| Latin America is the first region in the world to implement private individually capitalized social security, an experimental policy where workers fund their own retirement benefits through individual investment accounts. Countries throughout the world (including the United States) are currently considering similar reforms. The old state-sponsored social security programs were politically significant in Latin America because they represented financial and patronage resources for politicians, sources of power and career advancement for bureaucrats, and generous benefits for the middle and industrial working classes. Consequently, social security privatization generated fierce political opposition from labor, pensioners, and other interests with a stake in the old state-sponsored systems. This research asks: why did the Southern Cone of Latin America become the world's first region to experiment with social security privatization, and what explains the divergence in policy outcomes in Argentina, Brazil, Chile, and Uruguay? This research presents an analysis of the distributional consequences of social security reform, and their political implications for interest groups and state actors. The political role of interest group actors during political struggles over social security reform is analyzed. Since political institutions structure political competition, any study of the role of politics and policy reform must incorporate the role of political institutions. The range of policy outcomes in the region ultimately depended upon the degree to which political institutions provided political actors with the opportunity to shape policy by acting as veto players. Where institutions provided interest groups opportunities to veto policy, as in Brazil, privatization was limited. Where political institutions did not afford opportunities for interest groups to act as veto players, as in Argentina and post-1994 Uruguay, governments successfully implemented social security privatizations. This research demonstrates how political institutions shaped political conflict over policy reform by providing interest group actors with varying opportunities to shape reform. |
