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Source: Bloomberg
By: Bill Faries

May 25 (Bloomberg) -- Argentina’s government will unveil an economic plan this week that taps $24 billion in nationalized pension savings to spur construction and homes sales as South America’s second-biggest economy shows signs of contraction.

“We’re working on a stimulus plan, we’re working to sustain expectations, consumption and business activity,” Amado Boudou, the head of the country’s social security agency, known as Anses, told reporters May 20. “The most important thing is to sustain employment and economic activity.”

President Cristina Fernandez de Kirchner has already announced plans designed to spur purchases of goods ranging from washing machines to bicycles as Argentina confronts the possibility of recession for the first time since 2002. A 13.2 billion peso ($3.5 billion) stimulus was unveiled Dec. 4, followed by a 300 million peso effort to promote tourism.

As of April 30, the government has directed about 3 percent of Anses’s 102 billion pesos in savings toward projects designed to boost the economy after nationalizing 10 private pension companies last year, according to a report on the agency’s Web site. That is a 173 percent increase since the funds were nationalized, the report said.

Stimulate Housing

Press officials at Anses and state-run Banco Hipotecario SA, who declined to be identified by name in accordance with internal policies, confirmed the plan to be announced this week will facilitate mortgage lending, without giving more details.

“A lot is going to depend on how hard it is to qualify for these mortgages,” said Pablo Lara, who follows the construction industry at Estrateco, an economic consulting company in Buenos Aires. “We’ve had a huge number of plans to stimulate housing and construction in Argentina and most have failed.”

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.

Fernandez is slated to speak today in the northern province of Misiones, on the anniversary of the start of Argentina’s war of independence from Spain.

Argentina’s economy “hasn’t seen that much impact” from earlier stimulus plans and faces a “challenging financing program over the next three years,” said Alberto Ramos, a Latin America economist at Goldman, Sachs & Co. in New York. The country hasn’t had access to international debt markets since it defaulted on $95 billion of bonds in late 2001.

Previous Plans

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

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.

Argentina’s economy grew 2.7 percent in March from a year earlier, the government said May 21. Exports fell 13 percent in April from a year ago to $5.1 billion. The worst drought in 70 years has hampered production of soybeans, wheat and corn. The Argentine Rural Confederation said grain output will decline 35 percent this year to 63 million metric tons.

Consumption, Spending

“Unfortunately, the government didn’t capitalize on the good years to create a fiscal cushion,” Ramos said. “Any new fiscal expansion will likely be met with additional retrenchment in private consumption and investment spending.”

Fernandez said Dec. 15 that she wants to double employment in the construction industry to about 800,000 people. In a May 15 press 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. “We see it in the amount of activity, the level of employment and installed capacity and in a series of economic variables that tell us we aren’t going to grow at the levels we have been, but that we are going to grow.”

Government economic data sometimes contradicts private- sector reports.

Construction activity rose 1.9 percent in March from a year earlier, the national statistics institute reported April 30. Construya, an industry index published by companies including Aluar Aluminio Argentino SAIC and cement-maker Loma Negra SA said activity fell 12 percent in April from a year earlier.

“Construction in Argentina is clearly falling, not because on-going projects are being halted, but because no one is starting new projects,” Lara said.

Argentina’s national statistics institute will publish reports on supermarket sales, shopping center sales and construction activity for April this week.

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