A $30 Billion Pension Battle Risks Exodus at Colombian Regulator
(Bloomberg) — Colombia’s financial regulator is in disarray after dozens of officials were asked to resign amid a dispute over whether pension funds should be forced to repatriate tens of billions of dollars from abroad.
About 30 officials in the Finance Ministry’s Regulatory Unit were asked to resign on Wednesday, according to a person with direct knowledge of the decision who asked not to be named because details have not been made public. The head of the unit, Mónica Higuera, resigned last week.
President Gustavo Petro has repeatedly criticized Colombian pension funds for investing nearly half of their $140 billion in assets abroad rather than in the domestic economy. Earlier this year, the body was asked to green light a regulatory change that would force the repatriation of about 125 trillion pesos ($33 billion) of funds invested abroad.
The plan, submitted by the country’s financial watchdog Superintendencia Financiera, initially proposed a five-year timeline for repatriating assets. The person said Finance Minister German Ávila was pushing for this change to happen in just six months.
The Financial Regulatory Authority warned that inflows of this size could pose market, liquidity and counterparty credit risks. It could also raise concerns about breaches of contractual agreements with private equity funds and negatively impact retirement savers’ investment returns, the person said.
Despite this, the relevant person said that the government wants the work on the regulation to continue.
Larisa Caruso, Avila’s former adviser at the finance ministry, was appointed acting head of the unit after Higuera’s departure.
Caracol Radio first reported that the officials were asked to resign.
The Finance Ministry’s press offices and financial regulatory unit did not respond to requests for comment on the advisers being asked to submit their resignations.
The board, which examines and approves the regulations regarding the financial system, consists of representatives of the Ministry of Finance and the financial observer.
Some investors have warned that bringing back tens of billions of dollars in a short period of time could disrupt Colombia’s financial markets by creating artificial demand for local government peso bonds, or TES, and its currency. Private pension funds, including Grupo Aval’s Porvenir and SURA Asset Management’s Protección, are the biggest players in this $186 billion market, owning about 30% of outstanding TES.
Asofondos, the association representing private pension funds, argues that workers will ultimately bear the cost, losing some of the benefits of diversification in their investments.
It is not yet clear whether the government will proceed with the proposed regulation.
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