General trends in competition policy and investment regulation in mandatory defined contribution markets in Latin America
AbstractFollowing Chile's pension reform in 1981, a wave of multi-pillar pension reforms took place in Latin America (LAC). Their implementation has revealed new policy challenges. To shed light on these issues, this paper reviews the structure and performance of mandatory DC pillars in LAC. The review highlights three important points. First, it suggests overall positive outcomes from reforms in the LAC countries that implemented multi-pillar pension systems. There is, however, scope for increasing efficiency. Second, management fees have declined but remain relatively high whereas decreases in operational costs have only been partially passed through to consumers reflecting inadequate competition. Limits on transfers and related measures have been ineffective in curtailing management fees but created new barriers to entry. In recent years, a few countries inLAC introduced or are in the process of introducing a combination of new measures that focus more directly on the two root causes of inadequate competition - the inelasticity of demand to fees and selective elimination of barriers to entry by facilitating unbundling of services. These new measures show some promise. Third, the paper's review indicates that a greater diversification of pension fund portfolios in LAC appears to be necessary. Portfolio concentration owes to the adoption of strict quantitative investment regulations, underdeveloped capital markets and volatile macroeconomic environments. A gradual relaxation of these restrictions is now in progress in several countries. Regulators have become more conscious of the costs imposed by such regulations and macroeconomic conditions have improved. Greater overseas diversification seems inevitable given the development stage of local capital markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4720.
Date of creation: 01 Sep 2008
Date of revision:
Debt Markets; Emerging Markets; Access to Finance; Investment and Investment Climate;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-29 (All new papers)
- NEP-COM-2008-09-29 (Industrial Competition)
- NEP-DEV-2008-09-29 (Development)
- NEP-REG-2008-09-29 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olivia S. Mitchell, 1987.
"Worker Knowledge of Pension Provisions,"
NBER Working Papers
2414, National Bureau of Economic Research, Inc.
- David Hirshleifer & Siew Hong Teoh, 2003.
"Herd Behaviour and Cascading in Capital Markets: a Review and Synthesis,"
European Financial Management,
European Financial Management Association, vol. 9(1), pages 25-66.
- Hirshleifer, David & Teoh, Siew Hong, 2001. "Herd Behavior and Cascading in Capital Markets: A Review and Synthesis," MPRA Paper 5186, University Library of Munich, Germany.
- Edina Rozinka & Waldo Tapia, 2007. "Survey of Investment Choice by Pension Fund Members," OECD Working Papers on Insurance and Private Pensions 7, OECD Publishing.
- Annamaria Lusardi & Olivia S. Mitchell, 2006.
"Financial Literacy and Planning: Implications for Retirement Wellbeing,"
DNB Working Papers
078, Netherlands Central Bank, Research Department.
- Annamaria Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," CeRP Working Papers 46, Center for Research on Pensions and Welfare Policies, Turin (Italy).
- Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers wp108, University of Michigan, Michigan Retirement Research Center.
- Annamaria Lusardi & Olivia S. Mitchell, 2011. "Financial Literacy and Planning: Implications for Retirement Wellbeing," NBER Working Papers 17078, National Bureau of Economic Research, Inc.
- Jorge Roldos, 2007. "Pension Reform and Macroeconomic Stability in Latin America," IMF Working Papers 07/108, International Monetary Fund.
- Rodrigo Cifuentes & Jorge Desormeaux & Claudio González, 2002. "Capital markets in Chile: from financial repression to financial deepening," BIS Papers chapters, in: Bank for International Settlements (ed.), The development of bond markets in emerging economies, volume 11, pages 86-102 Bank for International Settlements.
- Marisa Bucheli & Natalia Ferreira-Coimbra & Alvaro Forteza & Ianina Rossi, 2005. "El acceso a la jubilación o pensión en Uruguay: ¿cuántos y quiénes lo lograrían?," Documentos de Trabajo (working papers) 0106, Department of Economics - dECON.
- Catal N, Mario, 2004. "Pension funds and corporate governance in developing countries: what do we know and what do we need to know?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 3(02), pages 197-232, July.
- Jorge Roldos, 2004. "Pension Reform, Investment Restrictions and Capital Markets," IMF Policy Discussion Papers 04/4, International Monetary Fund.
- Oecd, 2005. "Improving Financial Literacy: Analysis of Issues and Policies," Financial Market Trends, OECD Publishing, vol. 2005(2), pages 111-123.
- Sebastian Edwards & Alejandra Cox Edwards, 2002. "Social Security Privatization Reform and Labor Markets: The Case of Chile," NBER Working Papers 8924, National Bureau of Economic Research, Inc.
- Jeromin Zettelmeyer, 2006. "Growth and Reforms in Latin America: A Survey of Facts and Arguments," IMF Working Papers 06/210, International Monetary Fund.
- Anoop Singh & Martin D. Cerisola, 2006. "Sustaining Latin America's Resurgence: Some Historical Perspectives," IMF Working Papers 06/252, International Monetary Fund.
- Agustin Carstens & Luis I. Jacome H., 2005.
"Latin American Central Bank Reform: Progress and Challenges,"
- International Monetary Fund, 2005. "Latin American Central Bank Reform: Progress and Challenges," IMF Working Papers 05/114, International Monetary Fund.
- Monika Queisser, 1999. "Pension Reform: Lessons from Latin America," OECD Development Centre Policy Briefs 15, OECD Publishing.
- Srinivas, P.S. & Whitehouse, Edward & Yermo, Juan, 2000.
"Regulating private pension funds’ structure, performance and investments: cross-country evidence,"
14753, University Library of Munich, Germany.
- Srinivas, P.S. & Whitehouse, Edward & Yermo, Juan, 2000. "Regulating private pension funds'structure, performance, and investments : cross-country evidence," Social Protection Discussion Papers 23302, The World Bank.
- de la Torre, Augusto & Gozzi, Juan Carlos & Schmukler, Sergio L., 2007.
"Capital market development : whither Latin America ?,"
Policy Research Working Paper Series
4156, The World Bank.
- Augusto de la Torre & Juan Carlos Gozzi & Sergio L. Schmukler, 2008. "Capital Market Development: Whither Latin America?," NBER Chapters, in: Financial Markets Volatility and Performance in Emerging Markets, pages 121-154 National Bureau of Economic Research, Inc.
- Devenow, Andrea & Welch, Ivo, 1996. "Rational herding in financial economics," European Economic Review, Elsevier, vol. 40(3-5), pages 603-615, April.
- Solange Berstein & José Luis Ruiz V, 2005. "Sensibilidad de la Demanda con Consumidores Desinformados: El Caso de las AFP en Chile," Working Papers 4, Superintendencia de Pensiones, revised Apr 2005.
- Perry, Guillermo & Serven, Luis, 2003. "The anatomy of a multiple crisis : why was Argentina special and what can we learn from it?," Policy Research Working Paper Series 3081, The World Bank.
- Roberto Rocha & Dimitri Vittas, 2002. "The Hungarian Pension Reform: A Preliminary Assessment of the First Years of Implementation," NBER Chapters, in: Social Security Pension Reform in Europe, pages 365-400 National Bureau of Economic Research, Inc.
- Bateman,Hazel & Kingston,Geoffrey & Piggott,John, 2001.
Cambridge University Press, number 9780521484718, December.
- Chlon, Agnieszka & Gora, Marek & Rutkowski, Michal, 1999. "Shaping pension reform in Poland : security through diversity," Social Protection Discussion Papers 20852, The World Bank.
- Richard K. Abrams & Michael Taylor, 2000. "Issues in the Unification of Financial Sector Supervision," IMF Working Papers 00/213, International Monetary Fund.
- Walker, Eduardo & Lefort, Fernando, 2002.
"Pension reform and capital markets : are there any (hard) links?,"
Social Protection Discussion Papers
24082, The World Bank.
- Eduardo Walker & Fernando Lefort, 2002. "Pension Reform And Capital Markets: Are There Any (Hard) Links?," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 5(2), pages 77-149.
- Barrientos, Armando & Boussofiane, Aziz, 2001. "The Efficiency of Pension Fund Managers in Latin America," Centre on Regulation and Competition (CRC) Working papers 30696, University of Manchester, Institute for Development Policy and Management (IDPM).
- Chan, Sewin & Stevens, Ann Huff, 2004. "Do changes in pension incentives affect retirement? A longitudinal study of subjective retirement expectations," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1307-1333, July.
- Roque B. Fernández & Celeste González & Sergio Pernice & Jorge M. Streb, 2007. "Loan and bond finance in Argentina, 1985-2005," CEMA Working Papers: Serie Documentos de Trabajo. 343, Universidad del CEMA.
- Alberto Arenas de Mesa & David Bravo & Jere R. Behrman & Olivia S. Mitchell & Petra E. Todd, 2006. "The Chilean Pension Reform Turns 25: Lessons From the Social Protection Survey," NBER Working Papers 12401, National Bureau of Economic Research, Inc.
- Robert Holzmann, 1996.
"Pension Reform, Financial Market Development, and Economic Growth: Preliminary Evidence from Chile,"
IMF Working Papers
96/94, International Monetary Fund.
- Robert Holzmann, 1997. "Pension Reform, Financial Market Development, and Economic Growth: Preliminary Evidence from Chile," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 149-178, June.
- Taylor, Michael & Fleming, Alex, 1999. "Integrated financial supervision : lessons of Northern European experience," Policy Research Working Paper Series 2223, The World Bank.
- Impavido, Gregorio & Musalem, Alberto R. & Tressel, Thierry, 2003. "The impact of contractual savings institutions on securities markets," Policy Research Working Paper Series 2948, The World Bank.
- Campbell, John Y. & Viceira, Luis M., 2002. "Strategic Asset Allocation: Portfolio Choice for Long-Term Investors," OUP Catalogue, Oxford University Press, number 9780198296942.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.