Argentina’s main stock index fell, capping its biggest three-day loss in 18 years, on concern that the government’s planned seizure of private pension funds will further undermine investor confidence in South America’s second-biggest economy.
The Merval Index dropped 10 percent to 940.82. It has tumbled 23 percent in the three days since reports of a nationalization plan began circulating. Telecom Argentina SA lost a quarter of its value Cresud SACIF y A fell the most since 1996.
Argentine lawmakers will try to block the government’s use of $29 billion in nationalized pension assets to repay debt when they consider President Cristina Fernandez’s plan to seize the funds from private money managers.
Opposition deputies said the legislation probably will pass, and the debate will focus on limiting the way the government uses and invests the money.
Speculation that Mrs. Fernandez intends to use the money to finance the government has roiled Argentina’s markets. Bond yields topped 30 percent on concern that the pension takeover is a prelude to the country’s second default this decade.
“The government is trying to avoid having to pay interest on bonds, and they want to find more money for public works,” Esteban Bullrich, a congressman of the opposition Pro Party, said in a telephone interview in Buenos Aires. “We see this plan as illegal.”
Congress will seek to curb the president’s control of the panel that oversees the pension system by giving a majority of the seats to opposition parties, workers and retirees, said opposition Sen. Gerardo Morales, head of the social security committee.
He also said he wants congress to repeal the “superpowers” given the president to spend excess revenue without lawmakers’ approval.
The decision to take control of the private pension funds, known as AFJPs, has shaken investors already concerned about faltering prices on the country’s exports and a sputtering economy.
“Taking out the AFJPs means further reducing already-small capital markets in Argentina,” Guido Bizzozero, an analyst at Allaria Ledesma y Cia in Buenos Aires, said in a telephone interview. “That leads other players to exit or bet against the market as they had been doing with bonds and now are doing with stocks, generating chaos.”
The retirement system, set up in 1994 to help bolster capital markets, owns about 5 percent of companies listed on the Buenos Aires stock exchange and 27 percent of shares available for public trading, data compiled by pension funds show. AFJPs were net buyers of stocks for a third straight month in September, investing about $144 million in domestic equities, according to Deutsche Bank AG.
Telecom, the country’s No. 2 phone company, fell 25 percent to 3.97 pesos, extending a loss this week to 45 percent. AFJPs own 23 percent of the company, according to Raymond James & Associates Inc. Cresud, which farms wheat, corn and soybeans among other crops, plunged 20 percent to 2 pesos.
Mrs. Fernandez announced her plan to take over 10 private pension funds during a speech in Buenos Aires Tuesday. She said the proposal would protect retirees from the global financial crisis and denied trying to “grab the cash” to pay off debt or finance new programs or projects. The last time that Argentina sought to tap workers’ savings was in 2001, just before it halted payments on $95 billion of bonds.
Stocks, bonds and the currency have plunged since Oct. 20 on concern that the proposed pension takeover is aimed at meeting financing needs that have swelled as prices for the country’s commodity exports tumbled, eroding tax revenue.
Argentina hasn’t had access to international debt markets since its 2001 default and demand for its peso bonds has dried up on concern that the government is underreporting the rise in consumer prices.
Mrs. Fernandez described the takeover as a “rescue” for 9 million Argentines who maintain individual accounts managed by banks including London-based HSBC Holdings PLC and Spain-based Banco Bilbao Vizcaya Argentaria SA. The funds lost 2.25 percent in September from a year earlier. The private funds invested an average of 55 percent of their funds in bonds and 11 percent in stocks as of September, according Web site of the pension fund regulator.
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