SBS lowers AFPs' project investment threshold

Bnamericas Published: Tuesday, May 04, 2004
Peruvian banking and insurance regulator SBS put a new norm into effect on Monday (May 3) that will allow pension administrators or AFPs to increase total funds in investment projects, the SBS reported in a statement. Under the new resolution, AFPs will now be able to invest in projects worth over US$20mn, where the former regulations required a minimum of US$50mn in net worth. The AFPs will be able to invest indirectly in projects below US$20mn via investment funds. As a result, the AFPs will be able to invest in different types of projects after submitting these for evaluation and ratings. The AFPs will have to ask a ratings agency to evaluate both the project and its operator, chief technical coordinator for the joint governing of AFP-SBS, Elio Sánchez, told BNamericas. Each project will be evaluated in terms of investment recovery guarantees and trustworthiness. Project operators will be required to present information on their experience, infrastructure, resources, and so on. These qualities will be evaluated in conjunction with each AFP's risk management unit, Sánchez said. Possible project investments include concessions, infrastructure projects, housing projects, natural resources and cultivated forests, as well as other sectors that would require medium- to long-term financing. This push to investing in new projects should stimulate economic growth because currently the private pension system SPP represents 11% of GDP and close to 64% of overall internal savings, Sánchez said. "We believe that with more diversification, better investment opportunities, and increased medium- and long-term profitability associated with these types of projects, we can better [pension] fund profitability," he said. "The affiliates will benefit from the results because by increasing [fund] profitability by just one percentage point, the pension improves between 6% and 21% depending on the number of years you pay into the AFP," he added. SPP's total funds come to US$6.74bn, making the system the biggest institutional investor in the Peruvian economy.

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