Chile's government has delayed sending a bill to create a state-run pension fund manager (AFP) until March next year, local newspaper El Mercurio reported quoting government spokesperson José Antonio Viera-Gallo as saying.
Throughout 2008 the government had been planning to send such a bill to congress but nothing came of it as the Michelle Bachelet administration was torn between creating the AFP through state-owned bank BancoEstado or via state development agency Corfo.
The government's decision not to prioritize the creation of a state-sponsored AFP may have suffered from the recent resignation of one of its main sponsors, labor minister Osvaldo Andrade, a local political analyst told BNamericas.
Andrade resigned last week to pursue a seat in congress.
Viera-Gallo confirmed the creation of a state AFP stopped being a priority for the current administration, which is now focusing on strengthening the country's unemployment insurance, among other measures, to contain the backlash of a global recession.
Andrade's exit could also pave the way for finance minister Andrés Velasco's proposal to form the AFP using BancoEstado's platform, the source said.
The new player would aim to compete by offering lower commissions and higher fund profitability as today's private sector AFPs cash in about one third of their affiliates' contributions in terms of commissions and profits.
When approving a pension reform bill in January, the senate rejected the idea of letting banks offer mandatory pension plans to the public. The government then said it would send a separate bill with the aim of creating a state-run AFP, but it would have to change banking regulations to do so.
Today, the private sector AFPs are the only companies allowed to offer mandatory pension plans to the public but several are controlled by international financial groups such as Spain's BBVA (NYSE: BBV), Citi (NYSE: C) and Dutch group ING (NYSE: ING), and run them separately from their local banking units.
Chile's mandatory contribution pension system was created in 1981 to replace the bankrupt pay-as-you-go social security scheme.
