At a glance: How Uruguay’s AFAPs performed in July

All four of Uruguay’s private pension fund managers, or AFAPs as they are known, saw returns grow in the 12 months through July.

Estimated net real returns for the period averaged 4.60% (in UR, which is indexed to salaries). This is up from 4.10% in the 12 months through June.

The increase mirrors growth reported in Chile’s private pension system following a weak 2018 impacted by market turbulence.

Uruguay’s best performer was AFAP Sura, a unit of Colombian financial services giant Grupo Sura.

The biggest player by contributors is state-run República AFAP which, at the end of July, accounted for 566,854 out of the system total of 1.43mn. República also had the largest pot of assets under management at 306bn pesos (US$8.52bn), with AFAP Sura in a distant second with 97.3bn pesos.

Regarding investments, 45.8% corresponded to Uruguayan peso-denominated instruments, followed by local index-linked (33.9%) and foreign currency-denominated instruments (20.3%).

The system itself is mixed: it combines the individually funded, defined-contribution AFAP pillar and a defined-benefit pillar.

Calls have been made to overhaul pension system rules on account of the country’s aging population and the impact that this will have on its old-age dependency ratio and, in turn, government finances. Fiscal strength has been eroding.

On the issue of social security reform, Alejandro Chafuen, managing director, international, at US think-tank Acton Institute, told BNamericas recently that “I have noted a high level of understanding of the need, and of the economic reality, but not much willingness to make changes deeper than what the political system allows. It is possible [however].”

Uruguayans head to the polls in October to choose a new president.

Rating agency Moody’s said in a statement: “Moody's notes that most political forces have identified Uruguay's fiscal weaknesses as one of the most urgent macroeconomic challenges that the next administration, set to take office in March 2020, will face. In that sense, there is broad consensus among political parties that a pension reform has to be pursued by the next government. Additionally, Moody's believes that the next government will likely enact measures to bolster competitiveness and support economic dynamism by supporting investment and labor markets.”

Uruguay’s four AFAPs are regulated by the central bank.

REPÚBLICA AFAP 

Contributors at the end of July: 566,854, according to central bank data.
AUM at the end of July: 305.787bn pesos.
Real gross returns in UR for the 12 months through July: 4.51%.

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AFAP SURA 

Contributors at the end of July: 328,384
AUM at the end of July: 97.253bn pesos
Real gross returns in UR for the 12 months through July: 4.93%.

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UNIÓN CAPITAL AFAP (fully owned by the Uruguayan unit of Brazilian bank Itaú.)

Contributors at the end of July: 307,993
AUM at the end of July: 89.568bn pesos
Real gross returns in UR for the 12 months through July: 4.51%.

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INTEGRACIÓN AFAP (majority owned by the Uruguayan unit of Venezuelan state development bank BANDES.) 

Contributors at the end of July: 231,379
AUM at the end of July: 51.203bn pesos
Real gross returns in UR for the 12 months through July: 4.65%