Abstract

Latin American countries, pioneered by Chile, have launched bold old age pension
reforms. While these reforms may address issues of financial sustainability of the pension
systems, their most valuable contribution is related to political economy aspects as
they avoid perverse redistribution within the system and minimise the risk of government
appropriation. On the negative side, Chilean inspired reforms represent a costly approach to
reform; they may lead to concentration within the industry and increase risks faced by the
individual. They do not eliminate evasion, and in some of its versions, they may introduce
problems of adverse selection. More importantly, such reforms do not guarantee that old
age will be free of poverty, which is (or should be) the main objective of a pension system.JEL

JEL Classification: J26; H55; J14.