Worker Retirement Funds Can Now Be Invested in Mexican, Overseas Stock Markets
The government's plan to allow a portion of worker retirement funds to be invested in Mexican and global stock markets took effect with little fanfare in mid-January.
Under the plan, private retirement-fund administrators (Administradora de Fondos del Retiro, AFOREs) will be allowed to invest as much as 15% of their portfolios in domestic and international stocks. At current portfolio levels, this would be about 65 billion pesos (US$5.7 billion).
The new plan applies to 15 AFOREs, which currently manage about 33 million accounts. The number of fund administrators has dwindled from the original 18 that were awarded permits when the program was first created in 1997 (see SourceMex, 1997-02-05 and 1997-09-24). The majority of these pension-fund managers are affiliated with banks or investment firms.
Under new rules enacted by the retirement-savings regulator (Comision Nacional del Sistema de Ahorro para el Retiro, CONSAR) this year, each administrator will now be allowed to operate two separate funds (sociedad de inversion especializada de fondos para el retiro, SIEFOREs), as opposed to a single fund allowed previously.
The program creates SIEFORE 2, through which administrators can invest as much as 15% of worker funds in the Bolsa Mexicana de Valores (BMV) and in international stock markets. The rest of the investments allowed will be similar to those in SIEFORE 1, which directs funds to basic instruments such as municipal and state bonds and as much as 20% in principal-protected international securities.
AFOREs have invested 80 billion pesos (US$7.1 billion) of retirement funds in government projects such as a new terminal for the Mexico City international airport and a highway from Mexico City to Toluca in Mexico state, said CONSAR.
CONSAR president Mario Gabriel Budebo said the workers who opt to invest in SIEFORE 2 can increase their retirement earnings by as much as one percentage point per year. He noted that the stock-market investments offer other benefits to Mexican workers, such as a share in profitable companies. "This means that workers now have the possibility of becoming owners, even in a small way, of the largest, most solid enterprises in our country and in developed nations and to enjoy the accompanying profits and dividends," said Budebo.
New plan said to give workers more options
Financial experts generally approved the changes because of the benefits they will provide to workers. "We must remember that workers initially could invest only in funds comprising domestic financial instruments such as debt and government bonds," said Alejandro Villagomez, a financial columnist for the Mexico City daily newspaper El Universal. "With the approval of new investment vehicles, we have taken another step toward diversification."
Syndicated columnist Sergio Sarmiento said the Mexican economy would benefit from the expansion of the program. "There will be a greater availability of resources for investment," said Sarmiento.
"One of our country's most serious problems has been the absence of a stock market that is solid and ample," Sarmiento added. "This has limited financing options for the private sector."
Critics have raised concerns that investing retirement funds in the stock market could be risky for workers, especially in the event of an economic crisis similar to the one that followed the 1994 peso devaluation. …