Publication: General Trends in Competition Policy and Investment Regulation in Mandatory Defined Contribution Markets in Latin America
Date
2008-09
ISSN
Published
2008-09
Author(s)
Dayoub, Mariam
Lasagabaster, Esperanza
Abstract
Following Chile's pension reform in
1981, a wave of multi-pillar pension reforms took place in
Latin America (LAC). Their implementation has revealed new
policy challenges. To shed light on these issues, this paper
reviews the structure and performance of mandatory DC
pillars in LAC. The review highlights three important
points. First, it suggests overall positive outcomes from
reforms in the LAC countries that implemented multi-pillar
pension systems. There is, however, scope for increasing
efficiency. Second, management fees have declined but remain
relatively high whereas decreases in operational costs have
only been partially passed through to consumers reflecting
inadequate competition. Limits on transfers and related
measures have been ineffective in curtailing management fees
but created new barriers to entry. In recent years, a few
countries in LAC introduced or are in the process of
introducing a combination of new measures that focus more
directly on the two root causes of inadequate competition -
the inelasticity of demand to fees and selective elimination
of barriers to entry by facilitating unbundling of services.
These new measures show some promise. Third, the
paper's review indicates that a greater diversification
of pension fund portfolios in LAC appears to be necessary.
Portfolio concentration owes to the adoption of strict
quantitative investment regulations, underdeveloped capital
markets and volatile macroeconomic environments. A gradual
relaxation of these restrictions is now in progress in
several countries. Regulators have become more conscious of
the costs imposed by such regulations and macroeconomic
conditions have improved. Greater overseas diversification
seems inevitable given the development stage of local
capital markets.
Link to Data Set
Citation
“Dayoub, Mariam; Lasagabaster, Esperanza. 2008. General Trends in Competition Policy and Investment Regulation in Mandatory Defined Contribution Markets in Latin America. Policy Research Working Paper No. 4720. © World Bank, Washington, DC. http://hdl.handle.net/10986/6972 License: CC BY 3.0 IGO.”
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