The Peruvian government is looking at ways to reform the country’s pension system, only months after it enacted new laws impacting retirement plans.
Speaking at LatinFinance’s Andean Finance and Investment Forum in Lima, Economy and Finance Minister Alfredo Thorne said the government will soon announce a commission tasked with studying ways to make changes to the system.
“As we move forward, it is becoming more and more apparent we have to overhaul the whole system,” Thorne said. “And we want to generate as maximum a consensus as possible.”
Lawmakers have recently passed two pension reform laws. The first one in December allowed Peruvians to withdraw 95.5% from the country’s private pension system upon retirement. A second law, passed in June, allowed Peruvians to withdraw 25% to use toward a mortgage or repay an existing home loan.
At the time, the central bank said PEN15bn ($4.38bn) could be withdrawn from pension funds through mid-June 2017.
Thorne said the government aimed to staff the commission with technicians and politicians. Any formal announcement of the group would come after Congress votes on a request from President Pedro Pablo Kuczynski for legislative powers that would enable the government to rule by decree for 120 days on several key economic issues.
Under Peru’s current pension system, only 2.5m workers participate in the pension system out of a labor force of around 16m, Thorne said.
“Unless we solve the issue, it is very difficult to think we will have a credible pension system,” he added. “We need to close the system with some help from the government and the private sector.”
Peru’s neighbor Chile has faced backlash over its own pension system of late. Protests flared last month against Chile’s private pension system.
“Some of things I see in the Chilean system are positive, but some of them are not positive,” Thorne said. “If we are going to design a system for the next 20 years, we better get it right.”
Implementing a tax amnesty program
In a bid to spur domestic investment, Peru may emulate Chile’s tax amnesty program, Thorne added. President
Pedro Pablo Kuczynski recently asked Congress to grant legislative powers that,
if approved, would allow the government to rule by decree for 120 days on some
economic issues.
The plan
would allow the government to lower taxes and expedite infrastructure
investment among other measures. Among the proposals is a possible amnesty for
Peruvian holders of undeclared offshore assets.
Countries
across the region, including Argentina, Brazil and Chile, have launched similar
programs, hoping to either narrow budget deficits or stimulate investment.
Thorne
said the government would look to replicate Chile’s tax amnesty program, which
last year captured $1.5bn, about 10 times the amount originally forecast.
“What
we have in mind is very similar to what Chile did,” Thorne said.
It
is not clear when Congress could vote on the legislative powers package.LF
LatinFinance’s deputy editor Kevin Gray reporting from Lima.