MercoPress. South Atlantic News Agency

Argentina: private pension funds take over advances

Argentina's lower house approved President Cristina Fernandez de Kirchner's controversial plan to nationalize an estimated 30 billion US dollars in private pensions, a proposal that raised concern of a default and has further divided the ruling party.

Legislators voted 162 to 75 to back the plan after a session that began Thursday evening and ended after midnight. The proposal will be sent to two Senate committees for consideration next week with a full Upper House vote scheduled for November 20. "We've achieved a real consensus on this measure, convincing enough people in the opposition that the current pension system failed,'' ruling party lawmaker Jose Marian Diaz Bancalari told reporters. "The state has an obligation and a responsibility to oversee these funds". Concern about Mrs. Kirchner's plan was reflected in the Merval stock index, which fell 27% in the days after details were first reported on October 20. "The way these decisions are being made is disastrous for those looking for stability in the Argentine economy", said Felipe Sola, a member of the ruling party who opposed the bill, during the debate. Mr. Sola, a former governor of the province of Buenos Aires later announced he was leaving to form his own political grouping. The divided congressional opposition argues that the real purpose for taking over the funds is for credit-starved Argentina to be able to pay hefty debts maturing next year. On November 5, supporters and opponents of Mrs. Kirchner's plan rallied in front of the Congress building waving flags and beating drums. Protests have been sporadic and smaller than the nationwide demonstrations earlier this year against a plan to raise agricultural taxes. That plan was eventually defeated in the Senate. Nationalizing the funds would give the government a surge of continuing revenue at a time of slowing economic growth, offering 4.5 billion US dollars in new contributions next year, said Javier Kulesz, an economist at UBS Pactual in Buenos Aires. Last week, the Argentine government's attempt to force pension funds to repatriate cash from investments in the US was temporarily thwarted by holders of outstanding debt tied to the country's 2001 default on 95 billion US dollars of sovereign bonds. US District Judge Thomas Griesa granted a request by bondholders including Aurelius Capital Partners LP and Blue Angel Capital, to freeze Argentine pension fund assets in the US A hearing is scheduled in Manhattan federal court November 14 on whether to extend the order. The private pensions' funds system in Argentina has 9.5 million members and assets values in 30 billion US dollars.