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Pension savings: effects of the Petro proposal on pensions – Financial Sector – Economy


Mar 15, 2023

The idea of ​​President Gustavo Petro to invite the Pension Fund Administrators (AFP) to return the pension savings of Colombians to local investments it can be more than counterproductive, according to experts.

(Also read: Petro asks pension funds to bring member savings to the country).

Petro asked this morning that foreign investments return to the country after the bankruptcy of Silicon Valley Bank (SVB) and two other banks in the United States. According to the president, «55% of the pension fund portfolio, that is, the stock of contributors’ savings, is outside the country.»

The problem is that, according to experts, part of the investment made by pension funds assumes the principle of risk diversification and It is not a good idea to put everything in the same market.

(Of interest: 4.4 million workers are missing to catch up on their pension contributions).

Jorge Llano, AMV’s vice president of Market Development, assures that if this decision were made, the money from Colombian pension savings would also be at risk.

«It is very easy to understand how external investments operate. In terms of the long term, one should always have a diversified portfolio with significant participation in several countries to avoid country risk, that it is materializing and is increasing or devaluing those investments, it affects him and also that the others compensate those losses», explained Llano.

According to the professional, this is precisely what is happening with the Colombian market.

(Also: Why is the pension age in Colombia different for men and women?).

«We have seen a rise in the hard TES rate, although they are recovering, they are still very high and the stock market is also low on yields. What is happening is that the Country Risk is materializing with a rise in the dollar, a devaluation and Given that the AFPs have investments abroad, this is helping to have better yields and offset devaluations within the country«, I point.

In the Pension Fund Administrators (AFP) and other entities there are no direct observations in SVB, while in the administrators the exposure to venture capital investment funds is practically nil, experts explained.

«The issue is that this evaluation should always be done in the long term and not by circumstances, in order to prevent the 18 million affiliates from having much bigger losses just for being concentrated in one country and in that case, diversification is very important and the future may be better if the results of companies like Apple or Tesla are brought to Colombia and this will help us more,» Llano pointed out.

technical decisions

In it, José Manuel Restrepo, former Minister of Finance of Colombia, points out that investment decisions must be made with a technical sense, and must be made by investment committees and that diversification is the principle to improve the profitability of savings.

«By making a decision contrary to that technical criterion, you can concentrate the risk at the national level and In the event that a critical situation occurs, it is still affected, this does not solve the problem and, on the contrary, could aggravate it.«, he explained.

According to Restrepo, another point to take into account is that this can aggravate the costs and destroy the profitability of pension fund affiliates, «because many of these investments are not liquidated immediately, but costs must be assumed that They would be for affiliates. This is a proposition that risks deteriorating profitability and your savings.«, argument

In addition, what Restrepo sees is that although the Government has the right to issue decrees to regulate what the law and the constitution allow them to do, and in this sense he says that «he does not know of a decree or resolution that allows them to adopt this type of of measures», indicated.​

*Porvenir is part of the business group that controls the company Publishing House EL TIEMPO

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