Since its creation in 1981, Chile's private pension system has been paradigmatic in many ways and has been exported, with some variations, to other countries. Its goal: to give workers, and not the State, the ability to generate and manage the economic resources with which their old age and disability pensions will be financed.

The law was designed by then Minister José Piñera, brother of President-elect Sebastián Piñera, and implemented under the dictatorship of Augusto Pinochet. José Piñera claimed at the time that the state pay-as-you-go system was inefficient, regressive and delivered bad pensions: "It has a fundamental flaw, originating in an erroneous conception of human behavior: it destroys the link between contributions and benefits, in other words, between responsibilities and rights. When this happens on a massive scale and over a long period of time, the final result is a disaster."

Although this pension system has been perfected by the center-left coalition that has governed Chile since 1990, it continues to arouse heated debates wherever it is raised. Here in Spain, Pedro Solbes accused Manuel Pizarro of wanting to import "the privatized pension system imposed in Chile by Pinochet", during the televised discussion that pitted the two against each other in the last election campaign. More recently, the award Nobel Prize winner of Economics Paul Krugman visited Santiago and went on a tirade against the liberal model of his hosts: "In 2005 in the United States it was fashionable to adopt the Chilean pension system, but thank God we still have a model state-run . Otherwise there would have been another big crisis in our country". Krugman forgot that according to projections on Capitol Hill, in two more decades the revenues of the pay-as-you-go system will be less than the payments, and the reserves will be exhausted around 2040. It is the same fiscal crisis that threatens European countries whose populations are aging, such as Spain, where the possibility of postponing the retirement age is beginning to be discussed: if the birth rate falls and people's life expectancy increases, there are fewer active workers and more retirees, then the system reduces the promised benefits and the specter of bankruptcy arises.

The Chilean model tries to avoid that with the following formula: (a) it is based on the mandatory contribution of workers, who deposit 10% of their remunerations in personal accounts; (b) that money is managed by private companies, the pension fund administrators (AFPs), which compete to achieve the highest profitability in order to attract new clients; c) workers freely choose the AFP and the fund, among five alternatives, depending on their greater or lesser aversion to risk; d) the AFPs invest these savings in fixed and/or variable income instruments, previously authorized by the regulatory bodies, depending on the selection of the contributors; e) the AFP and the fund are different entities: if the AFP goes bankrupt, the fund is transferred to another business; and f) the State plays a merely supervisory and subsidiary role: it controls and supervises the AFPs and guarantees the pensions of those who do not accumulate sufficient savings.

Thanks to the pension funds, Chile's savings rate steadily exceeds 20% of gross domestic product, double that of the early 1980s. As the money collected by the PFAs is mainly invested in the domestic Economics , the capital market has developed more than that of any other Latin American country, as it receives millions of dollars every year to finance and build infrastructure and business projects in all areas. The modern local stock and bond market would be unthinkable without the existence of the AFPs.

As if this were not enough, contributors have obtained much higher returns than those previously shown: each year, the private funds have increased in value by an average of 10%, and old-age pensions are 40% higher than those that existed with the state outline . However, when the cows are weak, profitability falls: in 2008 it dropped by 20%, on average. However, as the Santiago Stock Exchange experienced a strong rebound last year, the profitability of the AFPs rose by 24%, as average, recovering from all the losses.

Critics complain that the pension system continues to be unrepresentative, and that it has been concentrated in a few companies that get rich in exchange for managing, at great expense, the mandatory savings of 7 million wage earners. Workers still do not have a seat on the boards of directors of the AFPs and pay very high commissions for the management of their money, amounting to around 2% of their taxable income.

In addition, the level of participation of the self-employed is low. Since they are not obliged to contribute, only 4% do so. For this reason, some analysts fear that the State will be forced to cover, one day, half of the pensions, which will not have minimum savings. More optimistic forecasts assure that the Treasury will only have to make position of 5%.

Other detractors say that the system discriminates against women, who can retire at 60 and not at 65, like men. As a result, their pensions are lower. Socialist President Michelle Bachelet has refused, however, to raise the retirement age for women because it would mean the loss of a right.

Bachelet introduced a new legal reform this week to address some of the problems described above: to reduce commissions, her government accumulated a portfolio of new contributors and put it out to public tender. The businessman who won the tender promised to charge cheaper commissions. Thus, more skill was introduced in a market that has become more concentrated over time: when it was born it had 12 companies; today it has half of them.

Although the Chilean model bears the original sin of having been created by a dictatorship, today it enjoys great legitimacy. The Concertación, which has governed Chile for 20 years, has a great deal of responsibility in this respect: it has introduced changes within the system, but has never proposed a change of system, "because it has worked and has been successful", said former socialist President Ricardo Lagos.

In Chile, the voices proposing a nationalization of pensions, such as the one proposed by the President and the Parliament of Argentina in November 2008, are absolutely marginal. Chilean workers know that pensions are their property and that, with each contribution, they grow proportionally to their efforts. No government has tried, until now, to appropriate this.