ARGENTINA - Argentina's Senate approved president Cristina Fernandez de Kirchner's plan to nationalise about US$24bn in private pensions.
"This is a proposal that will benefit the whole social security system," said Cesar Gioja, a senator for the ruling Peronist party, during the 12-hour debate.
Opposition leaders said the planned takeover is a cash grab, and that the state-run social security agency can't be trusted to manage the funds responsibly. Gerardo Morales, a senator from the Radical Civic Union, said nationalisation paved the way for the government to use the funds to pay debt and increase public spending.
"Anses is not ready to manage these funds," said Morales during the debate. "This is a very precarious bill."
The proposal was modified by the lower house to add restrictions on how the pension money can be used. The bill requires the social security agency to invest the assets "profitably and safely," and sets up a 13-member oversight board that will be named by the government. It also limits the amount that can be loaned to the government through bond purchases.
Next year, Argentina will need to borrow as much as $14bn, up from $7bn in 2008, as the economy slows, said RBC Capital Markets, a Toronto-based unit of Canada's largest bank.
Besides the $24bn in nationalised assets, the social security agency will receive new contributions of about $4.5bn next year, said Javier Kulesz, an economist at UBS Pactual in Buenos Aires.
Argentina created the private pension system in 1994 as part of a program to reduce state involvement in the economy and give workers more control of their retirement savings. The move also aimed to increase investments in the local capital markets.
"I haven't seen crowds in the streets defending the private pension funds," said Miguel Angel Pichetto, head of the Peronist party in the Senate. "The private system has failed and there's a general agreement on that."
Pension funds seized by the government will become part of the state system, which pays workers a guaranteed pension equal to 1.5% of their monthly salary for each year they worked. By contrast, payments under the private system depended on the performance of the stocks and bonds in which the funds invest.
"This government has worked hard to boost the minimum pension payments and we will keep working to make the system better," Anses's head Amado Boudou told reporters after the vote.
Fernandez described the takeover as a "rescue" for 9 million Argentines who maintain individual accounts managed by banks including London-based HSBC Holdings Plc and Spain-based Banco Bilbao Vizcaya Argentaria SA.
About 3.6 million people make monthly contributions to the private funds, and 450,000 retirees receive payments from their accounts.
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