Risk of flooding

"This will only tend to grow," wrote journalist Kike Mujica on his social media regarding the debate over the negative returns of AFP's Fund E. He was right, but the complicated part is not that the debate is growing, because in practice that has already happened. Resorting to the climate language so fashionable in this wintry October, the real risk is that it overflows. And it begins to overflow when the press confuses a loss of returns with a drop in the pension amount. Or when photographs of the managers are published under the headline "the faces of the fiasco," while another website "reveals" the executives' salaries even though it is public information. The torrent keeps growing when a third outlet announces that the AFPs do not want to answer whether they will or will not fire their executives, and it gains strength thanks to a "denunciation" because the son of the head of the industry association works on a fee basis at Segegob. In short, a topic as complex as the one discussed overflows when it moves from technical discussion to the political arena, although it was evident that this would happen for two reasons: 1) Because politicians smelled controversy, and of the kind that attracts the most attention: potential impact on people's savings, controversial decisions by top Sanhattan executives and, the icing on the cake, with the AFPs and the individual capitalization model as protagonists; 2) Because La Moneda took a couple of weeks to weigh the impact of the news and, once it reacted, added fuel to the fire, going directly from the superintendent's initial "concern" to the pecuniary responsibility of the directors. Now special sessions in Congress and investigative committees are being announced which, in cases involving private companies, often exceed the oversight limits of deputies. But they will move forward because, as they warn, there is consternation, and even "dismay," as one parliamentarian stated. Meanwhile, the FA is rushing to call for a reform of the commission system, as if it had anything to do with the problem that affected Fund E. Is it not the case that all this mess should be investigated? Of course it should, and that is exactly what is happening. As an apt press headline pointed out this week: "the institutions are working." And it is not being investigated whether someone took the money home, as has happened in other countries, but rather the fulfillment of the duty of care by those responsible for administering contributors' mandatory savings. To be more direct, we are not here in Cristina's Argentina, when savers' funds were expropriated and used to finance a fiscal deficit that kept growing, and there were no one held responsible nor compensation for those affected. And if we are going to look for those responsible, it is not enough to point only at the executives of the fund managers. Because events occur in a context and, in this case, it begins with the famous pension fund withdrawals that caused so much joy among parliamentarians. So they cannot play dumb either. Among other consequences, the withdrawals forced the AFPs to reconfigure and rebuild their investment portfolios, seeking—in the case of Fund E—long-term instruments that, due to the destruction of the local capital market, were found mostly outside the border. They opted for instruments that were duly approved by the regulator and "speculated," as some claim in an alarmed tone, with the interest rates of assets as solid as United States Treasury bonds, in an environment where quite a few anticipated a decline and not a rise as abrupt as what ultimately occurred. It is true that they proceeded and insisted on their endeavor (and everything indicates more than they should have) with derivatives to keep matching the duration of the more conservative funds. Or that is what they intended. By the way, speculating is nothing more—according to the RAE—than "carrying out commercial or financial operations in the hope of obtaining benefits by taking advantage of price variations," while profiting is "to gain, to take advantage of a business," and both things are precisely what we contributors expect from the fund managers in exchange for our fees. The debate will go from overflow to flood when some clever soul once again calls into question the existence of the individual contribution system and, in that ring, the fund managers will enter weakened. The reputational blow is strong and scratches their paint at a time when they were trying to agree with the regulator on the best conditions for what is coming: the generational funds and so many other changes stemming from the Pension Reform. We already commented on this in this column last Sunday: those generational funds are mandatory, so we contributors will not even have the possibility of moving our savings when we perceive that, rightly or not, the AFP is insisting on an instrument despite the warnings. NEWSLETTEROpinionSaturday, AMTense ideas, opposing views and a clear analysis: elements to unravel the issues that divide opinions and will set the agenda. By subscribing you are accepting the Terms and Conditions and Privacy Policies of La Tercera.