Argentina crisis could have global impact

Chart courtesy of WSJ (Click to enlarge)
Argentina is one of the world’s top five exporters of beef, soy, corn and wheat, and falling prices for those commodities have diminished the government’s main sources of revenue. Commodity prices have fallen as fears of a global slowdown have grown that could impact to reducing demand of commodities. The country spent much of its windfall during this decade’s commodity boom paying off debts and subsidizing fuel and other consumer items to stimulate rapid growth.

Now it may face a struggle to pay some $22.4 billion in debt obligations and other payments due next year. The government said the takeover of the private system, created as an option to state pension funds in 1994, aimed to protect investors from losses due to the global market turmoil.

But economists said the underlying motive of the nationalization of nearly $30 billion in private pension funds is the government needs to plug a gap in financing next year due to driving down tax revenue from falling commodity prices by as much as $6 billion. The move could also be seen as a grab for cash and power amid the global economic crisis. By isolating capital markets, it will probably dampen consumer and investor confidence further.

Will other developing countries take Argentina's lead and re-nationalize their countries pension plans?

Related Posts :

1. 10/22/2008 - Nouriel Roubini on CNBC this morning
2. Nouriel Roubini: How to prevent contagion effects of the financial crisis in Hungary
3. Iceland receives $6 bln rescue package
4. Will Hungary be the next Iceland?

Sources :

1. Bloomberg: Brazilian Stocks Fall on Global Growth Concern; Merval Drops, October 22, 2008 15:30 EDT
2. Deal Book of NYT: Argentina Nationalizes $30 Billion in Private Pensions, October 22, 2008, 7:52 am
3. The Wall Street Journal: Argentina Makes Grab for Pensions Amid Crisis, October 22, 2008

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