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Mexico Seeks Calpers-Style Investment From its Pension Funds

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Mexico Seeks Calpers-Style Investment From its Pension Funds

(Bloomberg) -- Mexico wants its $266 billion pension industry to invest more in public works projects to diversify risk and provide long-term returns, Finance Minister Arturo Herrera said.

Local funds can learn from foreign money managers such as the California Public Employees’ Retirement System, or Calpers, which have put money into infrastructure projects, Herrera said in an interview.

The government also wants fund managers to be rewarded for performance, and not just for holding Mexican workers’ savings, the minister said Wednesday, after the government presented an ambitious overhaul of the country’s saving system.

“We expect fund managers to get more and more professional,” and able to do risk analysis and long-term investments, Herrera said from the National Palace in Mexico City.

The funds need oversight to ensure that the investments are sensible, he added. As well as Calpers, Herrera also cited Canada’s Caisse de Depot et Placement du Quebec as an example of a pension fund that has successfully invested in infrastructure, including ports, airports, wind farms, highways and energy distribution.

Read More: AMLO Plans to Overhaul Mexico’s $266 Billion Pension System

The plan presented by Mexican President Andres Manuel Lopez Obrador together with business, union and congressional leaders seeks to have companies pay more toward employee retirement funds. The bill, which will be debated in congress soon, would focus on boosting pensions for low-income workers and increasing them for employees overall by 40%.

The reform would be fiscally neutral for Mexico because the government will transfer resources currently going to the pensions of higher-paid employees to finance an increase for lower-income workers, Herrera said during the interview. For companies, the increase in pension costs will amount to 90 billion pesos ($4 billion) once the transition is completed in eight years, he said.

Herrera defended Lopez Obrador’s decision not to raise more debt than congress authorized for 2020 to help companies and workers face an economic contraction that is forecast to be the deepest since 1932. Mexico can’t afford the kind of stimulus that advanced nations are carrying out, he said. If it were to replicate what Canada is doing, it would cost the nation 300 billion pesos in interest payments per year.

“That’s the equivalent of the cost of all of our social programs,” he said. “We would have to cancel them.”

(Updates with comments on raising debt in eighth paragraph.)

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(Bloomberg) — Mexico wants its $266 billion pension industry to invest more in public works projects to diversify risk and provide long-term returns, Finance Minister Arturo Herrera said.

Local funds can learn from foreign money managers such as the California Public Employees’ Retirement System, or Calpers, which have put money into infrastructure projects, Herrera said in an interview.

The government also wants fund managers to be rewarded for performance, and not just for holding Mexican workers’ savings, the minister said Wednesday, after the government presented an ambitious overhaul of the country’s saving system.

“We expect fund managers to get more and more professional,” and able to do risk analysis and long-term investments, Herrera said from the National Palace in Mexico City.

The funds need oversight to ensure that the investments are sensible, he added. As well as Calpers, Herrera also cited Canada’s Caisse de Depot et Placement du Quebec as an example of a pension fund that has successfully invested in infrastructure, including ports, airports, wind farms, highways and energy distribution.

Read More: AMLO Plans to Overhaul Mexico’s $266 Billion Pension System

The plan presented by Mexican President Andres Manuel Lopez Obrador together with business, union and congressional leaders seeks to have companies pay more toward employee retirement funds. The bill, which will be debated in congress soon, would focus on boosting pensions for low-income workers and increasing them for employees overall by 40%.

The reform would be fiscally neutral for Mexico because the government will transfer resources currently going to the pensions of higher-paid employees to finance an increase for lower-income workers, Herrera said during the interview. For companies, the increase in pension costs will amount to 90 billion pesos ($4 billion) once the transition is completed in eight years, he said.

Herrera defended Lopez Obrador’s decision not to raise more debt than congress authorized for 2020 to help companies and workers face an economic contraction that is forecast to be the deepest since 1932. Mexico can’t afford the kind of stimulus that advanced nations are carrying out, he said. If it were to replicate what Canada is doing, it would cost the nation 300 billion pesos in interest payments per year.

“That’s the equivalent of the cost of all of our social programs,” he said. “We would have to cancel them.”

(Updates with comments on raising debt in eighth paragraph.)

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting. In the meantime, we welcome your feedback to help us enhance the experience.