SAN SALVADOR, EL SALVADOR, March
12, 1999 ---IFC has become a shareholder in AFP Prevision, a leading Salvadorian
pension manager established to manage mandatory and voluntary pension funds
in El Salvador's new social security system.
The Salvadorian Private Pension System initiated operations in July 1998.
By year-end 1998, the system had enrolled 570,000 affiliates, of
which 135,000 affiliates or 24 percent of the market are with AFP Prevision.
The system collected pension fund contributions of close to $60 million
during the first six months of operations.
El Salvador is the first country in Central America to emulate the successful
Chilean model of a defined contribution private pension system. Reform
of the former state-run "pay-as-you-go" social security system
is part of the El Salvadorian government's agenda for further market-based
The Chilean model has proved that a private pension system can improve
old age security as well as capital market and private sector development.
By adding to private savings, these systems can help finance growing
levels of domestic investment in a country. IFC's involvement in
the Salvadoran pension industry, initiated through this project, would
help with other capital market development initiatives in El Salvador and
the rest of Central America.
The pension funds in El Salvador are expected, over time, to stimulate
demand for, and issuance of, equity and long-term fixed income instruments
and add nearly $2 billion to the local capital markets in the next ten
The sponsors of AFP Prevision are Banco Bilbao Vizcaya (BBV) of Spain;
Pacific Financial Group (Pacific); a Central American financial group;
an affiliate of Banco Salvadoreño (El Salvador's third largest bank); and
IFC, part of the World Bank Group, fosters growth in the developing world
and in emerging economies by financing private sector investments, mobilizing
capital in the international financial markets, and providing technical
assistance and advice to governments and businesses.