The privatisation of the pension fund system in Latin America was hailed as one of the most important developments of the 1990s. A major challenge for developing countries is the lack of local savings. By definition, developing countries are in transition. They need a great deal of capital to modernise their infrastructure and improve their workforce through better education and health systems. This left most countries highly dependent on international capital flows.

The problem is that international capital flows are highly volatile. They are dependent on external political and economic cycles. The sudden starts and stops of the international financial markets have only added to the fragility of the region.

The privatisation of the pension fund system was supposed to reduce this dependency and fragility. Moreover, it was supposed to improve the fiscal viability of the developing world by reducing or eliminating the need for the state to be the provider of pension benefits. State pensions are relatively old. Originally, they were associated with the military.

Aerarium militare were benefits that were awarded to Roman military veterans. Scottish Widows is an asset manager which was started in Edinburgh after the Napoleonic Wars as a provider of benefits for fallen soldiers. Veterans of the United States Continental Army were also awarded pensions after independence.

However, it was the expansion of the Industrial Revolution and the rise of labour unions during the 19th century that resulted in the creation of public pension plans.

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