August 6, 2009 3:02PM

Costa Rica’s Social Security System Will Go Bankrupt in 14 Years

An independent audit—the first ever—of Costa Rica’s social security system has found that the system will start eating up its reserves in just 6 years, and will see its finances “compromised” (read “go bust”) in only 14 years [story in Spanish here].

Just as in the United States, Costa Rica has a government-run Ponzi scheme called social security that sooner or later was going to become unsustainable due to demographic changes. However, the seriousness of the situation was hidden throughout the years by Enron-like accountability tricks that have been exposed by the external audit. For example, official records reported income to the system from public enterprises that never took place. It also estimated the sustainability of the pension fund based on unrealistic salary projections.

The consequences for Costa Rican workers are all too grave. This not only compromises the retirement of young workers, but also of those who are a few years from retiring. If we had only followed the example of countries like Chile or El Salvador that privatized their social security systems years ago….