Argentina's chamber of deputies on Thursday (Nov 6) approved backing President Cristina Fernández de Kirchner's plan to nationalize the country's 10 private pension fund managers, the AFJPs.
Lawmakers voted 162 to 75 to approve the proposal after an almost 12-hour session. The proposal will be sent to two senate committees on Monday (Nov 10).
The senate's work and social security committee said a full senate vote on the measure may take place November 20. The government aims for changes to the market to begin in January 2009.
Fernández de Kirchner 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.
Argentina implemented a major reform of its pension system in 1994 that resulted in a mixed two-pillar scheme in a legislative process that took 13 months.
"I think the lower house did not analyze it as thoroughly as they should," Gabriel Salvia, chairman of the Center for the Opening and Development of Latin America (CADAL), told BNamericas.
"Let's hope the bill has a more prolonged discussion in senate, consulting with more players and analyzing the implications it will have on the country's legal protection and investment climate," he said.
Salvia said the bill may not see as smooth a passage in the upper house as in the deputies chamber as the government suffered a major setback in the senate last July, when the country's vice-president Julio Cobos rejected a tax applied on farmers in a tie-breaking vote.
While Fernández said the decision was not an attempt to "grab the cash," market observers believe the government is only trying to secure badly needed funds for its financing needs next year and 2010.
"If Argentina wasn't an objective for investors before, now it is even less. If Argentines themselves were not bringing over their investments abroad, now they will not only not bring them back but there are many people thinking of taking their savings abroad," Salvia said.
About 9mn workers hold accounts with AFJPs, but only 3.6mn contribute regularly.
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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