In the past two decades, Latin American countries reformed their pension systems focusing mainly on addressing the weaknesses of the contributory schemes fiscal unsustainability, low coverage levels and a high degree of segmentation and barely addressed the non-contributory element. Thus, the reforms have failed to meet their objectives. Firstly, to this day, a large proportion of the population remains inadequately covered by the contributory system. Secondly, the fiscal outcome of the reform was worse than originally planned. Structural constraints such as the limited savings capacity of some population groups and the instability and precariousness of the labour markets in the region ensured that the pension reform would be unsuccessful. The Latin American experience shares similarities with that of China in terms of coverage and labour market informality. Both cases attest to the importance of combining contributory and non-contributory components in pension reform design.

July 30, 2009.