BUENOS AIRES - A BILL to nationalise over US$26 billion(S$40 billion) in private pension funds was approved by the Senate late on Thursday, after clearing the Chamber of Deputies earlier this month, and was headed to President Cristina Kirchner for her signature.
The measure, a flashpoint of controversy since Mrs Kirchner last month announced her intent to nationalise 10 bank-owned pension funds to protect retirees from the effects of the global financial crisis, was approved by a 46-18 vote in the Senate.
Mrs Kirchner defended the plan at last weekend's G20 summit in Washington, saying the 1994 privatisation of Argentine pension funds was responsible for '42 per cent of external debt' and played a large part in Argentina's 2001 default on its international debt obligations.
Argentina's private pension funds cover 9.5 million workers - of whom only 3.6 million meaningfully contribute - and lost 17.5 per cent of their worth, some US$8.1 million, between October 2007 and October 2008, according to the government.
Opponents of the nationalisation believe it is a confiscation of funds that would be used to pay the national debt of some US$150 billion. Argentina in 2009 faces debt payments of some US$20 billion.
'The privatisation system has failed, it's spent, it's in crisis. It has been a burden for Argentines. Sooner or later, the state had to deal with the crisis,' said peronist Senator Miguel Angel Pichetto in the 12-hour debate before the vote.
Social democrat leader Gerardo Morales voted against the measure, but agreed the privatisation of pension funds 'didn't work at all these past 14 years. The only thing it did was take money from the workers'.
However, Mr Morales warned that the nationalisation bill 'is precarious, impinges on privacy rights and really addresses the state's ability to deal with an eventual loan 'default'.'
The reform continues a policy of strengthening the state's role in the economy which began under the previous president, Nestor Kirchner, the current president's husband.
During Mr Nestor Kirchner's 2003-2007 presidency the postal service, the water works company and rail lines among other things were nationalised.
The proposed nationalisation has divided the country. Polls show that a majority of Argentines support a state-run retirement system, but the move caused panic among investors, sending Spanish stocks and Argentina's MerVal index plunging in October when it was announced.
The measure calls for transfering some US$26 billion in private pension funds to state coffers, but most of the money is invested in heavily devalued state bonds, stocks of companies affected by the current financial downturn, and in long-term investments.
The 10 private pension firms together administer around US$30 billion in retirement savings of 53 per cent of Argentine workers, and take in about US$4.6 billion each year in new contributions.
Eight of the 10 are controlled by private banks. One is a cooperative and another is controlled by state-owned Banco Nacion, the country's most important bank.
