New AFP seizures, why might they be a bad measure?

Congress may approve a new withdrawal of funds from the AFP this year after more than three bills have been introduced proposing new payments to affiliates.

One measure that proposes a seventh withdrawal suggests that workers they can request up to 4 UIT of their contributions, i.e. up to 19,800 soles, while another offers to withdraw up to 3 UIT, which is equivalent to 14,850 soles.

The third project presented proposes to release up to 50% of pension funds to pay off affiliates’ debts to banks, savings banks or official financial institutions.

At this point, the measures have not yet been evaluated in Congress, but Ministry of Economics He already warns that a new withdrawal from AFP would be the “worst measure”, but what is the reason for such a reaction?

Would that be a bad idea?

First of all, economist Enrique Castellanos recalled that previous withdrawals of funds have already affected the private pension fund.

“There were six withdrawal of funds Previously, we withdrew 88 billion soles, almost half of the fund (…) We ate half of it in two years, which cost us almost 30 years of savings,” he said.

Castellanos also points out that most workers work informally, so they don’t have an AFP account.

“75% of our workforce is informal, so 75% don’t see or hear it. 25% have AFP, nine million affiliates, and nearly half, four million, no longer have funds because they pulled out in the last two years. ”

For his part, the president of the Council for Private Competitiveness, David Tuesta, agrees that this situation will not help the majority. Peruvians and it will benefit small and medium-sized companies, as some congressmen say.

“This seventh withdrawal would only help formal workers, and everyone who had something, most likely between the first and second withdrawal, removed everything. This is not about helping small and medium-sized companies,” he said.

The former minister also points out that retirement savings are being split up.

“Consequently, there will be a lack of protection for old age and shifting risks and problems to the youngest (…) This has a very strong impact on pensions and on the well-being of the country,” he added.

Finally, Tuesta points out that it also affects economy in general, specifically the bonds issued by the country.

“The withdrawal of the pension funds meant that AFPs had to sell their assets in order to be able to pay affiliates who withdrew their money, which meant they sold a significant amount of Peruvian treasury bonds, which had already driven up the price of treasury bonds. becomes cheaper and therefore the interest rate for future financing is higher,” he explained.

The economist points out that with such an opportunity for a new pension investors they are worried, which breeds distrust in the country.

“How will this confidence be transmitted? It will be more expensive for us to get into debt, and who will pay these debts? Well, on the one hand, they will have to reallocate resources from the budget, and on the other hand, you will have to raise taxes, you will have to charge generations in the future to cover this debt,” he said.