BUENOS AIRES - ARGENTINA'S government plans to use billions of dollars of newly nationalised pension fund assets to grant low-cost loans to farmers, industry and automakers, in a bid to boost production and ease credit amid the global economic downturn, President Cristina Fernandez said on Thursday.

Most of the 13.2 billion pesos (S$6 billion) in loans will come from state-run banks and assets that the government acquired in last month's takeover of the country's 10 private pension funds, Ms Fernandez said, giving no other details. The interest rates and terms of the loans were unclear.

The plan pumps cash into the economy at a time that private financing has dried up - not only due to the global credit crunch, but amid government moves to nationalize the country's largest airline and takeover US$23 billion in private pension funds.

Those steps drove spooked Argentines to send US$4 billion in investments and cash out of the country in October alone, according to Buenos Aires economic consultancy Ecolatina, further stalling the country's sagging economy.

Business leaders reacted cautiously on Thursday, calling the stimulus plan a step in the right direction.

'The measure is trying to reactivate the economy in two ways: credit for consumers and credit for production,' said Mr Jorge Brito, head of the Argentine Bank Association, which represents the country's largest banks.

'It's a positive move.'

But economic analysts doubted it would be enough to correct the slowing exports, overvalued currency, and tanking investor confidence that is plaguing Argentine growth.

'The government's strategy seems to be to lend the funds as quickly as possible, without much attention to how they will be used,' Mr Daniel Kerner, an analyst at the Eurasia Group in New York, wrote in a note to investors.

'Its impact may be marginal at best.'

Much of the lending is focused on exporters, who have struggled as the slowing world economy slashes demand for their goods.

Some 3.1 million pesos in loans will go to boost automotive output, 1.7 million pesos to finance farm exports, and 1.3 million pesos for industrial exports including processed food and textiles.

Small- and mid-sized businesses, which export leather, wine and other goods, will have access to 3 million pesos in loans as long as they don't lay off workers.

Argentine consumers meanwhile see about 3.5 million pesos in loans, aimed at fueling the country's sagging economy.

Five years of more than 8 per cent annual growth is expected to slow to 4 per cent next year, the government says.

Consumer confidence dropped by 24 per cent in November over the year-ago period, while buyers willing to spend on big ticket items like cars and refrigerators fell by 41 per cent, a study by the Centre for Financial Investigations at Buenos Aires' Torcuato Di Tella University found.

'The government has to show it's being proactive during a crisis, but this won't be enough to revert the situation,' centre director Guido Sandleris said of the stimulus plan.

Argentina is one of the world's top-five exporters of wheat, corn, soy and beef. Commodities prices, which have tanked amid the global downturn, have caused export revenue to drop sharply, threatening to narrow the country's budget surplus next year.

To make local exports more competitive, Ms Fernandez on Thursday vowed to reduce export taxes on wheat and corn by five percentage points, to 23 and 20 per cent, respectively.

Ms Fernandez last month secured a new pool of assets to help bridge any budget gap, nationalising the country's 10 pension funds.

Congress approved the takeover, allowing her government to spend the assets as long as monthly pensions are paid on time.

Ms Fernandez is expected to sign the bill into law this week.

Argentina last week unveiled a US$21 billion (S$32 billion) public works plan that would invest pension fund assets in construction and infrastructure projects, creating 400,000 jobs next year.

But analysts warn that hefty public spending may make it harder for Argentina to service payments on US$28 billion in debt that matures over the next three years. -- AP