Costa Rica: $7 billion Poorly Used

While essential infrastructure projects lack funding, the capital accumulated in pension funds only serves as a source of funding for state coffers.

Wednesday, January 8, 2014

In a country where the need for funds for projects that promote economic development is increasing, the resources managed by pension operators have to be invested in obsolete investment schemes, ensuring only low returns for contributors.

These outdated guidelines not only prevent contributors from achieving better returns so that they can enjoy larger pensions in their old age, but also hinder the country's development by not allowing the use of these funds in long-term projects for infrastructure, telecommunications and other sectors of importance to the country.

In this way, 62% of the country's pension balances are invested in debt of the Central Bank or the Government, which, while offering low levels of risk, also generate low returns.



More on this topic

Public Infrastructure Financed with Pension Funds

February 2013

93% of the $58 million raised by the securitization of future revenues of the International Airport of El Salvador were provided by Pension Funds.

Editorial

The administrators of the pension funds are obliged to invest mainly in government bonds, and this significantly affects the low returns earned by contributors in those funds.

Operators Call for Comprehensive Pension Reform

May 2012

The Salvadoran Association of Pension Funds has asked for changes in legislation to be made firm in order to increase the profitability of the savings of workers.

The Salvadoran Association of Pension Funds (Asafondos) asked President Mauricio Funes to keep his promise to carry out a second part of reforms to the pension system.

El Salvador: The Future of Pension Funds

February 2012

The obligation to satisfy the state’s appetite for money is compromising the profitability of pension operators and the size of contributor’s future pensions.

A statement by the Salvadoran Foundation for Economic and Social Development (FUSADES) reads:

The dilemma of pension fund investments

Public Works Securitization

March 2010

Costa Rica still faces obstacles to implement this mechanism, regarded as the best alternative for funding public works.

Public works securitization is once again being discussed, as the upcoming Tourism Minister stated it will be used to fund a new National Conventions Center.

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