Fact Check: Argentina

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Infobae Reporting New Argentine Justice Investigation into Kicillof – Marynberg Connections

Until now, the K in the “K money trail” has clearly referred to the Kirchner family.  But an Argentine prosecutor is advancing on what potentially could become a money trail of a different “K”.

As we have reported extensively here, Diego Marynberg has connections to shell companies and financial maneuvers passing through Panama, Uruguay, Russia, Venezuela and the United States.  Marynberg was revealed to be a crony of Economy Minister Axel Kicillof, and has been linked to a mysterious insider bond transaction with the Central Bank of Argentina (BCRA) only days before Kicillof intentionally took the country into default earlier this year.

Yesterday, Infobae reported that prosecutor Guillermo Marijuan is advancing apace in the federal investigation of both men and the transaction between them involving public funds that is described in the complaint.  Recall that the discovery of the alleged insider deal worth US$200 million by then-Central Bank President Juan Fabrega may have been the reason for Fabrega’s spectacular ouster, reportedly at the hands of Kicillof himself.

Did Fabrega uncover a spectacularly unethical maneuver by Kicillof and his staff behind the scenes?  And did Kicillof maneuver for Fabrega’s ouster in order to hide his trail?

Against a backdrop of almost daily revelations chronicling the depth of corruption by nearly every major figure of the Kirchner government – and the panicked scrambling to give themselves immunity from prosecution by the Argentine justice system – it will be very interesting to follow the developments of this investigation.  With so much already out in the open from the criminal complaint that was filed earlier this year, any journalist or independent researcher has plenty to start digging into.

Who knows what might be uncovered by Marijuan?  Or others.

Fact Check Launches RUFO Countdown Clock

Today, Fact Check Argentina launched an official “Countdown to RUFO” clock on our homepage to mark the hours until RUFO expires at the end of this year.  To date, RUFO has been Axel Kicillof’s favorite excuse for not negotiating with creditors.

RUFO Countdown Clock

We’ve explained to our readers that RUFO is nothing more than a smokescreen aimed at scuttling any negotiations – likely concocted by Argentina’s lawyers at Cleary Gottlieb.  Since trotting it out this summer, Argentina’s leaders have consistently cited RUFO is a primary reason for not settling – or even meeting with its creditors.  Argentina’s leaders like to cite RUFO, in explaining their refusal to help their own economy by settling with creditors, but even exchange bondholders have stated that they would be willing to waive RUFO in exchange for a settlement.

Nevertheless, RUFO has a deadline, and that deadline is approaching rapidly.  Despite ATFA’s disagreement that RUFO would have hindered a settlement in 2014, we’re optimistic that its expiration in 2015 will pave the way for an agreement that will unleash new growth and investment in Argentina’s economy.

As recent news shows, Economy Minister Axel Kicillof has proven Argentina can pay what it contractually owes to the holdout bondholders.  Hopefully when RUFO expires, Crisitna Kirchner and Axel Kicillof will come to the table to negotiate.  It’s time.

Kicillof proves he can pay holdouts

Last Thursday, Argentina’s Economy Minister Axel Kicillof announced a buyback offer for holders of sovereign bonds – known as Boden 2015 bonds – that are scheduled to mature in 2015.  According to news reports, the Argentine government has given bondholders two options: accept $0.97 on the dollar or swap their Boden bonds for new Bonar bonds governed by Argentine law that would become due in 2024.  If all Boden bondholders accepted the cash offer, Argentina would pay approximately $6.5 billion in cash.

The cash offer is clearly unattractive to Boden holders, with the Bodens currently trading in the open market for more than $0.97.  Curiously, Kicillof announced that this offer “proves” that Argentina pays its debts. But by offering less than the par amount owed and less than the current market price is Argentina actually signaling that it may not pay the full 100 cents come October 2015?

The offer to swap Bodens for Bonar 2024s is equally unattractive. Boden holders should be trying to get cash at maturity, not new Argentine law bonds.  Argentina has shown no sign that it’s willing to end its self-destructive policy towards the holdouts which could lead to an unraveling of the previous exchanges. Argentina also shows no sign of discontinuing its unsustainable economic policies including constant money printing to feed local subsidies.  The only scenario in which it is attractive to take extended maturity Argentine bonds is if Argentina intends to resolve the holdout situation and end its current default.

Argentina is also offering to issue new Bonar 2024s for dollars. This is even more unattractive. Kicillof is asking people to part with their hard-earned dollars to buy Argentine law bonds that will have little prospect for value appreciation given Argentina’s stance towards the holdouts and that have the possibility of being pesified at any time. Argentina’s recent history of choosing to pay certain bondholders and not others, gives holders of Bonar 2024s no reason to believe that the Republic won’t at some point decide that the BONAR 2024s aren’t worth paying in U.S. dollars. Also, creating new debt while not paying the debt in default certainly is not consistent with the concept of treating creditors pari passu.

ATFA responded quickly to Kicillof’s new offer.  We released the following statement noting the hypocrisy of Argentina’s leaders claiming they have no money to pay judgments owed to our members:

“Argentina’s announced offer to use billions of dollars in cash to repurchase outstanding bonds – and almost one year ahead of schedule – makes clear that the Republic indisputably has the financial capacity to pay holders of the bonds which have remained in default for over 13 years.  Argentina cannot selectively pay certain creditors and not others and it should use that cash to pay holders of its defaulted debts.”

It’s quite brazen, but unfortunately in character, for Argentina to announce offers of billions of dollars of cash payments for certain bondholders whose claims have not even matured when Argentina has so far refused to even meet with the bondholders who are in default and who the federal courts have ordered the Republic to pay. Through this operation, Argentina is only proving that it has more than enough cash to settle with holdouts.

But it’s even more brazen for Kicillof to claim that Argentina’s new bond swap offer will somehow protect the country’s finances.  That is simply false.  If Kicillof wanted to protect the country’s economy he would settle with bondholders instead of wasting billions of dollars paying Boden debts in advance.  Settle first, then refinance your debts.  That is basic prudent economic management. But Argentina’s refusal to negotiate has nothing to do with economics; instead it is crass political gamesmanship that only hurts the people of the Republic.

As always, we urge Argentina to settle with its creditors.


Cristina’s frenzied operation to protect herself as Argentine justice closes in

Transparency International released its 2014 Global Corruption Perception Index, and found that corruption is getting worse and worse in Argentina.  But the Argentine government seems too busy to notice.  The entire government is scrambling to divert the Argentine judiciary from intensifying investigations into what appears to be a blatant culture of corruption.

Since Judge Claudio Bonadio raided the falsely-registered offices of the Kirchner family hotel company, Hotesur, the investigation has intensified into the vast money laundering operation set up by Patagonian businessman Lazaro Baez. (Hotesur, you’ll recall, owns the Kirchners’ Alto Calafate Hotel through which Baez paid for thousands of room-nights that were never used.)  Instead of cooperating, like an innocent person would, the President, her administration and her allies have launched a frenzied effort to prevent judges and prosecutors from doing their jobs:

 – The government has demanded the impeachment of Judge Bonadio in order to halt the investigation, and yesterday it used its simple majority on the nation’s Judicial Council to cut Bonadio’s salary by 30%.

 – The head of state personally accused Bonadio of money laundering because his son’s gas station (which he owns 20% of) hasn’t filed financial statements on time. The Casa Rosada hasn’t explained how – even theoretically – a gas station could be used in a money laundering operation, when fuel amounts going in and out have to be measured down to the milliliter.  It’s not quite like renting out thousands of your family company’s hotel room nights to friends of your government who then never occupy those rooms.

 – The Kirchnerist majorities in Congress are rushing to pass a bill in the coming days to allow Cristina Kirchner to run for the post of Member of Parlasur (the ceremonial parliament of Mercosur) by popular vote in 2015, and granting her immunity from prosecution for corruption, money laundering and tax evasion.

 – The government’s chief mouthpieces in the Argentine Senate have once again blocked an effort to suspend Vice President Amado Boudou as the presiding officer of that body even after he’s been criminally indicted for numerous charges of corruption.

 – The Argentine tax authority, the AFIP, has rushed to charge 4,000 companies and individuals allegedly implicated by a fugitive HSBC employee who stole bank account information from the bank that made its way to the Argentine government. The President herself ordered this operation immediately after the Hotesur raid to deflect public attention, but now officials realize that the move was so rushed and sloppy that they forgot several legal requirements and may have jeopardized the whole case.

The panicked effort by Kirchner to shield herself recalls the failed attempt to fire “K Money Trail” prosecutor José María Campagnoli, after he uncovered enough damning evidence.

Kirchner’s former Cabinet Chief, and now one of her yes-men in the Senate, Anibal Fernandez, recently attacked Bonadio by saying that a raid on a President’s private company “would never happen in a serious country.”  Maybe Mr. Fernandez should read Transparency International’s latest report.  “Serious countries” don’t shy from investigating allegations of corruption – particularly when levied against their President. “Serious countries” do not legislate  total impunity from criminal activity.  “Serious countries” don’t mobilize political tricks and power to threaten and malign prosecutors and judges at home and abroad.

Unfortunately for President Cristina Fernandez de Kirchner, perhaps, the “K Money Trail” happens to pass through at least one “serious country,” where the judges are beyond the reach of her government’s attempts to keep it from being exposed.  No amount of political protection granted by her lackeys in the Argentine government can change that.

UN Human Rights “Expert” Has Served as a Paid Advisor to Argentina

You’ll remember we posted about a certain UN Human Rights Council (UNHRC) letter one of our members received a while back. The UNHRC issued its formal response this past week. Didn’t see it? That’s because it was issued on Thanksgiving Day, when the entire country was on vacation. Give it no mind, as the letter simply regurgitated many of the Argentine government’s inaccurate claims. Coincidence? Apparently not.

It turns out that the Independent Expert on the effects of foreign debt on the enjoyment of human rights, Mr. Juan Pablo Bohoslavsky, worked (or is it works?) for the Argentine government for years. According to a profile of him from the NYU Past Global Fellows from Practice & Government,

Since 2005 he has been working for the Argentina state. He played a leading role in the nationalization of the Buenos Aires water company (AySA), of which he was consequently appointed managing director representing the federal government. He was rapporteur of the Argentinean judge in the arbitral case “Impregilo v. Ente Binacional Yacyretá” in the International Chamber of Commerce, and later became the institutional coordinator of the defendant in this case. He is now working as a consultant to the National Defense Minister of his country.”

It’s unclear from the website whether Bohoslavsky still works for the government, but either way, it is clear he was employed by the Kirchner government for years.

That’s rich given his title at the UN is “Independent Expert” and more so given the fact that President Kirchner recently lost her composure in a letter to Obama and threatened relations between the two countries would worsen over her discovery that ATFA co-chair Nancy Soderberg also serves on a U.S. government advisory committee on document declassification.  Unlike Soderberg, who is not paid for her service, Bohoslavsky has been, or might still be on the payroll of the Argentine government.

Speaking of the UN, a great piece was written this week on the UNHRC’s support of Argentina, and on the country’s desperate attempts to drum up support for a legal framework for sovereign debt restructurings. The article, written by two Heritage Foundation scholars for Fox News.com and titled Argentina’s Debt Crisis: Country turns to UN to avoid accountability, stated,

Rather than learn anything from this unhappy history, however, Argentina is opting for stubbornness, bullying and intimidation of its debt-holders, all with a helping hand from the United Nations, as it refuses to pay back bondholders for billions of dollars.”

The article went on to remind everyone that the UNHRC’s council “includes some of the world’s worst human rights violators in its membership,” and noted that “Argentina’s latest default  is different from earlier defaults, which were driven by economic crises. The 2014 crisis, though rooted in a previous $100 billion default that occurred 13 years ago, is a deliberate—and unnecessary—choice of the Argentine government.”

The authors then explained to readers that “following the court’s ruling, Argentina could have complied or at least paid interest on the bonds while trying to renegotiate a more favorable debt arrangement. Instead, this summer it decided to pay nothing, abandon negotiations, and rely on demagoguery to press its case in the court of public opinion.”

The piece ended by stating that the US opposed Argentina’s efforts at the UN, and that U.N.-endorsed demagoguery is no way to resolve a problem of habitual economic and fiscal incompetence. Unfortunately, however, it may be an effective means for seducing other countries to join Argentina in the misery of being a financial pariah.”

We couldn’t have said it better ourselves.

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