LIMA, April 4 (Reuters) - Peruvian lawmakers have approved a law that allows citizens to withdraw up to 25% of their holdings in private pension funds to provide an extra source of liquidity during a nationwide shutdown to halt the spread of the coronavirus.
The law, passed late on Friday night, was proposed by a multiparty grouping in Peru’s fractured congress and approved by 107 votes to four.
It was opposed by President Martin Vizcarra’s government which has warned it risks “skewing” the economy and pushing up borrowing costs. It will raise concerns among foreign investors who hold around half of Peru’s local currency debt.
If all the funds’ affiliates were to take up the option, it would result in up to 21.5 billion soles ($6.230 billion) being withdrawn from the funds, its proposers said, under a cap for each member of 12,900 soles ($ 3,740).
The law will now pass to Vizcarra to enact or revise it. His government this week passed a law allowing $580 from each fund by affiliates who had not contributed in the last six months but opposition parties said it did not go far enough.
Center-right Vizcarra assumed the presidency two years ago after the resignation of his predecessor over corruption allegations. He has no partisan representation in congress, which was elected in January and made up of a nine parties ranged between left and right.
The broad backing for the fresh pensions law suggests the president will face an uphill battle to win support for his own legislative agenda during little over a year left in office.
Peru’s 20-year-old private pension system is one of the most important sources of investment capital in the Andean country, managing an accumulated equivalent of $49 billion over almost three decades.
A total of 6.6 million affiliates have funds invested primarily in sovereign bonds, stocks, time deposits, and fixed income assets.
Vizcarra has promised to reform the system, accusing companies in the sector of “abusive” behavior. He said at a press conference on Thursday that Peruvians should not risk “jeopardizing” the government’s economic stimulus package worth 12% of GDP with measures that could “generate some kind of distortion.”
Economists say the world’s second largest copper producer, a $220-billion economy, is headed for its first annual contraction in over two decades as the impact of the coronavirus forced miners to slow or suspend operations and commerce in the country has been shut down by strict controls on movement. nL4N2BI4HZ
Peru now has 1,595 confirmed cases of coronavirus and 61 deaths, the health ministry said. (Reporting by Marco Aquino; writing by Aislinn Laing Editing by Alistair Bell)
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