Date: April 17, 2013

Amid the financial crisis in Europe today, the economist Juan Ramón Rallo has criticized the public PAYGO pension system of Spain and other European countries, and has given as an example of efficiency the Chilean pension fund administrators (AFP). Furthermore, he believes that the AFP model should be exported.

Just at a time when many experts are talking about possible reforms in the Chilean pension system, the Spanish economist Juan Ramón Rallo defends it against the Spanish public PAYGO pension system. In an article published in El Periódico de Mexico (see here), exposing the pension gap between a Spanish and a Chilean worker earning the same salary: “The current Chilean private pension system offers an expected income equivalent to about EUR 3,000 per month (approx. USD 3,915) for those who are earn a monthly salary of EUR 2,000 (approx. USD 2,610), and if one chooses to retire at 63, the expected pension is not EUR 1,350 (approx. USD 1,762) -as in Spain- but EUR 2,300 euros (approx. USD 3,002, 70% more).”

Funds Americas asked whether the Chilean model could be copied in other countries, and he says: “The Chilean model is exportable and should be done. Not only Chile shows that the private system is more efficient than the public one, also the historical performance of global stock markets. ”

For the director of the Instituto Juan de Mariana, the AFP system “is not Alice in Wonderland, but the powerful private capitalization system, of which our very socialist politicians prevented us in Spain”.