BAD MEMORY....

Argentina Makes Grab for Pensions Amid Crisis

BUENOS AIRES -- Hemmed in by the global financial and commodities bust, Argentina's leftist government found a novel way to scrape up the money to stay afloat: cracking open the piggybank of the country's private pension system.

President Cristina Kirchner proposed to nationalize the private pension system, which has about $30 billion in assets, a move that would provide the government with much of the cash it needs in the short term to avoid default for the second time this decade. But analysts said the plan reinforces Argentina's image as a renegade in financial circles and represents a repudiation of the system of private pensions that has been in vogue in developing countries.

What about consumers?

Budget Gaps
Economic turmoil of recent months has also dealt budget gaps to some other nations, notably oil-exporters Venezuela and Iran, but Argentina is doubly hurt. Because the Argentine government stiffed international creditors as recently as 2001, any attempt to return to the international credit markets in the coming year would be almost certain to fail especially now that banks and investors are allergic to anything that seems risky.

OPEC wanna cut the production

The government told Argentines its move to nationalize private pension funds was aimed at protecting investors from losses resulting from the global market turmoil. 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."

Protecting? but Is it not better to diversify? buying safe securities

Is this a good choice? What is behind of it?

But economists said the motive is to provide the government with about $5 billon in annual pension contributions that it needs to plug a gap in the financing next year and avert a second debt default. "They were in a tight situation and this was an accessible source of funds," said Buenos Aires economist Aldo Abram.

Ahh that's it

Opposition leaders vowed to contest it. Opposition leader Elisa Carrio vowed to resist, saying, "The government measures aren't designed to better the retirement system but rather to plunder the funds of the retirees." One pension-fund head suggested that contributors inundate the government with lawsuits. Even if they don't heed that call, the move also is expected to face legal challenges.

The same history

"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.

Bye Bye Fully Funded?

The pension system in places like Argentina and Chile is much more free-market-oriented than in the U.S. The U.S. Social Security system is run by the government and is "pay as you go," meaning the government uses contributions from current workers to pay retirees. Latin American countries like Chile decided to give workers the option of creating individual retirement accounts run by private companies where workers would be forced to set aside money for their retirement - similar in some ways to a 401(k)-type account in the U.S.