Published
January 17, 2025
This op-ed was originally placed in El Mercurio.
In the next few days, the Chilean Senate is expected to cast a long-awaited vote on pension reform. Just getting a viable reform proposal in front of legislators will constitute an important milestone for all working Chileans, the country’s political class, and the government of President Gabriel Boric.
While the individual savings system has produced many positive results in terms of returns, growth, capital markets, employment and poverty reduction, Chileans across the political spectrum, along with U.S. and other foreign investors, agree that the need for reform is urgent. A combination of rapidly changing demographics and evolving societal needs demands a plan that increases workers’ pensions and demonstrates the country’s commitment to address social needs.
The Boric government and the Congress deserve credit for proposals that seek to increase the mandatory contribution rate from 10% to 16%, reduce commissions, significantly improve pensions for women, and beyond. But the current version of the reform also includes a proposal that threatens to undermine the foundations of legal certainty and foreign investment upon which Chile’s generation of economic transformation has been built.
The proposal of concern would mandate forced stock auctions of existing clients of the private pension system. For the Chilean pension-holder, this would carry the risk of reduced investment alternatives and returns. But the most damaging blow to Chile and Chileans could come to the country’s heretofore strong investment climate. A forced auction is likely to result in a lack of fair compensation to private providers and thus subject Chile to damaging arbitration claims and judgments of expropriation.
Why is this of utmost importance? Because in the face of tepid 2% forecasted GDP growth, Chile will need to lean as much as ever on its strong record of attracting foreign direct investment. FDI has been a key pillar of the country’s economic rebirth as annual inflows have risen from zero in the mid-1980s to nearly $22 billion in 2023, a figure that as a percentage of GDP is six times higher than the U.S.’s.
Again to its credit, the Boric government seems to embrace the importance of a sound investment climate that spurs FDI inflows. Entry-into-force of the year-old Chile-U.S. Bilateral Tax Treaty (BTT) is a triumph of public-private collaboration between the U.S. and Chilean governments and respective private sectors that affords the potential of significantly enhanced investment, including in Chile’s most remote regions.
But to realize the promise of the BTT and all other opportunities, preservation of Chile’s sound investment climate is imperative. This starts with a more engaged public-private dialogue than has occurred to-date towards a pension reform that eliminates the counterproductive proposal tied to stock auctions and instead leans into already agreed upon plans that boost options and returns for pension-holders. The U.S. private sector looks forward to working closely with the Chilean government to enhance U.S. investment in Chile to drive sustainable growth that will provide Chilean workers with the long-term financial security they so richly deserve.
About the authors

Neil Herrington
Neil Herrington is senior vice president for the Americas Department at the U.S. Chamber of Commerce. His portfolio includes executive management of the department’s programs, councils, and hemispheric policy initiatives. Herrington also serves as president of the U.S.-Cuba Business Council, the U.S.-Colombia Business Council and the U.S.-Argentina Business Council.