Her main effort will be to overhaul Chile's much-hyped private pension system.

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The problems with Social Security are now largely known--the declining number of workers versus retirees, the fiscal irresponsibility of pay-as-you-go (it's the public-sector equivalent of a private pension system with no reserves, which, of course, is illegal).

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Because of the profligacy of its predecessor, the government of President Fernando de la Rua felt obliged, on taking office last December, to tighten fiscal policy, even though the budget deficit was relatively modest (and was due partly to the transition costs of switching to a private pension system).

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It has proposed sensible reforms to America's private-pension insurance system, including tying premiums to risk and a more accurate method of measuring pension assets and liabilities.

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The Conservative answer is to offer younger people the opportunity to opt out of the state system, and to build up a fully private pension.

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He and his colleagues considered the pension system in the round, taking into account both state and private provision.

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The private-sector pension funds, one of the main symbols of Chile's market system, have been reporting losses as share values have tumbled.

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The government could also force the pension system to roll over the 10% of public debt held by the private funds on terms of its own choosing.

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And attempts to reform the pension and health care system, to reduce the role of the state and introduce more private contributions, have run into fierce opposition from unions.

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