Argentine absurdity strikes again

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.


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Bad times for ex-presidents

The scandal that has haunted Carlos Menem since his presidency ended in 1999 will finally be aired in court when the ex-president (and current senator for La Rioja province) will be tried for his part in a secret arms deal that saw weapons sold illegally to both Croatia and Ecuador between 1991 and 1995.

Does this man look like a crook to you?

Does this man look like a crook to you?

The oral trial will be a drawn-out process, with 41 accused under investigation in the matter. Among them is ex-economy minister Domingo Cavallo.

Menem is accused of having signed three secret presidential decrees permitting the illegal arms sales. According to the accusations, Menem knowingly broke a United Nations arms embargo to aid Croatia in its fight against Serbian forces in the early 1990s. He then used the same trafficking network to send arms to Ecuador during a 1995 border dispute with Peru. Many Argentines find it particularly mortifying that Argentine weapons were sent to support Ecuador – not only because Argentina was acting as a mediator between Ecuador and Peru, but also because Peru was the only South American country to stick up for Argentina during the 1982 Falklands War.

Menem has eluded justice over the accusations for some time, and the question some are asking, though, is why now? Menem was detained and placed under house arrest on the same charges on 2001 but was acquitted (in a less-than-transparent process) due to lack of evidence. A case of double jeaopardy? And if not, why has the case taken seven years to be revisited? The timing has some saying it’s the Kirchners taking revenge on Menem – a fellow Peronist – for voting against their grains tax bill that saw farmers strike earlier this year. They do seem to have the power to turn – and halt – the wheels of justice, and the courts’ vigor in the case against Menem is a stark contrast to its lethargy when it comes to examining accusations of corruption against several serving Kirchnerite functionaries. In any case, when he stands trial this week, he will become the first democratically elected president in Argentine history to suffer such an indignity.

Ex-members of the military junta, on the other hand, have been seeing the pointy end of justice ever since the return of democracy in 1983 and it has only gotten pointier since the Kirchners have been in charge.

On Friday, ex-dictator, former president General Jorge Videla was moved from house arrest in the leafy and civilised Buenos Aires neighborhood of Belgrano to a military prison in the Campo de Mayo, just outside the capital.

Videla was convicted of crimes against humanity when Raúl Alfonsín, the first democratically elected president to follow the dictatorship, set up tribunals to judge the ex-military rulers. Videla enjoyed a few years of freedom after Menem handed out pardons for ex-repressors in 1990, but those pardons have been overturned by the Kirchners and since last year Videla has been stuck at home, much like any other 83-year-old man who finds himself heartily unloved by the majority of his neighbours and fellow citizens. But now instead of growing old and dying among family, he will be in prison – on the very site where many Argentines found themselves illegally held and tortured under his authority during the 1970s.

While serving out a life sentence, Videla faces further charges and will be called to give evidence in a number of pending cases, including an investigation into the widespread practice of “baby theft” – the policy of misappropriating the newborn babies of illegally imprisoned women, who were later “disappeared” and their babies illegally adopted by military families. He also faces kidnapping charges and is being processed for having participated in “Plan Condor” – a clandestine scheme by which the military governments of several Southern Cone countries (backed with training and tacit approval from the USA) helped each other by swapping illegally detained prisoners and exchanging information obtained under torture.

As for slippery old Menem – his get-out-of-jail-free card is still valid for a while. Serving senators are protected from imprisonment (possibly the main reason Menem has sought to prolong his political career), so even if found guilty, he buys some time until his term ends in 2014.