Progress is being made for the approval of a bill to authorize the use of 40% of the Pension and Retirement Funds of the Magisterium, equivalent to $1,492 million, to finance public works projects.
From a statement issued by the Board of Pensions of the National Magisterium:
Unanimously, the Committee on Financial Affairs at the Legislative Assembly approved the project to expand the scope of investment fund for the Collective Capitalization Regime (RCC) administered by the Pension Board.
While essential infrastructure projects lack funding, the capital accumulated in pension funds only serves as a source of funding for state coffers.
In a country where the need for funds for projects that promote economic development is increasing, the resources managed by pension operators have to be invested in obsolete investment schemes, ensuring only low returns for contributors.
INJUPEMP of Honduras plans to invest in building the Patuca III Hydroelectric Project.
This was announced in a statement put out by the institution. Patuca III is being constructed in the department of Olancho and will generate 104 MW of energy.
Andres Torres, executive director of INJUPEMP, is currently holding talks with officials from the National Electricity Company (ENEE) with whom he will define the issues of investment in energy projects.
The proposal is to use national domestic savings to finance long-term profitable infrastructure projects such as hydroelectric stations.
Laprensa.hn reports that "energy projects, such as hydroelectric plants, have become an alternative to generate returns on the savings managed by pension institutes, according to a recent study by the National Banking and Insurance Comission (CNBS)."
Up until June this year, statutory and complementary pensions amounted to $3.71 billion, surpassing basic pension regimes which had $3.61 billion.
The profits that this system has accrued are due to the fact that the investments of the administered fund had returns of around 20% between June 2012 and December 2013. In this way this system became the largest in terms of the amount of resources.
Costa Rica still faces obstacles to implement this mechanism, regarded as the best alternative for funding public works.
Public works securitization is once again being discussed, as the upcoming Tourism Minister stated it will be used to fund a new National Conventions Center.
The procedure to do this for the Conventions Center was already started and even approved by the Comptroller, but it hit a wall against the securities authority (Sugeval). Sugeval did not authorize this mechanism for raising capital, arguing there are risks when investing in securities which depend on cash flows generated by future real estate.
The Government of Costa Rica is putting emphasis on social spending and investment in public works as measures to deal with the contraction of the economy.
Labor flexibility, expansion of unemployment benefits, adjustment of rates for credit at state banks, the reduction of work hours, increase in pension benefits, are some of the measures announced in the "Plan Escudo" (Shield Plan).