BI ANNUAL REPORT N° 17 INTERNATIONAL FEDERATION OF PENSION FUNDS ADMINISTRATORS FIAP
1 TABLE ON CONTENTS
TABLE OF CONTENTS 2
I.- EXECUTIVE REPORT 3
. Mumber of members 3 . Number of contributors 5 . Managed funds 7 . Portfolio composition 9 . Pension funds yield 13 . Sales force 14 . Commissions 16
II.- PARTICIPATING PENSION FUNDS ADMINISTRATORS, BY COUNTRY 18
2 EXECUTIVE REPORT – DECEMBER 2004
NUMBER OF MEMBERS AS OF 12.31.2004 AND 12.31.2003
Latin America Starting Membership Membership Var.% Countries Year 12.31.2004 % 12.31.2003 % 2004-2003 Obligatory System: Argentina 1994 10.008.255 15,5 9.462.997 15,5 5,8 Bolivia 1997 893.848 1,4 841.657 1,4 6,2 Colombia 1994 5.747.396 8,9 5.213.023 8,5 10,3 Costa Rica (1) 2000 1.230.453 1,9 1.230.453 2,0 0,0 Chile 1981 7.080.646 10,9 6.979.351 11,4 1,5 El Salvador 1998 1.166.602 1,8 1.074.493 1,8 8,6 México 1997 33.316.492 51,5 31.398.282 51,4 6,1 Panamá (2) 1997 200.952 0,3 206.000 0,3 -2,5 Perú 1993 3.397.047 5,2 3.192.503 5,2 6,4 Dominican Rep. 2003 1.033.349 1,6 831.456 1,4 24,3 Uruguay 1995 659.770 1,0 635.888 1,0 3,8 TOTAL 64.734.810 100,00 61.066.103 100,00 6,0
Voluntary System: Brasil (3) 7.519.910 98,0 7.134.349 98,1 5,4 Ecuador 139.895 0,2 125.938 0,2 11,1 Honduras 13.822 0,2 11.185 0,2 23,6 TOTAL 7.673.627 100,00 7.271.472 100,00 5,5
European and Asian Countries Obligatory System: Bulgaria 2002 2.004.776 10,3 1.613.875 8,4 24,2 Kazajstán (4) 1998 6.164.316 31,6 6.164.316 32,0 0,0 Poland 1999 11.361.595 58,2 11.463.193 59,6 -0,9 TOTAL 19.530.687 100,00 19.241.384 100,00 1,5
Voluntary System: Spain 8.593.503 61,6 7.346.929 57,9 17,0 Russian Federation (4) 5.318.000 38,1 5.318.000 41,9 0,0 Ukraine 28.485 0,2 25.437 0,2 12,0 TOTAL 13.939.988 100,00 12.690.366 100,00 9,8
TOTAL FIAP 105.879.112 100.269.325 5,6
(1) Data as of 12.31.2003 (2) Data as of 06.30.2004 and 12.31.2003 (3) Anapp data as of 06.30.2004 and 06.30.2003 (4) Data of 12.31.2003
3 During the period analysed (December 2003 – December 2004), the number of enrolled workers belonging to FIAP’s member countries grew by 5,6%, from 100.269.325 in December 2003 to 105.879.112 in December 2004.
Latin America countries As of December 2004, those Latin American countries with mandatory pension systems presented an increase of 6% compared with the same date the year before, rising from 61,066,103 enrolled workers in December 2003 to 64,734,810 in December 2004.
In this group, the countries showing the largest increases were the Dominican Republic (24.3%) and Colombia (10.3%).
In the Dominican Republic, the considerable increase in the number of members is mainly due to the fact that the mandatory pension system has been running for only a short time. It began the collection process in July 2003, so the analysis for the previous financial year was based on statistics for 6 months. In 2004 the system has been fully operational and presents statistics for 12 months. In the case of Colombia, the linear increase in membership is due to the natural behaviour of population growth and insertion of new manpower.
In this group too, including El Salvador (8.6%), Mexico (6.1%) Peru (6.4%) and Uruguay (3.8%), the increase in the number of members is fairly similar to that observed in the previous period (between December 2002 and December 2003), while the increases observed in Bolivia (6.2%) and Chile (1.5%) are lower than those in the previous period. This may be due to the unemployment rates existing in both countries in December 2004 (8.7% and 9.2%, respectively) compared with those observed in December 2003 (8.5% and 8.8%, respectively).
Finally, in the case of Argentina (5.8%), the increase in the number of enrolled workers was slightly higher than in the previous period. This was due mainly to the fact that the number of undecided members who were distributed between the AFJPs with lower commissions and workers who changed to the individual capitalization scheme was substantially greater than the decrease in the number of members due to the updating of the register and new retirements.
In the case of Latin American countries with voluntary systems, there has been an increase of 5.5% in the number of members. In the case of Honduras, the information corresponds to only one of the AFPs in the market, showing an increase of 23.6% in the number of members, a lower variation than in the previous period, in which AFP Atlántida acquired 10% of the Horizontes Pension Fund. In Brazil (5.4%), though there was an increase in the number of members, this was lower than that recorded in the previous period. It is worth emphasizing that the information for this country contains data for ANAPP as of June 2003 and June 2004. The data does not therefore reflect the true variation because it is not comparable with the period being analysed.
4 In Ecuador (11.1%) it has to be remembered that these are voluntary pension funds, so there is considerable variability in the number of members, depending mainly on the country’s economic conditions.
European and Asian Countries The countries in Europe and Asia that have mandatory systems show an increase of 1.5% in the number of members. In this group, Bulgaria shows the largest increase (24.2%), due to the fact that the Universal Pension Funds began their enrolment process in the year 2002. This percentage, though high, has been falling gradually from the start of the enrolment process to the present, while Poland (-0.9%) has shown a decrease in members compared with the previous period, due to some people being removed from the roll by the Social Security Institute: in the early days of the system, these people had enrolled in two or more different administrators, which is illegal, and some of them were not entitled to enrol in any of them, so there were many “dead accounts” – money that was never paid into the funds. Now computer systems can identify people who enrol more than once or who are enrolled incorrectly. Due to this, many people who were not really members at all were left off the list, so the number of members fell.
In the case of countries with voluntary systems, the number of members increased by 9.8%. The largest increase was recorded by Spain (17%), this being higher than that recorded in the previous period. The Ukraine, on the other hand, showed an increase in membership (12%), though this was lower than that of the previous period. Since these are voluntary funds and the information corresponds to just one pension fund administrator, the percentage of members is variable, depending mainly on the economic conditions in the country and the characteristics of the administrator.
NUMBER OF CONTRIBUTORS AS OF 12.31.2004 AND 12.31.2003
Latin America Starting Contributors Contributors Var.% Countries Year 12.31.2004 % 12.31.2003 % 2004-2003 Obligatory System: Argentina 1994 3.541.146 13,5 3.331.437 13,2 6,3 Bolivia 1997 732.936 2,8 435.507 1,7 68,3 Colombia 1994 2.843.644 10,9 2.538.688 10,1 12,0 Chile 1981 3.571.864 13,7 3.618.895 14,4 -1,3 El Salvador 1998 489.328 1,9 497.303 2,0 -1,6 Mexico 1997 12.751.029 48,8 12.577.265 49,9 1,4 Perú 1993 1.313.878 5,0 1.336.383 5,3 -1,7 Dominican Rep. 2003 552.512 2,1 544.294 2,2 1,5 Uruguay 1995 346.240 1,3 335.316 1,3 3,3 TOTAL 26.142.577 100,00 25.215.088 100,00 3,7
5 The Latin American countries that have already reformed their pension systems have been included in the analysis of the number of contributors, except for Costa Rica and Panama, countries for which there is no available information. The European countries have not been included in the analysis because they do not have information available.
In these countries, the number of contributors increased by 3.7%. The most important increases were seen in Bolivia (68.3%) and Colombia (12%), while Chile (-1.3%) and Peru (-1.7%) showed falls in the number of contributors. In Bolivia the number of contributors recovered after the impact caused by the change in the method used by the AFPs to calculate the number of contributors, which resulted in a sharp drop in the previous period of –38.6%. The current method includes all those members who have paid at least one contribution in the past three months. In the case of Peru, the reduction in the number of contributors in 2004 was due to an effect of growth in 2003 generated by collection campaigns held that year, which recovered members who are not necessarily regular contributors. The fall in Chile’s case is explained mainly by one AFP which experienced a fall of 12% in the number of contributors. Though the Dominican Republic (1.5%) shows an increase, this is lower than the previous period. It is important to point out that in the Dominican Republic the data for the year 2003 refers to “accumulated contributors” which means those members who have made at least one contribution during the year, while in 2004 they were more accurate with the number of contributors and included only the number of members who paid in the month in question and did not consider contributions paid in earlier periods. El Salvador (-1.6%) shows a fall after showing a recovery in the previous period. This is due to the fact that the processing/assembly industry, which has been one of the main sources of employment in past years, has been undergoing a process of contraction, and as it has become depressed, much of the work force has been laid off. Uruguay (3.3%) presents a very similar increase to that of the previous period, due to its economic recovery. Argentina (6.3%) registers a smaller increase that that of the previous period, while Mexico (1.4%) also shows an increase that is slightly lower than in the previous period. In this last case, this may be due to the increase in the unemployment rate in the period December 2003 – December 2004 (3.0% - 3.8%)
6 MANAGED FUNDS AS OF 12.31.2004 AND 12.31.2003
Latin America Starting Fund Fund Var.% Countries Year 12.31.2004 % 12.31.2003 % 2004-2003 (Thousands of US$) (Thousands of US$) Obligatory System: Argentina 1994 18.238.370 12,3 15.947.337 12,8 14,4 Bolivia 1997 1.716.124 1,2 1.493.207 1,2 14,9 Colombia 1994 11.075.223 7,5 7.326.465 5,9 51,2 Costa Rica 2000 474.327 0,3 304.327 0,2 55,9 Chile 1981 60.798.510 41,2 54.177.170 43,4 12,2 El Salvador 1998 2.148.390 1,5 1.572.027 1,3 36,7 Mexico 1997 43.033.135 29,1 35.844.411 28,7 20,1 Panamá 1997 492.606 0,3 463.758 0,4 6,2 Perú 1993 7.844.272 5,3 6.341.380 5,1 23,7 Dominican Rep. 2003 187.869 0,1 33.950 0,0 453,4 Uruguay 1995 1.678.261 1,1 1.232.079 1,0 36,2 TOTAL 147.687.087 100,00 124.736.111 100,00 18,4
Voluntary System: Brasil (1) 112.870.521 99,62 87.654.570 99,50 28,8 Ecuador 411.236 0,3 430.583 0,3 -4,5 Honduras 16.032 0,01 7.847 0,01 104,3 TOTAL 113.297.789 100,00 88.093.000 99,86 28,6
European and Asian Countries Bulgaria 2002 166.319 0,6 73.586 0,5 126,0 Kazajstán (2) 1998 3.072.783 11,9 2.631.838 19,1 16,8 Poland 1999 22.488.465 87,4 11.058.208 80,3 103,4 TOTAL 25.727.567 100,00 13.763.632 100,00 86,9
Voluntary System: Spain 84.201.430 95,2 69.808.961 94,3 20,6 Russian Federation (3) 4.193.339 4,7 4.193.339 5,7 0,0 Ukraine 28.485 0,0 26.593 0,0 7,1 TOTAL 88.423.254 100,00 74.028.893 100,00 19,4
TOTAL FIAP 375.135.697 300.621.636 24,8
(1) Anapp data of 06.30.2004 (2) Data as of 06.30.2004 and 12.31.2003 (3) Data of 12.31.2003
MANAGED FUNDS
7 During the period analysed, the managed funds corresponding to the countries belonging to the FIAP increased by 24,8%, growing from US$300.622 million in December 2003 to US$375.136 million in December 2004.
Latin American Countries In the Latin American countries with mandatory systems, there has been an increase of 18.4% in the funds under management during the period between December 2003 and December 2004. This important increase is due to the fact that all the countries analysed showed growth in the funds under management.
The main increases occurred in the Dominican Republic (453.4%), Costa Rica (55.9%), Colombia (51.2%), El Salvador (36.7%) and Uruguay (36.2%). In the Dominican Republic, this large increase is due to the fact that the information recorded in the previous report – corresponding to the period December 2002 to December 2003, reflected statistics for only 6 months, whilst during 2004, when the system was fully operational, the statistics are for 12 months. In Costa Rica, the important increase in pension funds is due on the one hand to the quantity of active workers in the system and on the other, to the fact that the amount of salaries on which contributions were paid was greater in 2004 compared with 2003, due to the rise in salaries. For these reasons, and given that in the Costa Rican system, resources worth 50% of the money contributed are transferred annually by law to the labour capitalization fund (similar to the unemployment benefit system), the resource base on which yields are generated year by year is constantly growing, producing an increasing accumulation of resources. In Colombia the increase is due mainly to the favourable behaviour of the investments on the one hand and the linear growth in membership and secondly to the effect of revaluation on the exchange rate. In the case of El Salvador, the increase is slightly lower than the increases recorded in previous years. This is due in part to a certain improvement in collection, and also because, in view of the fact that the old-age pensions of those who retired under the pay-as-you-go scheme were higher than those of people in the capitalization system, the government decided to issue a complementary transfer certificate or recognition bond in certain circumstances, which came into effect in October 2003 (this certificate meant considerable amounts of Government money being issued, to be deposited in the pension funds). In Uruguay the increase, which was very slight compared with the previous period, is due to growth of collection.
Argentina (14.4%) and Bolivia (14.9%) show lower increases in the funds under management than those of the previous period, as do Chile (12.2%) and Peru (23.7%). In the case of Peru, the recovery of the world economy produced a rise in the price of raw materials which meant an automatic increase in the value of shares and in the fund’s yield. Chile experienced this increase thanks to the positive yield experienced on all the funds under management and the deposits corresponding to the year’s contributions. Mexico (20.1%) presents a larger increase than the previous period, due to the development and growth of the system itself.
On the other hand, in countries with voluntary systems, it may be seen that in Brazil (28.8%) the funds increased by a greater proportion than in the previous period, after the decrease observed in the previous period due to the devaluation of the currency. Honduras
8 (104.3%) shows a large increase, basically due to the increase in capturing new business and membership.
European and Asian Countries The European and Asian countries with mandatory systems show an increase of 86.9% in the funds under management. The main increase is to be seen in Bulgaria (126%), due to the fact that the Universal Pension Funds began operations relatively recently, in the year 2002.
Finally, in the countries with voluntary systems, the funds under management increased by 16%. The main increases were seen in Spain (20.6%) and the Ukraine (7.1%).
PORTFOLIO COMPOSITION
In the analysis of portfolio composition, we have included Latin American, European and Asian countries that have reformed their pension system and have more than two years in operation.
In order to facilitate the analysis, the information has been classified into: - State sector (bonds and paper issued by the Central Bank of each country) - Corporate sector (corporate bonds and shares) - Financial sector (mortgage-backed securities, time deposits, bonds and shares of financial institutions) - Foreign sector (securities issued by foreign institutions)
Further on, the information is also classified into Fixed Income and Equity Instruments.
On analysing the instruments in which the pension funds are invested, one observes that the main destination of the funds has been government sector instruments, with the exception of Chile, Peru and the Dominican Republic, which invest most of their funds in instruments in the financial sector; (the Dominican Republic invests 100% of its funds in instruments from this sector, specifically in fixed-term instruments) and Peru in the corporate sector. The second source of investment consists mainly of instruments from the financial and corporate sector.
On analysing fund investment in the government sector, one observes that in four countries: Argentina, Chile, Costa Rica and Bulgaria, the percentage invested in instruments in this sector has fallen, while in five: Bolivia, El Salvador, Mexico, Peru and Uruguay, investment in instruments in this sector has risen. In Colombia, Panama and Kazakhstan, there has been practically no variation in the percentage of investment in the government sector compared with the previous period. Chile and Peru are the countries that invest the lowest percentage in this type of instrument: 18.7% and 24.5% respectively, whilst El Salvador and Mexico invest over 80% of the funds in this type of instrument.
With regard to investment in instruments in the financial sector, there are four countries that invest over 25% of the funds in this sector: Chile, Panama, the Dominican Republic
9 and Bulgaria, with the Dominican Republic and Panama being the countries investing the largest percentage of the funds in this sector (100.0% and 35.7%, respectively).
In the case of the corporate sector, there are three countries that invest over 25% of the pension funds in the sector: Peru, Kazakhstan and Poland, Peru being the one that invests the highest percentage (45.2%) in classified instruments in this sector. In most countries, the percentage of funds invested in this sector has increased, the exceptions being El Salvador, Mexico and Uruguay. In El Salvador and Mexico this lower investment in the corporate sector is reflected in a higher investment in the financial and foreign sectors (in the case of El Salvador) and in the financial sector (in the case of Mexico).
With regard to investment in the foreign sector, eight countries are currently investing in this sector: Argentina, Bolivia, Chile, Colombia, El Salvador, Peru, Kazakhstan and Poland with, in general, an increase in the percentage invested of between 1% and 27% in December 2004. In Peru in the month of May the Central Reserve Bank increased the limit on investment abroad from 9% to 10.5% of the funds under management. However, that limit is inadequate, and a request has been made to increase it to 20% in order to guarantee a better performance for the Multi-funds due to come into operation as from November 2005 (1). In Colombia the limit on investment abroad rose from 10% to 20%. In the case of El Salvador, although a percentage of foreign investment appears on paper, this is only to comply with the rules regulating the classification of instruments in the country, because they are instruments expressed in dollars, which do not correspond to investment abroad. In fact, pension fund investment in such instruments has not so far been authorised. It is important to point out that authorization has been given in Mexico for a percentage of the funds to be invested in financial instruments abroad, and this will come into force as from January 2005, when the Multi-funds start operating in that country (2).
“ Others” include disposable assets and investment in instruments that have not been classified in any of the previous sectors. In Uruguay one sees a high percentage of resources in disposable assets due to the shortage of investment instruments and the fact that the AFAPs are forbidden to invest abroad. These high figures in disposables constitute a threat to the consolidation and independence of the individual savings system.
PORTFOLIO COMPOSITION AS OF 12.31.2004 AND 12.31.2003
10 Latin America Year State Corporate Financial Foreign Others Countries Sector Sector Sector Sector % % % % % Obligatory System: Argentina Dic.2004 62,3 14,7 11,1 10,3 1,7 Dic.2003 69,3 13,4 6,1 9,7 1,5 Bolivia Dic.2004 67,5 24,4 5,6 1,5 1,1 Dic.2003 60,7 19,6 8,8 3,3 1,9 Chile Dic.2004 18,7 24,4 29,5 27,3 0,1 Dic.2003 24,7 24,0 27,3 23,9 0,1 Colombia Dic.2004 48,5 19,6 21,1 9,7 1,1 Dic.2003 48,6 18,6 24,8 7,2 0,8 Costa Rica Dic.2004 77,2 11,4 11,5 n.a n.v Dic.2003 89,9 9,4 0,7 n.a n.v El Salvador Dic.2004 83,5 0,3 10,5 5,5 n.v Dic.2003 82,4 0,7 13,2 3,9 n.v Mexico Dic.2004 84,5 14,4 0,4 n.a n.v Dic.2003 81,6 15,4 - n.a n.v Panamá Jun.2003 63,3 1,0 35,7 n.a n.v Jun.2002 63,1 1,0 35,9 n.a n.v Perú Dic.2004 24,5 45,2 20,0 10,3 0,1 Dic.2003 19,1 42,2 30,8 8,3 -0,3 Dominican Rep. Dic.2004 - - 100,0 n.a n.a Dic.2003 - - 100,0 n.a n.a Uruguay Dic.2004 79,0 5,2 7,5 n.a 8,3 Dic.2003 69,5 7,6 10,0 n.a 12,9 European Year State Corporate Financial Foreign Others Countries Sector Sector Sector Sector Obligatory System: % % % % % Bulgaria Dic.2004 56,7 10,6 32,7 n.a n.v Dic.2003 74,5 4,9 20,6 n.a n.v Kazajstán Jun.2004 50,6 30,4 9,0 7,2 2,8 Jun.2003 50,0 26,3 16,1 6,4 1,1 Poland Dic.2004 62,6 33,2 3,7 0,0 0,5 Dic.2003 n.d 25,7 1,8 0,8 2,4 n.a: not allowed n.v: not available
On analysing the investment of pension funds in fixed income instruments and equities, it may be seen that three countries (Mexico, the Dominican Republic and Uruguay) invest only in fixed income instruments. The remaining countries invest both in fixed income and in equities, with Chile, Peru and Poland being the countries with the highest percentage of funds invested in equity instruments (44.7%, 51.2% and 30.8%, respectively).
11 In general, it is possible to see an increase in the percentage of funds invested in equities compared with December 2003, though Bolivia and Bulgaria show reductions in the percentage of fund investment in equity instruments (7.5% and 3.3%, respectively) compared with the previous period (9.0% and 4.9%, respectively). In the case of Bolivia, the Government, through the Law on Fund-Merging (the Individual Capitalization Funds and the Collective Capitalization Funds), made investment in equities obligatory, but at present the law has been suspended and it is not known whether this suspension will be indefinite or whether the law will come back into force again.
FIXED AND VARIABLE INCOME AS OF 12.31.2004 AND 12.31.2003
Latin America Year Fixed Variable Others Countries Income Income % % % Obligatory System: Argentina Dic.2004 84,9 13,4 1,7 Dic.2003 86,1 12,4 1,5 Bolivia Dic.2004 91,5 7,5 1,1 Dic.2003 89,2 9,0 1,9 Chile Dic.2004 55,2 44,7 0,1 Dic.2003 60,6 39,3 0,1 Colombia Dic.2004 88,0 10,9 1,1 Dic.2003 92,7 6,5 0,8 El Salvador Dic.2004 99,8 0,2 - Dic.2003 100,0 - - Mexico Dic.2004 99,3 - - Dic.2003 98,4 - - Perú Dic.2004 48,7 51,2 0,1 Dic.2003 57,9 42,4 -0,3 Dominican Rep. Dic.2004 100,0 - - Dic.2003 100,0 - - Uruguay Dic.2004 91,7 - 8,3 Dic.2003 87,1 - 12,9 European Year Fixed Variable Others Countries Income Income % Obligatory System: % % Bulgaria Dic.2004 96,7 3,3 - Dic.2003 95,1 4,9 - Poland Dic.2004 62,4 30,8 0,5 Dic.2003 75,5 25,0 2,4
PENSION FUND YIELD
In the yield analysis, we will consider the Latin American countries belonging to FIAP which have already reformed their pension system and where the system has been running for over two years, with the exception of Costa Rica and Panamá, countries that don’t have available information.
12 Latin America Countries Real Annual Yield Real Annual Yield (in local currency) (in dollars) % % Argentina 4,33 9,57 Bolivia 5,38 n.d Colombia (1) 10,4 - Chile (2) 9,1 - El Salvador - n.d Mexico 1,57 1,99 Perú 12,15 15,35 Uruguay 3,58 n.d
(1) Annual yield for the past 36 months (2) Average yield of the five funds
When analysing the yield, country by country, the following may be observed:
Bolivia: the yield obtained by the pension funds is due to the diversification of the investment portfolio between government instruments and those of the business, financial and foreign sectors. Given that 67% of the funds are invested in government instruments, these are what largely explain the yield obtained by the pension funds in this country. Colombia: the yield reported by Colombia corresponds to the annualised yield for the last 36 months (the yield is not calculated yearly) and is similar to that obtained in the previous period. Chile: due to the existence of multi-funds, the yield obtained during the period will depend on the fund to which the worker belongs. El Salvador: the variations in yield mainly reflect the price trends of the investments made in El Salvador eurobonds at different terms, and as is well- known, the increases in rates of the US Treasury affect international prices– among other things –, producing positive or negative effects on the yield of the pension fund. The economy of El Salvador has been “dollarized” since 2001 and the percentages in the Table are in that currency. Though the currency law laid down that the Colón could also circulate at the same time, in fact it is practically never used. Mexico: the yield of the pension funds is explained by the return obtained by medium and long-term government papers, in which 85% of the funds are invested, and private sector papers (corporate debt, financial instruments, para-state, state and municipal debt), in which 19% of the funds are invested. Peru: The recovery of the world economy produced a rise in the price of various raw materials, which meant automatic increases in the value of shares and, therefore, in yield. Uruguay: The low yield in local currency is due to various factors: the correction for the fall in bonds in the first six months of the year, the collapse of the dollar in
13 the local market (the variation in the exchange rate which moved from around 6% at the beginning of the year to 9% at the close of 2004).
SALES FORCE
As of the 31st December 2004 there is a noticeable fall in the number of sales personnel in Argentina (-1.16%), Bulgaria (-9.5%), Bolivia (-5.71%), Chile (-41.34%), El Salvador (- 5.76%) and Peru (-31.66%). There has been a downward trend in the number of sales personnel in all these countries since the pension system began.
In Honduras the number of sales personnel has remained practically the same, while in Uruguay it has increased slightly (4.88%). In Mexico a larger increase has been observed (23.79%) due to the commercial strategies promoted by the Afores, because since there are now greater facilities for transferring, the Afores have increased their sales forces in order to position themselves among the competition.
NUMBER OF SALES AGENTS
Latin America 12.31.2004 12.31.2003 12.31.2002 12.31.2002 12.31.2000 Var.(%) Countries 2004-2003 Argentina 9.120 9.227 9.118 11.381 11.638 -1,2 Bolivia 66 70 70 75 74 -5,7 Bulgaria 25.391 28.046 31.778 4.915 - -9,5 Colombia n.d 2.941 3.341 3.853 5.368 - Costa Rica n.d n.d n.d 1.463 - - Chile 2.281 3.812 3.944 3.868 4.885 -41,3 El Salvador 376 399 413 573 886 -5,8 Honduras n.d 10 10 - - - Mexico 22.121 17.870 12.116 10.781 11.400 23,8 Perú 611 894 861 880 1.735 -31,7 Uruguay 129 123 193 197 757 4,9 TOTAL 60.095 63.392 61.844 37.986 36.743 -5,3
NUMBER OF TRANSFERS PER YEAR
Latin America 12.31.2004 12.31.2003 12.31.2002 12.31.2002 12.31.2000 Var.(%) Countries 2004-2003 Argentina 710.590 364.384 330.542 412.683 401.009 10,2 Bolivia (1) 1.456 3.355 4.135 0 0 -18,9 Bulgaria 13.731 0 0 0 0 - Colombia 30.524 116.598 151.198 153.552 195.749 -22,9 Costa Rica 73.661 74.372 - - - -
14 Chile 215.603 255.509 229.114 235.584 255.788 11,5 El Salvador 12.120 53.361 47.058 80.402 134.957 13,4 Honduras n.d 4.000 - - - - Mexico 1.199.293 420.791 120.089 106.220 91.653 250,4 Perú 5.657 5.388 4.179 6.251 5.537 28,9 Polonia 160.748 296.545 345.869 185.745 141.584 -14,3 Uruguay 322 529 1.251 330 43.570 -74,3 TOTAL 2.423.705 1.594.832 1.233.435 1.180.767 1.269.847 87,6
(1) In Bolivia the law stipulated a captive market for five years
Figures reported in December 2004 correspond to transfers that took place between the months of January and December 2004. It is possible to see that in countries such as Argentina, Mexico and Peru there was a sharp increase in transfers.
In the case of Argentina, this increase is related with the greater number of sales personnel, and to a lesser extent, with the opening of branches. While in Mexico the increase in the number of transfers is due to modifications made in the rules governing this process, simplifying them and reducing the time needed for the formalities from three months to 21 days.
In the rest of the countries, there has generally been a decrease, though an irregular one, in the volume of transfers over the years.
COMMISSIONS
15 Latin America Year Fixed Comm. Variable Comm. % administrator % Insurance Co. Variable Comm. Variable Com. Countries US$ (% wage) (% fund) (% Yield) Obligatory System: Argentina Dic.2004 - 2,53 1,12 1,41 - - Dic.2003 - 2,54 1,31 1,23 - - Bolivia Dic.2004 - 2,21 0,5 1,71 (*) - Dic.2003 - 2,21 0,5 1,71 (*) - Colombia Dic.2004 - 3 1,55 1,45 - 4,5 Dic.2003 - 3 1,49 1,51 - Costa Rica Dic.2004 - - - - - 7,25 Dic.2003 - - - - - 7,65 Chile Dic.2004 0,84 2,26 1,37 0,89 - - Dic.2003 0,77 2,43 1,51 0,92 - - El Salvador Dic.2004 - 2,98 1,78 1,2 - - Dic.2003 - 2,98 1,76 1,21 - - Mexico Dic.2004 - 1,38 1,38 - 0,33 - Dic.2003 - 1,41 1,41 - 0,37 - Panamá Jun.2004 - - - - 1,26 - Jun.2003 - - - - 1,06 - Perú Dic.2004 - 3,19 2,27 0,92 - - Dic.2003 - 3,5 2,27 1,23 - - Dominican Rep. Dic.2004 - 1,5 0,5 1 - 28,75 Dic.2003 - 1,5 0,5 1 - 27,78 Uruguay Dic.2004 0,43 2,9 1,94 0,96 0,002 - Dic.2003 0,12 2,95 1,94 1,01 0,002 - European Countries Obligatory System: Bulgaria Dic.2004 - 0,15 0,15 - 1 - Dic.2003 - 0,1 0,1 - 1 -
(*) 0,2285 for fund < US$1.000 M / 0,14 for fund > US$ 1.000 M and < US$ 1.200 M / 0,067 for fund > US$ 1.200 M and < US$ 1.500 M.
Just the countries with mandatory systems were included in the analysis of commissions, excluding Kazakhstan and Poland for which no information was available.
When comparing the commissions charged by the administrators in each country in December 2004 and December 2003, one sees the following:
Argentina: The variable commission as a percentage of salary kept its structure, the commission charged by the Insurance Companies rose and that charged by the administrator fell. In July 2003 the new values of the disability and survivorship insurance came into force, the bidding process having taken place between May and July, with all the AFJPs presenting cost rises. Bolivia: The commissions structure of the previous period remained unchanged. Colombia: The variable commission (% salary) remained the same as in the period before. The commission charged by the administrator rose and the commission charged by the Insurance Companies fell in proportion. The administrators began to
16 charge a commission calculated as a percentage of the yield on the fund under management from those members who have not paid any contributions during the last six months. Chile: There was an increase in the fixed commission (0.84%) and a decrease in the variable commission (% salary), produced by the lower cost of the disability and survivorship insurance and a reduction in the commissions charged by the AFPs as a percentage of salary. El Salvador: The general commission remained the same as compared with the last three years, at 2.98%, but its composition between AFP and insurer varied according to the changes in the claim rates and the negotiation between the two parties. Mexico: A slight, generalised decrease in commissions charged by the Afores as a percentage of salary and as a percentage of the managed fund. Peru: A fall in the commissions of the Insurance Company of about 0.92%, due to the effect of the liberalization of the life annuity market and the obligatory, regulated bid processes for Insurance Company premiums. Uruguay: The fixed commission charged by the administrators showed a slight increase and there was a decrease in the variable commission (% salary) due to a fall in the commission charged by the Insurance Companies. However, the commission charged as a percentage of the managed fund remains the same. Bulgaria: There was a slight increase in the commission charged as a percentage of the worker’s salary. Dominican Republic: The commissions structure has remained unchanged.
17 II.- PENSION FUND ADMINISTRATORS IN EACH COUNTRY
ADMINISTRATORS ON DECEMBER 31, 2004
18 ARGENTINA BOLIVIA BULGARIA COLOMBIA COSTA RICA Administradoras de Administradoras Pension Company Administradoras Operadoras de Fondos de de Fondos de de Fondos de Pensiones Jubilación y Pensiones Pensiones y Complementarias Pensiones (Pension Funds Cesantías (Complementary (Retirement and Administrators) (Pension and Pensions Pension Funds AFP Unemployment Operating Administrators) Funds Companies) AFJP Administrators) OPC
Arauca Bit Futuro de Bolivia Douverie (*) Colfondos Banco de Costa Consolidar BBVA Previsión Saglasie Horizonte Rica Rodina Futura Allianz Porvenir Bco. Popular y Máxima ING Protección Des. Comunal Met Social Security Fund Santander BN Vital Nación CCB - SILA Skandia Caja Costarricens Orígenes Lukoil Garant e de S.S. Previsol Bulgaria Confía San José Profesión+Auge DZI (*) Pensiones ProRenta INS Bancrédito Siembra Interfin - Banex Unidos Vida Plena
Total: 12 Total: 2 Total: 7 Total: 6 Total: 8
Bulgaria: (*) Pension Insurance Company DZI started operations 12.01.2003
19 CHILE ECUADOR EL KAZAKHSTA MEXICO Administradoras de Administradoras SALVADOR N Pension Funds Administradoras de Fondos de de Fondos de Administradoras de Administrators Fondos para el Pensiones (Pension Pensiones .Fondos de Pensiones Retiro (Retirement Funds (Pension Funds (Pension Funds Funds Administrators) Administrators) Administrators) Administrators) AFP AFP AFP AFORE Cuprum Adpacific Confía ABN AMRO - Actinver (*) Habitat AFP Génesis Crecer KaspijMunaiGas Azteca (*) Planvital (*) Fondos BG. Capital Banamex Provida Fondos Kazakhmys Bancomer Santa María Pichincha Kazakhstan Banorte Summa Bansander Produfondos Korgau HSBC Kunaev Inbursa Kurmet ING Narodny Principal (*) Narodny Bank Profuturo GNP NefteGaz-Dem Santander Otan XXI PhillipMorris Kazakhstan Senim State Pension Fund Ular Umit Valut-Transit
Total:6 Total: 5 Total: 2 Total: 16 Total: 12
Chile:
(*) AFP Magister and AFP Planvital mergered at 2004 march.
ADMINISTRATORS ON DECEMBER 31, 2004
PANAMA PERU POLAND DOMINICAN URUGUAY
20 Administradoras de Administradoras de Pension Funds REPUBLIC Administradoras Fondos de Ahorro Fondos de Administrators Administradoras de de Fondos de Previsional (Social Pensiones (Pension AFP Fondos de Ahorro Security Savings Funds Pensiones (Pension Previsional Funds Administrators) Funds (Social Security Administrators) AFP Administrators) Savings Funds AFAP AFP Administrators) AFAP BBVA Horizonte Horizonte AIG BBVA Crecer Afinidad Profuturo Integra Allianz Polska Camino Integración Progreso Profuturo Bankowy Caribalico República Seguro Social Unión Vida Commercial Popular UniónCapital Union Profesional Credit Suisse Reservas Life & Pensions Romana DOM Siembra Ergo Hestia Generali ING Nationale- Nederlanden Polka Kredyt Banku Pekao Pocztylion Polsat PZU Zota Jesien Sampo Skarbiec- Emerytura
Total: 4 Total: 4 Total: 16 Total: 8 Total : 4
21 ADMINISTRATORS ON DECEMBER 31, 2003
BRAZIL BRAZIL SPAIN RUSSIAN Closed Companies Open Companies FEDERATION ABRAPP ANAPP Pension Funds Administrators Previ Bradesco Vida e B.B.V.A. Gazfond Petros Prev. La Caixa Lukoil - Garant Funcef Itau Prev. S.C.H. Surgutneftegaz Sistel Brasilprev Fonditel Blagosostoy Anie Fundacao Cesp Caixa Vida & Prev. Grupo Caser PF Vneshtorgbank Valia Santander Segs. Banco Popular Electroenergetica Centrus Unibanco AIG Caja Madrid NPF Nacional ItauBanco Previd. Banco Sabadell Rostelecom - Forluz Real Prev. Mapfre Garantia Real Grandeza HSBC Seguros Bancaja Telecom - Soyuz Banesprev Capemi Ibercaja Regionfond Fapes AFG Brasil Caja Cataluña Almaznaya Osen Telos Caja Rural Fundacao Copel Caja Mediterráneo HSBC Winterthur Refer Pensiones Postalis Caja Navarra Electroceee Deutsche / Zurich Funbep Bankinter Economus Grupo Skandia Unicaja Number of important Number of authorized Associated Pension groups: 83 groups Total : 272 Pension Funds: 276 Funds: 48 Total Plans: 1,893
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