Get access

Political risk and pension privatization: The case of Argentina (1994-2008)


  • The views expressed are those of the author and not those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. The author thanks Gustavo Canavire Bacarreza for his assistance and Camila Arza, Barbara Kritzer, Milko Matijascic, Katherina Müller, and three anonymous reviewers for their helpful comments.

Stephen J. Kay, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree St., N.E., Atlanta, GA, 30309-4470 United States. Email:


Proponents of pension privatization in Latin America argued that systems of private fully pre-funded defined-contribution individual accounts would be better insulated from politics than was the case with public pay-as-you-go pension systems. However as the Argentinean case demonstrates, most recently with the 2008 nationalization of its private individual accounts system, transferring pension management and investment to the private sector does not necessarily reduce or eliminate political risk. In fact, the implementation of systems of individual accounts creates a new set of political risks, in part because they are a potential financial resource for governments, especially during times of economic stress. This article describes the range of political risks inherent to individual account pension systems, with specific reference to Argentina's 1994-2008 experience with privatization.