On Oct. 21, Argentina’s government, led by Peronist President Cristina Fernández de Kirchner and her predecessor, Néstor Kirchner, announced their intention to expropriate $30 billion held by Argentine citizens in private pension funds (similar to 401(k) retirement savings accounts). The Kirchners need the money to refinance old bad debts so that they can borrow yet more money to keep the country afloat. The announcement rocked investor confidence in Argentina and sent the Buenos Aires stock market plunging.

Argentina’s 2001 sovereign debt default and 2005 debt restructuring set off a chain of events leading to this attempted seizure. The Kirchners’s pursuit of economically disastrous policies and the negative effects of the default are still being felt today, as shown by Argentina's steadily declining scores in the annual Index of Economic Freedom, published by The Heritage Foundation and The Wall Street Journal.

Coming just days after President Kirchner expressed a willingness to repay the Argentine government’s Paris Club and private bondholder debt, the announcement of the pension fund nationalization plan clearly signals an attempt to replenish government coffers. Prices for Argentina’s soybeans and other agricultural exports have dropped substantially in recent months, too, so the Kirchners’s attempt to grab private retirement accounts may also be a way to replace lost revenue from export taxes.

The Kirchners’s left-wing government has used revenues from commodities exports to finance the same sort of populist policies that have kept the Peronist party in power for more than 60 years. It’s a simple but economically destructive formula: wasteful welfare state handouts, a swollen bureaucracy to redistribute income, and powerful closed-shop trade unions protected from foreign competition, all generously lubricated with corruption.

A recent Heritage Foundation report on Argentina detailed the rising inflation rates, sagging climate for investment, and the precarious financial dependence that Argentina has developed with Venezuelan strongman Hugo Chavez. These factors led to crises not only in the economic sector but in the social sector, as demonstrated by this year’s months-long farmer strikes.

Rule of law, secure property rights, transparent government, and vigilance against state corruption are among the most important measurements of freedom used to calculate the annual ranking of countries in the Index of Economic Freedom. Argentina's rank plummeted from 19th-freest economy in the world (out of 156 countries) scored in 1998 to 108th of out 162 countries by 2008. The Kirchners callous disregard for these freedoms is a classic case of an assault by a leftist-populist regime on the rights of both Argentine citizens as well as foreign investors and bondholders.

The country's investment climate has been damaged. In August and again last month, Standard & Poor's cut Argentina's foreign-debt rating. It’s now B-minus, on par with Bolivia and Lebanon and below such countries as Belize and Burkina Faso — and far behind neighbor and rival Brazil. This lower rating will raise the cost of borrowing for Argentine businesses and make Argentina less competitive in the global economy.

Argentina’s economy is sinking into quicksand. Its government has an obligation to its citizens to reach an agreement with all external creditors so that it can regain full access to world financial markets. However, it shouldn’t do so through the theft of those citizens’ private property in the form of their retirement savings!

As a leader of the globalized economy and the international financial institutions that have ensured prosperity for billions of people for more than 60 years, the United States has a special responsibility to prevent abuse of that system. It’s imperative that U.S. policymakers push for an honorable debt repayment plan as a way to strengthen U.S. relations — not only with Argentina but with all of Latin America.