Chile Pension Reform Adds to Foreign Investments
In "Chile set to boost foreign investment," Financial News reporter Johanna Symmons (January 28, 2008) describes a proposed law that increases maximum international holdings from the current 40 percent to 80 percent. This means that the half dozen authorized private fund administration companies will have more latitude in how they manage the country's mandatory individual savings accounts. When approved, non-Chilean holdings could rise as much as USD 50 billion. In addition, reform will add to retirement plans of impoverished citizens, "funded by windfalls from copper production." Credit goes to President Michelle Bachelet who identified the need for change as "her administration's most important task."
This blogger is proud to say that she worked as a financial risk management expert on an official fact-finding team in early 2006. Led by Dr. Roberto Rocha (World Bank), colleagues and report co-authors included Mr. Graeme Thompson (former Australian regulatory chief and now pension consultant) and Dr. Eduardo Walker (Pontificia Universidad Catolica de Chile). If you are interested in learning more, know that pension professionals from around the world will be presenting at The 4th Contractual Savings Conference: Supervisory and Regulatory Issues In Private Pensions and Life Insurance. Hosted by the World Bank and occurring on April 2 through 4, 2008, the discussions will emphasize the "brave new world" of pension risk management. Yours truly is presenting a session entiled "Risk Management of Pension Funds: A Practitioners View."
If you are unable to join us in Washington, DC, I invite you to read about what other countries are doing in the area of pension reform for different types of plans. Chile is a particularly interesting case inasmuch as politicians and public policy leaders often reference this Latin American system as a noteworthy and innovative model. Think of it as a national 401(k) plan of sorts. While not perfect (no system is), many people like having their own account rather than being part of a "pay as you go" system. For more information, visit the site for the Superintendency of Pension Fund Administrators and click on the English overview.
