Consar Lifts the Lid

Sep 1, 2004

The government is gradually relaxing its strict controls on Mexico's Afores. This promises to unleash a radical shake up in a fast-growing industry.

Pensions regulator Consar announced in May that Mexico's private pension funds, known as Afores, will be allowed to set up "families of funds" offering contributors funds with a choice of two risk profiles - conservative or aggressive. This is a radical step in an industry that can only buy government bonds and highly rated investment-grade corporate paper. Aggressive funds will be allowed to invest in foreign and Mexican equities and dabble in derivatives, an even more radical advance. Investors aged 56 or above will be limited to the conservative portfolio, which will hold only debt. But even here Consar has relaxed its grip by allowing these funds to hold both Mexican and foreign debt.

Paying into an Afore is compulsory for all formally employed Mexicans, who can choose among 12 registered fund managers. Funds under management are growing at a remarkable rate. The Afores' aggregate portfolio grew 26% in...

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