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After months of negotiations with unions and private sector businesses, the Bolivian government has passed a law that re-nationalises the country’s pension system and significantly lowers the minimum retirement age. At a time when many countries in the region are taking up the Chilean model of private companies managing individual retirement accounts, the law sends Bolivia in the opposite direction.
President Evo Morales signed the bill into law in December, and it will take most of this year to replace the two private sector pension fund managers with a single state-owned fund manager. While the reform provides many benefits for Bolivians looking to retire, it’s not clear how sustainable it will be in the long term, as critics say its funding measures are not sufficient to cover its new obligations.
How the changeover affects Bolivia’s financial sector will depend on whether this new state entity acts purely as a disinterested manager of members’ retirement savings or adopts the priorities of Mr Morales’s administration as its own.
Read more at Financial Services Briefing: “Regime change” (February 2nd)