Latin American Economic Outlook 2008

image of Latin American Economic Outlook 2008
While democratic regimes seem to be firmly rooted in the region, Latin American economies continue to experience sustained economic growth, benefiting from the ongoing process of globalisation. This Latin American Economic Outlook, the first volume in an annual series by the OECD Development Centre, provides original insights and comparative indicators on four key issues affecting Latin America’s development: the impact of fiscal performance on democratic legitimacy; the relevance of pension fund reform and governance for national saving and capital markets deepening; the role market-seeking investments by the private sector can have at improving access to telecommunication services; and growing trade with China and India as an incentive to boost the competitiveness of Latin American countries. Policy recommendations and the identification of best practices in the areas under scrutiny aim to put OECD’s expertise and well-known analytical rigour at the service of Latin America’s development.

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Finance for Development

Pension Reform, Capital Markets and Corporate Governance

OECD Development Centre

Latin America leads the developing world in pension reform. Chile launched the process in 1981, followed since the 1990s by nine other countries in the region and some outside. The reform constitutes a transition from publicly managed “pay-as-you-go” to privately managed, fully funded retirement systems. Its objectives, in addition to providing a reliable source of retirement income for workers and reducing the fiscal drain on governments from existing systems, include two on which this chapter focuses: the enhancement of national savings, where overall results are not encouraging; and the deepening of local capital markets, where results are encouraging. Policy recommendations include measures to improve the alignment of incentives amongst pension-fund members (active and retired workers), sponsors (employers) and managers. Countries should re-examine regulations that hamper a healthy diversification of pension assets, while maintaining high prudential standards. Some countries must give attention to the excessively high administrative fees and costs that pension funds charge members. Better governance of pension funds can also enhance their role as agents for improved corporate governance outside the pension sector, contributing to long-term economy-wide productivity growth for the considerable benefit of workers, active and retired, and employers alike.


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