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Thursday, November 6, 2008

Kirchner wants your money!

Well, at least Argentine pension fund money. Apparently, Mrs. Christina Kirchner, who is also the wife of the former president of Argentina, Mr. Nestor Kirchner, is set to rake into the government portfolio; Argentine pension funds. GASP!!! Well, it should not be so shocking for her or anyone, to think about doing that.

This is a move, which some have taken up in arms against, understandably. Ms. Kirchner has said that nationalizing the pension scheme, would protect Argentine pensioner's from the global financial crisis. But, her opponents, have said that nationalizing the pension scheme, is being sought by her and her government in an attempt to pay for the Argentine debt, which it defaulted on, during the Argentine economic crisis and subsequent collapse between 1999 and 2002.

The pension portfolio in Argentina which she has her sights set on is worth over $30 billion USD.

Now, my thing is, nationalizing pensions, is not a bad thing considering the risk portfolio that Argentine trades 'may' be exposed to, considering that there has been no legislation, to counter-act or protect the Argentine market, from the most recent and same credit crisis that has hit the USA and Europe. Reports have it that emerging markets, especially in Latin America, are faring much better than anyone had expected- time will tell, indeed. Her move, however, is one where she can possibly seize a moment and actually do something proactive Argentinians and protect, just in the event of, traders and hedge funds losing Argentine pension's in this time of global economic uncertainty; $30 billion to play with, leverage and hedge for, is something anyone in the private market, would jump for. I would.

Now, the argument may be bolstered by the 'supposes" Suppose that Argentina, may not be as deeply rooted in the type of trading on derivatives and interwoven in the US big financials as one would imagine. However, it is the private market and Argentina, has one of the best run private Latin American markets to date; barring the economic crisis. A crisis, which can happen to any country and any financial system- just ask the USofA and Wall Street. So, as with the US financial crisis and their private market- along with their keen and standard bearing regulations- have yet to come to appreciate, the total risk exposure to all parties involved in the current financial crisis. Argentina, which one can assume if trying to resemble and more loosely regulated than that of the USA, may have that same type of market intelligence; or lack thereof.

While I would support the move to nationalize pensions- nationalizing, really has given the term and the initiative behind it, bad press- however, there would be certain stipulations and guidelines, to which I would allow Mrs. Kirchner the right to 'stabilize' Argentine pensions.

For one, I would appoint an overseer from the private market, to manage the portfolio and unwind any risk they have received, if any, from sub-prime and US and EU banks. And, the team of specialized instrument managers, would have no tie to the public service, at all. However, they must answer to government regulators on a weekly, if not daily basis. Public servants would only be used as clerical or, middle management, taking orders to do this and to do that.

Second, the move would only be temporary. Temporary, in the sense of one year- at best. That would give regulators, the kind of time needed, to investigate the integrity of the funds and release them- after they have received a full bill of health- back into the private market.

Third, regulators on the opposition side, must come together on this and not make this political. I hate pork. But, give those political animals, PORK! Shut em up and shut em down. Money talks. Make it talk so loud, til it puts the political animals, to a whimper.

And, lastly, if you can't get a coalition behind you, who would actually want to correct the Argentine default, then, you simply have to let it slide and tax EVERYONE. It sounds unfair, but everyone has to pay for the bill, if you want Argentina to be strong and secure, for a long future ahead.

To be honest, not that I would want a smash and grab on pensions, this time, to pay for any bad government debt. However, if it is a way out then it is a way out.

Other than that, Mrs. Kirchner is going to create allot of havoc in the market, and really not get anything done. My thing is now, nationalize it now, with very stringent stipulations and then worry about the market jitters, later- fact is, there has already been market jitters, as pension related assets and the Argentine market in general, has plummeted amidst talk of the nationalization.

The damage has been done to market confidence. So, just complete the deal already. Allay the fears and keep pension trading, for the short term, out of public administrators hands and unwind any bad debt and exposure it has to the larger financial institutions, which have the capacity to be more corrupt and unaccountable than government would. Because, two economic crises in the space of ten years, really is not something any country would want to endure.

Youri
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