Pensions, according to Gustavo Petro’s proposal, would cause collateral damage

The stock market in Colombia does not have the same weight as in other countries such as the United States, where millions of people invest their resources there and the stock market is a thermometer of the economy. Some even contemptuously assure that in Colombia there is no there is no ‘stock market’ but ‘chuspa’ as far as shares are concerned, due to the small number of listed companies.

However, between January and August, the not inconsiderable sum of 21.4 billion pesos was traded in the purchase and sale of national shares.. In addition, the capital market is not only stocks, since the largest are transactions with public and private debt securities, where Colombia does stand out internationally. With them, 257 billion pesos were traded during the first eight months of this year. Added to this are foreign exchange and derivatives operations.

The main players in both the equity and debt markets have been foreign investors and the Pension Fund Administrators (AFP), that in their almost 30 years of operations they have been protagonists in the success of the share issues of Ecopetrol, ISA, Davivienda or Grupo Aval, while at the same time they have become the great financiers of the Governmentas they are among the largest buyers of domestic debt securities (TES).

They do this because their mission is to yield the money that their affiliates contribute each month and that today already amounts to more than 300 billion pesos. Although they have been gradually increasing their investments abroad to diversify the risk (today thanks to investments abroad they benefit from the devaluation), it is feared that with the pension reform proposal that the Government has outlined, a death blow will be dealt to the capital market. This is because it is planned that all affiliates who earn up to four minimum wages will go to Colpensiones.

The problem is that they are 94 percent of the contributors, which would imply that in practice the funds would no longer have even a third of their current investment capacity. This is not counting the blow that would imply transferring the affiliates’ savings immediately to Colpensiones, since for that they would have to sell all the shares and TES they have in their possession, collapsing their prices.

Kevin Hartmann, a researcher on pension issues at the University of Leuven in Belgium, confirms that the largest holders of public debt bonds in the country are private pension funds, therefore, with the reform, as it is proposed so far, the market of capital would suffer a very severe reduction to the extent that there would be less liquidity from the contributions that this time would go to pay current pensioners. “Now, the question is whether the pension system should exist to serve the development of the capital market? I personally don’t think so.

Pensioners in Colombia. – Foto: Getty Images

The pension system must be there to pension. Any other goal is subservient to that primary goal,” she opines.

Financial operators have another idea, who consider that the capital markets are one of the most suitable mechanisms for investing pension savings.l, because what is sought are long-term alternatives that help secure the money to pay the allowances of future pensioners. In fact, the pension funds of Japan, Norway and South Korea are not only the ones that manage the most resources in the world, but also large global investors.

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Jaime Humberto López, president of Asobolsa, considers the concern about the stock market well-founded, given that the funds would keep only 6 percent of their affiliates. To this would be added an impact on foreign investors who come to the country because they know that when they liquidate their positions they have someone to sell to, but if the main players are not there, foreigners would not enter either. One more edge to take into account in the necessary debate on how to achieve a pension system that covers more Colombians, but also helps to encourage savings.

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