: