Finance & Business World

Argentine President Cristina Fernandez de Kirchner is using her country’s nationalized pension funds to offer low-cost mortgages and spur construction in an effort to ward off the first recession since 2002.

Fernandez said last night that the government will use as much as 5 percent of the funds held by the country’s social security agency, known as Anses, to help Argentines buy new homes or build their own over the next two years. The loans will be issued through state-controlled Banco Hipotecario SA.

“This is a great day for Argentines — our workers’ retirement funds will be used to generate more jobs,” Fernandez said. “The key to the economy is to generate more and better- paid jobs so that those funds keep growing.”

Fernandez is trying to revive a slumping economy by bolstering the construction industry and increasing home ownership. She also has announced plans to encourage purchases of goods ranging from washing machines to cars. A 13.2 billion peso ($3.5 billion) stimulus was unveiled Dec. 4, followed by a 300 million peso effort to spur tourism.

Eduardo Elsztain, president of Banco Hipotecario, said the lender will offer 20-year mortgages of as much as 300,000 pesos for new homes. The loans would carry interest of as little as 10 percent, said Elsztain, who was with Fernandez when she spoke at the bank’s headquarters in Buenos Aires.

South America’s second-biggest economy nationalized 10 private pension companies holding about $24 billion last year, a measure that Fernandez described as a “rescue” for 9 million Argentines who maintained the accounts.

Pension Spending

As of April 30, the government had directed about 3 percent of the social security agency’s 102 billion pesos in savings toward projects designed to boost the economy, according to a report on the agency’s Web site.

“They are using our funds, the funds of future pensioners to conduct this investment,” said Fernando Marengo, an economist at the Estudio Arriazu & Asociados research company in Buenos Aires. “It’s not clear if it will have a positive return for us in the future.”

The number of home sales in Buenos Aires fell 39 percent in the first quarter from the same period a year earlier, according to the Association of Notaries Public of Buenos Aires fast cash personal loan. Construction activity in Argentina declined 1.3 percent in the first three months of the year from the same period last year, according to the National Statistics Institute.

“This measure will barely reactivate construction and doesn’t solve the housing deficit that Argentina has,” Marengo said in a telephone interview. “The government seeks to prevent the economy from falling or falling further but this measure won’t change anything.”

Mortgage Funding

Mortgages funded about half the total value of new construction in 2003, and that percentage fell to 18.5 percent in the first quarter of this year, Marengo said.

Fernandez introduced a 3.1 billion peso plan to help finance auto sales in December. Vehicle sales fell 35 percent in the first four months of the year from the same period a year earlier, the country’s automakers association said.

“Taking in mind what happened with the last measures announced, I think this will be another announcement that will result in nothing,” said Guido Bizzozero, an analyst at the Allaria Ledesma y Cia brokerage in Buenos Aires.

After expanding at least 7 percent a year each of the past six years, Argentina’s economy will contract 3 percent this year amid lower prices for agricultural commodities and slowing demand for exports such as automobiles, according to the median estimate of five economists surveyed by Bloomberg.

Recession

Fernandez said Dec. 15 that she wants to double employment in the construction industry to about 800,000 people. At a May 15 news conference at the presidential palace, Fernandez rejected estimates that the economy will shrink this year.

“We are going to keep growing in Argentina and in no way are we going to enter a recession,” Fernandez said.

Banco Hipotecario fell for a fourth day yesterday in Buenos Aires trading, losing 3.2 percent to 0.91 peso, the lowest price since May 15.

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