Latin American Capital Markets

122 KAREN GOLDSTEIN ROSSOTTOFigure 5-1 I Institutional Assets in Selected Countries, 1999(Percentage of GDP)Source: OECD (2000); World Bank (2001); ICI (2001).pension and insurance industries, Chile's institutional and capital market growth hasbeen attributed to the initiation of a mandatory private pension system in 1981, theearliest in the region (Yermo 2000).Within the region, the level of development varies among different types ofinstitutional investors. Although pension fund development lags behind that of Chilethroughout the remainder of Latin America and the Caribbean, pensions currentlydominate the region's institutional sector Brazil and Chile account for the majority ofthe region's pension assets. Brazil's pension system began with employer-sponsoredplans in the 1970s and continues to consist primarily of defmed-benefit employer programs,while private pension plans serve primarily to complement the social securitysystem (Yermo 2000). The Dominican Republic, Panama, and Mexico have also hademployer-sponsored pension plans over the past few decades.Other Latin American and Caribbean countries introduced pension fundsfollowing social security privatization programs, based on the Chilean model, in the!990s.These programs, implemented in Peru in 1993—followed by Argentina, Colombia,Uruguay, Bolivia, Mexico, and El Salvador—led to a shift away from pay-as-you-gopublic pension systems to fully funded, defined-contribution systems that require employeecontributions to individual retirement accounts managed by private investmentfunds. In the Caribbean countries alone, private pension funds and other contractualCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub