AFP Cuprum takeover comes under fire
The acquisition of Chilean pension fund manager AFP Cuprum, a subsidiary of US-based Principal Financial Group, by AFP Argentum has come in for criticism from the labor ministry because of a tax issue.
"I address you in order to express my reservations about the process to constitute AFP Argentum and its merger with AFP Cuprum, and the role played by the regulator in it," said labor minister Ximena Rincón in a memo to pensions watchdog head Tamara Agnic.
Rincón described the transaction as "at the very least irregular and not in line with legal standards or the duty to protect the interests of the affiliates."
The minister added: "Because of the objections previously detailed, I ask you to refrain from authorizing similar transactions."
AFP Provida, a subsidiary of US-based insurer Metlife, is in the process of merging with the recently created AFP Acquisition.
Chile's congress has launched a probe into the Cuprum-Argentum merger.
The deal, cleared by the pension regulators, was carried out in accordance with an older tax law, which allowed for the use of goodwill to reduce the taxable base. That changed with the new tax law, in effect since January.
The use of goodwill would allow AFP Cuprum to reduce its taxes by approximately US$129mn, and AFP Provida by US$288mn, according to local paper Pulso.
Pictured: Ximena Rincón, Chile's labor minister (CREDIT: AFP).
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