Fact Check: Argentina

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The “real cause of Cristina’s fury with judiciary”: a judge has connected the dots on Kirchner family corruption

Meanwhile, internal operative is dispatched to “clean up” evidence not yet obtained from tax authority

Marcelo Bonelli writes in his regular Friday column for Clarin that “the real cause for Cristina’s fury” against the Argentine judiciary is that Judge Claudio Bonadio, who is investigating irregularities at her family’s hotel company, Hotesur, has apparently connected the evidentiary dots that link the Kirchner family to an elaborate corruption and money laundering scheme involving two Argentine tycoons, Lázaro Báez and Cristóbal López.

We have long reported here on the various ways that López and Báez have separately benefited from and supported the Kirchner family while they were in power. The infamous “K Money Trail” put Báez forth as the Kirchner family’s front man in an elaborate embezzlement and money laundering scheme. And López owns a huge conglomerate that also includes hotels, as well as media companies that benefit from the Casa Rosada’s advertising largesse, millions in energy concessions, and he is known as the “gambling czar” for his dominant role in the country’s gambling industry.

Bonadio has apparently uncovered the first tangible evidence linked all three in the corruption scheme, as Bonelli reports:

Gambling czar Cristóbal López is involved in the money laundering investigation being conducted by the judiciary into the hotels of the presidential family. Claudio Bonadio has found triangulated operations using company accounts of López’s to settle alleged fictitious income at Hotesur.

This would be the first proven connection of business transactions involving Lázaro Báez and Cristóbal López with the Kirchner family.

Báez and López have a close relationship with the President and multiplied their business dealings in the Kirchner decade. But this finding would unite them in an investigation for alleged corruption.

This invoicing – pending other evidence – has confirmed two things: that Báez paid the Kirchners through ghost rentals of rooms that he never used, and then there were transfers of funds using accounts of the gambling czar’s holding company.

The news of Bonadio’s discoveries “fell like a bucket of ice water” on the Casa Rosada, Bonelli reports, and is being discussed among the top industrialists in Argentina as “what is really worrying Cristina and infuriating her about the judiciary.”

As we’ve reported here, investigative journalists in Argentina began reporting strange things showing up on the credit card bills of guests staying at Kirchner family hotels. In some of those hotels that were once managed by Báez’s companies, charges would show up as being credited to companies owned by López. But apparently now Bonadio has found the evidence of the “triangulated” web of corruption involving the presidential family.

Bonelli also reports that Cristina’s closest aide, Carlos Zannini has ordered the head of the General Tax Directorate (DGI), Angel Ruben Toninelli, within the country’s national tax agency AFIP, to “clean up” Hotesur’s tax records while Bonadio’s investigation advances, or interfere with the investigation inside the regional office of the nation’s capital. According to the report, Toninelli pressured the Metropolitan Director of the DGI, Exequiel Lebed, to sign off on a whitewash of an internal investigation in his office into whether Hotesur used fake invoices to falsify its income, and then Lebed took a vacation, took sick leave, and then resigned.


Today, ATFA released a short web film, entitled, ARGENTINA:  STILL REFUSING TO NEGOTIATE.”  Featuring accredited news broadcasts and print coverage, and relying upon legal documents and contracts, academic studies, and economic analysis, ATFA’s film captures in 11 minutes the story of Argentina’s debt debacle.

The release of ATFA’s new film comes days after Argentine Economy Ministry (MECON) criticized the court-appointed mediator, Daniel Pollack for requesting that Argentina meet with its creditors, without preconditions, to negotiate a settlement.  To this entreaty, Economy Minister Axel Kicllof, who has previously stated that he would prefer a default to negotiation with creditors,  claimed that Judge Griesa is “blocking any negotiation” and resumed his harsh criticism of Judge Griesa’s court and the U.S. justice system. Those criticisms began last summer, after Argentina exhausted all of its efforts to use that same system of justice to advance its own goals.

It’s understandable that the Court would expect Argentina to finally come to the table.  After all, the so-called RUFO clause, the excuse that Argentina’s leaders had given for not negotiating all of last year, expired on December 31st.  ATFA never believed that RUFO was a legitimate reason not to negotiate, and we reported last summer that RUFO was nothing more than a smokescreen and ruse.

Given the message emanating from the MECON last week, ATFA’s release of ARGENTINA: STILL REFUSING TO NEGOTIATE is well-timed, and will provide our readers with a review of the facts relating to the decision of Argentina’s leaders to default. Those facts include:

 –  Argentina voluntarily agreed to be bound by New York law and waived its sovereign immunity when it issued its bonds.

 –  In 2012, Argentina lost a dispute in the New York court of Judge Griesa, which granted bondholders’ their contractual pari passu rights. Argentina then availed itself of the U.S. legal system to appeal the ruling.  The Second Circuit Court of Appeals, in upholding Judge Griesa’s ruling, called Argentina a “uniquely recalcitrant debtor”.

 –  In its appeal to the U.S. Supreme Court, Argentina promised that it would comply with Judge Griesa’s ruling if the Supreme Court did not hear its case.  In June 2014, the Supreme Court rejected Argentina’s appeal.

 –  Following its final court loss, Argentina chose to default instead of simply sitting down to negotiate with creditors.

 –  Argentina then broke its promise to the U.S. Supreme Court to obey the ruling, and it put in motion a scheme to evade Judge Griesa’s orders, which led a contempt of court citation in September 2014.

 –  As ATFA predicted, Argentina’s choice to default is having a dramatic impact on the Argentine economy and on the Argentine people.

 –  Argentina’s creditors are still waiting to negotiate.  MECON attempts to mislead its own citizens when it states otherwise, or claims that creditors are demanding immediate payment in full. 

 –   Sadly, Argentina refuses to negotiate.  Instead of negotiating, its leaders engage in rash attacks on the Judge, the court-appointed mediator, creditors, and even the United States government.  It fabricates new, nonsensical excuses to mask its defiant refusal to reach a resolution. All of this appears to be nothing more than an attempt to distract from the country’s self-imposed economic calamity.

As ATFA’s new film points out, it is no accident, or “conspiracy,” that Argentina continues to be isolated from the world’s capital markets, or that inflation continues to rise right along with Argentine unemployment, or that the Republic just one place removed from the “top spot” on the World’s Misery Index.

The decision to default has exacerbated the slow-motion train wreck arising from extreme mismanagement of the Argentina’s economy

RUFO expired more than 50 days ago.  Why won’t Argentina negotiate?


Argentine Export Problems Indicative of Deeper Rot: Agenda Item for WTO’s Upcoming Meeting?

Despite a substantial increase in Argentine wheat production in 2014-2015 – a “jump of around 20% in planted area” – it looks as though much of it will fail to reach the export market, thanks to what has been described euphemistically as “government conservatism,” but which most observers recognize as just another symptom of the flawed economic policies of the Kirchner administration.  Ever diminishing dividends are their hallmark.

According to the Buenos Aires Cereals Exchange, Argentina harvested a total of 11.2 Million Metric Tons (MMT) in early January, “bucking the trend” that featured stark declines over the past decade.

With domestic consumption pegged at 6MMT, and carryover stocks reported at 2MMT, that leaves between 7-9 MMT of exportable wheat, “although shipments more likely will come in at around 4 to 5 MMT.”

And yet, “wary after problems in the past, the government is being very tight with export licenses,” said Sebastien Villena, representative of the CREA farm group in Pergamino, Buenos Aires province, and so far has approved only “2.2 MMT in export licenses.”

Industry analysts surmise that additional licenses will be forthcoming, but the “problem for farmers is that nobody knows when the new quotas will be announced, and for what quantities.”

“It is precisely this type of uncertainty that has caused so many to simply give up planting wheat,” said Jorge Bianciotto, who manages over 10,000 acres around Pergamino, Buenos Aires province.

[For historical perspective, consider that prior to the introduction of Argentine export quotas in 2006, the Republic used to plant and export larger volumes.  “Peak acreage was 18.5 million acres, while peak production was 16 MMT.”]

This news comes on the heels of reports just little more than three weeks ago that Argentina’s current trade surplus – with a decline in exports of 17% — is the worst since 2001.  

Perhaps the World Trade Organization (WTO), during its upcoming General Council meeting on February 20th, could further examine Argentine governmental policies on trade, and the deleterious affect they have had on the overall business climate.

Of course, the WTO has weighed in several times previously on Argentina’s protectionist bent, most recently just this past month when it rejected the Republic’s bid to overturn a “ruling in favor of the United States, the European Union and Japan against the South American country’s licensing rules used to restrict imports,” having earlier recommended Argentina fix its trade rules because those import licensing requirements, among other import restrictions, were deemed in breach of international trade rules.

Readers of this blog can attest that we have long chronicled President Kirchner’s destructive economic policies, and how they have combined – along with her decision to voluntarily default on her loan obligations – to serve only misery to the Argentine populace.

Soon after her latest default, we highlighted expert analysis that warned of the consequence of that default.  In light of this current economic news, it’s worth reading again.  So, too, is Bloomberg’s editorial of the same period, identifying Argentina’s Contempt for Its Citizens.

At what point, we wonder anew, will the Argentine populace reject the contemptuous neglect of its leaders, and demand they govern rationally and in the interests of the many, rather than just the corrupt few?

At what point will Argentinians demand their leaders meet their legal obligations and negotiate a resolution with their creditors?

Another Setback For Argentina –This Time in the U.K.

Today a UK court ruled that it would not interfere with U.S. court proceedings related to Argentina’s obligations under the pari passu injunction.

After failing to get a U.S. court to release funds that Argentina illegally sent to BNY (as trustee) in June, a group of Argentina’s exchange bond holders sued BNY in a UK court seeking essentially the same relief. The court refused to give the bond holders a second bite at the apple.

The UK Judge reaffirmed the propriety of the U.S. court’s injunction freezing the funds because BNY, as trustee “can properly be the subject of any orders which that court considers appropriate”. The court also expressed its reluctance to get involved in the pari passu proceedings in the U.S.:  “The Court is, of course, very concerned not to intrude improperly into matters which are before U.S. Courts.”

This was a setback for Argentina.  The only item granted was a declaration — which was not even disputed by BNY — that, under English law and per the bond documents, the funds sit in trust. But no relief was granted.

It’s remarkable that Argentina remains unwilling to sit down and negotiate with its creditors, given that these creditors have stated repeatedly that they are seeking a final settlement to end the dispute.

Argentina is running out of time and excuses:  RUFO has expired, Argentine businesses remain unable to attract adequate credit, oppressive currency controls depress trade, and the Argentine economy is being squeezed. Negotiating a final settlement is the answer.

YPF’s first bond issue since Argentina’s default gets clipped

El Cronista Comercial reports that the first debt issuance by Argentina’s state-owned oil company, YPF, fell far short of its target because of the country’s sovereign default last year.  The company had announced – well in advance – that it would issue US$750 million in debt, its first issuance since Argentina’s government took the country into default last year.  But investors wouldn’t offer an interest rate that YPF could afford, and the company could only sell US$500 million in the operation:

“Yesterday more than 120 investors, mainly pension funds, investment and hedge funds in the United States, were involved. Also, private banks and insurance companies. And local investors, in a small proportion.  But despite the company having pre-announced the issuance due to an improvement in volatility, they ended up asking the (lead mandate) banks Citibank, JP Morgan and Itau for a rate over 9% for the longer term, which the company didn’t want to accept. (…) ‘The reasons are the Argentine default, the financial cost paid by Argentina, the price volatility of oil, and the oil and gas industry cutting back investment plans and laying people off,’ said sources linked to the issuance.”

Despite the fact that the Argentine government continues to deny it is even in default, investors– and their capital – live in the real world. Moody’s rated the debt issuance a punishing Caa1, with a negative outlook:

“YPF’s negative rating outlook is based on the negative outlook on the Argentine government … (which is) tied to concerns about the government’s haphazard policies, poor transparency and the quality and reliability of its official data reporting, as well as the sovereign’s willingness to pay its debt obligations.”

So even a company like YPF, with 49% ownership from private capital, is facing the consequences of the Argentine government’s puzzling default strategy, following the harm suffered by the country’s banks, its provinces and its municipalities.

Imagine if Argentina had settled with its creditors on mutually beneficial terms last year.  What a completely different picture all of this would be.

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