Hostname: page-component-77c89778f8-sh8wx Total loading time: 0 Render date: 2024-07-20T22:17:10.780Z Has data issue: false hasContentIssue false
  • English
  • Français

The Politics and Economics of Pension Privatization in Latin America

Published online by Cambridge University Press:  05 October 2022

Raúl Madrid
Raúl Madrid*
Affiliation:
University of Texas at Austin
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

This research note seeks to explain why a large number of Latin American countries have privatized their pension systems in recent years. It argues that the privatization schemes are a response to the severe capital shortages that have plagued their countries intermittently in recent years rather than to the financial problems facing some of the pension systems. The likelihood of pension privatization, I argue, is determined in large part by the vulnerability of countries to capital shortages as well as the influence wielded by international financial institutions, especially the World Bank. Whether such reforms are politically feasible, however, depends largely on the strength of organized labor and the president's degree of control over the legislature. A statistical examination of recent pension policy in Latin America provides support for most of these arguments.

Type
Research Reports and Notes
Information
Latin American Research Review , Volume 37 , Issue 2 , 2002 , pp. 159 - 182
Copyright
Copyright © 2002 by the University of Texas Press

Footnotes

*

I am grateful to Terry Karl, Larry Diamond, Geoff Garrett, Philippe Schmitter, Evelyne Huber, Steve Kay, Joan Nelson, Gilbert Merkx, and five anonymous LARR reviewers for providing helpful comments on earlier versions of this research note. I would also like to thank Carmelo Mesa-Lago for supplying essential data and Tse-Min Lin for statistical advice. The Institute for International Studies at Stanford University and the Institute for the Study of World Politics provided funding to carry out the field research that made this study possible.

References

AGOSIN, M. R., CRESPI, G., AND LETELIER, L. 1996 “Explicaciones del aumento del ahorro en Chile.” In-house document, Centro de Investigación Económica, Banco Interamericano de Desarrollo.Google Scholar
ARENAS DE MESA, ALBERTO, AND MONTECINOS, VERONICA 1999 “The Privatization of Social Security and Women's Welfare: Gender Effects of the Chilean Reform.” LARR 34, no. 3:7–37.Google Scholar
ARRAU, PATRICIO, AND SCHMIDT-HEBBEL, KLAUS 1995 “Pension Systems and Reform: Country Experience and Research Issues.” Policy Research Working Paper no. 1,470. Washington, D.C.: World Bank.Google Scholar
BAILLU, JEANINE, AND REISEN, HELMUT 1998 Do Funded Pensions Contribute to Higher Aggregate Savings ? A Cross-Country Analysis. Ageing Working Paper no. 5. 1. Paris: Organisation for Economic Cooperation and Development.Google Scholar
BARRIENTOS, ARMANDO 1998 Pension Reform in Latin America. Aldershot, U.K.: Ashgate.Google Scholar
BASAÑEZ, MIGUEL 1997 “Actitudes y opiniones electorales: Latino Barómetro 1995.” Paper presented to the Latin American Studies Association, Guadalajara, Mexico, 17–19 April.Google Scholar
BATES, ROBERT H., AND KRUEGER, ANNE O., EDS. 1993 Political and Economic Interactions in Economic Policy Reform. Oxford: Blackwell.Google Scholar
BEATTIE, ROGER, AND MCGILLIVRAY, WARREN 1995 “A Risky Strategy.” International Social Security Review 48, nos. 3–4:5–22.CrossRefGoogle Scholar
BROOKS, SARAH M., AND JAMES, ESTELLE 1999 “The Political Economy of Pension Reform.” Paper presented to the World Bank Conference “New Ideas about Old Age Security.” Washington, D.C., 14–15 September.Google Scholar
BROOKS, SARAH M. 2000 “Social Protection and the Market: A Political Economy of Pension Reform in Latin America and the World.” Paper presented to the Latin American Studies Association, Miami, Fla., 16–18 March.Google Scholar
BUSTOS CASTILLO, RAUL 1993 “‘Analysis of a National Private Pension Scheme: The Case of Chile’: Comments.” International Labour Review 132, no. 3:407–16.Google Scholar
CAREY, JOHN, AND SHUGART, MATTHEW SOBERG 1995 “Incentives to Cultivate a Personal Vote: A Rank Ordering of Electoral Formulas.” Electoral Studies 14, no. 4:417–39.CrossRefGoogle Scholar
CIEDESS (CORPORACION DE INVESTIGACION, ESTUDIO Y DESARROLLO DE LA SEGURIDAD SOCIAL) 1995 El ahorro previsional: Impacto en los mercados de capitales y de la vivienda. Santiago, Chile: CIEDESS.Google Scholar
CORSETTI, GIANCARLO, AND SCHMIDT-HEBBEL, KLAUS 1995 Pension Reform and Growth. World Bank Policy Research Working Paper no. 1, 471. Washington, D.C.: World Bank.Google Scholar
CRUZ-SACO, MARIA AMPARO, AND MESA-LAGO, CARMELO, EDS. 1998 Do Options Exist? The Reform of Pension and Health Care in Latin America. Pittsburgh, Pa.: University of Pittsburgh Press.Google Scholar
DIAMOND, LARRY, AND PLATTNER, MARC F., EDS. 1995 Economic Reform and Democracy. Baltimore, Md.: Johns Hopkins University Press.CrossRefGoogle Scholar
EDWARDS, SEBASTIAN 1996 “The Chilean Pension Reform: A Pioneering Program.” Paper presented to the conference “Privatizing Social Security,” held by the National Bureau of Economic Research, Cambridge, Mass., 1–2 August.CrossRefGoogle Scholar
ENSIGNIA, JAIME, AND DIAZ, ROLANDO, EDS. 1997 La seguridad social en America Latina: Reforma o liquidación ? Caracas: Nueva Sociedad.Google Scholar
FELDSTEIN, MARTIN 1999 Public Policies and Private Saving in Mexico. National Bureau of Economic Research Working Paper no. 6, 930. Cambridge, Mass: NBER.CrossRefGoogle Scholar
GILLION, COLIN, AND BONILLA, ALEJANDRO 1992 “Analysis of a National Private Pension Scheme: The Case of Chile.” International Labour Review 131, no. 2:171–95.Google Scholar
GODOY ARCAYA, OSCAR, AND PRIETO, SALVADOR VALDES 1994 “Democracia y previsión en Chile: Experiencia con dos sistemas.” Cuadernos de Economía 31, no. 93 (Aug.):135–60.Google Scholar
HAGGARD, STEPHAN, AND KAUFMAN, ROBERT R. 1995 The Political Economy of Democratic Transitions. Princeton, N.J.: Princeton University Press.Google Scholar
HAINDL, ERIK 1997 “The Chilean Pension Fund Reform and Its Impact on Saving.” In Generating Savings for Latin American Development, edited by Grosse, Robert, 113–34. Coral Gables, Fla.: North-South Center Press.Google Scholar
HOLZMANN, ROBERT 1996 Pension Reform, Financial Market Development, and Economic Growth: Preliminary Evidence from Chile. IMF Working Paper no. 96/ 94. Washington, D.C.: International Monetary Fund.Google Scholar
HOLZMANN, ROBERT 1998 A World Bank Perspective on Pension Reform. Social Protection Discussion Paper Series, no. 9, 807. Washington, D.C.: World Bank.Google Scholar
HUBER, EVELYNE, AND STEPHENS, JOHN D. 2000 “The Political Economy of Pension Reform: Latin America in Comparative Perspective.” Paper presented to the Latin American Studies Association, Miami, 16–18 March.Google Scholar
IDB (INTER-AMERICAN DEVELOPMENT BANK) 1996 Economic and Social Progress in Latin America: 1996 Report. Baltimore, Md.: Johns Hopkins University Press.Google Scholar
IDB (INTER-AMERICAN DEVELOPMENT BANK) 1997 Latin America after a Decade of Reforms: Economic and Social Progress in Latin America. Washington, D.C.: IDB.Google Scholar
ILO (INTERNATIONAL LABOUR ORGANISATION) 1995 The Cost of Social Security: Fourteenth International Inquiry. Geneva: ILO.Google Scholar
ILO (INTERNATIONAL LABOUR ORGANISATION) 1997 World Labour Report, 1997–1998. Geneva: ILO.Google Scholar
ISSA (INTERNATIONAL SOCIAL SECURITY ASSOCIATION) 1998 “The Future of Social Security: The Stockholm Conference.” Paper presented to the ISSA Conference in Stockholm, 29 June–1 July.Google Scholar
JAMES, ESTELLE 1996 Protecting the Old and Promoting Growth: A Defense of Averting the Old Age Crisis. World Bank Policy Research Working Paper no. 1, 570. Washington, D.C.: World Bank.Google Scholar
JAMES, ESTELLE 1997 Pension Reform: Is There a Tradeoff between Efficiency and Equity? World Bank Policy Research Working Paper no. 1, 767. Washington, D.C.: World Bank.Google Scholar
JONES, MARK 1995 Electoral Laws and the Survival of Presidential Democracies. Notre Dame, Ind.: University of Notre Dame Press.Google Scholar
JUBILADOS 1996 Jubilados, Organo de la Mesa Coordinadora de Jubilados y Pensionados de la República Argentina (Buenos Aires), no. 76 (March).Google Scholar
KAY, STEPHEN 1998 “Politics and Social Security Reform in the Southern Cone and Brazil.” Ph.D. diss., University of California, Los Angeles.CrossRefGoogle Scholar
KAY, STEPHEN 1999 “Unexpected Privatizations: Politics and Social Security Reform in the Southern Cone.” Comparative Politics 31, no. 4 (July):403–22.CrossRefGoogle ScholarPubMed
LACEY, ROBERT 1996 “La reforma de la jubilación en América Latina: Los retos y el papel del Banco Mundial.” Comercio Exterior 46, no. 9 (Sept.):683–91.Google Scholar
LIJPHART, AREND 1994 Electoral Systems and Party Systems. Oxford: Oxford University Press.Google Scholar
MADRID, RAUL 1997 “The Politics of Social Security Privatization.” Paper presented to the Latin American Studies Association, Guadalajara, Mexico, 17–19 April.Google Scholar
MADRID, RAUL 1998 “The Determinants of Pension Reform around the World.” Paper presented to the American Political Science Association, Boston, Mass., 3–6 September.Google Scholar
MAINWARING, SCOTT, AND SHUGART, MATTHEW SOBERG 1997 “Conclusion: Presidentialism and the Party System.” In Presidentialism and Democracy in Latin America, edited by Mainwaring, and Shugart, , 394–439. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
MALLOY, JAMES 1985 “Statecraft and Social Security Policy in Crisis: A Comparison of Latin America and the United States.” In The Crisis of Social Security and Health Care, edited by Mesa-Lago, Carmelo, 19–50. Pittsburgh, Pa.: University of Pittsburgh Press.Google Scholar
MCGUIRE, JAMES W. 1998 “Labor Strength and Human Development in Ninety-Three Countries.” Paper presented to the American Political Science Association, Boston, Mass., 3–6 September.Google Scholar
MESA-LAGO, CARMELO 1996a “Las reformas de pensiones de seguridad social en América Latina: Sistemas públicos, privados, mixtos y paralelos.” Estudios de la Seguridad Social, no. 80:58–85.Google Scholar
MESA-LAGO, CARMELO 1996b “Las reformas de las pensiones en América Latina y la posición de los organismos internacionales.” Revista de la CEPAL, no. 60 (Dec.):73–94.Google Scholar
MESA-LAGO, CARMELO 1997a “Análisis comparativo de reformas de pensiones estructurales en ocho países latinoamericanos: Descripción, evaluación y lecciones.” In Capitalización: La reforma económica y social de Bolivia, edited by Pierce, Margaret H., 411–93. La Paz: Ministerio de Capitalización de Bolivia.Google Scholar
MESA-LAGO, CARMELO 1997b “Social Welfare Reform in the Context of Economic-Political Liberalization: Latin American Cases.” World Development 25, no. 4:497–517.CrossRefGoogle Scholar
MESA-LAGO, CARMELO, AND DE MESA, ALBERTO ARENAS 1998 “The Chilean Pension System: Evaluation, Lessons, and Challenges.” In CRUZ-SACO AND MESA-LAGO, EDS., 1998, 56–84.Google Scholar
MESA-LAGO, CARMELO, AND BERTRANOU, FABIO 1998 Manual de economía de la seguridad social. Montevideo: Centro Latinoamericano de la Economía Humana.Google Scholar
MORANDE, F. 1996 Savings in Chile: What Went Right? Inter-American Development Bank Working Paper Series, no. 322. Washington, D.C.: IDB.Google Scholar
MULLER, KATHARINA 1999 The Political Economy of Pension Reform in Central-Eastern Europe. Cheltenham, U.K.: Edward Elgar.Google Scholar
NAIM, MOISES 1995 “Latin America: The Second Stage of Reform.” In DIAMOND AND PLATTNER 1995, 28–44.Google Scholar
NELSON, JOAN M., ED. 1990 Economic Crisis and Policy Choice. Princeton, N.J.: Princeton University Press.CrossRefGoogle Scholar
NELSON, JOAN M., ED. 1995 “Linkages between Politics and Economics.” In DIAMOND AND PLATTNER 1995, 45–58.Google Scholar
NOHLEN, DIETER 1993 Enciclopedia electoral de América Latina y el Caribe. San José, C.R.: Instituto Interamericano de Derechos Humanos.Google Scholar
ORSZAG, PETER R., AND STIGLITZ, JOSEPH E. 1999 “Rethinking Pension Reform: Ten Myths about Social Security Systems.” Paper presented to the World Bank Conference “New Ideas about Old-Age Security,” Washington, D.C., 14–15 September.Google Scholar
PALACIOS, ROBERT, AND PALLARES-MIRALLES, MONTSERRAT 2000 “International Patterns of Pension Provision.” Washington, D.C.: World Bank.Google Scholar
PIERSON, PAUL 1994 Dismantling the Welfare State? New York: Cambridge University Press.CrossRefGoogle Scholar
PIERSON, PAUL 1996 “The New Politics of the Welfare State.” World Politics 48 (Jan.):143–79.CrossRefGoogle Scholar
PIÑERA ECHENIQUE, JOSE 1991 El cascabel al gato: La batalla por la reforma previsional. Santiago: Zig-Zag.Google Scholar
QUEISSER, MONIKA 1998 The Second-Generation Pension Reforms in Latin America. Working Paper AWP, no. 5. 4. Paris: OECD Development Centre.CrossRefGoogle Scholar
REMMER, KAREN L. 1998 “The Politics of Neoliberal Economic Reform in South America, 1980–1994.” Studies in Comparative International Development 33, no. 2 (Summer):3–29.CrossRefGoogle Scholar
SANTAMARIA, MARCO 1992 “Privatizing Social Security: The Chilean Case.” Columbia Journal of World Business, no. 27 (Spring):39–51.Google Scholar
SCHMIDT-HEBBEL, KLAUS 1995 Colombia's Pension Reform: Fiscal and Macroeconomic Effects. World Bank Discussion Paper no. 314. Washington, D.C.: World Bank.CrossRefGoogle Scholar
SCHWARZ, ANITA M., AND DEMIRGUC-KUNT, ASLI 1999 “Taking Stock of Pension Reforms.” In-house report, World Bank, Washington, D.C.Google Scholar
SINGH, AJIT 1996 “Pension Reform, the Stock Market, Capital Formation, and Economic Growth: A Critical Commentary on the World Bank's Proposals.” International Social Security Review 49, no. 3:21–43.Google Scholar
SMITH, WILLIAM C., ACUÑA, CARLOS H., AND GAMARRA, EDUARDO A., EDS. 1994 Latin American Political Economy in the Age of Neoliberal Reform. New Brunswick, N.J.: Transaction.Google Scholar
WALLERSTEIN, MICHAEL 1989 “Union Organization in Advanced Industrial Democracies.” American Political Science Review 83, no. 2 (June):481–501.CrossRefGoogle Scholar
WILLIAMSON, JOHN, ED. 1993 The Political Economy of Policy Reform. Washington, D.C.: Institute for International Economics.Google Scholar
WORLD BANK 1994 Averting the Old-Age Crisis. New York: Oxford University Press.Google Scholar
WORLD BANK 1995 World Tables, 1995 Edition. Washington, D.C.: World Bank.Google Scholar
WORLD BANK 1996 “World Bank Research in the Marketplace of Ideas.” World Bank Policy and Research Bulletin 7, no. 1 (Jan.–Mar.):1–4.Google Scholar
WORLD BANK 2000 World Development Indicators on CD-Rom. Washington, D.C.: World Bank.Google Scholar