The impact of tax-financed pensions on poverty reduction in Latin America: Evidence from Argentina, Brazil, Chile, Costa Rica and Uruguay Fabio M. Bertranou, Wouter van Ginneken and Carmen Solorio International Labour Office In many Latin American countries, tax-financed pensions (TFPs) have expanded, mainly resulting from growing informalization of employment and stagnating or declining pension insurance coverage. In the five countries examined in this article, TFPs have generally been effective in reducing poverty and indigence. In Brazil rural social assistance pensions cut the incidence of destitution among poor older people by 95 per cent. In Chile TFPs considerably improved their poverty reduction effectiveness between 1990 and 2000. Tax-financed pensions have therefore been seen as an instrument to supplement contributory pension coverage and boost overall social security coverage. A key challenge is to increase pension insurance coverage through existing statutory pension insurance or special contributory schemes targeted on workers in the informal economy. Otherwise, TFPs could become financially and socially unsustainable in the future. There are also various ways to improve the financing, administration and eligibility criteria of TFPs, particularly because it is necessary to define consistent structure and benefit policies between these and contributory schemes. O ver more than 20 years now, many Latin American countries have radically changed their pension policies. Beginning with the structural reform of the pension system in Chile in 1981, and through the reforms introduced in other countries during the 1990s, many pension schemes are now wholly or partially based on defined contributions with individual © International Social Security Association, 2004 International Social Security Review, Vol. 57, 4/2004 Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA 3