Fact Check: Argentina

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Kicillof’s Favored Financier Selling His Luxury Manhattan Apartment for US$30 million

The New York Post reports this morning that Diego Marynberg – who was favored by Economy Minister Axel Kicillof’s ministry days before Argentina’s default last year with a suspicious US$200 million insider bond operation - has put his luxurious Manhattan apartment on the market. Here’s an excerpt from the article:

“Argentine financier Diego Marynberg — who has been called a crony of his country’s economy minister, Axel Kicillof, and is reportedly linked in a lawsuit to an alleged insider bond transaction with Argentina’s central bank before Kicillof took the country into default — is selling his sprawling Manhattan apartment.

“We’re told that Marynberg, who lives in New York, where he runs his fund, Latam Securities, is quietly putting his 17th-floor unit at 110 Central Park South on the market for $30 million.

“A Latam rep sniffed of the sale offering, “I don’t know anything about that.” Asked if it’s because of recent reports alleging a probe into the bond transaction, he added, “It doesn’t have anything to do with anything.”

“Right.”

Marynberg’s long career of shady dealings in Argentina, in Russia and Venezuela, and his money trail through the United States and Uruguay – where Kicillof has a vacation home – have been widely reported on this blog. The suspicious US$200 million bond operation with the Central Bank of Argentina last year, and the possible involvement of Economy Minister Axel Kicillof, is currently under federal criminal investigation by Argentine prosecutor Guillermo Marijuan.

We will continue following the developments of this new “K money trail” where ‘K’ might also stand for Kicillof.

CFK Sells Argentina to the Chinese…on the Cheap

Vaca Muerta now behind the pawn shop glass

Amidst increasing domestic turmoil President Cristina Fernández de Kirchner plans to embark next week on a grovel-fest to China, where she will bow and scrape for the only financing deal now available to her.

Both the timing, and the China-centric terms she will reportedly accept, underscore once again the extent to which Kirchner’s decision to default on the Republic’s loan obligations has isolated Argentina from international capital markets.  Despite possessing the power at any time to alleviate the economic plight of her country and its people by negotiating a final resolution of its outstanding defaulted debts, Kirchner is poised anew to cede both Argentine sovereignty and vast natural resources in “agreements directly tailored for China.”

These lopsided, China-favored agreements have been examined within this blog several times, most significantly here and here.

Kirchner tried to rush the arrangement through the legislature in the waning days of 2014 to preclude dissent. In fact, a quorum was achieved in the Senate by only one vote, and then, only after former President, and convicted arms smuggler, Carlos Menem, was dragged in to cast it. The accord has not been approved by the Chamber of Deputies.  Despite enjoying a majority there, President Kirchner didn’t even bring it to the Chamber, indicating a well-spring of hostility for the accord, even among Kirchner’s political allies.

None of this should be surprising because the accord – a “battery” of agreements including a $2.9 Billion renovation of the Belgrano Cargas freight rail system, an $11 Billion currency swap, and a $4.7 Billion lending facility to fund two hydroelectric dams (one of them named after Kirchner’s deceased husband, former President Nestor Kirchner) in Patagonia – was swiftly assailed during its forcible penetration of the Senate, because it “would give the cash-strapped Argentine government access to Chinese financing in exchange for sweetheart contracts that would allow the Chinese firms to import their own labor [into Argentina].”

Those “sweetheart contracts” refer to long-term, low-rate credits that are not subject to the rules of the tender… in other words, China is free to offload poor quality merchandise, while Argentina is compelled to pay artificially high prices for them.

José Ignacio de Mendiguren, the Secretary of the Argentine Industrial Union and national Deputy, penned a compelling op-ed in El Cronista, in which he established the following salient point…“In a context where unemployment is reaching more than 1.4 million Argentines and at least 4 million compatriots are in a precarious situation, assuming the inevitability of the agreement with China will make these figures worse.”

Additional scrutiny has revealed that the accord doesn’t just subvert Argentina’s labor force in favor of Chinese workers

And, it doesn’t just require Argentina to spend the money it borrowed on Chinese goods and services…

The hydroelectric deal appears specifically to mandate that Argentina contribute its own $1.3 billion, which will go directly to China.

As this blog has earlier documented, La Nacion conducted its own examination of the loan agreement between Argentina and China, discovering a cross default clause in that contract. The clause expressly states that an Argentine government default on other debt constitutes an Event of Default on the Chinese loans themselves…which means Argentina is currently in default on the terms of those agreements based on its ongoing exchange bond default.

Significantly, the hydroelectric deal was signed in mid-July of 2014, which means Argentina went into default on that contract within a few weeks of signing it…the moment President Kirchner committed to defaulting on her loan obligations, July 30. This default on the Chinese obligations could be construed as a willful misrepresentation of the terms of the contract.  It is that contract that specifically compelled Argentina to stipulate no imminent event was on the horizon…

This serves as another egregious example of President Kirchner’s irresponsible management of the government’s contractual obligations and the Argentine economy in general. Her unwillingness to resolve the existing default has placed fresh and heavier burden on the Republic’s finances.

Other La Nacion investigative nuggets regarding the accord emphasize the hypocrisy of the Kirchner administration in its manufactured narrative about the holders of its pre-2001 defaulted debt:

 – In the China agreements, Argentina waives its immunity and “submit[s] itself to foreign courts,” prompting La Nacion to observe, “the government of Cristina Kirchner ended up giving the Chinese banks foreign jurisdiction, submission to other courts and everything it wants to take away from the holdouts.” (Chinese insistence that the credit facilities be governed by English law suggests that they assign Kirchner/Argentine promises something less than face-value…)

 - The “contracts with China also appear to contain clauses that the Government…repudiate[d] in the cases against the holdouts, such as ‘acceleration’ of debt maturities, which are carried out if the country goes into default on a payment…the creditor is entitled to demand immediate payment of the total principal, even if many years to maturity remain.”

It is also worth noting that the railroad and hydroelectric dam contracts with China contain pari passu clauses. It is well-known how Argentina views its obligations under that provision.

And so, with the Argentine benefits of the accord seemingly illusory, investigative journalist Jorge Lanata devoted an entire show to the “small print” of the so-called “million-dollar” deals with China.

Among Lanata’s findings?  The Belgrano Railroad deal required Argentina to buy 2,800,000 railroad ties from China, even though there are at least 5 factories capable of producing these that already exist in Argentina. 

And the Argentine levy for this obscene charity to Chinese companies, at the expense of Argentine industry and its employees? An estimated 30%-35% more than it would customarily cost…

Lanata and other informed observers have made the point that this relationship is a classic model for the deteriorating terms of trade:  Argentina provides the commodities and China provides the manufactures.

Could this have any bearing on an Argentine economy “struggling to avert a recession”?  Oddly, President Kirchner’s “narrative” seems never to indulge this vein of analysis…

Neither are any of Kirchner’s narratives expected to indulge the topic of China’s well-documented degradation of the region, as documented by many, including the UK’s The Guardian.  It ran an in-depth piece, entitled, “China’s exploitation of Latin American natural resources raises concern,” with an equally compelling subhead, “Economic benefits countered by environmental damage and fears over lopsided nature of trade relations with Beijing.”

A few choice excerpts:

 – An “Amazonian forest cleared in Ecuador, a mountain leveled in Peru, the Cerrado savannah converted to soy fields in Brazil and oil fields under development in Venezuela’s Orinoco belt…These recent reports of environmental degradation in Latin America may be thousands of miles apart in different countries and for different products, but they have a common cause: growing Chinese demand for regional commodities.”

 – “The world’s most populous nation has joined the ranks of wealthy countries …that have long consumed and polluted unsustainably.”

 – “Even more than Africa, Latin America has become a major focus of Beijing’s drive for commodities.”

 – “A study last year by Enrique Dussel Peters, a professor at the National Autonomous University of Mexico, found that the region has been the leading destination for Chinese foreign direct investment – mostly for raw materials and by big government-run companies such as Chinalco and CNOOC.”

 – “Since the 2008 financial crisis, China has also become the main lender to the region…in 2010, it provided $37 Billion in loans – more than the World Bank, Inter-American Bank and the US Import-Export Bank combined.”

 – “Trade between China and Latin America was just $10 Billion in 2000.  In 2011, it had surged to $241Billion.”

The Guardian goes on to say, “Repayments to China are guaranteed by long-term commodity sales, which means a commitment to push ahead with resource exploitation – often with dire consequences for the environment and indigenous communities.”

From Argentina’s perspective, the expose’s conclusion seems particularly prescient (written 14 months or so before the Argentine/China flirtations that spawned the accord):

“The lopsided nature of China-Latin America trade is also questioned because while it is good in terms of GDP quantity, it has not been so beneficial in developmental qualityCommodity suppliers are delighted at the Chinese demand for their exports, but manufacturers complain of a flood of cheap Chinese imports that undermine their competitiveness.”

For certain, it is a description that should embolden opponents of the accord, especially if they hope to safe-guard Argentina’s crown jewel, her national patrimony, the gigantic Vaca Muerta shale formation in remote Patagonia that represents the world’s second biggest shale gas reserves and the fourth largest shale oil reserves…as well as a perpetual dream-source of Kirchner revenue…

Kirchner’s long-harbored desire to transform the Vaca Muerta from crown jewel to fungible asset came a step closer yesterday on news that Argentina’s state-run energy division, YPF, had signed a preliminary agreement with China’s Sinopec to extract oil and gas from the region.

We remind readers that a transfer of patrimony remains preventable. If Argentina negotiated a resolution in good faith with its creditors, it would not need to be on the short end of such one-sided financial arrangements.

The Facts About Argentina’s Relationship with Iran

The Nisman Indictments Are a Validation of Years’ Long Concern about the Kirchner Government’s Close Ties to Iran

The Kirchner administration is reeling from detailed, formal accusations by Argentine prosecutor, Alberto Nisman, that President Cristina Fernández de Kirchner and her Foreign Minister, Héctor Timerman, engaged in a “criminal plan” to cover up an investigation into Iran’s involvement in Argentina’s most horrific terrorist attack in history, the July 18, 1994 car-bombing of a Jewish community center (the Argentine-Israeli Mutual Association, or AMIA) located in Buenos Aires, in which 85 people were killed.

The news reverberated around the world, provoking much outrage, if not too much surprise; the Argentine/Iran alliance has been a source of frequently expressed concern in Washington and elsewhere these last few years.  To many observers, this blog included, the news seemed further validation that Kirchner’s “corrupt populist administration…is on the road back to ruin.”

As terrorist efforts unfolding in France, Belgium and elsewhere were shaking the world, Argentina’s leadership was thrust into the limelight as negotiating with Iran in a secret deal that has left unresolved the terrorist attack on Argentina in 1994.

Nisman’s meticulously documented assertions were referenced within a 300-page summary of a just-concluded two-year investigation that he presented to a Buenos Aires court Wednesday, along with a plea for Judge Ariel Lijo to interrogate Kirchner and Timermanhimself a member of Argentina’s Jewish community“for being authors and accomplices of an aggravated cover-up and obstruction of justice regarding the Iranians accused of the AMIA terrorist attack.”

Distilling both crime and motive to one impactful sentence, Nisman declared, “The president and her foreign minister took the criminal decision to fabricate Iran’s innocence to sate Argentina’s commercial, political and geopolitical interests”.

Developments are being exhaustively reported by international and U.S. media, as well as La Nacion, Ambito Financiero, Clarin, Buenos Aires Herald, the Times of Israel, MercoPress, and El Cronista.

Although the full Nisman narrative has not yet been released – much of it is still classified as “secret,” according to Clarin – it will be buttressed by “scalding documentation,” detailing an investigation that “lasted two years and included following of spies of the Intelligence Secretariat (SI) compromised in this plot,” as well as wiretaps of the main suspects setting up “a criminal plan to take Iran out of the [AMIA] attack.”

The AMIA terrorist car-bombing was never solved, and Mr. Nisman’s investigation “reached a dead end some years ago after Iran refused to hand over a number of officials, including the former Iranian cultural attaché in Argentina, Mohsen Rabbani, who is suspected of masterminding the deadly 1994 attack.”

Nisman has tried for years to get Rabbani and other AMIA terror suspects extradited to face trial in Argentina.

In 2013, Argentina signed a “controversial agreement with Iran to set up a joint commission to investigate the blast.” This agreement, Nisman alleges, was “a direct result of the ‘oil for grains’ secret deal” that Kirchner sought.

The Guardian summarizes, “in that memorandum, Iran agreed to set up a truth commission on the bombing in return for Argentina closing down the judicial investigation and cancelling the Interpol warrants while the commission worked.”

“The agreement, which was roundly condemned by Jewish community leaders, was approved by Argentina’s Congress but foundered after Iran failed to confirm it, apparently because the Interpol warrants were not lifted in time.  It was finally declared unconstitutional by the federal appeals court.”

From its proposed inception, the joint “Truth Commission” has been a source of well-documented, well-argued outrage for providing diplomatic legitimacy to the terror-financing Iran.  As the Wall Street Journal aptly declared at the time, “to many Argentines, that seemed like letting the fox decide the fate of the chickens.”

Among the many Nisman bombshells is the charge that Kirchner conspired in a “sophisticated criminal plan” to “negotiate directly with Rabbani,” and that Rabbani, as Clarin reports, “was the chief negotiator of the pact and ‘backroom deals’ such as dropping the red alerts from Interpol against Iranians, which Timerman was supposed to make happen.”

“Every message from the President was communicated in detail to the fugitive Mohsen Rabbani, who was Iran’s Cultural Attache in Buenos Aires at the time of the attack.”

Nisman claimed further, “before the signing of the memorandum with Iran we found evidence that people from the [Argentine] intelligence services were passing information from the AMIA case to Iran.”

Additional serious charges include:

 – “Mrs. Kirchner had ordered Foreign Minister Hector Timerman and others to negotiate immunity for Iranian suspects in hopes this would reestablish trade ties and allow Argentina to import Iranian oil to ease a domestic energy crisis. The alleged plan didn’t come to fruition, however.”

 – Timerman orchestrated “secret deals with Tehran” to establish false trails and “alter the investigation to exonerate the Iranians from any responsibility.”

 “‘The impunity of the Iranians was ordered by the president and instrumented by Timerman,’ Nisman said, with the goal of scoring closer geopolitical ties with Iran, trading oil and even selling weapons.”

 – “The president conducted secret negotiations with Iran through non-diplomatic channels in 2013, and offered to cover up the involvement of Iranian officials in return for oil to ease Argentina’s chronic energy deficit. Under the deal, the oil would be exchanged for Argentinian grain.”

 – “A deal in which Argentina, under the orders of Mrs. Kirchner, promised to absolve former Iranian officials accused of masterminding the attack…in exchange…Iran would send oil to Argentina to ease its crippling energy deficit.”

In an interview with La Nacion Thursday, Prosecutor Nisman made clear that, “Cristina Kirchner decided absolutely everything.  She is the one who gives the order to Foreign Minister Hector Timerman to wipe Iran clean of this problem.  She is the one who established the existence of a parallel diplomacy to handle these things, besides orchestrating the false track.”

 

Equally alarming, Clarin reports that President Kirchner has been aware of prosecutor Nisman’s investigation for at least the past month…and has done her level best to obstruct its progress, and thwart its main investigator, boldly attempting to “preventively decapitate the leadership of the SIDE, including the head of counterintelligence and then-Nisman advisor, Antonio Stiuso.”

 

The Guardian reports Nisman quoting prime terror suspect, Rabbani, in an intercepted 2013 telephone conversation with an Iranian confidante of Kirchner allies in Buenos Aires, “Iran was Argentina’s main buyer and now it’s buying almost nothing…That could change.  Here [in Iran] there are some sectors of the government who’ve told me they are willing to sell oil to Argentina…and also to buy weapons.”

 

An Argentine federal judge will now decide whether to hear the complaint and whether anyone should be summoned for questioning.  Given that this news was received like a “neutron bomb in the heart of power,” like “a blow with the highest political impact,” it’s certain to be an ongoing story that will be much examined.

 

Although she made a public appearance Thursday, President Kirchner did not speak to reporters, and has not yet commented on the allegations.  Foreign Minister Hector Timerman, particular focus of the allegations, read a statement dismissing Nisman as “despicable,” and his allegations a “media show,” while declaring that President Kirchner had made great strides “in the search and punishment of the perpetrators of the brutal attack.”

 

Despite these vigorous denials from the Kirchner government, Prosecutor Nisman offers compelling evidence that President Kirchner, working through an ad hoc team combining officials including Minister Hector Timerman with unofficial intermediaries, attempted to make a Faustian pact to exchange impunity for Iranian operatives involved in the horrific AMIA bombing, one of the world’s worst terrorist incidents, in exchange for access to oil and markets for Argentina’s agricultural products, and perhaps also weapons.  If the allegations are true, there might finally be some consequences leveled on this government, whose lawless behavior toward courts and judges is also reflected in its decision to align with outlaw states like Iran and Russia.

Closing in on the Kirchners: New evidence ties Lazaro Baez and Cristobal Lopez to corruption

More information was revealed this week by the Argentine press about the “K money trail,” widening the already striking picture of corruption that implicates the Kirchner family.  Evidence is mounting against two central figures in the story, who allegedly helped the Kirchner family launder money in exchange for lucrative business deals with the government.

La Nacion reported that K-businessman Lázaro Báez – the number one recipient of public works contracts during the Kirchner governments – listed a suspicious US$56.3 million in income in 2011 for his flagship company, Austral Construcciones, as the settlement for an alleged dispute with “J & J Holding NV” of the Caribbean island of Curacao, claiming that it derived from a failed partnership investment allegedly made by Austral in 2009 in Belize.  But some simple research by a reporter revealed that J & J Holding NV has not existed in Curacao since 1989; its registered address from that time “no longer exists” according to the public business registry in Curacao itself; and its last registered agent, Corporate Trust, also no longer exists.  Furthermore, Austral had no record of ever making the investment, and the nature of the alleged partnership is inconsistent and unclear.

What is clear is that the mysterious “award” of US$56.3 million allowed Austral to balance its books for 2011, establish a trust handled by K-money trail “bagman” Leonardo Fariña and obtain up to 314.8 million pesos in loans from the state-owned Banco Nacion.  (Fariña is now in jail over tax evasion charges after telling Argentine television in detail how he and Baez participated in a large-scale scheme to embezzle and launder millions of dollars in public funds on behalf of the Kirchner family.)  The other interesting fact is that the money from the non-existent J & J Holding was paid to Austral through a money trail that went from Curacao (a tax haven) to Belize (a tax haven) to a trust in Uruguay, then to Austral in Argentina.  Belize was a noteworthy stop on that money trail, because it is also the location of Teegan Inc., a Baez family shell company through which millions of suspicious euros passed on its way from Argentina to Switzerland.  Could Teegan be involved this maneuver by Baez?  Where did the 56.3 million dollars really come from?

Meanwhile, a very familiar face emerged in the resort town of Bariloche that implicated President Cristina Kirchner herself, through her hotel company HotesurAnother “K businessman”, Cristóbal López, has been reported on here for a while.  Lopez owns an inn in Bariloche called “El Retorno.”  Lopez has seen “exponential growth in his wealth” during the Kirchner era, mostly through running casinos licensed by the government, as well as media companies that receive government advertising money, highway concessions and public works contracts from the government.  Interestingly, Clarin and La Nacion report that guests at “El Retorno” who use their credit cards to settle their hotel or bar charges are noticing that their bank statements indicate that the company that collected the money from them was not “El Retorno,” but the Hotel Alto Calafate – an establishment 1423 kilometers away in El Calafate, Santa Cruz (a different province) and with an entirely different owner: the Kirchner family.  Indeed – when Lopez’s guests pay their bills with a credit card, they are paying the Kirchners directly.   The only tangible link between the two hotels is that they both contracted the same company to manage them: Idea SA, co-owned by Maximo Kirchner, the presidential son, and his friend Osvaldo “Bochi” Sanfelice.   But the management company is not collecting the funds from Lopez’s guests – it’s going directly to the President’s hotel’s bank account without any legal or contractual explanation.

Alto Calafate is under investigation in Argentina for being used by the Kirchner family and Lazaro Baez to launder millions of pesos of unknown origin, after it was revealed that Baez had rented thousands of hotel rooms there from the Kirchners that were never used.

No Indignity Too Small

Illustrating once again that no Argentine – least of all the roughly 13 million of them who are of child-bearing age – is immune from the degradations of an imploding economy, various media are reporting a sustained and total dearth of feminine hygiene products throughout the South American Republic.

This shortage, so clearly attributable to the Kirchner regime’s desperate and destructive import restrictions, has been preceded in Argentina by several other essential items once plentiful, but now in alarmingly short supply, among them, adult diapers, baby diapers, jobs, pensions, and mirth.

It has been a frequent, if joyless, task of this blog to document the increasing outrages wrought on the Argentine people by its government, most recently in evidence with President Kirchner’s efforts to cede both sovereignty and jobs to China.

These, like many of her flawed decisions before them, stem from Kirchner’s refusal to negotiate with her creditors, the massive default she subsequently chose, and the many new obstacles she erected for herself that now block access to both international capital markets and IMF funding.

All of which is to say, this shortage itself isn’t setting any precedents, unpleasant though it must be.

What Is novel is the government response to it.

Yes, it is patently dishonest.

Yes, it ignores obvious realities.

And, Yes, it dodges and weaves, and shifts blame elsewhere.  So, in just about every metric, It Is a standard Argentine Government response to self-inflicted misery.  (If you are having trouble recalling the Kirchner Default Response Structure, please click here…or here)

No, where the blame-shifting here differs from the canards of the past is in its lack of “message discipline”; the Argentine government is seemingly so eager to divorce itself from this hardship (even bureaucratic functionaries are liable to have wives, moms, sisters, girlfriends, daughters, aunts, female friends, female co-workers…), that its response was schizophrenic, blaming not one conspiracy, but two…

First, according to AP, Argentine Cabinet chief, Jorge Capitanich “said there were no special restrictions on importing tampons, which he called ‘sensitive products,’ and blamed the shortage on a commercial ‘strategy’ by importers.”

AP had no trouble rebutting this claim, finding no less an authority to do so than the head of the Chamber of Importers, Miguel Ponce, who laid the blame squarely on the Argentine government’s regulations, saying, “authorities have been particularly slow to issue import permits for several products… some companies have had trouble getting access to foreign currency.”

Then, Commerce Secretary Augusto Costa attributed the shortage to a surge in demand caused by “irresponsible media reports”…“there was a sort of tampons run,” Costa said in a Radio Del Plata interview late yesterday.  “It was induced by media operations.”  He, too, denied that import controls were to blame…

But the facts were numerous, and, as they so often do, proved impervious to even the most impassioned rhetoric.

Bloomberg detailed a few of those salient fact-nuggets:

  – “The government restricts imports, requiring authorization from regulators to bring in goods, in an effort to curb the decline in international reserves, which have fallen 40 percent since their high in 2011.”

  – “In recent months, Argentina has tightened its already strict control on foreign currencies in an attempt to curb inflation and capital flight. The government hopes that by restricting currency exchanges it will protect reserves at home needed to pay off its debts. That has often made it hard for importers to get the funds they need to buy products abroad.”

  – “The restrictions on imports, combined with high inflation in South America’s second-largest economy, have led to periodic shortages of pharmaceutical products in recent years, such as latex gloves and needles.”

Like AP, Bloomberg also referenced import authority, Miguel Ponce, citing the bombshell that he earlier dropped on Radio Mitre… “the central bank owes importers about $5.5 billion for authorized purchases…there was a total restriction of foreign exchange” from Dec. 20 to Jan. 5, “which explains shortages in some products, including tampons.”

In its close, the reliably serious Bloomberg reported:

“In recent days, Twitter has exploded with jokes and complaints about the shortage. Some said Argentina was becoming more like Cuba and Venezuela, where hygiene products frequently are hard to find.”

 

 

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