Uruguay Bankers’ Pension Fund to Sell Local Bonds in Rescue Plan

The pension fund serving Uruguay’s financial industry workers is set to sell as much as $400 million in local currency bonds as part of a rescue plan for the deficit-plagued institution.

(Bloomberg) — The pension fund serving Uruguay’s financial industry workers is set to sell as much as $400 million in local currency bonds as part of a rescue plan for the deficit-plagued institution.

Financial firms and labor union AEBU agreed to a plan that would see the fund raise about $1.15 billion through peso bonds and employer and employee contributions to cover a deficit of about $900 million through 2035, said Barbara Mainzer, executive director at ABPU, the trade group representing private sector banks. The government-backed plan is still pending congressional approval, which it’s widely expected to get. 

“The additional financing provides a certain degree of margin in case deficits are bigger. It also assures repayment of the bonds so the government guarantee doesn’t become financial aid,” Mainzer said in a telephone interview. 

Read more: Uruguay Quietly Raises Pension Age in Contrast to Angry French

President Luis Lacalle Pou’s administration is trying to fix swelling deficits at private pension funds serving bankers and white-collar professionals after his ruling coalition approved a sweeping overhaul of the country’s retirement system earlier this year. However, unions have said they will gather signatures to overturn key aspects of that reform in a plebiscite during general elections in October 2024. 

The bankers’ pension fund, known by its Spanish acronym CJPB, faces a $300 million deficit this year through 2025, according to a report drafted by AEBU. It’s now up to the government to send the rescue package, which union members approved in a general assembly Tuesday, in a bill to Congress. 

“The fund shouldn’t have problems for at least the next 15 years” with this plan, AEBU chairman Elbio Monegal said. “But we’ll have to keep an eye on employment and how the financial sector performs.” 

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