Chilean Model Research Articles

El mito de las privatizaciones y la experiencia chilena

El autor hace un análisis de los procesos de privatización de empresas y bienes estatales en América latina, para luego detenerse en la experiencia de Chile. Para el caso chileno, se indica que los efectos negativos de las privatizaciones exceden en mucho sus consecuencias positivas, y refutan la teoría neoliberal que ve en ellas una fuente de eficiencia económica y bienestar para todos, confirmando la interpretación del Premio Nóbel de Economía Stiglitz para quien las reformas neoliberales son, básicamente, un proyecto político que significa la radicalización de la dependencia de las economías y los sistemas políticos del mundo periférico a las principales sociedades del Norte, y sus empresas trasnacionales, en función de nuevo ordenamiento de la economía y el sistema de poder mundial, en el contexto de una nueva revolución científico-tecnológica.

In the image of the market: the Chilean model of water resources management

Chile's free-market Water Code turned 20 years old in October 2001. This anniversary was an important milestone for both and international debates about water policy, because Chile has become the world's leading example of the free-market approach to water law and economics and water resources management - the textbook case of treating water rights, not merely as private property, but also as a fully marketable commodity. This approach is often referred to as the Chilean model. This paper summarises key aspects of the experience since 1981, in order to draw lessons for international discussions about how to reform water laws, policies, and economics. The model of water resources management shows the need for a more institutional and interdisciplinary approach to the economics of water.

Ideas, Economic Pressures, and Pension Privatization

This article maintains that the recent wave of pension privatization has been spurred largely by rising pension expenditures and chronic capital shortages. Many policymakers in Latin America and around the world believed that privatizing their public pension systems would boost their domestic savings rate and resolve the systems' financial problems, thereby reducing their dependence on unstable foreign capital and freeing resources for other, more productive uses. There is no clear evidence that pension privatization will bring these economic benefits, however. To understand why policymakers held these beliefs, we must examine how ideas about pension privatization have formed. Two particularly important factors are the Chilean model and the World Bank's growing influence on pension policy. A probit analysis of the determinants of pension privatization provides support for these arguments.

Ideas, Economic Pressures, and Pension Privatization

AbstractThis article maintains that the recent wave of pension privatization has been spurred largely by rising pension expenditures and chronic capital shortages. Many policymakers in Latin America and around the world believed that privatizing their public pension systems would boost their domestic savings rate and resolve the systems' financial problems, thereby reducing their dependence on unstable foreign capital and freeing resources for other, more productive uses. There is no clear evidence that pension privatization will bring these economic benefits, however. To understand why policymakers held these beliefs, we must examine how ideas about pension privatization have formed. Two particularly important factors are the Chilean model and the World Bank's growing influence on pension policy. A probit analysis of the determinants of pension privatization provides support for these arguments.

POWER, NATURE AND NEOLIBERALISM: THE POLITICAL ECOLOGY OF WATER IN CHILE

ABSTRACTSince the 1990s, international water sector reforms have centred heavily on economic and market approaches. In regard to water resources management, tradable water rights have been promoted, often supported by the neoliberal model adopted in Chile. Chile's 1981 Water Code was reformed to comprise a system of water rights that could be freely traded with few restrictions. International financial institutions have embraced the Chilean model, claiming that it results in more efficient water use, and potentially fosters social and environmental benefits. However, in Chile the Water Code is deeply contested. It has been criticised for being too permissive and has produced a number of problems in practice. Moreover, attempts to modify it have become the focus of a lengthy polemic debate. This paper employs a political ecology perspective to explore the socio‐environmental outcomes of water management in Chile, drawing on a case study of agriculture in the semi‐arid Norte Chico. The case illustrates how large‐scale farmers exert greater control over water, while peasant farmers have increasingly less access. I argue that these outcomes are facilitated by the mode of water management implemented within the framework of the Water Code. Through this preliminary examination of social equity and the environmental aspects of water resources management in Chile, I suggest that the omission of these issues from the international debates on water rights markets is a cause for concern.

Results of Chilean water markets: Empirical research since 1990

Chile's free‐market Water Code turned 20 years old in October 2001. This anniversary was an important milestone for both Chilean and international debates about water policy because Chile has become the world's leading example of the free‐market approach to water law and water resources management, the textbook case of treating water rights not merely as private property but also as a fully marketable commodity. The predominant view outside of Chile is that Chilean water markets and the Chilean model of water management have been a success, and this perception has encouraged other countries to follow Chile's lead in water law reform. Much of the debate about Chilean water markets, however, has been based more on theoretical or political beliefs than on empirical study. This paper reverses that emphasis by reviewing the evolution of empirical research about these markets since 1990, when Chile returned to democratic government after 16 years of military rule. During the period since 1990, understanding of how Chilean water markets have worked in practice has gradually improved. There have been two major trends in this research: first, a gradual shift from exaggerated claims of the markets' success toward more balanced assessments of mixed results and, second, a heavy emphasis on the economics of water rights trading with very little attention given to the Water Code's impacts on social equity, river basin management, environmental protection, or resolution of water conflicts. The analysis in this study is qualitative and interdisciplinary, combining law, economics, and institutions.

Learning from others: the spread of capital housing subsidies

One of the benefits of globalization is that governments have the opportunity to learn from the experiences of others. The ability to learn from others' discoveries and mistakes should improve government performance. This is the basis for the World Bank's partial transformation into a knowledge bank. However, we know little about how governments draw lessons in practice. We know that sometimes they are forced to accept unwelcome lessons, as in IMF conditionality agreements. But perhaps equally often the process of adoption is voluntary. The paper considers how Colombia developed its capital housing subsidy programme. A ready exemplar was available in Chile and the major development banks were anxious to persuade other governments to accept the Chilean model. The paper considers whether Chilean experience was imitated in Colombia, the role that was played by the development banks, and how and why internal considerations determined the final form of the programme.

Has the Chilean Neo-Liberal Experiment Run Out of Fuel? A View On Specialisation, Technological Gaps and Catching-Up

Due to an extraordinary growth performance during the last two decades the Chilean neo-liberal model of development, based on the exploitation of the country's static comparative advantages, has turned into a benchmark for most developing countries. The aim of this paper is to discuss the long term sustainability of the Chilean neo-liberal model of development. We present new empirical results obtained by using CAN2000 as well as input-output analysis that describe the Chilean model of development during the period 1986-1998. On the basis of these stylised facts, a simple ricardian-evolutionary model is developed in order to offer an interpretative framework to discuss the conditions under which Chile could maintain the current catching-up process in the long run. The main conclusion is that, with the recent ceasing of the push effects of the neo-liberal policies, it is unlikely that an increase of the export volume, given its structural characteristics, will be sufficient to this end. Indeed, an increase of the country's sectoral industrial interdependence and an improvement of its international specialisation pattern towards goods with higher technological content and higher income elasticity of world demand are necessary conditions for maintaining the current catching-up process in the long run.

The Chilean Model

For those mesmerized by the magic of the marketplace and the end of history (Fukuyama, 1989), contemporary Chile constitutes a remarkable demonstration of the inevitable triumph of economic and political liberalism. Democracy and capitalism seem to flourish. Official circles as far away as Eastern Europe, establishment intellectuals, and the mainstream media have praised the country as a model for Latin America, the developing world, and beyond (Kandell, 1991; Whelan, 1995). However, as with Brazil in the 1960s and 1970s or, more recently, the Asian tigers, the Chilean model is more a semantic construction than a concrete reality: a global showcase and in many ways a precursor of the New World Order. In this sense, it has become another decontextualized North American ideological export. Understanding the country's path to modernization since the early 1990s (Silva, 1991)' requires attention to the continuity with the 16-year-long dictatorial period. Despite ostensible differences in political discourse, the democratic government of the center-left alliance known as the Concertaci6n is in many respects the new management of an establishment whose origins, fundamental orientation, structure, and officialdom and even many aspects of its modus operandi have been inherited from the Pinochet era.

Averting crisis? Assessing measures to manage financial integration in emerging economies

The Asian crisis provides heterodox economists with the opportunity to investigate counterfactually whether the financial policies they have proposed would have averted the crisis. The paper argues that neo‐liberal financial integration introduces distinct risks to emerging economies—currency, flight, fragility, contagion and sovereignty risks. The paper presents the financial policies endorsed by the heterodoxy—transactions taxes, trip wires and/or speed bumps, convertibility restrictions, the Chilean model and a publicly managed mutual fund. The paper considers whether these policies mitigate risks, and whether they could have prevented the Asian crisis (and the transmission thereof). The paper concludes with policies to avert future crises.

Chilean Model of Development

Chilean Model of Development

Individualizing Social Risks: International and Legal Dimensions of Privatization of Pension Schemes in Latin America

RésuméDepuis dix ans, le modèle chilien de privatisation des régimes de pension s'est répandu en Amérique latine et suscite beaucoup d'intérêt sur le plan international. Ceci soulève des questions importantes quant à l'individualisation des risques sociaux et à l'érosion des bases de la sécurité sociale fondées sur les droits de la personne. Cet article examine les caractéristiques des régimes privatisés de pensions en Amérique latine et explore certains facteurs qui ont motivé la tendance vers la privatisation. Les approches préconisées par la Banque mondiale et l'Organisation internationale du travail pour la réforme des régimes de pension sont également comparées. Les normes juridiques et les principes généralement reconnus pour l'élaboration des régimes de pension fournissent une toile de fond pour l'examen de questions entourant la mise en œuvre de régimes privatisés, notamment le rôle changeant de l'État relativement à la protection.

Recent changes in Latin American welfare states: is there social dumping?

The article evaluates the degree to which the recent wave of pension reform in Latin America can be considered social dumping. While competitive pressures did create incentives for reform, the region's pension systems were already becoming financially unsustainable, consuming greater percentages of GDP throughout the 1980s and 1990s. To the extent that the transition costs of privatization crowd out other – more redistributive – forms of social spending, as occurred in the Chilean case, social dumping may occur. However, it is problematic to speak of a single 'Latin American' trend in social spending in general or in pension reform in particular. The demonstration effect of the Chilean model, International Financial Institution support for privatization, and concerns about economic competitiveness provided incentives for governments to pursue privatization, but policy outcomes were filtered through the prism of domestic politics. Given the dismal financial and distributional picture of the old pay-as-you-go (PAYG) system and its steep transition costs (simply cutting benefits in the old system would be far cheaper), social security privatization is not readily explained as social dumping.

A Chilean Model for Russia

What Russia at the beginning of the twentieth century was not a Bolshevik Revolution but an American one. The tragedy of that great nation was that it got a Lenin instead of a Jefferson. Today, nearly ten years after the collapse of the Soviet Union, Russia's new president, Vladimir Putin, has the historic opportunity to start the freedom revolution that his country missed last century. I had the opportunity to assess Russia's situation at the end of April, when I traveled to Moscow at the invitation of President Putin s newly appointed economic adviser, Andrei Illarionov. As a member of the team of economists that entered the government in Chile in the 1970s to produce a free-market economic revolution and a return to democratic rule, I was inevitably asked whether Russia needed a Pinochet and whether the country should introduce a economic model. My unequivocal answer was no to the first question and yes to the second. President Putin and his government must not identify the core of the Chilean experience with its historically specific interruption of political liberties. Such a break has happened in many other nations, and in almost all cases, their generals-turned-presidents have not only been a disaster for their countries but have also left a legacy of more state intervention and corruption. I told my Russian audiences that the replicable aspect of the Chilean model is the radical, compre

Critique of Mexico’s New Social Security Act

The new Social Security Act in Mexico implies not only an important reform in terms of the funding mechanism, but will also have consequences of great importance for the economy, the financial sector, labor markets, and politics. The analysis presented here describes the recent history of Social Security in Mexico and the problems it faced before the reform. This paper refers to research done by actuaries and other professionals to outline the main weaknesses (rather than the presupposed superiority) of fully funded schemes vs. a pay-as-you-go (paygo) method, as well as the main pitfalls of the so-called Chilean model. It also presents the ideas of experts showing that an individual capitalization system is not necessarily more secure than a paygo system and that it transfers risks to workers. I am not of the opinion that the former paygo system was optimal, but I do strongly believe that the reform was done inappropriately, among other reasons because the new system abandons insurance techniques and focuses on investment techniques, despite both concepts being complementary. I suggest that a hybrid, two-tiered system, consisting of a paygo system for low-income workers and an individual accounts system for higher-income workers, could have been a better option for Mexico.

The Chilean model

In 1981, Chile replaced its government‐run pay‐as‐you‐go pension system with a national system of individual Pension Savings Accounts managed by the private sector. The new system has contributed to the increase in the country's savings rate, the productivity of capital and the rate of economic growth. More important, Chilean workers now have property rights over their own pension contributions and enjoy much higher pensions than under the old system.

Waiting for the Forest Law: Resource-Led Development and Environmental Politics in Chile

Chile has gained a reputation as the Latin American economic success story of the 1990s. Domestic savings rates are high, foreign investment continues to expand, inflation remains single-digit, and economic growth has averaged 6 percent annually from 1984 to 1995. In the seven years of democratic government since 1989, the poor have begun to share some of the benefits of this growth. From 1989 to 1993, unemployment fell from 12.2 percent to 4.9 percent, and social expenditures increased by a third in real terms (Hojman 1995). But Chile's impressive recent record of sustained economic development coupled with improvements in social justice has incurred significant environmental costs that raise doubts about the ecological sustainability of the Chilean model (Meller, O'Ryan, and Solimano 1996).

Survey on the Privatization of Social Security in Latin America: Pension Funds à la Chile?

This paper surveys the social security system in several Latin American countries. Specifically, the cases of Bolivia and Brazil are documented in order to determine if the Chilean model is a viable one in the Latin America and Caribbean region. An institutional approach suggests that while there has been a marked interest in tailoring pension funds a la Chile, policy makers of the region must be aware of the similarities and differences in the politico‐social‐economic environment. The macroeconomic transformation undertaken in Chile was a unique one obeying to specific conditions of time and process. It is indicated, however, that even in the case of developed nations, some features of the Chilean model may be very appealing as well.

Learning from social security reforms: Two different cases, Chile and Argentina

This paper compares two of the most important structural reforms of social security in Latin America: the Chilean private fully funded system, and the public/private Argentinean “integrated” (pay-as-you-go/fully funded) program. Chile was the first country in the world to completely privatize the old public pension system. This landmark reform has had a strong influence on other pension reforms, not only in Latin America but also in other developing and developed countries. The Argentinian model has important differences in comparison with the Chilean model: 1. (a) more inter- and intragenerational solidarity; 2. (b) relatively lower transition costs to be covered by the state; 3. (c) higher coverage of self-employed workers; 4. (d) a more comprehensive regulatory framework; and 5. (e) less gender inequality. Given these elements, the Argentinian pension model offers new insights to countries currently reforming their pension systems. The paper concludes addressing important questions regarding the weaknesses of the new Argentinian model.

Chile: the great transformation

Chile is frequently cited as a remarkable of neoliberal economic restructuring. In fact, countries around world are encouraged to follow Chilean model so that they can reap extraordinary benefits of rapid growth and expanding export markets associated with drastic economic reform in Chile. But Chilean experience is extremely complicated and contradictory.The international discussion on economic restructuring in Latin America often runs on two tracks: one dominated by consultants and scholars from English-speaking world and another in which Latin Americans talk to each other. This book attempts to bridge gap.Two outstanding Chilean scholars and activists present an original interpretation of Chilean experience. They cut through rhetoric surrounding the Chilean miracle and provide an integrated analysis of process of socioeconomic and political change that transformed their country between 1970 and 1990. In so doing, they discover not only a neoliberal revolution, but a capitalist revolution with roots far deeper than Pinochet reforms.The book provides a valuable resource for people around world who hope to understand principal success story of Latin American adjustment. Copublished with United Nations Research Institute for Social Development.