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Argentina: State pension could undermine private funds

Argentina’s capital markets could lose some of their most important local investors at the end of this year as the government pushes people to move away from private pension funds to a new state-run scheme.

The country’s 11 pension funds (known as administradoras de dondos de jubilaciones y pensiones – AFJPs), which have Ps93.3 billion ($30.3 billion) under management, provided a lifeline for the capital markets during the economic crisis of 2001 to 2002 and, over the past two years, have been among the most important investors in government paper and bonds by Argentine companies.

However, the government has set up a new state-run pension scheme – under law number 26,222 – and is actively encouraging many of the AFJPs’ 11.5 million clients to move to it by the end of this year. In April, president Néstor Kirchner became the first person to do so.

Alberto Saravia, chief executive of Argentine fund management group Saravia Financial Management, says: "Some local experts believe that between 40% and 50% of the private schemes’ members could opt for the new state pension plan. Already 260,000 people have done so. The private pension funds have been by far the most important investors in the Argentine capital markets.

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