This week marks the 10-year anniversary of El Salvador’s adoption of a private social security system. Following the example of Chile 17 years earlier, El Salvador moved from a government-run (and bankrupt) pay-as-you-go system to one of individual accounts for workers administered by private operators. Salvadorians are free to choose who runs their pension accounts as well as the conditions of their own retirement.
Today, the combined value of the pension operators’ assets — that is, the savings of the Salvadorian workers — represents 21.5 percent of the country’s GDP.
An editorial yesterday in the local newspaper El Diario de Hoy lauds the success of the reform and credits Cato’s José Piñera as the father of the “pension revolution.”