Pension funds willing to renegotiate bonds

Argentina's pension fund managers, AFJPs, are inclined to stretch out maturities and reduce interest rates on their "guaranteed" dollar-denominated government bonds, local news service Infobae quoted AFJP association (UAFJP) director Carlos Peuget as saying. In 2001, former economy minister Domingo Cavallo convinced AFJPs and other financial institutions to swap some of their government debt for papers with longer maturities and lower interest rates, as part of an unsuccessful attempt to stave off a sovereign default. The following year President Eduardo Duhalde pesofied the so-called guaranteed bonds. According to local paper Clarin, today the bonds are worth some US$20bn and AFJPs are by far the largest holders. Peguet said pension fund managers are maintaining their stance not to accept pesofication of the bonds or defaulted dollar-denominated government bonds in exchange. But last week the government issued a decree forcing AFJPs to accept the defaulted bonds and economy minister Roberto Lavagna went on the record as saying it was a "grave management error" not to accept the pesofication of the guaranteed bonds. Lavagna claims accepting the pesofication would have been more beneficial for the pension system's nine million affiliates since the AFJPs will not be granted any special treatment in the upcoming negotiations of Argentina's defaulted debt. "The AFJPs are only claiming their legal contractual right" and asking the government to respect the original conditions of a deal they struck in the past, a local analyst told BNamericas. However, considering the current situation in Argentina, it may have been smarter to be more flexible and accept the pesofication because the debt-negotiations are unlikely to begin until next year and the outcome is highly uncertain, he said. Clarin and fellow local newspaper Nacion reported the AFJPs may take legal action against the government if it insists the pension funds must accept defaulted bonds in exchange for their guaranteed bonds.