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| SCENARIOS-Argentina's pensions takeover plan |
| Buenos Aires, 07.11.2008 |
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| The lower house of Argentina's Congress begins debate on Thursday on a plan to nationalize pensions, a political gamble by President Cristina Fernandez that could give her government control of about $25 billion in retirement funds.
Her center-left administration is confident of victory in both houses, despite a partial erosion of its strong majority due to a prolonged conflict with farmers over export taxes earlier this year.
In a bid to gain support for the bill, ruling party deputies agreed late on Tuesday to include some opposition demands into the text. The Chamber of Deputies is expected to vote this week and to pass the bill to the Senate.
Fernandez, who has seen her popularity slide since she was elected a year ago, is keen to avoid complications in Congress on the pensions bill following her devastating defeat over a soy export tax hike earlier this year.
The pensions proposal sent local financial markets into a tailspin and investors viewed it as a desperate effort to boost cash flow ahead of a year when debt obligations rise sharply and even as a bid to stave off default.
Here are possible scenarios in Congress:
BILL PASSES UNCHANGED
The bill could be approved without any changes by both houses, though many political analysts say it will likely have a rougher ride in the Senate. A victory would boost Fernandez's troubled presidency ahead of mid-term elections in 2009, which at the moment appear a major challenge.
BILL PASSED WITH CHANGES
The bill could be approved with changes. This is seen as the most probable outcome because Fernandez wants to get the law passed at any cost because her weak administration cannot stand another defeat, political analysts say.
"The government will concede everything it has to concede in order to get the law," said analyst Graciela Romer.
The government could accept the creation of a cross-party commission to control the use of the pension funds, or agree to limit their use to social security spending or public works rather than debt repayments.
Passage of the pensions takeover, which was not among Fernandez's campaign pledges, would help her put the farming debacle behind her and forget the export tax's defeat by ruling party senators.
BILL REJECTED
Congress could deal Fernandez an unexpected blow and reject the pensions nationalization. But that is seen as unlikely due to her firm majority and the support of some opposition sectors for the measure, something missing during the farm conflict.
If the bill were to be defeated, it would likely be at the hands of senators. Government allies hold a smaller majority in the upper house and they showed during the farm conflict that they are willing to break party lines.
A defeat would further weaken confidence in Fernandez's administration ahead of the mid-term elections late next year and could deepen markets concern over the financing outlook for 2009 because the pension funds would not be a source of cash.
(Reporting by Damian Wroclavsky in Buenos Aires, editing by Vicki Allen)
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