Peru: Pension fund withdrawal

PERU - In Brief 07 Mar 2024 by Alfredo Thorne

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The risk of a new pension fund withdrawal has increased recently, although we believe that the probability remains at 40%. Congress-member Jose Luna Galvez, owner of the Telesup University and Podemos political party, which has strong influence on Congress's Consumer Defense Commission, is pressing for another pension fund withdrawal. He is pushing for the bill to be discussed in Congress's plenary next week, probably on Wednesday.  It not apparent what his real intention is, and he may be trying to distract public opinion. He is facing several investigations, and the Judiciary has recently requested that he be stripped from his properties. There are several bills sitting in this commission proposing a withdrawal, including one that calls for 100% withdrawal, although that would be illegal. However, Congress's legislation mandates that the withdrawal must be initiated in the Economic Commission, and the votes are tied 11 to 11. The commission president, Cesar Revilla, is pressing for a pension reform, which includes a 4 Unidades Impositivas Tributarias (UIT, inflation indexed units, each amounting to PEN5,150) cash withdrawal.  However, our understanding is that Minster of Economy and Finance, José Arista, has the upper hand. There is strong pressure to approve a new pension reform, but the current one was drafted by the previous minister, Alex Contreras. The Economic Commission is expecting Arista to decide which pension reform he would favor. Most likely he will meet with the head of the Economic Commission this weekend and request time to review the pension reform proposal.  On the negative side, however, is the pressure to approve the cash withdrawal. If Revilla fa...