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Growth in Bolivian pension sector expected to slow.

LA PAZ -- The sale by Spain's BBVA of one of two Bolivian pension fund concessions to Anglo-Swiss company Zurich Financial Services was forced by the merger Banco Bilbao Viscaya and Banco Argentaria. However, it also highlights BBVA's efforts to consolidate its status as the region's leading fund manager.

In late April, Zurich agreed to pay $19 million to acquire BBVA's 80% stake in the Futuro de Bolivia pension fund. The deal gives Zurich one of the country's two pension funds, created after the 1996 pension reform. Futuro's had 271,133 members at the end of 2000, with a total portfolio worth $ 3 2 9.3 million, slightly smaller than its rival Prevision's $362.6 million portfolio, also operated by BBVA.

The purchase complements Zurich Financial's growing interest in Bolivia. In September 2000, Zurich took its first step into Bolivia with a 51% purchase of the country's largest insurance provider La Boliviana Ciacruz Seguros y Reaseguros.

The number of participants in the Bolivian pension system has risen rapidly since it was established in 1997 with 120,000 members. At the end of 2000, more than 633,000 Bolivians participated. Although Bolivia's market still has room to expand, the rate of growth is expected to slow due to the large number of people that are employed in the informal economy, which is ineligible for the program.

Zurich will benefit from a protected market until full liberalization takes effect in May 2002. Most analysts say the entry of competing companies will be limited by the market's expansion potential. "We expect some limited competition from newcomers serving elite markets," said one Futuro executive.

Bolivia's pension funds have achieved a steadily increasing yield on their investments since their inception, but have not performed identically. Despite its smaller size, Futuro has outperformed the Prevision fund. Futuro's investment yield was 15.5% in 2000, compared to Prevision yield of 14.4%, a remarkable difference given 65% of all pension fund investments are required to be government bonds currently paying 8%. Futuro's results were better, say analysts, because of differences in how the other 35% was invested and the timing of buying and selling decisions.

BBVA officials say the sale of Futuro also is part of a regional restructuring program. BBVA sold its interest in Mexico's Afore Profuturo pension fund, and bought a controlling stake in the larger Afore Bancomer. In Argentina, BBVA sold its 50% participation in Siembra, and in Colombia it acquired the Colpatria pension fund, which was then merged with another fund, Horizonte. Three E1 Salvador pension funds owned by the BBVA, Prevision, Porvenir and Maxima also have been merged.

BBVA officials say it is the leader among the region's pension fund managers with 28% of the market. BBVA manages $24 billion in assets for 10.4 million customers across the region.
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Publication:America's Insider
Article Type:Brief Article
Geographic Code:3BOLI
Date:May 31, 2001
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