UPDATE 1-Argentina limits pension fund investments abroad
(Recasts, adds details)
BUENOS AIRES, Oct 18 (Reuters) - Argentina ordered private pension funds on Thursday to scale back their investments in other countries belonging to the Mercosur trade bloc to help expand credit for local firms, the Economy Ministry said.
The pension funds will have to reduce their Mercosur investments, made largely in Brazil, to 8 percent of their portfolios by the end of December and to 2 percent by the end of 2008, the ministry said in a statement.
The move comes as President Nestor Kirchner seeks to spur increased investment in South America's second-biggest economy with steps that have angered some in the financial community.
On Wednesday, Argentine banks pledged to cut interest rates on some business and personal loans days after he threatened to force rates down by decree.
A source at an Argentine pension fund who asked not to be named said the companies had not been consulted by government officials about the move.
The idea behind the move is that banks that own the pension funds could use the deposits in individual retirement accounts for loans to local businesses rather than invest abroad.
The investments in the countries in Mercosur -- whose full members include Argentina, Brazil, Paraguay and Uruguay -- represent around 9 percent, or 10.4 billion pesos ($3.23 billion), of the funds' portfolios. ($1 = 3.22 Argentine pesos)
