Last Nail in Coffin
Nationalization of the country’s private pension funds is the final nail in the coffin of Argentine capital markets. And efforts to normalize external creditor relations are stalled.
by Jason Mitchell Argentine president Cristina
Fernandez roiled financial markets in October by announcing
plans to nationalize pension funds. This involves bringing into
the state-run pension system annual contributions of 15 billion
pesos and funds under management of almost 100 billion pesos at
the Administradoras de Fondos de Jubilaciones y Pensiones
(AFJPs). The government says it did this because private
pension funds had underperformed since they were set up in
1994, and because it wanted to ensure that senior citizens
receive a decent pension. However, market watchers say the true
motive is to shore-up fragile government finances, which will
be tested by next years $11.7 billion in capital
amortizations on debt and $6.9 billion interest payments. Some
$2 billion of the amortizations involve debt held by the AFJPs
and a further $1 billion of the interest payments would also be
destined for private pension funds.Analysts say that the
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