Latin American countries ought to move swiftly to unshackle restrictions on international investing for their pension funds, especially following the collapse of Argentina's privatized system. The crisis in Argentina shows why a privatized system, properly funded with investments diversified, offers more assurance of securing the long-term objective of providing retirement benefits than a government pay-as-you-go program.
Had the Argentine system shown the fortitude to resist pressure to allocate a big part of its assets to government debt and diversified its investments internationally, participants would have at least more assurance their pensions were secure, even as their non-retirement savings and livelihoods crumbled in that nation's financial crisis.
Mexico and other countries in Latin America that have been worldwide leaders in privatizing Social Security should see the Argentine situation as a warning to avoid the same mistake and liberalize their investment policies. The purpose of pension funds is to better secure retirement incomes, not to provide an easy source of government financing In the long run, providing funded and secured pension benefits will help a nation's economy. That is the lesson those in control of the Argentine government and pension system ignored.
