(Updates with details)
By Helen Popper
BUENOS AIRES Nov 20 The Argentine Senate gave
final congressional approval on Thursday to a state takeover of
$24 billion in private pension funds, a move that has raised
investor concerns about Argentina's ability to pay its debts.
Senators voted 46-18 with one abstention to back the
nationalization pushed by President Cristina Fernandez, who
says it will protect workers and retirees from the global
financial crisis. The lower house of Congress passed the bill
on Nov. 7.
Opposition leaders criticized the takeover as a government
attempt to bolster state coffers to meet mounting debts next
year, when Fernandez also faces legislative elections.
"This is a historic change," said Miguel Pichetto, a
senator from the ruling Peronist party.
Pichetto said it "will bring stability to financial markets
and the investments pension funds have in local companies."
The approval helps Fernandez regain her political footing
after a bitter farming conflict earlier this year in which she
suffered a stunning defeat over a tax hike on soybean exports.
Opinion polls show there is widespread support for the
nationalization among Argentines who complain the private funds
charge high commissions and offer low returns.
Argentina's social security system has been mixed since
1994, with workers being able to steer obligatory contributions
into either the state system or the privately administered
funds, called AFJPs.
But government officials say a 20 percent slump in the
pension funds' assets has left workers exposed to the global
Fernandez's pensions plan sent local debt and stock markets
into free fall when she announced it unexpectedly last month,
with critics branding it a desperate bid by the government to
get its hands on fresh funds and even avert a debt default.
Latin America's No. 3 economy has racked up five years of
sizzling growth, but the global financial crisis is slowing the
Argentina owes $20 billion in interest and principal on its
debt next year, and only $8 billion of that is accounted for in
the government's financing program.
CONCERNS ABOUT USE OF FUNDS
Critics of the plan say the government is out to boost cash
flow by raiding annual pension contributions of some $4
billion, which they argue will only serve to worsen Argentina's
"This looks to me like an act of desperation," said
political analyst Jorge Giacobbe.
"Next year is going to be very tricky even with the revenue
from the AFJPs. It's hard because of the payments that are due,
plus the global problems and the bad or nonexistent
relationship the government has with the people," he added.
To counter criticism, Fernandez agreed to create a
commission that includes the political opposition to oversee
how the money is invested.
Under the new law, the government will still be able to
raise funds by issuing bonds to the social security
administration, as it has done periodically in recent years
because the country remains largely shut out of international
Argentina has been hamstrung by lawsuits from holdouts who
rejected a 2005 debt restructuring, three years after a $100
billion default during a deep economic crisis.
The pensions takeover means the state will become the
biggest institutional investor in Argentina, holding shares in
some of the country's top companies, a prospect that has
angered many business leaders.
(Additional reporting by Lucas Bergman; Editing by Peter