On Thursday evening, in the Budget and Finance Commission of Deputies, Finance Secretary Pablo Quirno stated that the dismantling of the Sustainability Guarantee Fund which is today in the orbit of the ANSeS will allow the overall stock of public debt to be reduced by 37,185 million dollars. This is an accounting operation: the debt securities issued by the national government – in pesos and dollars – which today are found in the FGS will go to the Treasuryand this, once said documents have been received, they will fire them.
The mechanism is foreseen in Article 223 of the Omnibus Law project. “Government debt securities consolidated in accordance with the provisions of this law shall be transferred to an account owned by the National Treasury, where they shall be canceled due to asset confusion.”
In turn the Article 226 He says “Have the transfer of the assets of the Guarantee and Sustainability Fund established by decree 867/07 at the Ministry of the Treasury. The National Executive has the power to adopt all measures necessary for the implementation of the provisions of this article.”.
What will happen, if the Law is approved, is this an activity is deleted from the FGS active (the bonds you have in your portfolio) and a liability in the Treasury (what he owed to the FGS).
This means that in the next report published by the Ministry of Economy, The debt stock would go from 425,294 million dollars (latest official data) to 388,109 million dollarsif these articles of the bill are approved.
According to the latest official report, today 68% of FGS assets correspond to public sector securities and 17% to company shares which are listed on the stock exchange. Although one of the objectives of the FGS is to finance productive activities to strengthen economic growth and create registered employment, Only 4.8% of the fund is allocated to “Production or Infrastructure Projects”. The other more or less important share (4%) is the ANSeS loans granted to pensioners and non-pensioners.
What is the FGS for?
That is to say that today the FGS essentially functions as a fund that invests in government bonds.
But the curious thing is that the FGS was created to respond to the needs of ANSeS in the event that a crisis prevents payment to the organisation’s beneficiaries. The ANSeS states that “The FGS can finance the following cases:
•In case of possible insufficiencies in the financing of the public pension system in order to preserve the amount of pension benefits.
•Prepare to pay salary adjustments and cancel pension debts in situations duly ascertained by the National Social Security Administration (ANSES), as established by the Historical Reparation Law.
It is known, in these years in which the purchasing power of the pension assets has fallen between 30 and 40%, the FGS He did not put a burden to pay pensions or pensions.
Quirno explained to the Commission that the pesos regularly collected by ANSeS (contributions and contributions) They are sufficient to finance only 50% of the organization’s needs to meet pension benefits. The other half is provided by the Treasury. «The pension system has been broken for some time and so has the FGS it has never functioned as a countercyclical fund“Quirno underlined.
The Economist Oscar Cetrangoloa well-known expert on Social Security issues, said Clarion that he never found meaning in the creation and then existence of the FGS, and this according to him His settlement is entirely reasonable:
“It was an initial mistake when AFJP was nationalized and reverted to a pay-as-you-go system. The justification for the end of the individual capitalization system was that the money needed to pay pensioners could not be found on the capital market. But we returned to the pay-as-you-go regime and the funds accumulated by the AFJP went to the ANSeS but continued to be allocated to the capital market. Over the years it became clear that the FGS only served to set up state directors in private companies and do some open market operations. But in the meantime, the debt stock has been artificially inflated. They lied about the debt and they lied that the FGS is used to pay pensions”.
–The FGS never put a burden to integrate payments?
–I don’t know if it ever was, but what I am sure of is that what the Treasury invested to pay pensions was much more than what FGS assets are worth today.
Months ago, before knowing the Government’s current project, the economist Eduardo Levy Yeyati expressed a similar comment to the newspaper La Nación: “The FGS was a device designed for other reasons, not to guarantee the payments of the distribution system, and its transfer to the Treasury, to the extent that it does not imply a fiscal cost, does not changes the sustainability of pensions in any way. Strictly speaking, “The public debt present in the investment portfolio should be paid off directly, in a consolidation of the public sector accounts”.
FGS has been suspected in 2022 and 2023 of operate in the bond market at the request of the Central Bank to keep financial dollar prices at bay.
In recent weeks it has participated by taking on the debt issued by Argentine airlines so that the flag line could rig the accounting and show a smaller deficit than the real one.
Quirno concluded his speech to the Budget Committee by recalling that the intra-public debt is equivalent to 37,185 million dollars. Of this, 92% is held by the FGS and 8% is distributed across 65 national public sector bodies.. “These 65 entities have 65 organizations or decision-making bodies. They increase expenses precisely because of their administrative issues and make debt management difficult. These institutions have a budget and with their excess resources they have invested in Treasury bonds themselves. The capital consolidation will allow the Treasury, which issues the debt, to adapt the budget items to the real needs of these organizations, to avoid inefficiencies.”
As for the shares of private companies held by FGS, Quirno stressed: “They will go to the Treasury and stay there, there is no plan on what to do with that asset” whose value he calculated 5.5 billion dollars.
In the FGS share portfolio, the investments in Ternium Argentina; Pampa Company; Southern Gas Transport Company; Banco Macro and Grupo Financiero Galizia.
Quirno recalled that the 5.5 billion dollars that the shares are worth today would be enough to cover just two months of the expenses incurred by ANSeS to pay its beneficiaries.
Source: Clarin
