You Win Some, You Lose Some: Pension Reform in Bachelet’s First and Second Administrations

Abstract

This article analyses and compares President Bachelet's successful efforts to reform the Chilean pension system in 2008 and her failure to achieve the same objective in 2017. The article addresses the impact of electoral promises, policy legacies, policy ideology, presidential power, the role of the private sector, and the role that the government coalitions had in the process of pension reform during the Bachelet administrations. We argue that the 2008 reform was possible because of Bachelet's personal commitment to reform and the presence of a stable governing coalition that had the will and capacity to legislate. In the second administration, although the policy legacies and ideology had remained the same, the reform did not materialise due to intense conflict within the administration and within the government coalition, as well as conflict between the administration and the coalition. These conflicts, in turn, generated a vicious cycle responsible for Bachelet's declining popularity, limited political capital, and reduced support for reform. A stagnant economy further undermined these efforts. In brief, this article argues that when assessing success and failure in pension policy reform it is important to analyse not only policy legacies and political ideology but also the strength of the executive, the cohesion of the governing coalition, and the country's economic performance.

The pension system in Peru: Parallels and intersections

“…Low contribution rates and gender inequity have resulted in lower than expected pensions at retirement, well below the promised replacement rates of 60 to 70%. Furthermore, in many countries, the ACR did not significantly change, remaining below or only slightly above the coverage rate that had existed before the structural reforms (Arenas de Mesa & Mesa‐Lago, 2006; Borzutzky, 2001, 2003, 2005, 2019; Cruz Saco, Seminario, Leiva, Moreno, & Zegarra, 2018; Mesa‐Lago & Bertranou, 2016; Ortiz, Duran‐Valverde, Urban, Wodsak, & Yu, 2018).…”

Bringing Back the State: Understanding Varieties of Pension Re-reforms in Latin America

“…For example, Arza (2012) shows how the low levels of support for the private pension system in Argentina in the aftermath of the 2001 crisis and the low levels of coverage and savings provided support for its elimination in 2008. Similarly, Borzutzky (2019), focusing on Chile, argues that negative policy legacies, in terms of low expected future pensions, played a significant role in the 2008 re-reform.…”

The 2019 crisis in Chile: fundamental change needed, not just technical fixes to the health system

“…President Bachelet reformed pensions in the late 2000s to help the poorest 60% of the population. The reformed pensions did not depend on contribution history, but left core elements of the privatized scheme in place [14]. Education policies from the dictatorship also persisted despite a 2006 "Penguin Revolution", when high school students revolted against the segregation of public and private schools and a 2011 revolt by university students demanding an end to the free-market approach to education [15].…”