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Corruption in Argentina

A few weeks ago, one of the most watched political TV shows had as a guest Jorge Molina -a former director of Aerolineas Argentinas- as part of a segment on corruption in Argentina. Specifically, the segment was devoted to report a possible complex, widespread and sophisticated network of systemic corruption at a high level that has been operating methodically resembling the works of a mafia organization of sorts. During the interview by host Mariano Grondona, the interviewee stated that sometime around September 2007 right before elections, he was visited by Manuel Vázquez -a former assitant to Secretary of Transportation Ricardo Jaime- who requested “aid” for u$d 1.5 millions for the electoral campaign. Molina then described how he instead offered to contribute what was legally permitted by the “ley de partidos politicos”, a sum considerably smaller.

Succintly, Molina made clear that he was not only coerced into funding the official political campaign at the time but also threatened with roadblocks on his actions as manager of the company if he didn’t cooperate by making it easy for Aerolineas to engage in certain transactions of very large amounts, in which pressumably Vázquez et al. would have had a bite. Interestingly, right after Aerolineas Argentinas was nationalized, the company finalized the purchase of 20 embraer planes from Brazil. The same transaction Molina refused to greenlight, adding that prices set for buying the planes looked stretched in many ways.

Ever since the death of Nestor Kirchner many political figures with ties to the administration have been voicing the need to “profundizar el modelo”. That is, to complete the structural changes initiated by Nestor Kirchner… whatever that means. In reality, digging deeper is hard to find anyone that can precisely explain what is or even how to “further Kirchner’s vision for Argentina”. It is possible that the common person in the street would view this change as one where unions acquire even more power and a bigger piece of the cake just as Moyano has been declaring recently that it is time for argentines to have a “worker” in the Pink House. For yet another group of perhaps more sophisticated citizens, this furthering may entail even more widespread redistribution of income dangerously depleting any wealth left. But for the more savvy bunch, it could just be that what all this really means is pursuing a method of governing where the figure of the government is used to access and acquire power over both private (nationalizing) and public resources with the ultimate goal of manipulating existing structures to facilitate the channeling of funds to those in charge.

Molina’s tale seems to point in this direction as much as many of the recent emails that have been made public through the investigation of the Jaime/Vazquez affair. It may be that a leftist and radical government may find it easier to enrich its own comrades by the use of their special powers. Something that can be vastly more difficult to accomplish if free market forces that make competition and efficiency mandatory where the order of the day. Unfortunately, the average criollo will hardly be able to connect the dots when not even 5 judges working on these and other cases of corruption in official agencies may be able to bring any light or prove any wrongdoing.

Here goes a hope and a wish for Argentina’s bright future… and a new rising model.

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New challenges

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This week we may have a chance to see how well the President is coping with the aftermath of her husband’s death. There is to consider the federal budget as well as the coming G-20 meeting in Seoul this Wednesday. The two fronts were battles may occur are plagued with dilemmas. On the one hand, Argentina as a priviledged member of the G-20s will look to push forward its stance of negotiating with the “Club the Paris” the remainder of 6,700 billions owed outside of the realm of the IMF. However, this presents in itself a contradiction given that G-20 members must abide to the rules of the organization which preclude a certain and dominant relationship to the IMF. No one understands what Argentina’s administration message will be, neither if it will make much sense. As part of the bylaws countries are subject to revisions and audits by the same organization Cristina and her cohorts are trying to play games with. And as it is public knowledge, data that relies on government figures has been thought to be fraudulent for some time.

One thing is for sure, the government will spin any possible news such as bilateral meetings with powerful countries in the best possible light trying to make it sound like other members are being responsive to Argentina’s allegations.

Meanwhile, this same Wednesday kirchneristas will try to make a successful move at the House of Representatives in order to setlle matters with the 2011 federal budget. Problem is they can hardly reach the needed number of votes. Here too, we may see the official spinning machine at work looking to blame the opposite party (parties) for getting to 2011 without a budget. It is very unlikely that we may see officials change their unyielding attitude as they have been recently emboldened by a new public opinion poll that shows that over 60% of interviewees think Cristina Kirchner will be able to continue and complete whatever changes had been initiated by her husband during his presidential tenure.

Interesting times!

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A new era?

Politics aside, Argentina seems to be entering a new era after the death of Mr. Kirchner.

Ron Sommer -presently chief financial officer at an institution of higher education in New York City- recently wrote a column for Seeking Alpha showing a bullish scenario for specific stocks. Namely, Telecom Argentina. His detailed analysis based on his 35 years of financial management experience has led him to believe TEO offers a great opportunity for investment. With one caveat… “There are certain risks in investing in Argentina. Among the risks are political instability, an unfavorable regulatory environment and currency risk, among others” he explains in his blog.

These remarks carry a lot more weight than he would have you believe. Mr. Sommer may certainly be right in that value-wise TEO should be on our radar but when considering Argentina, disregarding any other factor ex-financials would be highly dangerous if not outright suicidal.

The death of Mr. Kirchner opens up the possibility of a large power vacuum in the political front with a possible subsequent power struggle that will engage all major and minor political forces into disputes that may range from the colloquial ones to those that have the potential to change Argentina’s future forever. Some of these disputes may revolve around the newly sponsored bills by a few congressmen that aim at splitting corporate profits among the working class -in the order of 10%-.  Needless to say, this would be the equivalent to crossing the rubicon in any western economy.

At the center of such bills is the push by Moyano and the unions he controls to seek a greater chunk of money participation. As it has not been enough that unions already get plenty of favors by the administration, both in terms of funds as well as political aspirations, now they have decided to embark on a new cause: to loot private corporations.

Politics, when it comes to Argentina, always takes over and nothing becomes more essential to assess possible investments and financial scenarios. Further advancement of former vicepresident Mr. Scioli within local politics may bode well for businesses going forward and help slow down any progress on the “profits” bills mentioned earlier. But right now, it will be best to take a wait-and-see approach until the dust settles. So even though Mr. Sommer’s point of view presents a bullish stance, it is good to remember that there is always the Matador that kills the bull.

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