(Bloomberg) – Peru’s Congress overwhelmingly approved a bill late Thursday that would give workers access to retirement accounts, which officials estimate could result in $7 billion in withdrawals. ing.
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The bill was approved by a vote of 95 out of 106 members present, despite opposition from the government. The government could veto the bill, but Parliament could easily override the bill, which would only delay its implementation.
Lawmakers have repeatedly targeted Peru’s much-maligned private pension system since the pandemic, saying it fails to provide adequate pensions to citizens despite charging high fees. . Banking regulator SBS says the bill is the seventh withdrawal approved since 2020, which has already seen workers withdraw $24 billion from their personal retirement accounts.
Read more: Investors brace for Peru’s $7 billion pension withdrawal bill
The withdrawals have had an impact on Peruvian markets, as pension funds are among the biggest buyers of government bonds and domestic stocks. They are now expected to make a large sale to extract cash. However, some of the market impacts may have already been priced in. The Lima stock exchange has fallen since the bill passed its first committee vote on March 25th.
Still, the pension fund, known as AFP, may not have to sell as many assets as some fear in this case. “The headline figure for this bill is $7 billion, but AFP’s general asset liquidation appears to be closer to $3 billion,” said Gilberto Hernandez Gomez, a strategist at BBVA in New York.
He said that was explained by two factors. One is that not everyone withdraws from their retirement accounts, and two is that AFP already has about $2 billion in cash or cash equivalents.
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