Peru’s Congress approved a bill to let workers withdraw as much as 25% of their pension savings to soften the blow of the coronavirus pandemic, casting aside warnings the measure will spook investors and push up borrowing costs.
Lawmakers voted 107-4 in favor of the bill, according to a video broadcast on state television.
The pensions proposal from the newly-installed Congress has shaken the $44 billion private pension industry and dented investor confidence. It comes as the government is pushing a 90 billion-sol ($26 billion) stimulus package to deal with the economic impact from the coronavirus pandemic that’s prompted a nationwide quarantine, killed 61 Peruvians and infected almost 1,600.
A potential fire sale of up to $8.7 billion in stocks and bonds by Peru’s four private pension funds has alarmed foreign investors, who own more than half the country’s local currency debt. The sol and local currency bonds declined this week and analysts are warning that the sell-off is only just beginning.
The legislation now will be sent to President Martin Vizcarra, who has 15 days to veto it, propose amendments or sign it into law. Congress can vote again for its promulgation.