Argentine Peronist lawmakers balk on pension bill

BUENOS AIRES Oct 24 (Reuters) - Lawmakers from her own Peronist party have begun to question Argentine President Cristina Fernandez's planned takeover of $30 billion in private pension funds, which sent local markets into a tailspin.

A small group of Peronist congressional deputies who have doubts about the bill told Reuters they will not pass it without changes to specify how the government will manage retirement accounts.

"The congressman ... doesn't believe you can just improvise a bill involving millions of Argentines. The way the bill stands now, he will not approve it," said the spokesman for Deputy Felipe Sola, an influential Peronist and former governor of Buenos Aires, Argentina's most populous province.

Another Peronist congressman, Enrique Thomas, said the bill needed changes to guarantee savings and allow time for account holders to move their funds into the state pension system.

Debate on the bill is set to begin next week in the 257-seat lower house, where more than 140 deputies are Peronists or allies of Fernandez, who said her bill is meant to protect retirement savings from the global credit crisis.

Leaders of the opposition Radical Civic Union initially voiced support for the bill after Fernandez sent it to Congress on Tuesday, but have backed down as the week progressed.

Critics have said the president's surprise pension announcement this week was a desperate move to gain access to funds and stave off default next year when the government needs to raise $12 billion to pay interest and principal on debt.

MARKETS SPOOKED

The plan spooked global markets on Wednesday as investors began imagining state takeovers of sectors in other emerging markets. Argentina stocks tanked and its benchmark bonds are trading at 20 percent of their face value -- levels that imply high expectations of default -- and bond prices were sinking on Friday for an eighth consecutive session.

Some 9.5 million Argentines have accounts in the private pension system, and about 38 percent of that number are currently paying into the system. Less than 500,000 people are drawing pensions out of the 14-year-old private system.

The pension fund administrators, known as AFJPs, have been criticized for high commissions, but industry leaders defended their management of retirement funds and say they will lobby against the bill.

President Fernandez took office last year with a firm grip on Congress, but her control deteriorated during a bitter political battle earlier this year when the Senate killed her decree raising soy export levies.

Latin America equities strategist Christopher Ecclestone from the Hallgarten research firm in New York, said Fernandez erred by not attacking pension fund administrators first to generate resentment against them before announcing the takeover.

He sees lawmakers resisting the pension bill as they did the soy-tax bill.

"After all the soybean tax was on a small group of farmers. This is on 9 million constituents. Argentine deputies have to face elections like anyone else ... They want to be in Congress for 20 years not just the next four years," Ecclestone said.

Miguel Heredia, a congressional deputy for the Front for Victory, Fernandez's branch of Peronism, told Reuters he wants the law to be more specific about how money would be handled.

"We really need to form a state agency that seriously controls the destiny of the funds, that precisely limits what can be used by the national government, how it can be used, where, and how to handle profits," Heredia said. (Writing by Fiona Ortiz, editing by Anthony Boadle)