Monday, October 27, 2008

10/27/08 8:45 AM 

Argentina's Property Grab - 

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Argentina's Property Grab 

A cautionary tale for anyone who owns a retirement account. 

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Argentine President Cristina Kirchner announced this week that her government 

intends to nationalize the country's private pension system. If Congress 

approves this property grab, $30 billion in individually held retirement accounts 

-- think 401(k)s -- managed by private pension funds will become government 


That the state could seize retirement savings no doubt seems outrageous to 

Americans. But it is a predictable development in a country where government 

intervention in the financial system is the norm. With Washington now 

expanding its role as guarantor in American banking, that's something to think 


Mrs. Kirchner won't have trouble making the case for expropriation to Congress, 

which is controlled by her fellow Peronists. When the Argentine government ran 

out of money in 2001, it blamed the market and increased its own role in the 

economy. Since then it has imposed price controls, defaulted on its debt, seized 

dollar bank accounts, devalued the currency, nationalized businesses and tried 

to set confiscatory tax rates with the aim of making society more "fair." Mrs. 

Kirchner and her predecessor (and husband) Nestór Kirchner have also 

preserved the Peronist tradition of big spending. 

All of this has been deemed acceptable because of the "crisis." But it has come at 

a cost: Among emerging market investors Argentina is now considered one of 

the worst places on the planet to put your money. Now that commodity prices 

are cooling and the global economy is slowing, Mrs. Kirchner is facing a $10 

billion shortfall in what is due on government debt by the end of 2009. Where 

else to turn but to the resources of the private sector? Argentina, if little else, 

serves as a cautionary tale on how to ruin an economy. 

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