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Latin America Faces Growing Challenges for Pension System

"While for the last 25 years there has been decreasing social security coverage, Latin America's population over 65 is growing and will triple from 6.3% in 2005 to 18.5% in 2050. Also, labor markets continue to be highly informal, while independent and short-term employment have been increasing, which further complicates coverage and affiliation to retirement schemes. South American pension systems have been diverse in terms of coverage and quality, yet in no case have they incorporated all workers (see figure). Currently, states are assuming more active roles and universal coverage schemes are again gaining relevance.

"There have been recent reforms away from the market in at least two countries. After privitization in 1997, Bolivia is now undergoing a nationalization process and a non-contributive pension system for all over 65 was recently strengthened. In Argentina, President Cristina Kirchner's government decided that private funds that cover nearly 10 million people would be transfered to state hands in 2009.

"Decreased emphasis on individual contributions contributions to determine coverage is also being observed in other countries. In Chile, where market reforms began, a universal non-contributive pension system (where beneficiaries are covered regardless of affiliation to pension systems) has been expanded in recent years. And in Peru a public pension for all poor adults over 75 was announced in July 2010. Renewed concern for assuring access to pensions has also reached the supranational level. Since 2006, Mercosur's unified retirement allows workers to have contributions in Argentina, Brazil, Paraguay and uruguay count towards their pensions if they reside in any of these countries."

Implications:

"Countries have learned that individual capitalization schemes are useful but insufficient for social inclusion. There is a need for public policies to better complement public and private financing, and to adopt non-contributive programs to protect those most vulnerable to old-age poverty. Faced with rapidly aging populations and changing labor markets, in the medium term South American policymakers will have to find the right formulas for each country in order to protect the right of all to pensions of acceptable quality."

The pursuit of a fair pension system that is able to provide enough funds for all people to avoid poverty in their retirement is a great pursuit, unfortunately the ability to do so is not simply a matter of finding the correct policy. First we must ask ourselves, is it possible within our global system for all people to live without poverty, at any age?

Latin American countries are correct in adjusting their pension funds to be able to provide for people who have spent most of their lives in informal or short-term employment. These trends of increased unemployment in the traditional sense are the new norm.

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Sources:

FORO Nacional International, August 2010, pg. 2
http://newsletters.clearsignals.org/FORO_Aug2010.pdf#page=2

For an in depth look at labor issues see William Greider's One World Ready or Not: the manic logic of global capitalism