In These New Times

October 23, 2008 (LPAC)–On Oct. 21, Argentine President Cristina Fernandez de Kirchner announced the re-nationalization of the private pension system, known by its acronym AFJP, which was imposed on the country in 1994. This was a partial privatization, which financier interests had eventually hoped to complete, based on the model of Chilean dictator Augusto Pinchet. They were horrified then, when Fernandez accused the ten private funds of carrying out a “a policy of looting,” and asserted the State’s constitutional right to take control of them on behalf of the general welfare. People come before banks, she warned.

The President’s action unleashed howls of rage from the City of London and allied quarters, whose toadies claimed that Argentina’s sovereign action had actually caused the sharp decline of stock markets around the world! “Concern of a second Argentine default in a decade rattled investors in emerging markets,” Bloomberg reported. And the {Daily Telegraph’s} own Ambrose Evans-Pritchard shrieked today that the President and her husband, former President Nestor Kirchner, were stealing the $29 billion in private funds in order to meet 2009 debt obligations. Argentina has become a “Latin Iceland,” he argued, warning that other governments such as Ukraine, Pakistan, and Hungary were lining up to take similar action.

But in Buenos Aires, police conducted raids on many of the AFJP offices today. Speculating that the re-nationalization was about to occur, in the past few days the AFJPs had dumped huge quantities of state bonds on the market, causing their value to drop sharply, while at the same time, buying up large amounts of dollars, driving the value of that currency so high that it destabilized the exchange rate. Of $140 million in dollar-purchasing transactions, the AFJPs accounted for half of that amount.

Government prosecutors say the private system had caused “serious and irreparable harm … not only to its affiliates but also to the Nation-State.” The ten funds have been ordered not to carry out any transactions for the next seven days, while the government pursues a lawsuit that could land fund managers in prison.