Date of Award


Document Type

Honors Thesis

Degree Name

Bachelor of Arts


Business Administration

Advisor/Committee Chair

Bret Benjamin


This paper seeks to inform readers on the history and the performance of tying state-sponsored retirement plans to the market. In the late 1970’s and 1980’s, many Latin American university students participated in an exchange program affiliated with the University of Chicago. After completing their studies under notable free-market economists such as Milton Friedman and Arnold Harberger, these students returned home and took prominent positions in governments- mainly in Chile, Argentina, and Brazil. In Chile, the students developed a plan known as el ladrillo (“the brick”). In 1981, their retirement system was completely privatized. Mutual funds, called Administradoras de Fondos de Pensiones (AFPs), were set up to collect Chilean worker contributions, invest the savings, and gradually pay out benefits once workers reached retirement age. Over the past thirty-five years, the AFPs have averaged high returns, and the establishment of a minimum mandatory contribution has eliminated unfunded government liabilities. The successes and failures of the Chilean pension system has been studied by both neoliberal and alter-globalist scholars alike. Over 25 countries have implemented market-based or mixed-source state retirement plans since Chile’s experiment in 1981. Recently, Chile has experienced difficulties with its retirement system, as large rates of noncompliance have reduced contributions into the AFPs. After analyzing the problem from a socioeconomic lens, I have concluded that the private retirement system is sustainable in Chile, albeit with modest reforms. Furthermore, pension privatization can and has been replicated in other nations; with moderate financial cost that was largely achieved through the privatization of public firms in CEE countries. In historically capitalist countries with relatively small amounts of publicly-held firms (U.S. and Europe), a large source of capital isn’t always readily available. Through modest budgetary reform, though, privatization should be examined in the Global North as policymakers attempt to address future Social Security deficits.