In 1995, the government of Uruguay undertook a first pillar-based reform of the pension system, as opposed to the second pillar-based Chilean-style reform. The paper's first section describes Uruguay's pension system prior to reform. It demonstrates quite clearly that the crisis faced by that system is the result of both its design and its functioning. Moreover, it shows that over time it created an increasingly unsustainable fiscal burden. The second section presents the reform enacted in September 1995, describing its institutional layout. The third section is dedicated to a forecast of the financial consequences of reform, contrasting it with a no-reform scenario. The simulation exercise shows that reform eases the fiscal burden but that it remains high enough to require substantial fiscal contributions. Finally, the last section outlines the author's conclusions.
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