Business Interests, Conservative Economists, and the Expansion of Noncontributory Pensions in Latin America

Abstract

Since the 1990s, most Latin American countries have significantly expanded noncontributory pension programs. In explaining this wave of expansion, research has focused on the protagonism of left parties and social movements and on electoral competition, generally disregarding the roles of organized business and conservative policy experts. This article demonstrates, through a detailed analysis of Chile’s 2008 noncontributory pension reform, that conservative economists played active roles in formulating a noncontributory pension policy characterized by moderate, targeted, and “incentive-compatible” benefits and financed by the general budget. The conservative design of the program facilitated broad support from employers and private pension funds, critical for the eventual passage of the reform. The analysis illustrates the need to incorporate business interests into explanations of welfare state reforms in Latin America and the broader Global South, in particular by distinguishing the interests of employers and private providers and by focusing on their interaction with conservative policy experts.

Can defined contribution pensions survive the pandemic? The Chilean case

“…In January 2008, the Chilean Congress approved the reform, which included the creation of the Basic Solidarity Pension (PBS), special benefits for women, and the inclusion of independent workers. As Dorlach notes, the conservative policy design of the reform, which did not curtail the activities of the AFPs, facilitated its approval by making it acceptable to the pension fund industry (Dorlach, 2021).…”

Subnational policy innovation: The birth of social pensions in Mexico

“…Mexico enjoyed relatively favourable macroeconomic economic conditions in the early 2000s due to the boom in oil prices during those years (Colmenares, 2008), among other reasons. In this context, the federal government decentralised spending and constantly increased the federal transfers to states (Diaz-Cayeros, 2006). Between 2000 and 2006, all states and Mexico City increased their financial resources via federal transfers and debt (Sour, 2008).…”

The causes of welfare state expansion in democratic middle‐income countries: A literature review

“…Indeed, the revenues of Latin American governments were substantially higher during times of high commodity prices and low international interest rates (Campello, 2015, p. 17). Indicative of this effect of fiscal capacity on welfare state expansion is that Chile, the world's largest copper exporter, passed its landmark non‐contributory pension reform in January 2008, on the heels of a historically high fiscal surplus of 8.8% of GDP (Dorlach, 2020).…”

“…In countries like Indonesia and Turkey, the World Bank also provided technical and financial support for the introduction of non‐contributory health insurance programmes for the poor (Sumarto & Kaasch, 2018; Yilmaz, 2017). The expansion of non‐contributory pensions in Latin America, on the other hand, was made possible by support from organized business, in particular private pension funds (Dorlach, 2020). This somewhat unexpected support for the expansion of non‐contributory social policies was oftentimes driven by the conservative, targeted design of these programmes and their limited fiscal cost (Dorlach, 2020; Holland & Schneider, 2017, p. 992).…”

“…The expansion of non‐contributory pensions in Latin America, on the other hand, was made possible by support from organized business, in particular private pension funds (Dorlach, 2020). This somewhat unexpected support for the expansion of non‐contributory social policies was oftentimes driven by the conservative, targeted design of these programmes and their limited fiscal cost (Dorlach, 2020; Holland & Schneider, 2017, p. 992).…”