The structural reforms: models,
2
Reversing pension privatization
period for processing benefits, and achieving substantial capital accumulation in the pension funds as well as reasonable to high capital returns in LAC.
3
Conversely, the structural reforms had substantial design and implementation flaws: 1 the premise of a universal paradigm that fitted all regardless of significant economic,
social, and political differences among countries worked in some and failed in others; 2 the private system was geared to an urban, formal labour market but in most of LAC the
informal and rural sectors predominated, therefore the majority of the labour force was excluded not in CEE; 3 most of the reforms assumed effects that did not materialize:
coverage was stagnant or declined, competition did not work properly in most countries particularly in small ones, administrative costs were high, the invested portfolio remained
concentrated in the majority of cases due to the lack of a capital market or an incipient one, gender equity was eroded private schemes normally lack social solidarity;
4
4 most of the reforms neglected the first or zero pillar to provide non-contributory social
assistance pensions for the poor less so in CEE; 5 the premise that ownership of individual accounts and private management would preclude state intrusion and politics
was shattered in Argentina where the government pressured pension administrators to invest in state funds, provoking a fund loss during the crisis of 2001-02
— eventually the state nationalized private funds in Argentina, Bolivia and Hungary; 6 the halt or
substantial reduction of contributions to the public system generated high transition costs, which also lasted much longer than anticipated and induced unsustainable fiscal costs and
debt levels; in Chile they were still 4.7 per cent of GDP in 2010, 30 years after the reform, although considerably less in Bolivia and Hungary it has been argued in LAC that fiscal
costs in the long run would have been higher without the reform; and 7 the global financial crisis of 2007-09 sharply reduced the capital accumulated and its returns in
private systems, prompted criticism, and halted further structural reforms
—although there was a recovery later on, some countries used the losses to justify the re-reforms Mesa-
Lago, 2008, 2010; Calvo et al., 2010; Schwartz, 2011; Fultz, 2012b.