Argentina Cracks Down on Corruption

Former president Cristina Fernández de Kirchner faces multiple corruption probes. (Photo: Argentine Social Development Ministry)

Bribery laws underscore Argentina corruption crackdown.

Tenacitas International

BUENOS AIRES -- A quiet revolution is underway in Argentina where last week Congress debated a package of laws aimed at curbing corporate corruption. This follows a stream of controversies engulfing former president Cristina Fernández de Kirchner and her associates. Fernández, who left office in December 2015, is being investigated by a federal judge for allegedly conspiring with the central bank to sell dollar futures at below-market prices in an effort to prop up the value of the peso. In June José López, Fernández’s former public works secretary, was caught trying to hide US$9m in cash in a convent. He now faces charges of illicit enrichment.

The measures by President Mauricio Macri’s 10-month-old government are designed to hold companies responsible for corrupt practices involving the public sector. Currently it is employees who are typically prosecuted for corruption such as bribery. Employers escape punishment. Under the new proposals those companies who co-operate with investigators, or adopt internal anti-corruption policies, will be treated more leniently, while those whose managers are aware of wrongdoing will receive harsher penalties. The move is part of an attempt to bring the country’s anti-corruption laws in line with its neighbors – and Fernández is not the only former Latin American leader to find herself in the crosshairs of anti-graft investigators in recent months.

Decades of political dodgy-dealing have mostly inured Argentines to corruption scandals. But the multiple controversies surrounding Fernández have shocked even the most cynical of political pundits. In April police detained Lázaro Báez, a construction magnate and friend of Fernández and her late husband the former president Néstor Kirchner. Prosecutors are investigating infrastructure projects he was contracted to undertake while the Kirchners were in office. Cristóbal López, another friend of the Kirchners, is alleged to owe the government US$530 million in unpaid taxes. He and Báez are accused of renting Patagonian properties owned by the Kirchners in return for generous public contracts. While the investigations continue Fernández has had her bank accounts and credit cards frozen; and in July investigators discovered $4.7 million in a safety deposit box held under the name of her daughter, Florencia.

The disclosures have shaken Argentines and revealed the extent to which corruption has infected the highest levels of the country’s business and politics. Transparency International ranks Argentina ranks 107 out of 175 countries in its annual Corruption Perceptions Index, well behind its neighbors Uruguay (21), Chile (23), and Brazil (76). But Mauricio Macri’s victory in November 2015 has brought new hope that Argentina can get a grip on the issue. “I’m going to be implacable with corruption,” the former businessman promised before his inauguration. He has filled his cabinet with technocrats, many of whom have experience working in the private sector. They are imbued with a new sense of optimism: Andrés Horacio Ibarra, the minister of modernization, told La Nación recently that “the goal is to be one of the ten most transparent countries in the world” within four years.


President Macri’s initiative follows other crackdowns in Latin America. In Brazil, the probe into bribery at Petrobras, the state-controlled oil company, toppled the president, Dilma Rousseff, and has now embroiled her predecessor, Luiz Inácio Lula da Silva. In Guatemala a UN-backed corruption commission helped jail Otto Pérez Molina, the country’s president, for a kickback scheme at the customs agency. Panama is seeking to extradite former president Ricardo Martinelli from the US for his alleged use of public funds to spy on its citizens. Peru’s attorney-general is looking into accusations that former president Ollanta Humala and his wife accepted campaign finance contributions from Hugo Chávez. And Mexican president Enrique Peña Nieto was forced to apologize after his wife purchased a US$7m luxury home from a government contractor.

Argentina’s government has unveiled a raft of reforms in an effort to catch up with its more proactive neighbors. In March the country’s Financial Information Unit signed an information-sharing agreement with the US Financial Crimes Enforcement Network (FinCEN), part of America’s Treasury, designed to help both countries tackle money laundering. In the same month the government introduced the Law of the Repentant, a Brazilian-inspired plea-bargaining law, which offers reduced sentences to those who share information with prosecutors. The Forfeiture Law, currently working its way through Congress, will empower the state to seize property and goods linked to corruption, drugs trafficking and money laundering.

Macri’s government has pledged to support transparency and avoid conflicts of interest. Ministers have been asked to set a personal example: in September José Manuel Aranguren, Argentina’s energy minister, was forced by Macri to sell $1m of shares of Royal Dutch Shell Plc, his former employer. The government is also working to enshrine transparency through legislation. The Access to Public Information Law, passed on September 14th, obliges state agencies to make information of public interest available to anyone who requests it. Requests for information must be answered within 15 working days and establishes a new Access to Public Information Agency, an autonomous office that will work within the executive branch. The new law puts Argentina on a par with its peers: it had previously been one of just four countries in South America without one.

The flurry of anti-corruption activity in Argentina has prompted comparisons with neighboring Brazil, which is widely admired in the region for its independent institutions and even-handed judiciary. That may be premature. The scale of the task was laid bare in the World Economic Forum’s latest Global Competitiveness Report. The report ranks Argentina 130 out of 138 countries for the quality of institutions. It also rates Argentina poorly when it comes to the public’s trust in politicians (129). During a recent visit to Buenos Aires, an Organization of the American States (OAS) mission praised the new government’s actions but warned that there is still plenty it can do to improve transparency, particularly in its hiring of staff and acquisition of goods and services.

While speculation is rife over whether Fernández will be sent to prison, there seems little prospect of it happening any time soon. Some politicians have expressed concern over the lack of progress in the cases against her. Judges say the delays are the result of a lack of resources. But some observers suspect darker motives. They accuse the government of colluding with investigators to soft-pedal the cases to enable Fernández to compete in legislative elections next year. Given her plunging popularity, the theory goes that Macri would prefer Fernández as the nominal leader of the Peronist party to younger, more electable alternatives. The government denies the accusation and insists it respects the judiciary’s independence. That may be true. But, for many Argentines, the true test of Macri’s anti-corruption efforts is whether or not Fernández ends up behind bars.

Republished with permission from Tenacitas International.


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