Department

Latin American Studies

Publication Year

2010

Abstract

Chile implemented a privatized Social Security system in 1924. The system was designed to provide benefits to all individuals within the state. However inefficiency and lack of contribution hindered the state-run program from the beginning. In 1952 politicians implemented a "Pay as you go System" (PAYGO) which encouraged individuals to put their savings into a government run savings account. Once again a lack of contributions combined with government deficits and benefits received by non-contributors, hindered the system. In 1980 Chile privatized Social Security industry and required all individuals who entered the workforce after 1980 to use Administradora de Fondo de Pensiones (AFPs). These were designed to encourage more individual savings and less reliance on the government. This paper examines the various iterations of the Chilean Social Security system and includes individual interviews as well as recommendations and conclusions.

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