Friday, November 21, 2008

Argentina Nationalizes Private Pensions

"nationalizes" = using the power of government to steal.

Link

Argentina’s Senate on Thursday night comfortably passed a bill to nationalise the country’s private pension funds in the final congressional hurdle for the government’s controversial plan.

A month ago, investors and financial markets were shocked by President Cristina Fernández’s announcement that she planned to nationalise the 14-year-old pension system, and saw the move as an ill-concealed asset grab designed to plug a hole in the government’s $21bn debt servicing requirements next year. The government denied this, saying it was simply rescuing a flawed system that had never worked well.

The private pension funds, known as AFJPs, were widely criticised for charging high commissions but the sudden way in which the president announced the nationalisation plan, and its speedy course through Congress, have done nothing to calm fears among investors that the government will flout property rights and take any measures it considers necessary to keep public finances flush.

The Senate approved the bill by 46 votes to 18 with one abstention. Under the new regime, the AFJPs’ $26bn in assets and annual contributions of up to $5bn will pass to the state social security administrator, Anses, which will be responsible for all retirees under the state’s pay-as-yo-go system.