Is Latin America Retreating From Individual Retirement Accounts?
In 1981, Chile initiated old-age pension reforms that introduced mandatory funded individual retirement accounts (IRAs) and moved away from public systems. Beginning in the 1990s, ten other Latin American countries followed in Chile’s wake. In recent years, even before the onset of the financial crisis, a second round of pension reforms was initiated to strengthen the public component and address the problems created by individual accounts. The most extreme case of retrenching is Argentina, where IRAs were eliminated for mandatory contributions in late 2008. This country has gone back to a traditional defined-benefit pay-as-you-go scheme. This brief reviews the two rounds of pension reforms to determine whether Latin American countries are moving away from individual pensions. Even though this region is quite heterogeneous, its labor markets and social security systems share some common features, such as a large informal economy and a variety of uncoordinated institutions providing old-age income protection. The 2008-2009 financial crisis and economic recession is posing new challenges to systems that have introduced IRAs.
|Date of creation:||Jul 2009|
|Date of revision:||Jul 2009|
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- World Bank, 2007. "Argentina : Facing the Challenge of Ageing and Social Security," World Bank Other Operational Studies 7989, The World Bank.
- Joaquin Vial & Angel Melguizo, 2008. "Moving from Pay as You Go to Privately Managed Individual Pension Accounts: What have we learned after 25 years of the Chilean Pension Reform?," Working Papers 0805, BBVA Bank, Economic Research Department.
- Augusto Iglesias-Palau, 2009. "Pension Reform in Chile Revisited: What Has Been Learned?," OECD Social, Employment and Migration Working Papers 86, OECD Publishing.
- Barr, Nicholas & Diamond, Peter, 2008. "Reforming Pensions: Principles and Policy Choices," OUP Catalogue, Oxford University Press, number 9780195311303, March.
- Calvo, Esteban & Williamson, John B., 2006. "Old-Age Pension Reform and Modernization Pathways: Lessons for China from Latin America," MPRA Paper 4872, University Library of Munich, Germany, revised 2007.
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