Argentina President Moves to Nationalize
Pensions
October 21, 2008 (PLANSPONSOR.com) - Argentina's
leftist President Cristina Kirchner has signed a proposal
nationalizing the country's private pension funds.
The proposal, which must be approved by the country's
legislature, was signed by Ms. Kirchner, along with Labor
Minister Carlos Tomada and Amando Boudou, the head of the
national social security system, ANSES, according to the
Wall Street Journal.
The New York Times says that under the plan all the
assets in individual accounts would be transferred to the
state's "pay as you go" system, and affiliation to the
state system would be mandatory, effectively putting an end
to the current dual system.
"While the U.S. and other countries are stepping in to
rescue their banks, Argentina must protect our retirees,"
Fernandez said as she signed a nationalization bill that
now goes to Argentina's Congress, where her Peronist party
has a ruling majority, though opposition leaders have vowed
to contest the proposal.
Rescuing Retirees?
The Wall Street Journal says that an announcer during
the televised signing ceremony described it as a project to
"eliminate" the "capitalization system," a reference to the
defined-contribution plans run by 10 private funds known as
AFJPs.
In a speech following the signing ceremony, Boudou said the
reform would "rescue Argentine retirees from uncertainty."
The proposal would reportedly
shift about $30 billion in assets from the
administrative oversight of the ten private pension funds
(eight of the ten are controlled by private banks, one is a
cooperative and another is controlled by state-owned Banco
Nacion).
The proposal triggered a steep drop on Argentina's stock
market (Argentina's benchmark Merval index fell by more
than 11%) after it was disclosed by union officials and
reported in the Argentine press. The WSJ cites
economists that said the underlying motive would be to
provide the government with about $5 billon in annual
pension contributions - that it needs to closed a gap in
financing next year and avert a debt default.
Ahead of the Kirchner announcement, a federal judge
ordered the country's pension funds to halt all
"modifications to their portfolios" of stocks and bonds
over the next seven days.
Argentina established the private pension funds in 1994,
under conservative president Carlos Saúl Menem. Workers had
the choice of going into the new system or staying in a
revamped state system.
Nevin E. Adams
editors@plansponsor.com