Saturday, July 25, 2009

Sebastian Pinera, Chile and the US

I never realized before I moved from the US to Chile that there are many links between the two countries. These days I seem to run across stories that contain the links on a daily basis.

First, a little background. Sebastian Pinera (Miguel Juan Sebastián Piñera Echenique) was a Presidential candidate running against current President Michelle Bachelet but lost in 2005/2006. A new election is coming soon (there is currently a 4-year limit for presidents here). Pinera is the perennial candidate of the right-wing National Renewal Party(part of the "Alliance for Chile" coalition) and Michelle Bachelet of the Concertación-affiliated Socialist Party, has won record high approval ratings (74 percent) for her handling of Chile’s economic crisis. Candidates of the Concertación – formally known as the Agreement of Parties for Democracy – have won every presidential election since 1989, the return of democracy after the Pinochet dictatorship.

There are many parties here but they have become part of "coalitions", the Concertacion specifically to combat the Pinochet years. I hear the screaming all the way from the USA that you need more than a two-part system. And I understand. But the parties here(here's a list )
simply group into coalitions-and parties join and leave at will(not so different than Republicans becoming Democrats and vice-versa).

Back to Pinera. His brother Jose Pinera works at the Cato Institute in the US now and
was responsible for promoting a plan of "free market reforms" that he considered could double Chile's annual rate of growth to 7%, he became, first, Secretary of Labor and Social Security (1978–1980), and then, Secretary of Mining (1980–1981), in the cabinet of General Augusto Pinochet. As such, he was responsible for four structural reforms: the creation of a retirement system based on private personal accounts (the AFP system), the opening of the private health insurance system (the ISAPRE system), the redesign of the labor code changing the terms of trade union elections, and the constitutional law on mining. Never mind that the pension system here is a mess(especially after the economic mess), never mind that fees charged for pension account eat most of the returns(link here) with portion below.

There are prohibitively high expenses and fees. Voracious commissions and other administrative costs have swallowed up large shares of personal accounts. It is estimated that roughly 28 to 33 percent one-quarter to one-third of contributions made by employees retiring in 2000 went toward fees.
  • The brokerage firm CB Capitales calculated (see English language discussion by Stephen Kay of the Federal Reserve Bank of Atlanta here) that when commission charges are taken into consideration in Chile, the total average return on worker contributions between 1982 and 1999 was 5.1 percent-not 11 percent as calculated by the superintendency of pension funds. That report found that the average worker would have done better simply by placing their pension fund contributions in a passbook savings account.
That was written with 1999 figures-imagine people with pensions here now with the stock market crash. They were still paying those high "fees" even though their pension funds suffered tremendously.

...Are you listening up there in the USA? Look no further than Chile and its "free market reforms" of privatization to see how they don't work. More about those another time...these "reforms" were instituted under a dictatorship(often undisclosed in glowing accounts of Friedman and Pinochet "saved" Chile). Make no mistake, Chile's strong economic position today is the result of Concertacion policies. But, know that Jose(I see he has a Youtube entitled "José Piñera - The Man Who Fought for Prosperity and Democracy"....yeah he improved "prosperity" alright for the insurance companies, the corporations. The people?

Jose was by GW Bush's side, back in the social security privatization discussions in the US. Ans although you'll see recent rants by Jose about how wonderful privatization is, the other side has moved on-but don't think privatization won't continue to rear its' ugly head in the US. And if you don't think the US health plan won't look similar to Chile's ISAPRE, I know some swampland for sale...

So, Sebastian Pinera, perennial candidate, is running again. I saw a poll showing he and Frei (concertacion candidate) were within a few points but another independent and former socialist party candidate has entered the race. He is somewhat left of Frei and appears to be taking votes-Pinera is now far ahead with the other two splitting the rest of the vote. Pinera has carefully distanced himself from the Pinochet legacy.

So today I saw an article that, if true, is pretty shocking.

Santiago - Documents revealed by the US Central Intelligence Agency (CIA), published on Friday in this capital, relate presidential candidate Sebastian Pinera to ex dictator Augusto Pinochet and several actions for illegal enrichment.

El Siglo weekly highlighted today several CIA documents, one of which said Pinera's father had collaborated with that spy agency since 1965, and his brother Jose, Pinochet's Labor and Mining minister, was its direct collaborator and financial analyst.

Pinera told Spanish El Mundo daily in early July that he had always been opposed to Pinochet's government.

The weekly, which entitled its front page headline as Dossier Pinera: secret CIA documents, devoted several pages to demonstrate Pinera's closeness to Pinochet's environment, as well as data about the origin
of his fortune.

The reports conclusions emphasized "the inconvenience that a man about whom the intelligence services of the largest power in the world have so much information assumes the Republic's presidency."

Quoting the documents, El Siglo journalist Francisco Herreros revealed a 1982 operation, ordered by the then US ambassador, to take Pinera out of the country because he had been accused of several crimes related to fraudulent placing in administration and liquidation of the Talca Bank.

A list of around 80 false companies were created to receive credit from the Talca Bank and then "to buy its shares," is among the crimes attributed to Pinera and his brother Jose, together with Carlos Massad, El Siglo

The link here:

And I went to the original story which is here and in Spanish at La Nacion, a small Chilean paper. I did a google translate and it is passable. There are several other stories there that link as well and tell a tawdry tale of high finance, corruption and politics. Chilean banks were mainly nationalized before Pinochet, then sold(privatized) under Pinochet-another "miracle", Allende paid money out of the treasury to nationalize and Pinochet sold the banks, thereby receiving money.

The first document is a collection of background and analysis on Juan Miguel Sebastian Piñera Echenique, ordered by the Communications Department of the United States Embassy in Santiago, which is numbered WSA/Was/3215B records the data entry 1975, 1984 and 1990 and relates to the laundering of assets, creation of shell companies, bribery and conspiracy, all acts related to the intervention and liquidation of the Bank of Talca in 1982.

Below is a list of shell companies set up to receive credits from the Bank of Talca and buy shares of the bank. " El documento atribuye la autoría intelectual de esa asociación ilícita a José Piñera Echeñique, Carlos Massad y Sebastián Piñera Echeñique. The paper attributes the intellectual authorship of that conspiracy to Jose Pinera Echenique, Carlos Massad and Sebastian Pinera Echenique.

A link here.

I have to see if I can find the so-called CIA documents...but another day. I have to say it seems suspicious as it's a little unclear how Sebastian Pinera attained his billionaire status, although he is widely know as the "father of credit" in Chile. Hmmm.

Update: The Santiago Times has a story here in English.


Vicki said...

Excellent researching and discussion Laura. Wish I had more time online to read more of your links...John Dinges has some interesting books and articles out on Chile-US connections, but these I didn't realize.

Anonymous said...

As a chilean citizen living in the US, I congratulate you for your well explained situation regarding who Sebastian Pinera really is.. unfortunately he will become the next President, unless Frei gets the people's support, which I doubt after his disappointing government..Enjoy my country!

Laura said...

Chilean citizen: I do enjoy your beautiful country! The election, we'll see. Could be a very close runoff

Anonymous said...

hahah up yours socialists, long live Piñera! I hope that in Europe we could have someone like him, tahta way I wouldn't have to work half a year just pay my taxes.. make no mistake, Piñera will be the best president of Chile.. congratulations folks :)

Laura said...

Lovely and sweet comment Anonymous. It's been said At the end of the day, you get the government we deserve and deserve the government you get.

I truly hope this world out for the Chilean people. They voted for "change" although President Bachelet is enjoying 80% approval.But people always want change. And I think most people don't really understand issues in Chile or the US. I recently saw a comment on another blog from a right winger saying he thought Pinera would bring more badly needed regulation to the construction industry. When pigs fly....

Laura said...
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Anonymous said...

If they mandate a streamlining of the Chile retirement plan fees, the plan would return 11%?

Why are people throwing the baby out with the bathwater?

Something tells me people who want the other plan of US SS don't care it is their children they are abusing. Maybe we can hope their motivations are not influenced by their experience as a parent and more influenced by their lack of ability to find a mate that can tolerate their selfishness?