BOGOTA, Feb 25 - Colombia's government has circulated a draft decree from the labor ministry that would require the transfer of 25 trillion pesos, equivalent to about $6.75 billion, from private pension managers into the state-run pension administrator Colpensiones.
The proposal, published late on Tuesday, specifies that Pension Fund Administrators (AFPs) must move specified individual savings account balances to Colpensiones within 15 days of the decree's issuance. The accounts identified for transfer belong to individuals who opted to switch into the public system during a transition window created by a 2024 pension reform that is currently under review by the constitutional court.
The draft decree comes in the wake of a separate Finance Ministry proposal aimed at reducing the proportion of pension assets invested abroad. That earlier plan could require pension funds to repatriate as much as $30 billion in assets held overseas, according to the draft proposal.
Analysts have warned that, taken together, these measures could prompt AFPs to raise their holdings of domestic government bonds. Such a shift in asset allocation would occur as the administration contends with a large fiscal deficit, creating pressure on the country’s borrowing dynamics and domestic debt markets.
The draft decree's 15-day compliance window and its focus on accounts of those who transitioned during the reform's implementation period are central operative details. The 2024 reform and its transitional arrangements remain subject to scrutiny by the constitutional court, a review that bears directly on the legal underpinnings of any forced transfers.
Currency conversion noted in the draft places the peso-dollar rate at $1 = 3,703.28 pesos, which is used to express the peso-denominated transfer in U.S. dollar terms.
As the two proposals - the labor ministry's transfer decree and the Finance Ministry's limit on overseas investments - advance through consultative and legal processes, their potential effects on pension fund portfolios and the domestic government bond market will be focal points for market participants and policymakers.
Summary: A labor ministry draft decree would move 25 trillion pesos from private pension funds to Colpensiones within 15 days for accounts of individuals who switched into the public system during a 2024 reform transition now before the constitutional court. The draft follows a Finance Ministry plan to curb overseas pension investments that could force up to $30 billion in repatriation, and analysts say the combined measures may lead AFPs to increase holdings of domestic government bonds amid a large fiscal deficit.