Chequing out

Lawmakers allow withdrawals from Andean pension funds.

Chile has passed an extraordinary coronavirus measure to help its people cope with the economic impact of the pandemic by allowing people to withdraw 10% of their savings from their private pension funds (AFPs). This isn’t a novel strategy, Chile’s neighbour Peru permitted a 25% withdrawal earlier in the year, but it is a surprising move from the financially conservative country.


Chile has the most orthodox savings system in Latin America and has never allowed withdrawals of any kind so alarms bells were ringing around the Chilean financial markets. “It is expected that the Central Bank will significantly support short-term liquidity, as seen in Perú, with an easy liquidation of international assets and short-term assets where the Pension Funds are not impact actors. What can be seen is an appreciation of the Chilean peso that could break the floor of 750 pesos per dollar” said the portfolio director of one of the biggest Adean banks, “the AFPs may repatriate between USD 3-7 billion.”

“We expect slightly positive returns between 0% and 1% in 2020.”

VP at a Colombian Pension Fund.


Colombia has also introduced a law that would allow the withdrawal of 10% of funds for the newly unemployed that have not received any help from the government. “We expect a minimum delay of 10 weeks for the processing, although it is expected that the project could take the whole year, and even extend beyond March 2021 to be approved,” said our source.


So how are the Pension Funds in the region going to generate returns? A VP at a Colombian Pension Fund said “we estimate that the recovery process will continue and we expect slightly positive returns, we are thinking about returns between 0% and 1% at the end of 2020”.

“Private equity investments should continue to grow and generate real returns.”

A portfolio director at one of the biggest Adean banks.

A portfolio director at one of the biggest Adean banks is thinking more about alternatives, “It is difficult because interest rates on government bonds are close to zero. It’s hard enough to get risk-adjusted returns. But, we believe that less liquid or private equity investments should continue to gain space and to support the development of countries and generate real returns”. Someone tell LAVCA!

 

Important Notice
While the information in this article has been prepared in good faith, no representation, warranty, assurance or undertaking (express or implied) is or will be made, and no responsibility or liability is or will be accepted by Deheza Limited or by its officers, employees or agents in relation to the adequacy, accuracy, completeness or reasonableness of this article, or of any other information (whether written or oral), notice or document supplied or otherwise made available in connection with this article. All and any such responsibility and liability is expressly disclaimed.
This article has been delivered to interested parties for information only. Deheza Limited gives no undertaking to provide the recipient with access to any additional information or to update this article or any additional information, or to correct any inaccuracies in it which may become apparent.

This Week

Volume 2 – Issue 9

Dare we dream?

Dear Members, Dare we dream that the inoculation programmes starting around the world may actually be the beginning...

Law and order

Civil society demands action to protect social leaders and human rights activists in Colombia.

DeFi

Decentralised financial services and products resonate with Mexicans.

Hydrogen economy

Mexican industry and government begin to think about hydrogen.

Gateway or destination?

Airports consider their business model as a gateway and destination.

Bumper crop

Paraguay, Uruguay and Argentina seek to grow soya exports.

Service restrictions

High-end restaurants trying everything to remain in business.

Digital innovation or survival?

The pandemic has forced LatAm boardrooms to embrace digital innovation.

Vacuna VIP

Privileged few secretly given COVID vaccine in Argentina.

B Movement

Marrying profit with purpose or just good marketing?