In Latin America, the number of people aged 60 and over will exceed for the first time the number of children under 15 years of age in 2036, according to ECLAC. This accelerated demographic change, added to the high rates of informality registered by the labor market in the region, puts increasing pressure on pension systems.

Both state and individual capitalization schemes are in the eye of the storm. The state systems constitute one of the main factors of imbalance in public accounts in several Latin American countries. On the other hand, private systems continue to provide poor pensions and, in some cases, are far from guaranteeing adequate levels of coverage.

"The demographic changes have caused systems of distribution in the region to enter financial and actuarial problems, and many countries have adopted systems of individual capitalization," says Diego Valero, president of the pension consultant Novaster. "(But) the contribution rates are still low in Latin America, which, together with the low contribution density (non-continuous professional careers and periods without contributions), has meant that the pensions paid by these new individual capitalization systems are lower than what the unsustainable distribution systems paid."

These deficits have been driving reforms to pension systems in a large part of Latin America. In this report we will focus on the changes that have already taken place and those that are under discussion in Brazil, Chile, Argentina and Peru. We will describe the current systems in those countries, the changes that were applied in recent months and what might be implemented in the short and medium term. In addition, we will analyze the effects of these reforms on pension funds.

Figure: Ageing Populations


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