Bonds News

Argentina pension funds try to avoid nationalization

BUENOS AIRES, Nov 2 (Reuters) - Argentina’s private pension funds will propose a series of reforms as an alternative to the government’s bid to nationalize the system, newspaper La Nacion quoted a top sector official as saying on Sunday.

Sebastian Palla, president of the Union of Argentine Retirement and Pension Administrators business group, will send the government a plan on Monday that envisages more conservative investment and would eliminate commissions during profitless months, the paper said.

“All of this was put forward before, at different times,” Palla told the paper. “None of it is hugely novel. What we are doing now is grouping (the ideas) together while we urgently discuss this.”

President Cristina Fernandez’s government last month announced a plan to take over Argentina’s private pension system, in what was seen as a desperate move to secure funds to head off the specter of a new debt default.

Critics say the government wants to use the flow of $4 billion a year in retirement contributions to meet billions of dollars in payments coming due next year.

“Today, (private Argentine pension funds) have 10 percent of their members’ contributions invested abroad and 55 percent invested in Argentine debt,” Palla said. Argentine bonds fell around 60 percent in October.

“Let us discuss the composition of these portfolios. The healthiest thing would be to have more diversified risk.”

The head of Argentina’s social security system said last week the government would not liquidate private pensions or use them as a tool to finance debt if Congress approves a bill to nationalize the funds.

The move to take over pension funds, which manage around $25 billion in retirement savings, has rocked investor confidence in South America’s No. 2 economy.

The government on Saturday urged the country’s pension funds to fight a U.S. court freeze on about $2.5 billion worth of assets, as holders of defaulted government bonds try to get their money back.

A U.S. judge this week ordered the freeze after bondholders argued that the plan to nationalize 10 private pension funds meant the assets managed would become state property and therefore subject to claims by holdouts who rejected a restructuring after Argentina’s world-record debt default. (Reporting by Karina Grazina, Writing by Simon Gardner)