October 1, 2002
Privatizing state pension systems is a remarkable Latin American innovation. The idea of turning over billions of dollars in retirement savings to professional managers has profoundly affected the debate on pension reform, a critical policy issue in every major economy around the world. Privatization was meant to achieve several objectives at a single stroke: a fully-funded pension system would no longer be a burden on the public finances, it would reduce dependence on imported capital by increasing domestic savings and it would revitalize the capital markets by channeling resources to the private sector.
Although the concept of pension reform
The privatization of retirement funds in Latin America has come up short. Except for in Chile, the pioneer of privately managed pension funds, governments are still grappling with huge fund deficits and unfunded liabilities.