[Homestead] Argentina nationalizes private pensions
bobford79 at yahoo.com
Sat Nov 22 10:30:43 EST 2008
If my memory serves me correctly this am (sometimes it serves me poorly) Argentina , in my youth, was the envy of most Latin American country. 'more secure, better educated, better standard of living, etc. Today. The gov't is seizing the private pension plans, putting them all into their "social security" program, in order to "save them"? There must be several of Orwell's expressions I should use , here. ...............bobford
Argentine Stocks Fall as Biggest Shareholders Seized (Update5)
By James Attwood
Nov. 21 (Bloomberg) -- Argentine stocks fell and the Merval posted the biggest weekly decline among global markets as the state seizure of the nation’s biggest shareholders undermined investor confidence and threatened to spur an equity sell-off.
The Argentine Senate last night approved President Cristina Fernandez de Kirchner’s plan to nationalize about $24 billion in private pensions, a move opposition parties called a cash grab and the government said is a way to protect retirees from the worst financial crisis since the Great Depression.
For the Buenos Aires Stock Exchange, the government’s decision underscores the growing irrelevance of a market whose listed stocks dropped to 82 from a record 669 four decades ago and is discouraging outside investment because of capital restrictions. The Merval index fell 4.1 percent to close at 828.99, extending a weekly decline to 19 percent, the steepest since the pension seizure plan emerged a month ago.
“It’s a substantial blow to the capital markets,” said Eduardo Costantini, the 62-year-old chairman of Buenos Aires- based real-estate and asset management group Consultatio, the sole Argentine company to go public this year. “The only long- term investor with characteristics of the pension fund industry disappears with this.”
The funds, known by their Spanish acronym AFJPs, hold about a quarter of shares available for public trading in Argentina, data compiled by the companies show. They were net buyers of shares for a third month in September as the benchmark Merval index tumbled 10 percent and emerging-market funds pulled out.
Argentina’s index is down 61 percent this year, compared with the 51 percent decline in Brazil’s Bovespa index and 38 percent slide in the Mexican Bolsa. Argentina’s economy, which slipped into a recession after the government defaulted on $95 billion of debt in 2001 before recovering, is headed for a slowdown. That may lower tax revenue and hurt its ability to meet debt payments, according to Goldman Sachs Group Inc. economist Pablo Morra.
The government is taking over pension funds as MSCI Inc., whose stock indexes are tracked by investors with $3 trillion in funds, prepares to remove the biggest stock, Tenaris SA, from its Argentine measure and considers downgrading the nation to frontier from emerging-market status.
“Put all those together and it really spells the death knell of the Argentine equity market as a place where foreigners want to invest,” said Citigroup Inc. strategist Geoffrey Dennis. Citigroup this week cut its recommendation for Argentina to “zero” from “underweight.”
In 1995, a year after the AFJPs were set up to help bolster capital markets, Argentina’s share of emerging market equity fund investments was 4 percent, making it the third most invested Latin American market after Brazil and Mexico, according to fund flow tracker EPFR Global in Cambridge, Massachusetts. That shrank to 0.5 percent at the end of September, putting it in fifth spot among regional peers.
The pension funds’ assets include 6.8 billion pesos ($2 billion) held in local stocks, according to Argentine regulators. They will be transferred to the state-run social security agency as part of the government’s decision.
The funds invested about $144 million in domestic equities in September, according to Deutsche Bank AG. Foreigners have been selling at the fastest pace in eight years. Emerging-market funds sold about $340 million in Argentine stocks through September in the biggest outflow since 2000, according to EPFR.
The government forced the pension funds to sell more than $500 million in Brazilian stocks in a three-day fire sale last month, as Amado Boudou, the head of the social security agency Anses, said pension accounts shouldn’t hold any foreign assets.
In an Oct. 28 speech to lawmakers, Boudou vowed to “protect the value” of the AFJPs’ domestic equity holdings and said the government won’t “rush out and sell at any price.”
While Mariano Kruskevich, an analyst with Grupo SBS in Buenos Aires, said the social security agency is unlikely to begin a broad sell-off of local stocks given the “shallow” market and continuing credit crisis, some investors speculate it’s possible.
Holdings in individual companies probably will be cut to a maximum of 10 percent over five years, Ambito Financiero newspaper reported Oct. 27, citing people it didn’t name at Anses.
AFJPs own at least 20 percent of companies including Buenos Aires-based Telecom Argentina SA and Siderar SAIC. Anses press officials didn’t return phone or e-mailed requests for comment.
‘Look to Sell’
“If emerging markets stabilize, I think they’ll look to sell whenever they can,” said Greg Lesko, who helps manage $1 billion at Deltec Asset Management in New York, including Latin American shares. “A fire sale wouldn’t serve anybody’s interest. They’ll probably do their best to time it. A lot’s going to do with what’s going on in the rest of the world.”
The pension nationalization also will hurt Argentina’s asset management industry, which oversees the AFJPs’ foreign holdings, and eliminate demand for share and debt issues, Consultatio’s Costantini said. His company, which raised about $100 million in an initial public offering in May, probably will be the last IPO for “a long time,” he said.
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