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Argentina Plans Regulatory Overhaul to Spur Investments

The Merval index fell the most in 11 months as Argentina’s plan to overhaul securities rules and force insurers to spend more on industrial and infrastructure projects fueled concern about government intervention.

The benchmark equity gauge retreated 3.6 percent to 2,368.96 at the close in Buenos Aires, its steepest decline since November 2011.

“It’s scaring away the few investors we had left,” Guillermo Maresco, a trader at Buenos Aires-based brokerage Nacion Bursatil, said in a telephone interview. “The Dow Jones Industrial Average is also falling, so we’re facing the perfect storm.”

A bill will be sent to Congress that replaces self-regulation of issuers and brokers with a greater role for the regulatory agency known as CNV. The proposal would also make trading cheaper, interconnect markets and eliminate the requirement for brokers to be stakeholders in exchanges, Economy Minister Hernan Lorenzino said yesterday in televised comments.

“We want to generate a big change in line with major global markets and the expansion of channels that the general public can access,” the minister said. “We are going to propose that the markets themselves operate as corporations and have the obligation to propagate their activities.”

Grupo Financiero Galicia SA, Argentina’s largest consumer lender, fell 4.3 percent, while YPF SA, the country’s largest oil company, retreated 4.7 percent. All 13 stocks that form the index fell.

Government Intervention

Since her re-election a year ago, President Cristina Fernandez de Kirchner has limited imports, ordered insurers to repatriate investments and banned the buying of dollars for savings, real-estate transactions and the repayment of local debt. Speaking in a televised national address yesterday, she said the bill will force insurance companies to raise their investments in projects to 7 billion pesos ($1.48 billion) next year from the current 88 million pesos.

“We’re going to modify the destination of insurers’ phenomenal amount of funds so they go from short-term investments of financial nature to long-term investments of productive nature,” Fernandez said.

Insurance companies, which hold 64 billion pesos, will be forced to invest from 5 percent to as much as 30 percent of their funds in such projects, she said. Their investments will be determined by a committee led by the Economy Ministry, according to today’s official gazette.

Frontier Market

Argentina became the only major Latin American market classified as “frontier” in June 2009 when MSCI Inc. removed the country from its benchmark emerging-market index, citing capital controls. The demotion also followed Fernandez’s seizure of about $24 billion in assets held by private pension funds, the country’s biggest stockholders.

The capital market bill will give the CNV greater faculties to create new instruments that will enable retail investors to participate in investment projects, Lorenzino said. It will also allow state agencies to share information.

“We are promoting state intervention in capital markets to protect investors,” he said.

The securities regulator and universities will have a role in credit ratings, he said. Fernandez described the credit rating industry as a “fraud.”

She vowed to defend Argentina’s interests against an investment fund behind a petition to seize an Argentine naval vessel in Ghana.

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