C) Chile
1.) The transition to market economics in Chile:
c) Privatization and deregulation (reform of social security etc.)
________________________________________________________________________
Privatization under Pinochet
Under the military regime of Pinochet the government privatized all enterprises that were under state control in the Allende period. The Chicago Boys, Chilean technocrats, who were engaged to reform the Chilean economic system, privatized 202 of more than 500 nationalized firms in the first two years of the dictatorship (73-74). Until 1979 nearly all enterprises were under the control of private business. 1980 only 25 companies belonged to the public sector. Many firms were sold under price.
Beneath this radical tendency to privatization another remarkable process took place. At the end of the eighties six economic groups controlled between one half and two-thirds (believing Imbusch or Nohlen/Nolte)of the 250 biggest companies capital shares. This meant a conglomeration of economic power for the so-called grupos. In 1978 the most important grupos in Chile were: Cruzat-Larraín (37 companies, 14.8% share of the market, 936.9 million US-$ capital), J. Vial (25, 10.0%, 477.3 million US-$), E. Matte (12, 4.8%, 325.3 mil. US-$), A. Luksic (9, 3.6%, 161.4 mil. US-$), A. Angelini (8, 3.2%, 141.8 mil. US-$), A. Edwards (9, 3.6%, 95.9 mil. US-$) (Imbusch: 184).
A second phase of privatization began in 1986. Until 1989 most of the enterprises of the state-owned holding CORFO were privatized. The privatization program in Chile between 1985-87 was the most radical project in a development country ever. The sale of CORFO-enterprises brought 3.7% of the government revenue in 1986. Until 1988 it increased to 7.2% of the revenue. Altogether 33 state-run enterprises were sold in this second phase of privatization. Mainly companies of the civil service sector were sold. Telecommunication, power supply companies, water purification units, steel mills like the CAP etc. were privatized.
From 1985 until 1990 more than one half of the foreign investments were transacted in shares of privatized firms by debt-equity swaps. The enterprises were in good condition, i.e. that the reasons for this policy were ideologically motivated. The military government wanted a private economy (Nohlen/Nolte: 314/5).
Privatization under Aylwin and the Concertatión
The Concertación stopped this privatization-process. At the end of the year 1991 the employers’ associations like the SOFOFA began to criticize this policy. SOFOFA-president Hernán Briones said it was the biggest mistake to stop the privatization-process. The neoliberal entrepreneurs wanted a lean state, which is concerned about ist fundamental topics: national defence, maintenance of the basic infrastructure and the struggle against poverty. Their arguments were:
The entrepreneurs wanted the following state-owned companies to be privatized: the copper enterprise CODELCO; the most important money institution Banco del estado, the petrol-firm ENAP; the electrcity-firm Colbún, the service company EMPORCHI and several further service- and telecommunication-firms (Imbusch: 430).
Not only employers’ associations attacked the government’s policy but also the newspaper El Mercurio and the opposition party Renovación Nacional. They imputed to the Concertatión a ‘socialist attitude’. Further support against the government gave the Instituto Libertad y Desarrollo. Aylwin did not agree and told on a meeting with SOFOFA-representatives, that state-run companies need not to be ineffective by any means. In Aylwin’s oppinion they work well and efficiently (Imbusch: 432/3).
The Chilean social security system
Chile was one oft the pioneers in social welfare in Latin America. Important social laws were invented in 1923. In 1935 already 56% of the gainfully employed persons (g.e.p.) were profiteers of this social system. In 1955 66% gained benfits by it. 1970 it were 76% of the g.e.p.s and in 1974 Chile was the Latin American leader with 79% of the g.e.p.s. Then a decline to 63% came in 1980. The social system contained: old-age pension, support in the case of disability, job accidents, health insurance and unemployment benefit (Nohlen/Nolte: 325). 1971 (under Allende) the social security sytem cost 17% of the GNP, in 1980 it were 11% of the GNP, but still the highest rate in Latin America beneath Uruguay. Since the 1950ies the principle of share in the costs was valid. I.e. that the insurance contributions were financed by the employees, the employers and the government.
In May 1981 a radical break with this practice came. The military regime privatised the social insurance company according to the neoliberal theorists. They also allowed private holders in the public health service sector called Institutos de Salud Previsional (ISAPREs). Since 1983 the old-age pension is in private hands, what is named Administradores de Fondos de Pensiones (AFPs). The g.e.p. must take an old-age insurance but he is free to choose the company and changes are possible. The employer does not have to make a contribution. The insurant has a private account and has to pay the insurance company a commission. The contributions of the insurants are invested in the capital market, and the insurants get a profit-sharing. The amount of the pensions are calculated by the account of the accumulated contributions and by the profits of the investments in the capital market. The state garantuees a minimum pension.
In 1982 more than 70% of the social insurants belonged to the new system. In 1990 3.7 million people were part of the AFPs and 14% of the Chilean population were insured with ISAPREs, mostly people with higher incomes.
Despite this privatization of the welfare system the state still has to spend a lot of money. He has to garantuee the minimum pensions and has to pay pensions of the old system. Nevertheless the Chilean social security system is supposed to be a model for the other Latin American countries that are struggling with deficits in social insurance.
The Chilean private insurance companies gain high profits because of the advantageous proportion of contribution payers and service recipients. So the privatization of the social security system has given strong impulse on the capital market. In 1991 the accumulated fonds of the AFPs made up 30% of the GNP (Nohlen/Nolte: 326).
Literature: