AFP: the impact of the new withdrawal on infrastructure and the Stock Market | disbursement | SBS | BVL | savings | insurance | investment | g of management | YOUR MONEY

The strongest impact has been felt by the capital market, although in the Lima Stock Exchange (BVL) show caution. Before the disbursements, almost S/ 7.5 billion bonds were placed in Peru per year, and today it does not even reach 50% of that amount due to the absence of actors such as the AFPs, which have experienced a need for liquidity since 2020. “Until 2019, 10 or 15-year financing operations were common; today they do not exceed five”, reports José Martínez Sanguinetti, executive vice president of Investments at Rimac Seguros. And he adds: “2023 was the year with the fewest bond issues in decades; “2024 doesn’t look better”.

The AFPs are more cautious about buying local papers, so there could be companies more affected than others. Jean Pierre Fournier, Vice President of Investments of AFP Integra —the administrator that concentrates 45% of active members—indicates that managers will continue to be more selective considering that portfolio management is no longer “traditional”. And it is not the same that the company to which it is lent belongs to a predictable sector than that it is in one that is more indebted and volatile in the future. “For these it will be more difficult to obtain cheap financing”mentions.

Preparation: Daniel Zavala

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You have to invest in papers with terms of five or seven years that are liquid and with which one can transact, and that is usually found in the international market. Buy papers that will not be traded on the stock market [local] It will be difficult if the situation is not clearer”, he adds.

And, in that sense, Miguel Ángel Zapatero, general manager of the BVL, notes that the challenge is to attract foreign capital, although “it is not simple” if the recent adjustment of Peru’s risk classification is considered. The proposal in the face of the situation is to continue promoting the entry of the retail investor. Since 2018, more than 30,000 people have entered the stock market through technological tools: they now have a 28% participation, with an average individual balance of S/ 7,000. By 2024, Zapatero estimates that about 20,000 more will enter.

Prepared by Daniel Zavala

10 years ago, close to 11% of the AFP portfolio was invested in infrastructure projects, which represented 2%-2.3% of GDP at that time. The scenario today is totally different. From the PPK government, Fournier points out, ““It has been difficult to generate long-term projects” that are bankable or attractive to the bond market.

If they told us that an infrastructure project is coming with a term of 15 years, it is not that we are going to close the doors, but the rate that will be requested will be high, depending on the degree of complexity and whether it is construction or just operation.“, he says. This would cause the issuers to give up and there would be no “click” necessary. It is not all. It is estimated that, in the absence of guarantees of political stability, the next projects that could be put out to tender will take longer to obtain financing: more than 14 months for financial closure from the good bid.

Prepared by Daniel Zavala

Prepared by Daniel Zavala

READ ALSO: AFP Retirement 2024: what happens if I do not send my application on the assigned date according to my ID

Experts have estimated that about 30% of what will be withdrawn from AFP funds will go to savings accounts and possible investments. Rimac Seguros foresees a double impact on its business. On the one hand, it calculates that its potential annuity market will be reduced “a bit”, considering that many members would be left without a pension. On the other hand, it is expected to attract clients who opt for investment products with low risk. At another time, Martínez commented that the insurer will continue investing in the country. “Regardless of which sector you are in, we evaluate each issuer based on its credit merit”.

Regarding the dollar, Pablo Arana, researcher at Centrum PUCP, warns that the AFP disbursements, plus the withdrawal of the CTS and the tension in the Middle East, would increase pressure on the exchange rate, so the US currency would remain volatile .

In the pension world, the motto is to always think in the long term, but in the short term there is no certainty that anyone will stop withdrawals. The implicit non-aggression pact between the legislature and the Government opens the possibility of a new disbursement. “The AFPs will have until 2026 to manage their portfolios more calmly before a new exit is considered before the elections“Arana maintains.

At the end of April, the annualized nominal profitability of the AFPs It was below 6.3% (fund 1 reached 15% at the end of 2023). According to AFP Integra, this year’s performance “could be more limited due to withdrawals”.

ABOUT THE AUTHOR
Ani Lu Torres

Coordinator in the magazine G de Gestión and member of the economics and business podcast ‘Actualidad Latinoamericana’. She writes about management, agriculture, technology and entrepreneurship. Bachelor in Journalism from the Antonio Ruiz de Montoya University. She is an active participant in courses at the Knight Center for Journalism in the Americas.

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