Peru's Humala caught in uproar over pension funds

Tue Apr 19, 2011 3:00pm EDT

Related Topics

* Humala's official plan calls for state-run pensions

* Candidate backtracks

* Finance minister says studying ways to protect funds

LIMA, April 19 (Reuters) - Left-wing presidential candidate Ollanta Humala vowed on Tuesday to leave Peru's $30 billion in pension funds in private hands, even though his campaign platform calls for replacing them with a government-run system.

It was the second move in as many days by Humala that aimed to appease investors.

Humala, a former army officer who won the first-round vote on April 10 with almost 32 percent of the vote, faces a June 5 run-off against right-wing lawmaker Keiko Fujimori that is expected to be tight. He has adopted an increasingly moderate tone as he campaigns.

Critics have said Humala's official pension plan could jeopardize a key pillar of the country's market-based growth model in one of the world's fastest-growing economies.

The privately run funds, known as AFPs, are the biggest investors in Peru's stock market and, to a lesser extent, in housing construction and infrastructure. They also buy government bonds.

Humala's plan would establish a public pension system to which all classes of workers would be required to contribute based on income.

It would also guarantee a minimum pension to all individuals over 65, mainly to ensure workers who toiled in the vast informal sector have a basic safety net.

The plan says any future contributions to the private pension system, which was set up in the 1990s, would be optional and only complement the public system. Workers in all sectors, even public-sector workers, contribute to the privately run system.

"We guarantee that we won't touch the AFPs," Humala said on Tuesday, referring to workers' savings that are in funds managed by private banks. "We want to give confidence to the Peruvian people."

FINANCE MINISTER STUDIES SAFEGUARDS

Finance Minister Ismael Benavides said he was studying ways to safeguard private pension funds from any legal changes carried out by the next government.

"We're not trying to protect the profits of pension fund companies, but rather the savings of the Peruvian people," Benavides said in the latest sign the outgoing government does not fully trust Humala's pledge to manage the economy prudently, the newspaper Gestion reported.

Humala on Monday added experienced technocrats to his campaign team, leading analysts to say he might revise his official campaign platform. [ID:nN1821532]

Humala won the first-round vote by promising to better distribute the fruits of a decade-long economic boom in a country that still has a poverty rate of around 35 percent.

Investors have sold assets in Peru's stock market .IGRA and the local sol currency PEN=PE since the election. (Reporting by Caroline Stauffer and Marco Aquino)

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