Nov. 3 (Bloomberg) -- Argentine deputies may vote this week on President Cristina Fernandez de Kirchner's plan to nationalize about $26 billion in private pension funds, a proposal that spurred investor concerns that the country may be heading for its second default in a decade.

The lower house will probably vote on the proposal as early as Nov. 5, said lawmaker Stella Maris Cordoba of the ruling Victory Front party in a telephone interview. If the bill is passed, it would have to go through a Senate committee and then be voted on by senators.

``I'm confident that we can pass this bill because there's a general agreement on the need to eliminate the private pension funds,'' said Cordoba. ``We can't waste more time, we have to approve it as soon as possible to avoid further losses in the funds' value.''

President Fernandez said the plan aims to protect taxpayers and future retirees amid the global financial crisis. She described the takeover as a ``rescue'' for 9 million Argentines who have individual accounts. Her proposal caused stocks and bonds to plummet after the announcement as investors interpreted it as a sign the government wants to seize the funds because it is running out of money to service its debt.

As well as taking control of existing assets, the government will receive additional income of $4.5 billion a year in pension contributions from workers who now pay into the private funds, said Javier Kulesz, an economist at UBS Pactual in Buenos Aires. The additional income will help the government meet financing needs as economic growth stalls, said Kulesz.

Growth to Slow

In 2009, the economy may expand by 1 percent compared with 6.8 percent this year, JPMorgan forecasts.

Opposition lawmakers Carlos Raimundi and Juan Acuna Kunz, who support the elimination of the private pension fund system, said they want to include changes to the bill that would ensure the government won't use the money to pay debt or fund government spending.

``The use of those funds has to be absolutely clear, written and highlighted in the bill,'' said Raimundi during a debate on the bill by Congress's social security committee on Oct. 28. ``This must be included in the bill so it can gain more credibility.''

Fernandez is counting on her majority coalition in Congress to pass the measure, and sought to widen support by proposing the creation of a committee of six deputies and six senators to oversee management of the funds. Acuna Kunz said he wants to expand the committee to include workers, pensioners and the public's ombudsman.

Though 9 million workers hold accounts with private pension funds, only 3.6 million make regular contributions. The funds lost 2.25 percent in September from a year earlier, according to the pension fund regulator.

Vice President Julio Cobos, whose deciding vote in July as head of the Senate defeated a government bid to increase taxes on agricultural exports, said the reform should be supported by a ``majority and wide consensus,'' newspaper La Nacion reported on Oct. 30.

Markets Last Week

Last week, the yield on Argentina's benchmark 8.28 percent dollar bonds due in 2033 fell 133 basis points, or 1.33 percentage points, to 27.52 percent, according to JPMorgan Chase & Co. The bond's price rose 1.5 cents on the dollar to 25.5 cents.

The Buenos Aires benchmark stock index Merval rose 13.5 percent to 1010.79. Banco Patagonia SA (BPAT AF) rose 32.3 percent. Mirgor SACIFIA (MIRG AF), which makes climate-control systems for vehicles, fell 7.6 percent.

The following is a list of events in Argentina this week:

Event                         Date
Tax revenue                   Nov. 3
Vehicle production            Nov. 5

To contact the reporter on this story: Eliana Raszewski in Buenos Aires eraszewski@bloomberg.net

Last Updated: November 2, 2008 22:00 EST