Chile’s privately run pension funds are in a battle for survival, reeling under the impact of billions of dollars of withdrawals as politicians and social movements attack a system once viewed as a model for the world.

Chileans have taken out more than $30 billion from their retirement savings in the past year and congress has authorized a third wave of withdrawals that could drive the figure to more than $50 billion. That would leave the pension funds with about $180 billion of equities and fixed-income assets. Many lawmakers are now calling for the whole system to be dismantled.

“I’m not sure it’s the end of the AFP system, but I think it’s clear this round of withdrawals will change things,” said Mario Castro, a fixed-income strategist at BBVA in New York. “Clearly we’re going to have reforms to the pension system, which will most likely include a significant role for the government.”

Created during the dictatorship of August Pinochet on the advice of free-market economists known as the Chicago Boys, the private pensions Chileans are required to fund are a bedrock of the country’s system. The savings they have generated over the past four decades have given local credit markets and the peso a stability that is the envy of serial defaulters such as Argentina or Ecuador, and prompted countries including Peru and Colombia to adopt similar structures. Yet, many complain that the funds have failed to provide decent pensions.

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