By Nelson Bocanegra
BOGOTA, March 23 (Reuters) - Colombia's private pension
funds association said on Thursday a reform proposed by the
leftist government of President Gustavo Petro is unsustainable
and would have a significant impact on capital markets.
The bill, one of a raft of reforms proposed by the
government, would strengthen the state pensions administrator in
an effort to give benefits to more people.
It would require private funds to send about 80% of the
money they manage, equivalent to about $3.8 billion annually, to
state pension fund Colpensiones, said Santiago Montenegro, head
of the Asofondos association.
That would leave private funds with much less to invest in
public debt, corporate bonds and stocks on the local and
international markets, Montenegro said.
"This is important flow that will stop being provided on the
capital market, to financing of companies, to debt refinancing,"
he told journalists.
Private funds administer obligatory pension savings of some
346 trillion pesos, about $72.4 billion, equivalent to nearly
30% of Colombia's gross domestic product.
Private funds had 116.2 trillion pesos invested in TES
bonds at the end of February, a fourth of the investment in
internal public debt.
Though the reform, which would enshrine a range of
contribution regimes depending on income, would boost financing
in the short term for the government to pay pensions, it will
not finance needs in the medium and long-term, Montenegro said.
"The devil is in the details," he said. "In the medium-term
we would need to pay more taxes and reduce benefits, like
raising the retirement age, increase contributions or reduce the
sum of pensions."
Petro's coalition has a majority in Congress, though a
health reform proposal has caused friction with some legislative
allies and led to the exit of a minister.
"The proposal will not bring a long-term solution to the
current problems of coverage, equity and sustainability in the
system," the ANIF thinktank said in a report, saying it could
more than double pension obligations to some 249% of Gross
Domestic Product.
(Reporting by Nelson Bocanegra
Writing by Julia Symmes Cobb; Editing by Richard Chang)
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