10/27/2008

Argentina: Cristina’s looking-glass world

A short-sighted plan to nationalise private-pension funds in Argentina

ACROSS the developed world, solvent governments have temporarily nationalised banks whose survival was in doubt. Argentina, which often resembles the rest of the world seen through a distorted mirror, likes to do things differently. There the private pension system, which has suffered investment losses but is otherwise sound, now faces permanent nationalisation by a government whose own solvency has been called into question. “The G8 countries are protecting their banks, and we’re protecting our workers and retirees,” declared President Cristina Fernandez de Kirchner, as she announced a bill containing the measure on Tuesday October 21st.

The immediate effect was to leave them less protected: the Buenos Aires stock-exchange index fell 24% in two days, and investors dumped Argentine bonds, sending their yield soaring to 28%. Many economists and opposition politicians fear that the government’s intention is to raid the pension funds to fill a widening fiscal hole. “A legalised robbery” was how La Nacion, a newspaper, dubbed it in an editorial. ...



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[Source: The Economist: News analysis - Posted by FreeAutoBlogger]

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