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Chilean pensions regulator reaffirms approval of controversial AFP mergers

Chile's pensions regulator has decided not to invalidate its approval of the mergers between pension fund managers, or AFPs, Cuprum and Argentum, and between Provida and Acquisition, the regulator said in a Dec. 14 statement on its website.

The regulator initiated the invalidation process in July in compliance with an order from the Comptroller General, but in a press release the regulator said it would not go through with the invalidation.

The merger of Administradora de Fondos de Pensiones Cuprum SA and Argentum, both owned by U.S.-based Principal Financial Group Inc., was approved in early 2015. That same year, the regulator approved the merger between MetLife Inc. units AFP Provida SA and Acquisition. In both cases, given the timing just before the implementation of a new tax reform, the parent companies received sizable tax benefits, which drew strong criticism from some lawmakers at the time.

In fact, the former head of the pensions regulator, Tamara Agnic, resigned earlier in 2016 amid controversy surrounding the approval of the mergers.

However, after hearing arguments from AFP Cuprum and AFP Provida, among others, the regulator said its decision to stand by its original approval is based on its view that if the "irregularities" detected by the Comptroller General had not existed, the "legal, regulatory, tax and fiscal" consequences of the mergers would have been "similar."

In addition, the regulator considered that the companies involved placed their "legitimate trust" in the regulator, which instructed them on the administrative procedures to follow in both mergers.