Chilean Social Security Reform as a Prototype for Other Nations

August 1997, Vol. 18, No. 8
Paperback, 12 pp.
PDF, 395 kb
Employee Benefit Research Institute, 1997

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Executive Summary

Chilean Social Security Reform as a Prototype for Other Nations—Chile has privatized its social security system more extensively than any other country to date (Sigma, 1997). Because few dispute that social security privatization has been accompanied by a revived economy and widespread public support, interest in Chilean social security reform has spread to other Latin American countries; to transition economies in Eurasia; and to developed nations, including the United States. Since 1993, Peru, Columbia, Argentina, Uruguay, and Mexico have implemented privatized social security reforms that resemble Chile's system. One analyst predicts that "80 percent of central America will have Chilean-style reform in five years."

This article briefly describes the evolution of the reformed Chilean social security system and some of its advantages and disadvantages. In addition, the article analyzes some of the system's more ambiguous characteristics, the merits of which depend on one's viewpoint and/or conflicting data reports. Finally, it explores the circumstances that could potentially prevent nations with different political and economic characteristics from adopting Chilean-type reform and suggests possible reasons to withhold judgment on the Chilean system's success until the system has matured further.