Welcome. This is Anastasia Yuglova bringing you the Cato Daily Podcast.

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Although President Bush's plan to reform Social Security met with no such success,

Cato's co-chairman of the Project on Social Security Choice Jose Pinera does not tire of advocating for change.

As Chile's Secretary of Labor and Social Security, he was the architect of the country's successful

reform of its pension system, instituting private personal accounts available to

all Chilean. In today's podcast, he makes the case for similar reforms in the United States and

all over the world. After 25 years, how has the private pension system benefited the common Chilean worker?

The Chilean private pension system has been a huge success, especially for the common work. They have had personal accounts for 25 years.

The rate of return has been 10% on average above inflation. So you can imagine the power of compound interest

when you have a 10% real rate of return.

So every Chilean worker is accumulating

real capital for old age. when they reach the retirement age they will be able to buy

an index annuity and leave their old life without begging the government for retirement benefits.

So the system has been safe, has given a good rate of return, has been very inexpensive.

The administrative costs have gone down to 50 basis point, that is half

of 1%, and it's going down with economies of scale. Now the system has always need, course a small adjustment to the development of technology,

capital markets for example we need more international diversification, but it's clearly

consolidated and appreciated by the Chilean workers.

And what have been the contributions of the pension system to the larger Chilean economy?

Well, there was some analysts that called the Social Security Reform the mother of all reforms

...