Argentina's Senate approved a state takeover of $24 billion in private pension funds. President Cristina Kirchner said this would protect workers from the financial crisis but critics have raised concerns about the country's ability to pay debts.
A bill to nationalize over 26 billion dollars in private pension funds was approved by the Senate late Thursday, after clearing the Chamber of Deputies earlier this month, and was headed to President Cristina Kirchner for her signature.
The measure, a flashpoint of controversy since Kirchner last month announced her intent to nationalize 10 bank-owned pension funds to protect retirees from the effects of the global financial crisis, was approved by a 46-18 vote in the Senate.
Kirchner defended the plan at last weekend's G20 summit in Washington, saying the 1994 privatization of Argentine pension funds was responsible for "42 percent of external debt" and played a large part in Argentina's 2001 default on its international debt obligations.
Argentina's private pension funds cover 9.5 million workers -- of whom only 3.6 million meaningfully contribute -- and lost 17.5 percent of their worth, some 8.1 million dollars, between October 2007 and October 2008, according to the government.
Opponents of the nationalization believe it is a confiscation of funds that would be used to pay the country's public debt. Argentina in 2009 faces debt payments of some 20 billion dollars.
The reform continues a policy of strengthening the state's role in the economy which began under the previous president, Nestor Kirchner, the current president's husband.
During Nestor Kirchner's 2003-2007 presidency the postal service, the water works company and rail lines among other things were nationalized.
The proposed nationalization has divided the country. Polls show that a majority of Argentines support a state-run retirement system, but the move caused panic among investors, sending Spanish stocks and Argentina's MerVal index plunging in October when it was announced.
Date created : 2008-11-21