translated from Spanish: Was improving pensions, the main objective of the AFP system?

Individual capitalization is the architecture that enshrines the forecasting regime for most Chileans, and was imposed by the military dictatorship in the early 1980s to replace a solidarity distribution system where an active person’s contributions finance the pensions of immediate retirees through social welfare funds.
Later, the technicians of the time indicated, on the front pages of the newspapers, that by 2020 this new system would provide pensions equal to the salary that the worker had.
This change embraced the principle behind all the transformations that regime officials made; promote the individual over collective considerations of society. Principle that from October 18, 2019 is called into question in all its forms.
However, this column would not be complete if the main reason and the main objective sought by the individual capitalization system, which was not precisely to generate better pensions, is not highlighted;
The dictatorship imposed since 1973, beyond ideological considerations, implemented a profound transformation of the Chilean development model, liberalizing trade, prioritizing the productive factor at private hands in the past of a state that until that time was actively involved in all basic services and sectors sensitive to the social fabric of the country. This implementation was carried out on the basis of eliminating the essential freedoms of society together with serious human rights abuses.
This led to the country finding itself during those years in deep international isolation, which, on the one hand, brutally condemned human rights abuses and, on the other, suppressed foreign investment circuits. On the other hand, domestic savings did not work as expected and the authorities of the time promoted to counter the international aspect. As a result, the balance of payments at that time resulted in harsh negative numbers as they contracted more debt.
In return, as a way of giving a financial respite to the domestic market and industry, which was completely lacking in liquidity and investment, the technocrats who backed the dictatorship, designed and created a capital market consisting of the workers’ planned funds becoming part of an individual system, where nominally the property is of the worker , creating the figure of the Pension Fund Manager (AFP) who takes the funds “of the worker” manages them and makes them rent to “increase” the individual account that will be used only to finance the retirement pension.
This administration involved worker’s money becoming part of a fledgling local financial market that, bringing together the planned savings of 1,400,000 workers to 1981, they were placed mainly in local banks, to provide liquidity, in the form of term deposits (average rate of 4% annual interest) who had them as a system of end-consumer credits with interest rates of 20% to 25% per annum.
This reform allowed the country to achieve an economic recovery, reduce inflation, boost domestic consumption and most importantly, saving from bankruptcy numerous banks and financial institutions that had been provisionally intervened by the state and after its savings of “return” them to their owners.
In short, the creation of the AFP System was not primarily aimed at standardizing or improving workers’ pensions, but was aimed at saving the country’s economy, halting the inflationary crisis, and incentivizing domestic consumption and dynamism, reflecting – and reflecting – the banking and moreiveness of credit available to almost anyone , generating a financial market where the interest on loans becomes the main business of the system.
It is therefore difficult to conclude that the creation of the AFP system was tremendously successful in recovering an internal economy of the time, saving domestic companies and creating a financial market for consumption and interest rate, using the same money from those taking out the final loan. In turn, it is a tremendously failed system in its initial conception, in terms of the amount to be paid pensions to meet the objective of a social welfare system like that of any democratic society that seeks the common good of its inhabitants.
Judge what is needed for the times we live today.
 

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Original source in Spanish