Argentina Makes Grab for Pensions Amid Crisis
I know it's just Yanqui propoganda, but if anyone's interested, the Kirchners made the front page of the Wall Street Journal today. I'm shocked that they don't seem to be able to discern that this paternalism is necessary so that the Kirchners can protect Argentina's workers and retirees from the capitalist horde. Well, actually, I'm not shocked. But enough of my editorial, here's the article:
[quote]BUENOS AIRES -- Hemmed in by the global financial squeeze and commodities slump, Argentina's leftist government has seemingly found a novel way to find the money to stay afloat: cracking open the piggybank of the nation's private pension system.
The government proposed to nationalize the private pensions, which would provide it with much of the cash it needs to meet debt payments and avoid a second default this decade.
The move came as wealthy nations unveiled fresh steps to fight the credit crunch. The U. S. Federal Reserve said it would bolster money-market funds, which have faced withdrawals, by lending as much as $540 billion to the industry. France said it would inject $14 billion into six banks on condition they agree to increase their lending. In a sign banks were a little more willing to lend to each other, the London interbank offered rate, a benchmark for many business and consumer loans, again declined.
Argentine President Cristina Kirchner said the move to take over the private pension system was aimed at protecting investors from losses resulting from global market turmoil. Funds in the system, which is parallel to a government pension system, are administered by financial firms. The private system has about $30 billion in assets and generates about $5 billion in new contributions each year.
While no one knows for sure what the government would do with the private system, economists said nationalization would let the government raid new pension contributions to cover short-term debts due in coming years.
Argentina's financing needs are growing quickly as the global financial squeeze pushes down prices of its commodity exports, such as soybeans. Coupled with unchecked government spending, the commodity downturn has carved a gap of around $10 billion to $11 billion in what Argentina must pay on its debt between now and the end of 2009, according to economists. The payments are from debt restructured after a 2001 default and new debt issued locally.
Budget Gaps.
The economic turmoil of recent months has exposed budget gaps in many emerging nations. They've run smaller budget deficits, but thanks less to spending restraint than to the income bonanza. Now they're being forced to make tough choices: Mexico this week said it will run a budget deficit next year of 1.8% of annual output rather than a balanced budget as planned.
Argentina is doubly hurt. Having stiffed creditors as recently as 2001, it has few prospects of returning to international lending markets soon. Economists who were critical of the nationalization proposal said it reinforced Argentina's image as a renegade in financial circles.
The private pension system was created as an alternative to state pension funds in 1994, when conservative President Carlos Saúl Menem ran Argentina and free-market policies were in vogue in Latin America. Countries in the region followed the example of Chile, which had privatized pensions in 1981. In Argentina, workers have the option of paying into individual retirement accounts run by pension funds rather than the government.
Three million Argentines do so. They can track their accounts and have some say over how the pension funds invest the money, making the system somewhat like U. S. 401(k) accounts. After a nationalization, it's presumed the government-run system would absorb the private funds.
The Latin American system has helped create a large pool of domestic savings that can fund local capital markets and lend money for projects like toll roads. In Argentina, Mexico and Chile, pension funds are among the biggest players in local stock markets, helping young companies get access to capital.
The main Merval Argentine stock index tumbled 12% on Tuesday, largely on fears that the market would atrophy if the government used new pension contributions to pay debt rather than let it go into the capital markets.
The head of the Argentine association of private pension funds, Sebastian Palla, blasted the government step. He said that since their 1994 inception, the funds have had a 13.9% average annual return.
'Accessible Source'
President Kirchner painted the move as an attempt to help workers weather the financial crisis. The value of private retirement accounts in Argentina has probably fallen in recent months due to a declining stock market, economists say. President Kirchner said in a speech: "The main member countries of the [Group of Eight] are adopting a policy of protection of the banks and, in our case, we are protecting the workers and retirees."
Buenos Aires economist Aldo Abram, among many other economists, wasn't buying that argument. "They were in a tight situation and this was an accessible source of funds," he said.
The step requires approval of Congress, where the governing Peronist party has a majority. Opposition leader Elisa Carrió vowed to contest it, saying, "The government measures aren't designed to better the retirement system but rather to plunder the funds of the retirees."
Still, the proposal is likely to pass, said Alberto Bernal-Leon, head of macroeconomic strategy at Bulltick Capital Markets in Miami. He noted that Argentina will have elections next year, and said access to pension funds would make it easier for the government to muster support through patronage.
One pension-fund head who is opposed to a takeover suggested that contributors inundate the government with lawsuits. Even if they don't heed that call, the move is expected to face legal challenges.
In a history replete with financial crises, Argentines have had lots of experience with the government meddling with their money. Prior to the 2001 economic collapse, when the government was trying to maintain the peso at parity to the dollar, the government placed limits on bank withdrawals. Later, it issued a decree converting dollar-denominated deposits to pesos.
Argentina has been largely shut out of international capital markets since 2001, when it declared the largest sovereign-debt default ever.
"With the [latest] announcement, the custom of violating the rules of the game has been repeated, which deepens the lack of confidence," political analyst Rosendo Fraga wrote in the Buenos Aires daily La Nacion.
The Argentine economy has been buoyed the past five years by rising prices for the agricultural commodities. It also got a hand from Venezuelan President Hugo Chávez, whose government bought billions of dollars of Argentine debt in recent years. But prices of commodities such as soybeans have plunged in recent months, and Mr. Chávez is facing his own problems with the sharply lower price of oil.
Mr. Abram, the economist, said a pension takeover would help the government close about half the gap in funds needed for its debt service, as pension contributions go into public coffers rather than private ones. He said the rest of the funding needs could be obtained from a state-run bank or by dipping into currency reserves.
José Piñera, a former Chilean cabinet minister who pioneered the privatized pension system and has served as a consultant to many other countries that have implemented it, called the nationalization proposal "just another step in Argentina's 100-year 'road to underdevelopment.'"
—David Luhnow contributed to this article.[/quote]Write to Matt Moffett at [email]matthew. Moffett@wsj. Com[/email]
Argentine Bonds, Stocks Sink as Takeover Fuels Default Concerns
[url]http://www.bloomberg.com/apps/news?pid=20601087&sid=a8feHCIdRSew&refer=home[/url]
Nevertheless I am coming in two weeks time to pay my annual visit.
Since the euro is declining too I am thinking of bringing dollars with me unless BANELCO raises the daily limit to as many pesos you want now. LOL
Markets: Madrid Loses Over 5% Due To Argentina Effect
(AGI) - Madrid, 23 Oct. - After yesterday's "earthquake", the Madrid stock exchange continues to decline: it is currently down 4.03%. And in the meantime, the controversy the day after the Argentine government's announcement of the nationalisation of pension funds that manage business worth 30 billion dollars, belonging to 9.5 million workers and worth a monthly income of 300 million dollars shows no sign of placation. The news literally caused the bottom to drop out of South American markets (the Buenos Aires lost over 10%) with the inevitable repercussions on the stock market in Madrid. In any case a calm signal is being launched towards the markets: the Argentine central bank reported today that the government will be able to cover bond payouts in 2009. In the meantime, contact between Madrid's government and Argentine authorities is becoming more frequent: according to executive branch sources in Madrid, "work is progressing with a common sense of availability for an agreement with companies". The objective is to give them "trust, tranquillity and guarantees". What worries investors is the fact that, with the nationalisation of pension funds, the Argentine state has become a minor shareholder with 14 quoted companies, most of these Spanish, as for example Gas Natural Ban, Metrogas, YPF and Telefonica. The Minister of Planning, Julio de Vido, called for a meeting yesterday with YPF and Telefonica, in order to banish ideas of general nationalisation of the economy. That which permitted the Beunos Aires stock exchange to close at 10.11% , despite the fact it had been losing over 17%.
[url]http://www.agi.it/business/news/200810231539-eco-ren0048-art.html[/url]
Aerolineas Being Nationalized
Argentina kicking out Aerolineas owners-Marsans.
10.23.08, 9:29 AM ET.
MADRID, Oct. 23 (Reuters) - The Argentinian government is kicking the Spanish owners of Aerolineas Argentinas out of the company, one of the men controlling majority stakeholder Marsans said on Thursday.
'They are kicking us out and we will see if this concludes in the best possible way, which is my hope,' Gerardo Diaz Ferran, one of the two men who control unlisted travel firm Marsans told Spanish radio station Cadena Ser.
Earlier a newspaper in Argentina said the government had decided to seize Aerolineas Argentinas because talks with the owners over a price had broken down.
The Argentine government and Marsans agreed on Oct. 14 to extand talks for one more month to set a price for the state takeover of the country's biggest airline after Marsans agreed to sell its 95 percent stake in July.
[url]http://www.forbes.com/afxnewslimited/feeds/afx/2008/10/23/afx5596272.html[/url]
& quot;Argies are so stupid, they don't know they're stupid & quot;
Mongers-
Actually I believe Sidney is attributing this quote to me, as I have said it many times and I do believe it when it comes to all money and business related manners. However, I am not the original author of the quote, as credit for that belongs to my former boss here in Argentina. I can honestly state that I probably have more experience dealing with Argentine business practices over the past 3 years than almost anyone on this board and I find that this quote holds true time and time again. Bars, restaurants, clubs, and shops all are retarded when it comes to doing business; they believe in "one timing", the customer, sucking as much money as possible out of the customer with no regard to whether he will come back and build a long lasting business relationship. They would prefer to "skimp" on product, and overcharge for said skimpy product, than to provide a well-sized product and sell it at a modest profit.
The same holds true for Argentine employees, by and large, although there are of course exceptions, those that buy into the "Western" idea of business. The majority of my Argentine employees still, after 2.5 years, do not understand our primary concept and promotion that has been wildly successful up to this point. They just cannot understand that giving somebody a great deal will cause them to return time and time again and in the long run much more money is earned and the free word of mouth publicity gained from this practice brings a never ending stream of clients.
Actually, the stupidest of the stupid here are probably the majority of bar owners in Buenos Aires. On three separate occaisons, my business was shut down by the government for periods ranging from 45, to 17, to 7 days. Each and every time we reopened, the place was packed to capacity within an hour or two of reopening. Even though there are half a dozen competitors in the neighborhood, all but one is almost always empty, and not a single one thought to try to steal our customers through copying our promotions or business model while we were shut down. In the USA, the minute a promotion or new idea works, every bar within a 50 mile radius is copying the promotion or idea. This all because when it comes to business and money matters "Argies are so stupid, they don't know they're stupid".
Suerte,
Rock Harders
