Deputy Superintendent of AFP from SBSElio Sánchez, estimates that the new rule, together with the recent withdrawal of up to 4 UITs from pension funds, will imply a reduction of almost half of the pension funds (S/60,000 million).
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Thus, the rule, far from promoting voluntary contributions, destroys retirement savings and will affect the growth of the economy -weakened by political instability and external headwinds-, because it reduces savings, investment, the size of the capital market and adds volatility to the exchange rate, according to experts.
According to the Financial Stability Report of the Central Reserve Bank (BCR), the approval of the last withdrawal of the pension funds was one of the reasons why, this year, the medium and long-term interest rates of Public Treasury bonds increased by 194 and 182 basis points, respectively.
Situation that, according to the BCR, negatively affected the values of mutual funds, pension funds and insurance company investments.
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Also, the monetary authority adds that the expectations of additional withdrawals reduced the capacity of the AFP to finance companies in the Peruvian stock market.
For this reason, José Larrabure, vice president of the CFA Society, assures that the regulation in question represents a “mortal blow” for the capital market, since it results in less availability of loanable funds and makes financing more expensive.
The expert explains that a significant withdrawal of pension funds, in the short term, will cause an increase in interest rates on government bonds, which will be reflected in the cost of mortgage loans, long-term loans from companies and debt rates in the local stock market.
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Also, since withdrawals reduce the ability of AFP to cushion the massive sales of Peruvian bonds by non-residents, in scenarios of uncertainty, the Public Treasury will have difficulty issuing debt in local currency.
With which, it can force the State to take financing in dollars, dollarizing the public debt and increasing the country’s risk perception, says Víctor Fuentes, chief economist of the IPE.
Exchange rate volatility
Another negative impact of the Congress rule is the volatility that will be generated in the exchange rate, according to Bank of America.
According to Marco Ortiz, a professor at the Universidad del Pacífico, the withdrawal of pension funds generates upward and downward forces for the dollar.
On the side of rising forces, he explains that non-residents, seeking to anticipate further deterioration of Peruvian bonds, are going to go out and sell the titles they own and demand dollars to leave the country, with which, in addition to increase risk and interest rates, the dollar will appreciate.
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On the side of downward forces, he explains that the time has come when the AFP must sell local bonds and instruments from abroad to return the contributions, they will receive dollars that they will sell to make the payments, which will generate a depreciation of the dollar.
However, since the timing of both events will not necessarily coincide, it will generate volatility in the exchange rate.
Ortiz predicts that the monetary authority will most likely intervene to reduce volatility.
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“Could you see a BCR buying more long bonds and putting them on the balance sheet to hold their price a little and that the long rates do not skyrocket “he adds.
Pension less than the minimum
Given that the norm establishes that the amount of the minimum pension in the private pension system may not be less than the value of a basic basket, Sánchez indicates that the Executive’s regulations must define the number of baskets that will serve as a reference. Since if only one basket is considered, the minimum pension will be lower than the one that currently exists in the national pension system, which is S / 500.
In addition, it indicates that it should be considered that the surpluses that are above the savings goal should be withdrawn when the right to retirement is reached, otherwise the possibility will be opened for everyone to withdraw money, and this is not what which reflects the title of the standard.
The AFP Association did not respond to our request for an interview.
Also…
Contradictions of the norm, according to the SBS
Although the title of the rule says that it promotes alternative voluntary contributions for pension purposes, in reality it allows the withdrawal of the excess of the minimum retirement savings.
The rule distorts the figure of the minimum pension, because far from targeting those people who, due to their low income, will not receive a pension, it benefits higher income affiliates to a greater extent.