Argentine private pension fund association UAFJP was scheduled on Monday to present a counterproposal to the announced nationalization of the AFJPs made last month by President Cristina Fernández de Kirchner.
Fernández plans to nationalize the country''s 10 AFJPs and take over the US$26bn in assets held under management to "rescue" Argentine retiree savings from falling asset prices prompted by the global financial crisis.
In a press release, UAFJP president Sebastián Palla said the AFJPs will propose to local regulators, lawmakers, labor unions, business chambers and opinion leaders maintaining the current mixed system as well as improving integration among public and private structures, among other issues.
Argentina implemented a major reform of its pension system in 1994 that resulted in a mixed two-pillar scheme. Coupled with the social security system, a fully funded defined-contribution individual capitalization pillar is managed by AFJPs.
The UAFJP proposal also calls for allowing affiliates to choose freely from signing up with either of the two systems and not being assigned by default to the pay-as-you-go scheme, paying out a minimum pension after five years of contributions instead of the original 30 years, creating a second AFJP fund to lower risks, not charging commissions when funds post negative returns, rising contributions to 11% of gross salaries and creating a voluntary savings scheme.
The funds lost 2.25% in September from a year earlier, according to pension fund regulator SAFJP. About 9mn workers hold accounts with AFJPs, but only 3.6mn contribute regularly.
Argentine lawmakers are expected to begin debating the nationalization plan this week.
US ASSET FREEZE
In another blow to the AFJP industry, last week US district judge Thomas P Griesa blocked Argentina from transferring any of its pension fund investments out of the US until he hears this week the complaints of bondholders who have a US$553mn legal claim against Argentina.
Bondholder lawyer Barry Ostrager, of New York-based Simpson Thacher & Bartlett, said the freeze order was necessary because Argentina "is already taking steps to cause nominally independent private pension fund managers to repatriate FJP (10 private pension funds) overseas investments back to Argentina, even prior to the nationalization legislation taking effect," AP reported.
The plaintiffs are vulture funds Aurelius Capital Partners, Aurelius Capital Management and Blue Angel Capital I.
A hearing is scheduled in a Manhattan federal court for Thursday (Nov 6) on whether to extend the freeze order.
The order does not prevent AFJPs from making their usual investment decisions related to the pension funds assets as long as they are not moved out of the US, according to the ruling.
BRAZIL OUTFLOWS
On Wednesday and Thursday last week, the AFJPs sold 1.3bn pesos (US$385mn) of the 1.8bn pesos they have invested in Brazilian mutual funds as told by Argentine regulators, according to a report by FundPro.
"It was a massacre," a local fund manager told BNamericas, adding the industry was already weakened last August when the government cut tax breaks on mutual funds.
Last year, the government forced AFJPs to repatriate some US$4bn in mutual fund assets held in Brazil in a move to limit their investments in countries affiliated to the Mercosur trade bloc.
Big players in the Argentine pension market include Spanish bank BBVA (NYSE: BBV), US insurer MetLife (NYSE: MET), Dutch financial services group ING (NYSE: ING) and UK bank HSBC (NYSE: HBC).
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