Season 2 Episode 1: The Chicago Boys and the Chilean Model The Accidental Plan Sponsor®

Our tour around the globe starts in South America. Chile has been seen in retirement circles as an early pioneer in reforming their retirement system in the late 1970’s.  While studied and admired by many, there are many more layers to the story when viewed from historical and current events. 
Host Josh Cohen talks to two individuals who have played a meaningful role in shaping the system.  University of Chicago educated Martin Costabal led efforts in the Chilean government to implement the new system in the midst of the Cold War.  Cristian Rodriguez has led the largest retirement plan provider in the country, and is making the case for the systems long term survival.
Travel with us to Chile to hear about their unique history and hopefully learn from their creative retirement solutions. 
 
Key Takeaways:
[:21] Josh Cohen, your host, states the main objective of Season 2: to explore how other countries around the world organized their retirement systems to accommodate a work force that is living longer and working much differently than what the previous generation did.
 
[3:50] Other countries looked up to Chile since they had updated and reformed their retirement system and it used to be viewed as a success. Josh talks about the wider political circumstances in Chile.
 
[5:03] Josh begins to explore the current state of the Chilean system by starting with its beginnings; that is why he talks with Martin Costabal who participated in its creation within the Chilean government.
 
[6:21] Martin shares how he got an offer from the University of Chicago that changed his life; he explains his personal and professional reasons for moving to the United States.
 
[10:30] General Augusto Pinochet Ugarte was self-declared president in Chile after a coup, while Martin was studying abroad.
 
[11:13] In August, 1974, Martin acquired an MBA from the University of Chicago and goes back to Chile to work in the Ministry of Economics with the purpose of instituting policies to reprivatize many industries and battling out of control inflation. He found that an economic blueprint called “The Brick” was already in place with those same goals.
 
[16:17] Martin focused on creating a new retirement system for Chile along with a group of 20 people, based on some foundations from “The Brick.”
 
[19:20] Cristian Rodriguez, Chairman of the Board of AFP Habitat, speaks about the organization and its role in managing pensions. Cristian has been working with Habitat for the past 23 years in several positions, he gives an overview of its evolution over the years.
 
[22:04] The Chilean retirement system lays on three pillars: 1. The government-backed foundational pillar (The solidarity pillar), 2. The employment based pillar (The contribution pillar), and 3. A voluntary saving system (similar to the IRA in the USA). Cristian talks about the pros and cons of each.
 
[34:47] One challenge for the system in Chile is that not all workers save the same. That is why there is a need to modernize the first pillar to include the informal and independent kinds of work that are becoming more and more prevalent worldwide. People also need to achieve a better understanding of the retirement system and the outcomes they will be generating.
 
[38:20] Josh talks about four main factors of any retirement system: Access, Adequacy, Alignment of Interest, and Innovation. He also shares his insights in regards to the Chilean retirement system.