Beyond Contributory Pensions

In the past ten years, many Latin American countries have implemented reforms of their pension programs. However, these reforms have not received much attention from the international community. The Inter-American Dialogue hosted a book launch and policy discussion on these reforms and the new role of non-contributory pensions in Latin America, during which Rafael Rofman presented Más allá de las Pensiones Contributivas (Beyond Contributory Pensions), followed by a commentary from Ángel Melguizo and a general discussion. The book provides an in depth analysis of the motivations behind these changes and how they differ across countries.

In the past, pension reforms in Latin America have generally shifted between an emphasis on coverage, adequacy, and sustainability. The book analyzes the policies of fourteen Latin American countries, providing both a description of their reforms and their outcomes. The policy approaches in these countries involved various combinations of responses, incorporating three major choices: (1) creating universal coverage or targeting a specific population group; (2) integrating the new policy with preexisting programs or starting new programs; and (3) introducing temporary changes or a permanent change in the system. Each of the fourteen countries pursued their own combination of these policy choices, along with the decision to implement these reforms gradually or immediately.

The study concluded that pension reform is heterogeneous in both design and in implementation across Latin America. Larger pre-existing pension schemes tended toward universal coverage after reforms, while smaller schemes focused more on (narrower) poverty reduction objectives. However, as Ángel Melguizo pointed out, the figures show that, in spite of the changes introduced, these policies will remain inadequate in the future. He explained that Latin America would be on a “slippery slope” if countries don’t move beyond the expansion of non-contributory pensions and contemplate a broader perspective on old-age income security.

The meeting concluded that, while pension reforms have taken the first step in the process of reducing poverty among the elderly in Latin America, the reform agenda remains open. Furthermore, as the book demonstrates, there is no one right answer to the design of pension systems.