New compensation fund: the Government set the rules for how contributions can be invested

The Government made progress this Wednesday in the regulation of a key chapter of the labor reform: the Labor Contribution Fund (FAL), intended for the payment of severance payments. Through resolution 1276 published in the Official Gazette, the Ministry of Economy, headed by Luis Caputo, established the guidelines and limits for investing the resources that employers must contribute every month.

The regulation states that these funds can be invested without limit in debt issued by the national Treasury. In contrast, investments from provinces and the Autonomous City of Buenos Aires will face caps. Deposits in entities authorized by the Central Bank and negotiable obligations of private companies issued in the country are also permitted.

The considerations emphasize that the entities managing the FAL must preserve the value of the contributions, ensure the availability of funds for benefits, and diversify investments. The goal is to protect the assets and ensure the necessary liquidity to meet the fund's obligations.

The resolution delineated four major categories of permitted instruments: national Treasury debt; debt securities from provinces and the City; deposits in banks authorized by the BCRA; and private negotiable obligations. For provincial, Buenos Aires, and negotiable obligations, public offering authorization, trading in markets authorized by the National Securities Commission, and a national risk rating of AAA granted by at least two rating agencies registered with the CNV are required.

Permitted instruments and performance requirements

Regarding performance, the instruments may have a fixed rate, TAMAR rate, adjustment by CER, or by exchange rate. Dual Bonds that combine these modalities are also allowed. This way, alternatives are sought to preserve the real value of the monthly contributions from companies.

Except for national Treasury debt, the resolution set specific caps to avoid risk concentration. Deposits in the same financial entity and its affiliates cannot exceed 15% of the total assets of the FAL. For debt from provinces and the City of Buenos Aires, the limit will be 15% in total and 5% per jurisdiction.

In the case of private negotiable obligations, the cap will be 20% of the total portfolio and 10% per issuer and its affiliates. Additionally, instruments whose performance is tied, wholly or partially, to the evolution of the exchange rate cannot exceed 10% of the FAL's assets.

It was also established that at least 10% of the assets must be maintained in high liquidity and low market risk assets. Only sight deposits, pre-cancellable fixed terms or with a maturity of up to 30 days, and national Treasury letters in pesos, at a fixed rate or adjusted by CER, with a remaining term of up to 90 days can be counted for this purpose.

Minimum liquidity and implementation timelines

If this liquidity percentage falls below the minimum due to the payment of benefits, the managing entity must restore it within 90 days. The resolution will come into effect this Thursday, August 13, and grants the CNV a period of 45 days to issue the necessary complementary and clarifying regulations to implement the new scheme.

With these rules, the Government aims for the FAL resources to be managed prudently, prioritizing the security and availability of funds to cover severance payments when appropriate, while allowing for some diversification within clear limits.