MercoPress. South Atlantic News Agency

Government hails nationalization of pension funds

The new law nationalize the private pension funds

Argentina's Senate passed on Thursday a bill to nationalize the private pension funds system in a move that analysts say could protect the potential beneficiaries from short-term stock market chaos but also limit their long-term retirement income.

Lawmakers voted 46-18 in favour of the state takeover after nearly 12 hours of debate, bringing an end to a 14-year-old pension system created during a wave of privatization throughout Latin America. Congress' lower house had approved the measure last November 7. President Cristina Fernandez de Kirchner is expected to sign the nationalization into law soon. An estimated 24 billion US dollars involves the operation. Senate budget commission leader Fabian Rios said the private pension system "failed" because it was designed for developed economies where citizens can afford large investments in their retirement. "This is a day of redress for the workers and retirees of this country," said Labour Minister Carlos Tomada. "It's a cultural change. The measure returns the state to its role as guarantor of social security." But critics have called it a money grab by a government that faces huge debt payments and upcoming congressional elections. Analysts say the plan is a mixed bag that will protect retirees in the short term but could hurt them in the long run. However when Argentine workers were allowed to switch between private and public pension funds last year, only 20% opted for the government's plan. But while there have been sporadic protests by workers worried about their future employment and rallies in support of a state-run program, Argentines have remained surprisingly reticent about the takeover. Most have little confidence in either system: They've been spooked by a seizure of their private bank accounts during the 2001 meltdown fear and wary of profiteering private companies handling their money in a country with a historically strong state presence. Meantime in New York lawyers for the social security administration appealed this week a US judge's orders freezing Argentina's pensions fund investments in the United States. District Judge Thomas Griesa of the US Court for the Southern District of New York in Manhattan extended a freeze he first imposed on Oct. 29 at the request of bondholders to satisfy prior judgment against Argentina on behalf of holders of its defaulted sovereign debt. "We are looking to the court of appeals to review the various restraints on expedition," said New York lawyer Marco Schnabl, who represents Argentina's Administracion Nacional de Seguridad Social (ANSES). "We are not a party to the litigation. We were dragged into this when restraints were imposed on us," Schnabl said. "The plaintiffs have argued that this is a permissible thing to do, but we do not believe it is permissible. We hope the court of appeals will referee between these two positions." The filing was made to the 2nd US Circuit Court of Appeals the same day senators were debating to approve of the state takeover of private pension fund assets. Argentina's government plan has raised investors' concerns about the country's ability to pay its debts. ANSES lawyer Schnabl argued that the judge's rulings in favour of hedge fund Aurelius Partners, and other funds who have sought repayment on the government's defaulted debt, go against protections under the US Foreign Sovereign Immunities Act. The bondholders sued Argentina after refusing to accept huge losses in the country's 2005 debt restructuring, three years after the biggest sovereign debt default in history.