UPDATE: Argentina President Signs Plan To End Private Pensions
Wednesday October 22nd, 2008 / 0h13
(Updates to include additional comments from officials and details of the fund management) BUENOS AIRES -(Dow Jones)- Argentine President Cristina Fernandez signed a bill Tuesday that will end the country's 14-year-old private pension fund system if it is approved by the country's legislature. Details of the document - which Fernandez signed along with Labor Minister Carlos Tomada and Amando Boudou, the head of the national social security system, ANSES - weren't immediately available. However, Boudou said that the full 97 billion pesos in the private pension system would be transferred to the state agency. And ANSES spokesman Sergio Poggi said the private pension funds would cease to exist "as we know them." Cabinet Chief Sergio Massa said that a congressional commission would control the transfer of funds to ANSES and monitor the program as it moves forward. Massa compared the program to the state retirement system in European countries such as France, Spain and England. The agency will be "an intergenerational pact" whereby current workers pay for current retirees, he said. At present, workers have the option of paying into the state system or choosing retirement plans run by 10 private funds known as AFJPs. In a speech following the signing ceremony, Boudou said the reform would "rescue Argentine retirees from uncertainty" and was "the end of a failed experiment." Former president Carlos Menem implemented the option of private retirement plans in the 1990s. "That was a phenomenal error that cost Argentine society dearly," Boudou said. The value of the private funds has fallen sharply due to the international financial crisis and the sharp drops in share and bond values which have resulted. News of the nationalization first broke Monday, prompting a massive selloff in Argentine stocks and bonds. The Merval index of large-cap stocks closed down 11.99% Tuesday, following a 3.29% loss on Monday. The pension funds are some of the largest investors on the local scene and the loss of those funds will decrease liquidity and trading volume, according to analysts. -By Michael Casey and Shane Romig, Dow Jones Newswires; 54-11-4590 2428; michael.j.casey@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=0sewZ%2B3zHRiSf2ktabCOTg%3D%3D. You can use this link on the day this article is published and the following day.
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