MercoPress. South Atlantic News Agency

Argentine contagion helps Madrid market plummet 8%

Ibex diminished 5,03pct with the numerous Spanish blue chips connected to Argentina

Shares in Spanish companies with investments in Argentina slumped on the Madrid bourse on Wednesday after proposals to nationalize the country's pension funds were announced.

Repsol YPF's shares suffered their sharpest fall in 11 years in trading in Madrid, slipping by more than 15% to €15.08. The group, Spain's largest oil producer, owns YPF, the biggest oil company in Argentina. Telefónica, the telecoms group, fell 8.8% to €14.25 and Santander, the bank, slid almost 10% to €8.36. The Spanish stock market ended the day more than 8%. Argentine President Cristina Fernández de Kirchner announced this week legislation for the country's private pension system to be nationalized. The plan to take control of more than ten funds, which hold about 30 billion US dollars in savings, was sent for approval to Congress Tuesday. "We are taking this decision in a context where the biggest countries, members of the G8 and others, are taking protective measures for their banks," Mrs. Kirchner said. "Instead, we're taking them for our retirees and workers." Argentine bond yields soared above 24% and shares plunged before Mrs. Kirchner's speech, with the Merval index down 11%, extending its loss for October to 35%. However Argentina's Planning Minister Julio De Vido told YPF, the Argentine unit of oil company Repsol not to worry about the security of its investments during a meeting on Wednesday, Repsol said. "In Argentina, companies enjoy a secure legal framework, so there is no need to worry, especially in the case of YPF, as we are familiar with its business and investment plans and we think they coincide with the country's needs," De Vido told YPF officials, the company said in a news release. Repsol agreed to sell up to 25% of YPF to Argentine businessman Enrique Eskenazi in a two-stage deal agreed in 2007. Eskenazi, now YPF's vice president, was present at the meeting with De Vido, Repsol said. Analysts said that the nationalization move was an attempt to seize assets and avoid Argentina's second default this decade. The last time that the Government sought to tap workers' savings to meet debt payments was in 2001, just before it stopped servicing almost 100 billion US dollars of obligations. The retirement system in Argentina owns 27% of shares available for public trading in Buenos Aires. The global financial crisis has complicated Argentina's efforts to renegotiate 20 billion US dollars in defaulted bonds and pay off 6 billion US dollars owed to the Paris Club group of creditors. Argentina does not have access to international debt markets since its 2001 default.