Early Retirement

Study #221 - Privatizing Social Security in Latin America

Chile, the first nation in the Western Hemisphere to establish a social security system, was the first nation in the world to privatize its system. Since Chile instituted a privatized system in 1981, seven other Latin American countries - Peru in 1993, followed by Argentina, Colombia, Uruguay, Bolivia, Mexico and El Salvador - have adopted the Chilean model to some degree. The new Mexican system, launched in February 1997, already is the largest in Latin America. Most other Latin American countries are considering such a move.

In Chile, the only nation with long-term experience with a privatized system, the average annual real return on assets has been 10.7 percent, and retirement benefits are 19.6 percent higher than under the old system. Private disability pensions are 30.9 percent higher, and survivors benefits are 17.8 percent higher for widows, although they currently are only 75 percent of those under the old system for orphan children. The reformed pension system also has bolstered Chile's economy.