By Manuel Riesco | March 10, 2005
Americas Program, Interhemispheric Resource Center (IRC) www.americaspolicy.org
The privatization of pensions in Chile enacted by the dictatorship of Augusto Pinochet in 1981 has been hailed worldwide as a success story, and U.S. President George W. Bush recently said that it was "a great example" for social security reform in the United States .
Some champions of Chile’s system make ideological arguments: It is a preferable system because it depends on private property, free choice, and personal responsibility; it links individual contributions with benefits, and personal effort with rewards. Other proponents argue on the basis of financial and actuarial calculations: At 4% yearly rates of return, saving 10% of salary throughout a career can afford a pensioner some 70% of salary at retirement. A recent argument has been added that seems tailor-made for U.S. consumption: The system entitles a foreign migrant worker to keep pension savings even upon leaving the country at retirement. Nevertheless, the Chilean private pension system has proven itself unable to keep its bright promises. A quarter century after its inception, most pensioners find themselves shortchanged, while the public coffers continue to carry most of the burden of federal retirement benefits.
[...]
Full text: http://www.americaspolicy.org/commentary/2005/0503chilessref.html