Plans by Mexican President Andrés Manuel López Obrador to force fund managers to cut their fees as part of a pension reform have prompted threats of litigation.

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Private pension funds would have to cut their commissions almost in half to 0.54 percent, from 0.92 percent, according to a bill sent to Congress in September, which is expected to be approved in both chambers in the next weeks.

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The industry manages 4.5tn pesos (US $ 212 billion). The government seeks to overhaul the private pension system, which was established in 1997, to increase retirement pay by 40 percent and launched a coup by persuading the private sector to increase its contributions.

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Unchanged, it says workers could expect to retire on just 30 percent of their wages. The planned fee reduction caught fund managers by surprise, Bernardo González, president of the Mexican Association of Pension Administrators, told the Financial Times.

Several Afores would no longer be able to operate and would trigger litigation under international trade treaties, including the USMCA, he warned.

Funds with foreign capital were evaluating litigation under the T-MEC or the Pacific Alliance treaties, González said. “They [the funds] are obviously very concerned. . . because they would have to resort to treaties to defend themselves, “he added.

Read more @Financial Times