The Latin American experience in pension system reform: Coverage, fiscal issues and possible implications for China (original) (raw)
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Pension System Reform in Latin America and Potential Implications for the Chinese Case
2009
In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes-fiscal unsustainability, low coverage levels and a high degree of segmentation-and barely addressed the non-contributory element. Thus, the reforms have failed to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal outcome of the reform was worse than originally planned. Structural constraints such as the limited savings capacity of some population groups and the instability and precariousness of the labour markets in the region ensured that the pension reform would be unsuccessful. The Latin American experience shares similarities with that of China in terms of coverage and labour market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design. H 55; H 53
2020
In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes-fiscal unsustainability, low coverage levels and a high degree of segmentation-and barely addressed the non-contributory element. Thus, the reforms have failed to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal outcome of the reform was worse than originally planned. Structural constraints such as the limited savings capacity of some population groups and the instability and precariousness of the labour markets in the region ensured that the pension reform would be unsuccessful. The Latin American experience shares similarities with that of China in terms of coverage and labour market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design.
Latin America's Pension Revolution: A Review of Approaches and Experience
Latin America (LA) is in the midst of a pension revolution that has caught the attention of pension system experts and policy makers elsewhere. There is one common feature that makes the LA approach unique in providing old-age security: adoption of an important second pension pillar that is fully funded and based on contributions to individual accounts in pension funds that are invested in financial markets and managed by private companies. However most other reform features differ significantly across the eight country reform experiences implemented to date. This paper compares reform approaches, evaluates actual and potential reform effects, and points out issues of concern. Pension reform has been largely successful in helping to defuse the "ticking pension time bomb" of PAYG systems and to make pension arrangements less prone to political interference. Pension reform could also lead to sizable efficiency gains in factor markets, helping to raise social welfare and economic growth. However significant problems of design and implementation remain in LA's 8 reformed pension systems. They represent a challenge for policy makers in both the latter countries and those that are considering future reform. , as well as from outstanding assistance provided by Montserrat Pallares-Miralles and Francisco Gallego. All errors and omissions are mine.
Old-age pension reform and modernization pathways: Lessons for China from Latin America
Journal of Aging Studies, 2008
While numerous Western countries first experienced cultural rationalization, next economic modernization, and then faced the challenges of population aging and pension policy reform, both Latin America and China, in contrast, are dealing with these challenges in the context of much less developed economies and stronger traditional cultures. In this article we analyze old-age pension reform efforts in eight Latin American countries that have introduced funded defined contribution schemes with individual accounts. We are searching for insights about the potential success of similar reforms being implemented in China. All of these societies are organized primarily around the principles of family, reciprocity, loyalty and poverty. Our analysis suggests that these distinctive characteristics have important implications for the likely success of the reforms currently being implemented in China, particularly in four interrelated areas: coverage, compliance, transparency, and fiscal stability.
Social Security at the Crossroads: Toward Effective Pension Reform In Latin America
International social security review, 2006
Individual pension savings accounts in Latin America promised to improve compliance and raise benefits in a cost-effective manner, while at the same time raising savings rates, which would in turn promote economic growth. A review of the evolution of pension reform in Latin America shows results to have been mixed. Analyses of the recent reforms generally fail to consider the extent to which the success or failure of pension systems is driven by exogenous factors, including macroeconomic and labour market conditions, and institutions. A number of recent studies have issued a reassessment of the region's reforms that stresses the importance of a basic guaranteed pension benefit and recognizes that a range of alternatives are viable in the region. Pension systems based on individual accounts are undergoing a thorough reevaluation.
A review of the pension systems in Latin America
Latin America is one of the pioneers in introducing individual capitalization schemes as part of their compulsory component of their pension systems. Thirty years have passed since Chile took the !irst step. Now what reforms have been achieved today? What challenges lie ahead? This paper reviews the motivations of the reforms and their progress, using the experience of Colombia, Chile, Mexico and Peru. The main results are presented in terms of coverage, replacement rates, and !iscal sustainability, with projections to 2050. The results show that while the reforms of both the public and private pension systems have been key to providing !iscal sustainability and have strengthened retirement savings for groups with greater permanence in the labour market, there are still many pending challenges in order to address the signi!icant percentage of people who are self-employed, within the informal sector or frequently unemployed. In that sense, for each of the countries studied, recommend...
Pension systems in Latin America : concepts and measurements of coverage
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This paper focuses on the coverage dimension, looking at empirical data in Latin America. Coverage of pension systems has slowly become a central issue in the policy debate in the region. After more than a decade of reforms and debates, the central problem of the pension systems in Latin America (how to protect most workers and their families from the economic risks caused by aging and retirement from the labor force) remains unsolved in countries were structural reforms were implemented, as well as in countries where reforms were limited to parametric adjustments and countries where no significant reforms were adopted. Proposals and debates over the last decade have been shaped by ideological positions and objectives that were not always related to the central goals of the programs, and should not be the driving force to shape the social security systems.
Chile and beyond: The second-generation pension reforms in Latin America
International Social Security Review, 1995
Schmidt-Hebbel, Klaus. 1994. Colombia's pension reform: Fiscal and macroeconomic implications. Washington, DC, Policy and Research Department, World Bank (mimeo). Vergara, Pilar. 1985. Auge y caiah del neoliberalismo en. Chile. Santiago, Ediciones Ainavil-li0. Vittas, Dimitri. 1995a. The Argentine pension reform and its relevance for eastern Europe. Washington, DC, Financial Sedor Development Department, World Bank (mimeo).-. 1995b. Strengths and weaknesses of the Chilean pension rtform. Washington, DC, World Bank (mimeo). World Bank. 1994. Averting the old age crisis. Washington, DC.-. 1995. Social security administration in Latin America and the Caribbean. Washington, DC (mimeo). VOl. 48. 3-4/95 /nrmarional social sewrlty Review
Gaps in the welfare State and reforms to pension systems in Latin America
CEPAL Review
Pensi on systems in Latin America are organized as tripartite contributory schemes paid into by employers, employees and the State. Their coverage has always been segmented and very low because a significant percentage of the labour market is composed of subsistence sectors with low productivity and unstable, uncertain access to commercial and financial networks (associated with a lack of employment protections, low income levels and a high incidence of poverty). As a result, contributory systems exclude a large proportion of workers and their families from protection against the risks of disability, old age and death, with large differences in coverage between the formal and informal sectors. The main challenge now is to incorporate solidarity financing into pension systems in an efficient way, so that contributory and noncontributory schemes can be combined in accordance with the logic of social security.