Argentina’s wacky economic policies are making the news again, with the president succumbing to the nationalisation fever currently sweeping the capitalist world, saying she plans to have the government take over Argentina’s private pension funds.
President Cristina Fernández de Kirchner made the surprise announcement on Tuesday, in an appearance on state TV. She said that the government would nationalise all of ten Administradoras de Fondos de Jubiliación y Pensión (Administrators of Retirement and Pension Funds, or AFJP for short) that hold some $30 billion worth of investments, mostly Argentine government bonds and the and shares that represent the retirement savings of millions of Argentines.
The Economist sums up the situation nicely, echoing the lack of confidence most Argentines place in their government. What many here and abroad are asking is whether the proposed nationalisation is really a move to protect Argentines’ retirement from the vagaries of the stock market in uncertain times, or is it just a craven attempt to fill treasury’s coffers so the government can fund its election campaign in 2009?
Commentators and opposition politicians here in Argentina are extremely dubious. One opposition leader, Buenos AIres-based Elisa Carrió, said the move was an attempt to “plunder pensioners’ funds” and use the cash “to pay off debts or to amass a war chest for elections,” which will see a new Congress sworn in next year. Mauricio Macri, mayor of Buenos Aires and political foe of the Kirchners, who detect presidential ambitions in the millionaire ex-manager of the Boca Juniors football club, says the move would be a “criminal mistake” and has urged all citizens and opposition leaders to pay close attention to what’s going on.
The government, which appears to prefer improvisation over careful planning, is in an increasingly dicey fiscal position, with revenues dropping dramatically following the fall in commodities prices over the last few months. Some estimates say the weakening demand for Argentina’s agricultural products could see the government short by as much as USD$6 billion next year.
Many say the plan to nationalise pensions is sure to result in a drawn-out conflict which will see the government rely on populist rhetoric to justify the state takeover while heaping abuse on the “selfish” urban upper- and middle-classes who resist any effort that would see their wealth distributed more evenly. This is pretty much the same song sheet Cristina’s used during the debate over her attempt to impose a hefty tax-hike on farmers that saw the country divided strongly along ideological lines, with farmers staging a 100-day export strike earlier in the year. The measure was ultimately defeated in Congress, where Kirchner’s own party members – and, dramatically, her vice president – voted the bill down. The new proposal to nationalise retirement funds is also likely to meet with strong opposition across all party lines in the Congress but whether it will again split Argentines along the traditional – but arguably irrelevant – ideological divide remains to be seen. The president has lost considerable political capital over the course of the year and accusations of corruption like those being aired in the Valijagate suitcase scandal point to an extreme lack of transparency in her government.
Even lefty columnists, like La Critica‘s Martín Caparros, find they can’t support the move. “I couldn’t be more in favour of the nationalisation of pension funds,” he wrote on Wednesday. “Argentina needs to recover the State that was destroyed by the Peronists of the 1990s, but for this to happen the State must be and appear to be unblemished, unpolluted, cleaner than a propaganda white-wash. We all know this is not the case, and this makes it so much harder to defend certain policies.”
The private pension funds were created by Carlos Menem’s neo-liberal (but Peronist in name) government in the ’90s after years of poor management of retirement funds by successive Argentine governments which left the savings exposed to economic turmoil like hyper-inflation as well as the risk that they’d be sacked by crooked or incompetent politicians. Around 85% of workers took up the offer from private funds, and though the funds’ performance has fallen far short of perfect it’s not clear that their investors will feel confident with the government taking over.
The news saw the local share market, the Merval, sink by 18 points on Wednesday, to its lowest level in 20 years. But the Argentine exchange wasn’t the only one affected by the announcement. Markets around Latin America plunged after the news, which also shook things up in the mother country, where Spain’s share market dropped by 8%, its second sharpest fall for the year. The Spanish national daily, El Pais, referred to the move as an “Argentine absurdity.” Several major Spanish corporations have significant investments in Argentina, and would be affected by the move. Relations between the Kirchners and their Spanish counterparts are already somewhat strained by the Kirchners’ determination to nationalise Aerolineas Argentinas, which is owned by Spanish businesses. Despite assurances that the deal will be done above-board, with a proper takeover of shareholdings, there is so much mistrust of the Kirchners – and their government does so much talking out of both sides of its mouth – that some fear the company will be not so much nationalised as expropriated.
Filed under: economy, news, politics | Tagged: Aerolineas Argentinas, Carlos Menem, Cristina Kirchner, Eilsa Carrió, Mauricio Macri, Merval, pension funds, Spain | 1 Comment »