Incluye bibliografía

Executive summary -- 1. Motivation and main findings -- 2. Regulation in the Latin American pension reform model -- 3. Rationale and impact of draconian regulation -- 4. Data -- 5. An evaluation of the costs of draconian regulation -- 6. Policy implications -- 7. Conclusion -- Notes -- Bibliography -- Annex A -- Annex B -- List of tables -- List of figures.

This report assesses the impact of regulatory regimes on the market performance of private pension funds in Latin American countries that have undertaken reforms of their pension systems. It focuses, in particular, on the effects of " draconian " regulation, a set of rules on the industry ' s structure, investment regime, and performnce. The authors conclude that while such rules may have achieved their basic objective of safeguarding workers ' retirement savings from financial systems that lack transparency and solidity, the rules are not without costs. These rules create distortions in asset management, limit opportunities for diversification, and consequently, hamper the performance of pension funds. This paper shows that the return to retirement assets, expected replacement rates, and hence the net welfare gain from pension reform, is lower under a draconian regulatory framework than under a more liberal pension fund investment regime. Important policy conclusions are that existing regulatory regimes should be liberalized as soon as possible to allow pension fund investments in a wide array of financial instruments, and that regulations should require evaluation of fund performance against market benchmarks, as opposed to exclusive focus on comparisons with industry averages. This report also suggests a review of the current structure of the private pension fund industry in Latin America and an evaluation against alternatives in light of actual performance experience.