The Latin American Experience with Pension Reform

Workable Pension Systems: Reforms in the Caribbean

“…Solis-Soberon (1999) and Srinivas, Whitehouse, and Yermo (2000) argue that portfolio limits result in lower risk-adjusted returns and so lower benefits. While recognizing the potential for these effects, Valdés-Prieto (2000) disputes the empirical evidence presented by Srinivas and Yermo and cites contradictory data from other studies. More important, argues Valdés-Prieto, limits may be necessary for reasons specific to the initial conditions of reform in each country.…”

“…Ultimately, pension reform probably would not have occurred if the systems were performing their functions in terms of providing old age income security (Valdés-Prieto 1998). Despite differences in initial conditions, most of the region experienced a gradual erosion of confidence in the old pay-as-you-go, state-managed systems.…”

“…More important, argues Valdés-Prieto, limits may be necessary for reasons specific to the initial conditions of reform in each country. Valdés-Prieto (2000) highlights the rationale for placing heavy restrictions on equity investments during the first five years of the Chilean reform. As he points out, the possibility that pension funds would have been used to prop up an insolvent banking sector-at the expense of workers-justified transition rules on the funds' investments.…”

“…For more information visit our website: www.iadb.org/pub potential for translating greater efficiency into lower commissions when consumers are informed and markets are contestable (Valdés-Prieto 1999).…”

A Primer on Social Security Systems and Reforms

“…Diamond (1996) states that "it may be that a surplus is a contributing condition for a successful privatization" (p. 80). Valdés-Prieto (1998) acknowledges that a surplus is sufficient, but not a necessary condition, to reform. During a review of the reforms in several Latin American countries in the early and mid-1990s, he finds that even countries emerging from hyperinflation have successfully managed a transition by issuing debt after the inflationary period.…”