The Case Study Of Pension Fund Investment In Infrastructure In Latin America And Its Enlightenment To China

Improving the quantity and the quality of infrastructures has a positive effect on social and economic development, especially for developing countries. For the purpose of developing infrastructures, public-private partnership (PPP) has been widely used in the world. How to arrange financing is crucial for PPP projects.Pension funds could become the ideal source of financing for infrastructure projects, since they have accumulated large volume of assets. Given the long-term nature and good risk/benefit ratio of the infrastructure investment, and their low correlation with financial market, pension funds could benefit from investing in infrastructure.However, there are still a lot of obstacles and challenges in the process of pension funds investment in infrastructure. Solving the problems needs both theoretical research and learning from the practice. The purpose of this article is to do case study on the best practice of pension funds investment in infrastructure in Latin America, summarize the lessons, and point out the enlightenment of LAC case to China.This article has seven chapters:The first chapter introduces the purpose of this article, and reviews the relative research both domestic and aboard. It also introduces the research methods used in this paper, together with the shining points and the shortages.The second chapter reviews the pension reform in Latin America, and introduces the existing pension system. Then, the chapter describes the infrastructure gap in Latin America, and points out it necessary to use PPP model to improve infrastructure, and pension fund could invest in PPP project.The third chapter analyses the operating mechanism of PPP model, and gives two cases of PPP projects in Latin America. Then it introduces how pension funds in Chile, Peru, Mexico, and Colombia invest in infrastructures.The forth chapter introduces direct and indirect investment, and investment through infrastructure bond, CKDs, and infrastructure fund. It also introduces in which infrastructure sector pension funds make the largest investment.The fifth chapter highlights the importance of guarantees and subsidies on encouraging pension fund to invest in infrastructure projects. Then it introduces subsidies, financial guarantees, and different kinds of non-financial guarantees. It also introduces some case studies of different ways to provide guarantees and subsidies used by different countries in Latin America.The sixth chapter analyses the importance for the existence of concession law, and introduces legal framework for concession in Brazil, Chile, Colombia, Mexico, and Peru.The seventh chapter summarizes the lessons learned from LAC case, and suggests China to construct explicit Concession Law, create a Federal Subsidy and Guarantee Fund, establish infrastructure investment fund, and develop new financial instruments that better match the investment appetite of pension fund. The chapter also suggests how to choose between direct and indirect investment, and points out investment risk that pension fund may face when invests in infrastructure.The innovation of this article is using case analysis and comparative analysis on LAC countries to find out the best practice of LAC pension fund investment in infrastructure, and pointing out the enlightenments of LAC case on China.However, as a result of the information and data restriction, the description of LAC financial innovation may not comprehensive enough. And since the article focus on the overall description of LAC best practice, the introduction of each LAC country is not deep enough.