The $29 billion in the privately run retirement accounts will come in handy for the Argentine government as it struggles to "find new sources of funding for the government since the global financial crisis complicated efforts to renegotiate $20 billion in defaulted bonds and pay off abut $6.7 billion owed to the Paris Club group of creditors," reported Bloomberg News.

Making the announcement at a rally in Buenos Aires, President Fernandez justified the measure by comparing it to emergency bailouts of the financial sector that have been mounted in the US and Europe. "We are taking this decision in a context where the biggest countries, members of the G8 and others, are taking protective measures for their banks.... Instead, we're taking them for our retirees and workers," she said.

She claimed that the measure was being taken to protect pensioners from the violent fluctuations of the financial markets, not as a state cash grab.

Speaking alongside President Fernandez, the head of Argentina's social security administration, Amado Boudou, said the establishment of private pensions was an "enormous error" and constituted a "failed experiment."

Read More