Colombia pension reform would impression capital markets, personal funds say


By Nelson Bocanegra

BOGOTA (Reuters) – Colombia’s personal pension funds affiliation stated on Thursday a reform proposed by the leftist authorities of President Gustavo Petro is unsustainable and would have a major impression on capital markets.

The invoice, certainly one of a raft of reforms proposed by the federal government, would strengthen the state pensions administrator in an effort to provide advantages to extra folks.

It might require personal funds to ship about 80% of the cash they handle, equal to about $3.8 billion yearly, to state pension fund Colpensiones, stated Santiago Montenegro, head of the Asofondos affiliation.

That would go away personal funds with a lot much less to spend money on public debt, company bonds and shares on the native and worldwide markets, Montenegro stated.

“That is vital circulation that may cease being supplied on the capital market, to financing of firms, to debt refinancing,” he informed journalists.

Personal funds administer compulsory pension financial savings of some 346 trillion pesos, about $72.4 billion, equal to just about 30% of Colombia’s gross home product.

Personal funds had 116.2 trillion pesos invested in TES bonds on the finish of February, a fourth of the funding in inside public debt.

Although the reform, which might enshrine a variety of contribution regimes relying on revenue, would increase financing within the brief time period for the federal government to pay pensions, it won’t finance wants within the medium and long-term, Montenegro stated.

“The satan is within the particulars,” he stated. “Within the medium-term we would want to pay extra taxes and cut back advantages, like elevating the retirement age, improve contributions or cut back the sum of pensions.”

Petro’s coalition has a majority in Congress, although a well being reform proposal has prompted friction with some legislative allies and led to the exit of a minister.

“The proposal won’t carry a long-term resolution to the present issues of protection, fairness and sustainability within the system,” the ANIF thinktank stated in a report, saying it may greater than double pension obligations to some 249% of Gross Home Product.

(Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Enhancing by Richard Chang)