A BLITZ of advertising has swept Argentina since early May, as
21 new pension funds try to lure workers away from the state-run
This has been possible because the National Congress passed a
pension-reform law that took effect early this year.
About 5.5 million workers have until July 1 to decide if they
want to sign up with a private company. But the initial shift has
been slow as workers remain wary of handing over their money.
"People don't trust people here, and you're asking people to give
money to a private company for the following 40 years," says
Fernando Coccaro, an analyst at Pistrelli Diaz Associates, an arm
of United States consulting firm Arthur Andersen.
"There also was bad publicity," Mr. Coccaro says, that
hampered the start up. It included last month's resignation of
three top officials in the government agency serving as a
pension-fund watchdog. Workers also were upset with a lack of
information about the system and a requirement - now dropped - that
they couldn't return to the state system.
While it's difficult to pin down numbers, the 21 funds have
drawn about 500,000 people. Meanwhile, companies have spent close
to $100 million on marketing.
Despite its faltering, many analysts say the new pension network
is a positive step.
Problem-ridden state system
The state system has had many problems, from workers who haven't
paid into it to officials who siphoned off funds. After decades of
contributions, many retirees are collecting pensions of only $150
a month. Last year, the government was forced to wait for proceeds
from the sale of Yacimientos Petroliseros Fiscales, the state oil
company, before it could retire a multimillion-dollar debt to
The private system's major contribution will be creating a
financial option for future retirees.
The economy and its capital markets will be the most immediate
beneficiary of the private pension funds. Once the system is
running (probably not for another year), it is expected to collect
about $2.5 billion annually. At least 90 percent of the capital
from the pension funds must stay in Argentina. Therefore, analysts
say, the system could fuel development of Argentina's capital
markets by creating mortgage-backed securities, securitized loans,
and other investment vehicles that now don't exist.
The new funds also will give the country an alternative to
foreign capital, especially if interest rates abroad go up and
inflows of foreign capital decrease.
The pension funds are "a positive development for the country
despite the beginning problems," says Timothy Gibbs, president of
Buenos Aires Capital Partners investment bank. …