The Political Economy of Pension Reform in Post-Authoritarian Chile, 1990-2017: The Role of the Business Elite

Recent scholarly work on the Chilean pension system has praised the expansionary 2008 reform, placing it within the universalist agenda in Latin America. Indeed, this reform increased minimum pension and established a set of pension top-ups for the bottom 60% of income earners. Yet when considering the reform together with previous pro-business measures undertaken during the 1990s, the situation in Chile is less positive. These dynamics observed during the 1990s, concurrent with pension retrenchment in other Latin American countries, have not been accurately considered in the scholarly debate so far. This paper aims to explain why and how after almost three decades of democracy, Chile still exhibits a pension system characterised by low benefits (e.g. the average monthly benefit is less than Chile´s minimum wage), despite the dominance of left-wing governments. Using the concepts of instrumental power and structural power, the paper shows how the Chilean business elite has used its multiple sources and mechanisms of power to maintain a predominantly defined-contribution, private-account pension system, with no elements of intra- or intergenerational solidarity. In its core, the system has been preserved despite a growing discontent among workers. Chile is thus far from converging to the more universal trajectory of South European countries in this policy area.