Performance of privatized pensions in Latin America, 1980-2020: The case of Mexico

Abstract

This article assesses the performance of 40 years of pension privatization in Latin America between 1980 and 2020, implemented by structural reforms in the 10 countries that still have such systems. The methodology contrasts the theoretical promises made by the reformers with reliable statistics, finding that only one of the said promises has been fulfilled. The 10 countries are classified into three types of structural reforms: substitutive (Chile, El Salvador, Mexico, and the Dominican Republic); mixed (Bolivia, Costa Rica, Panama, and Uruguay), and parallel (Colombia and Peru). Performance is measured based on International Labour Organization (ilo) principles: coverage, social solidarity and gender equity, adequacy of benefits, efficiency and reasonable administrative cost, as well as financial-actuarial sustainability. The Mexican structural reform is assessed innovatively in each of the five principles, and the two substantial re-reforms introduced in 2020 and their effects (that transformed the system from substitutive to mixed). Finally, there are recommendations to cope with the pending problems after those re-reforms.