Mexico Pensions May Need Higher Caps to Invest Abroad: Regulator

Mexico should consider lifting caps on how much pensions can invest abroad as the funds’ resources may double in the next six years, outpacing the growth of the local financial market, according to the industry’s regulator.

Mexico pensions, known as Afores, are currently allowed to invest only 20 percent of their resources under management in non-Mexican securities, Carlos Ramirez, head of the agency known as Consar, said in an interview yesterday. The industry currently has $154 billion in assets, Consar data show.

“We have to consider that we need to diversify the resources,” Ramirez said in an interview at Bloomberg’s Mexico City office. “Not only in the type of instruments, but also in terms of the country.”

Regulators have been pushing the funds, which have historically invested primarily in Mexican government bonds, to diversify holdings. Ramirez, who was appointed to head Consar in January, said lawmakers are unlikely to make changes that would lift caps in the near-term.

The system’s growth makes the current limits appear insufficient and requires greater efforts to ensure that pension fund asset managers are qualified, he said.

“One of the first things we are going to do is focus on that -- how professional are the asset managers managing this money,” he said.

Ramirez said the low percentage of workers’ salaries that are deposited in their pensions represent “significant structural problem of the system.”

It’s “probable” Mexico will see more mergers in the industry, he said.

In November, Grupo Financiero Banorte SAB and Mexico’s Social Security Institute, known as IMSS, announced they had agreed to buy Banco Bilbao Vizcaya Argentaria SA’s Afore Bancomer unit for $1.6 billion to create the nation’s largest pension fund. Consar said in a statement yesterday that merger will go into effect on March 11.