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  HOME | Latin America (Click here for more)

Pension Reform, a Thorny Issue across Rapidly Aging Latin America

MIAMI – Uncertainty about the future sustainability of pension systems is creating headaches for governments across Latin America, especially considering that overhaul proposals are often deeply unpopular and can even trigger social unrest.

Rapidly aging populations are the biggest concern for policy makers immersed in this issue, with countries such as Nicaragua, Mexico and Chile projected to see rates of aging that are up to three times those of some European nations.

While there are currently nearly 50 million people in the region 65 years or older, that number is forecast to quadruple to 200 million by 2065.

“The problem is that no system is thinking about that rapid aging. Reforms are needed and they’re trying to make adjustments, but they’re not being carried out quickly enough,” Mariano Bosch, principal economist and pensions coordinator at the Inter-American Development Bank’s Labor Market and Social Security Unit, told EFE.


With many countries of the region virtually stagnant economically and on the cusp of a so-called “demographic winter,” demonstrations both in favor and against pension reform have spread throughout the region.

In Nicaragua, that issue triggered a socio-political crisis that has left hundreds dead since April 2018.

A controversial overhaul measure in that Central American country that raised contributions for employees and workers while reducing the benefits of new pensions by up to 30 percent was relaunched early this year despite the crisis, further ratcheting up opposition to the reform plan.

In the case of current massive unrest in Chile, one of the key demands of protesters is an overhaul of the country’s system of mandatory individual retirement accounts – also called capitalization – that was installed during Gen. Augusto Pinochet’s 1973-1990 dictatorship.

The Chilean population complains that pension fund management companies make enormous profits through their investments in the financial markets but that this money does not trickle down to retirees in the form of adequate pension payouts.

In Brazil, rightist President Jair Bolsonaro’s flagship project to shore up public finances and boost economic growth also has sparked opposition.

The initiative, which encompasses nearly all workers in both the public and private sectors, recently received congressional approval and is to be signed into law soon by Bolsonaro, imposes a mandatory minimum retirement age of 65 for men and 62 for women.

Under the previous rules, many Brazilians were able to retire with a full pension in their 50s.


The situation of retirees is most acute in Venezuela and Argentina, which are mired in deep recessions and have sky-high inflation rates that have eroded purchasing power.

There are 4.5 million pensioners in Venezuela and they all receive on a monthly basis the equivalent of one legal minimum salary: 150,000 bolivars or $6.90.

In Argentina, retirees are among those hardest hit by that nation’s severe crisis, with the average pension payout in October amounting to just 13,437 pesos (around $218) while the price of the basket of basic goods is more than double – 37,815 pesos ($595.50).

In Mexico, it is estimated that 80,000 Mexicans will reach retirement age in 2022 but that seven out 10 will not have accumulated the 1,250 weeks of contributions necessary to access a minimum guaranteed pension.

That concern is also pressing in the Dominican Republic, where people need to have made at least 30 years of contributions and be a minimum age of 60 years old to qualify for old-age pension benefits.

The International Labour Organization has calculated that more than half of older persons in Latin America do not receive a pension from a contributory system and are therefore forced to remain active in the labor market.

Bosch said urgent reforms to pension systems are needed to correct this problem, noting that many workers do not meet years of contribution requirements because they were either unemployed at a particular time or were among the roughly 140 million people across the region forced to work in the informal sector.


Much of the region has implemented distribution systems in which retirees’ pensions are funded by the contributions of the current workforce, while others have adopted a system of individual capitalization managed by private companies.

But no matter the model all countries must make corrections in response to the demographic pressure; failure to do so “will make the systems more costly for the state,” Bosch said.

“Here we have a call to action. The longer they take, the tougher the adjustments will be,” he added.


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