The government of center-right Colombian President Iván Duque has presented a capital markets bill.

Key aims of the draft legislation are modernizing the payments system and boosting financial inclusion, accelerating development of the local capital market, modernizing parts of the financial system and strengthening institutional frameworks.

The bill comes after experts put the sector under the microscope and submitted their recommendations.

The proposed reform impacts the insurance sector, via the modernization and overhaul of current rules, such as implementation of a risk-based regulation and supervision model.

It also encompasses the private pension fund management (AFP) sector, via changes such as in the spheres of competition and commissions. Colombia currently has four AFPs.

One section calls for scrapping phased-withdrawal pensions – provided by AFPs – and tweaking rules governing the alternative pension type, annuities, provided by life insurers. Introducing a tender mechanism for contracts to assume new members of the formal labor force is also mulled as are measures to ease market access for entities wanting to enter the voluntary pension fund contribution management space.

Elsewhere on the legislative agenda, the government is also poised to present a tax reform bill. Experts have recommended the country reduces exemptions and expands the taxpayer base, among other areas. The proposals would result in a bigger tax haul, needed to help the country improve its finances after it increased spending to help mitigate the impact of the COVID-19 crisis. Stronger revenue is also critical to Colombian efforts to avoid erosion of its credit rating.

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