ARGENTINA - Argentina's Lower House has voted to support president Cristina Fernandez de Kirchner's plan to nationalise about US$26bn in private pensions, a proposal that raised concern of a default.
"We've achieved a real consensus on this measure, convincing enough people in the opposition that the current pension system failed," ruling party lawmaker Jose Maria Diaz Bancalari told reporters. "The state has an obligation and a responsibility to oversee these funds."
Concern about Fernandez's plan was reflected in the benchmark Merval stock index, which fell 27% in the days after details were first reported on 20 October. Lawmakers aligned with Fernandez say the global financial crisis is making private pension plans less attractive, giving momentum to their efforts.
"The way these decisions are being made are disastrous for those looking for stability in the Argentine economy," said Felipe Sola, a member of the ruling party who opposed the bill, during the debate.
The vote followed a warning by Fitch Ratings on the risk incurred by the Argentine corporate sector if pension funds were nationalised.
Joe Bormann, managing director at Fitch, said the nationalisation of private pension funds threatened to eliminate the local bond market as a source of liquidity.
He explained: "While the asset allocation of corporate debt in the Argentine pension system is small, the pension funds' participation in the local debt market is essential. Without them, there are not enough investors to absorb the huge financing needs."
Fitch said during the first nine months of 2008, Argentine corporate bond market activity dropped dramatically to $306m from $1.85trn during a similar time period of 2007.
Additional factors of concern pointed out by Fitch were inflation, the negative business climate and the lack of institutional trust.
Fitch said in the future a weaker local demand would negatively impact all corporate sectors. Disposable income dependant companies such as media, real estate and retail would be hit hardest, it added.
However, Fitch also said the Argentine corporates had a much more conservative capital structure than in previous crisis with more liquidity and less debt.
The registration deadline for the Workplace Savings & Benefits Awards 2019 is today.
This week's top stories were the DWP giving the green light to CDC and TPR granting extensions for 11 master trust authorisation applications.
Susan Martin says building strong foundations for business are the only way forward as the pensions industry is radically shaken up
The Pensions Regulator (TPR) has granted Now Pensions a six-week extension for its master trust authorisation application after the 31 March deadline, PP can reveal.