April 30, 2020 / 5:20 PM / a month ago

Peru's Congress enacts pension fund law in defiance of president

LIMA, April 30 (Reuters) - Peru’s Congress on Thursday enacted a new law allowing people to withdraw up to 25% of their holdings in private pension funds to mitigate the impact of the coronavirus pandemic, snubbing the country’s president who had refused to sign the legislation.

Lawmakers passed the bill earlier this month, but President Martin Vizcarra rejected it as harmful to savings and the economy and refused to sign it into law. On Wednesday, he proposed a reform of the controversial legislation within six months.

“The executive missed the deadline to approve or amend the law,” Manuel Merino, a lawmaker for the centrist Popular Action party and the president of Peru’s fractious Congress, said after signing the bill into law.

Vizcarra, who dissolved the previous Congress last September after a long struggle with the opposition, could have delayed the law’s enactment had he returned the bill requesting amendments, but he opted instead to outright reject it.

The current Congress, which was elected in January, is a mosaic of parties from the left and right with no one holding a majority.

Four private pension fund companies operate in Peru, managing an equivalent of $46 billion, according to data at the end of March. The system was started almost three decades ago, following the Chilean model. nL1N2BS01Z

Mariano Alvarez, general manager of the AFP Habitat pension fund, said the funds would have to liquidate assets of around 30 billion soles ($8.9 billion) to make money available for clients under the new law, hurting retirement savings.

“This is the worst time to sell any type of asset, when there is a world crisis,” he said.

Alvarez also said that selling assets “overnight” was complicated and he hoped that affiliates would withdraw their funds gradually. “This law is clearly increasing country risk,” he added. (Reporting by Marco Aquino Writing by Aislinn Laing Editing by Paul Simao)

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