Last Nail in Coffin

Dec 1, 2008

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 year’s $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 country’s...

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