Withdrawal from CTS 2024: Labor Commission approved the opinion, what will be the impact? | ECONOMY

The Labor Commission of the Congress of the Republic approved with 11 votes in favor and 3 abstentions the opinion that seeks to extend the validity of the withdrawal of Compensation for Time of Service (CTS) until December 31, 2024.

There are 14 projects presented to date, of which ten propose that the deadline be until December 31 of this year, three until 2025 and one until December 31, 2026.

The opinion includes projects 7010/2023-CR, 7130/2023CR, 7152/2023-CR, 7358/2023-CR, 7400/2023-CR, and 7468/2023-CR; However, before the debate, 6495/2023-CR presented by Congressman Jorge Coayla (Peru Bicentenario) was added and Congresswoman María del Carmen Alva (Not grouped) requested that her project 7571/2023-CR be included, but it was pending submission of a written request.

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As Jorge Antonio Delgado, president of the Association of Microfinance Institutions of Peru (Asomif), explained, the CTS is a compensation created so that, when people in the formal sector lose their job for any reason, they have a way to sustain their income during the time it takes for them to have a job again.

“They are generating expectations for people and that money will not even go to a productive activity that generates income, but rather to consume,” he noted.

For Delgado, there is no justification for approving a rule of this type and rather it leaves unprotected people who decide to withdraw their funds, faced with a possible situation of unemployment.

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John Sarmiento, manager of Financial Services of the Peruvian Federation of Municipal Savings and Credit Banks (Fepcmac), maintained that legislation is being done on a formal segment and dependents, which are fewer compared to the informal ones.

“I believe that all these exercises and initiatives are populist measures that, unfortunately, affect the growth of the municipal savings bank system since that amount withdrawn ends up being the lever we need to strengthen credit,” he stated.

Likewise, he added that the foundations have not been provided to help understand that they end up being support for economic reactivation. “It is a measure for some, not for all, that will put money in the market, but that does not help the reactivation, undoubtedly,” he observed.

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Impacts

According to the Evolution of the Financial System report of the Superintendence of Banking, Insurance and AFP (SBS) as of December 2023, savings and CTS deposits were reduced by 7% and 17.5% respectively. This, within the framework of the validity of Law 31480, which authorized workers to use 100% of their CTS deposits until December 31, 2023.

Sarmiento noted that the municipal savings bank system has more than 8 million clients in passive products, of which 5.5 million are savings, 2.3 million are fixed-term clients and 422 thousand clients are through CTS, he said.

As of January 2024, municipal savings banks have a 73.3% share of CTS deposits and, of the S/ 30,944 million in deposits, S/ 1,880 million are from CTS, Fepcmac noted.

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According to Sarmiento, the number of people who have withdrawn their CTS has been decreasing and for this new withdrawal the impact of the withdrawal that occurred until December 31, 2023 would already be discounted.

“From December 2023 and January 2024, it went from S/ 1,926 million to S/ 1,880 million, that is the contraction that there was, but the impact in other years was greater,” he added.

For his part, Delgado explained that the fact that people withdraw all of their CTS will make it difficult for microfinance institutions to accommodate their operations for longer terms. “A 15-year mortgage loan must have permanent and current deposits. I cannot place a 15-year operation if I do not have funding for those terms, equal to three years, four years, two years,” he said.

Thus, he argued that the liquidity of the terms would be restricted in order to provide facilities to people who want to take out a consumer loan, vehicle loans, among others.