(Bloomberg) -- Colombia’s government is proposing to redirect the pension contributions of millions of workers away from private managers and into the public system, while setting up a fund intended to neutralize the impact this would have on the local bond market.

Under the draft bill, contributions from workers earning as much as three minimum wages (about $730) per month would automatically be paid into the public system. Workers could still pay into private funds with contributions that exceed that amount, according a statement from the Labor Ministry.

Currently, all workers can choose whether to enroll in the public or private systems.

The leftist government of President Gustavo Petro is trying to overhaul Colombia’s welfare state this year with an ambitious set of bills whose fate is likely to determine the future of his seven-month old administration. 

If Petro can get the bills through, it will strengthen his coalition and the position of his allies ahead of local elections in October. Defeats, on the other hand, could weaken his government, and make it hard for him to achieve his goals of transforming the nation’s conservative economic model. 

Petro’s ruling coalition has been shaken by rebellions over his health care bill, currently being discussed by lawmakers. The government postponed the pension bill presentation in congress to March 22 from March 16 while it seeks consensus, the ministry said. A labor market reform bill intended to increase workers’ rights is also expected in the near future. 

Read more: Petro Faces Cabinet Pushback Over Colombian Health Reform 

Some investors have fretted over the impact Petro’s bill might have on local asset markets, where private funds own about a quarter of the $96 billion stock of government peso bonds, or TES. The reform would set up a “savings fund” which would “avoid any impact on asset markets”, and which would acquire TES, the Labor Ministry said, without elaborating.

“This draft is part of a negotiation,” said Sergio Olarte, an economist at Scotiabank Colpatria, in a phone interview. “Since they are implicitly saying that they take the public debt market into account, that is positive.”

The proposal to move contributions from anyone earning less than three times the minimum wage into the public system would drastically cut the flow of TES purchases from private pension funds, Olarte said. If that were the final decision it would be negative for investors, he added.

Colombia’s private pension funds will continue to manage the assets they have under management —currently more than $70 billion— and these assets won’t be touched by the government, according to the bill. 

The bill would also give a monthly payment of about $47 to 2.5 million people above the age of 65 living in poverty. 

The bill is likely to face changes during its passage through congress. 

(Adds analyst comment)

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