The “Boudougate” trial highlights a lack of confidence in both Argentina’s politicians and currency at a time when the country may need it most.
Argentine headlines in recent weeks have been dominated by the “Boudougate” case, in which Argentine vice president Amado Boudou is accused of illegal economic and political activity. Just after Argentines were told they must endure a 17% devaluation in their currency, the peso, news of corrupt politicians misusing their offices for financial gain has rubbed salt into the wound.
“Boudougate” dates back to 2010, when the Federal Administration of Public Deposits (AFIP) declared the bankruptcy of Ciccone Calcográfica, a printing press licensed to produce bank notes and other official documents. Yet in September of that year an investment company called The Old Fund took over the struggling Ciccone. Suspicion was aroused not only by the deus ex machina appearance of what now appears to be a shell company, The Old Fund, but by Ciccone’s nationalisation by the government in 2012. The prosecution is trying to prove that Mr Boudou is somehow connected to The Old Fund through various payments and properties linked to its director, Alejandro Vandenbroele.
The first charge against Mr Boudou is the inappropriate use of public office, as at the time of the takeover he was Minister of Finance. Had Ciccone gone bankrupt Argentine jobs could have been lost along with confidence in the Argentine peso. Mr Boudou and the head of AFIP, Ricardo Echegary, could have faced uncomfortable questions about why they allowed such an important business to slide.
The question of why the struggling Ciccone was then nationalised leads to an even more complicated web of business and politics. Previous to its bankruptcy Ciccone’s only competitor in printing state documents was a company called Boldt. In 2010 negotiations over Ciccone’s debts concluded that Boldt would rent some machines from Ciccone which it has since held onto, giving it a monopoly over the market and prompting government intervention. Yet the fact that Boldt depends on Daniel Scioli – governor of Buenos Aires and former vice president – for its printing rights adds a political dimension to the matter. Mr Boudou and Mr Scioli come from rival Peronist factions, La Campora and the Justicialistas respectively, meaning Mr Scioli’s influence over a major company like Boldt gives him a strong platform from which to lobby in elections next year.
In addition to exacerbating factional rivalries like that of Boudou-Scioli, the nationalisation of Ciccone has caused opponents of government policies to rally behind the prosecution. Increased state control over the printing of peso notes has awoken fears of higher inflation; hardly surprising considering the fictional economic growth and GDP figures that the government has been publishing in recent years. Political motives for breaking monopolies have already been called into question with the publicity of the Clarín case last year.
The second charge against Mr Boudou is of money laundering as both the identity of The Old Firm’s owner and the origin of the money which saved Ciccone remain unclear. As many Argentine politicians are involved in big businesses, it is difficult to differentiate legitimate enterprise from veiled money laundering schemes. Prominent officials suspected or charged with money laundering include the ex-secretary of transport, Ricardo Jaime, the head of the army, César Milani and (surprise, surprise) Mr Echegaray of AFIP.
That’s the way the cookie crumbles
Unfortunately corruption scandals in Argentine politics are no novelty. Perhaps the most well known culprit is former President Carlos Menem who was found guilty of trafficking firearms in June last year and sentenced to six years in jail. He is also suspected of obstruction of justice in the investigation of the 1994 bombing of the AMIA Jewish Community centre and privatising businesses at cheap rates to his friends, causing economic losses to the state.
But Menem is still a free man, as his position as Senator of Rioja prevents him from being incarcerated. By the time he finishes his term, he will most likely be too old for incarceration. Thus while individuals accused of corruption have been named and shamed, efforts to combat the problem are unsatisfactory.
So where does the problem begin and end? Corruption is often so ingrained in culture that it cannot simply be eliminated by legislation.
A study by Christopher J. Robertson and Andrew Watson has shown that there tends to be more corruption in countries with a rapid rate of change in Foreign Direct Investment (FDI). Argentina’s commodity-based economy and vast natural resources attract huge amounts of foreign currency which can then be siphoned off by those who process it. An example of this is in neighbouring Brazil, where huge investment in the World Cup meant some businessmen cut corners in construction works and pocketed the rest. If the next government drops the short-term populist policies that have contributed to the “boom and bust” pattern of the Argentine economy, this could be a step towards decreasing corruption.
Another factor that could exacerbate the problem in Argentina is the fact that many who are complacent about corruption have lived through several economic crises and under the military dictatorship. When faced with the option of accepting rule-breaking, or impoverishment, or being “disappeared”, most would see illicit activity as the best of a bad lot. But it has now been more than thirty years since the military dictatorship and another generation will soon take power. If indignation at the Ciccone scandal is illustrative of popular attitudes it could signal shift to a more condemnatory attitudes towards corruption.
Turning a corner?
When the Financial Times asked Daniel Kerner of Eurasia political risk consultancy about whether corruption allegations were likely to damage the Argentine government in April 2013, he stated that “unless the accusations (more) directly touch President Cristina Fernandez de Kirchner or one of her main advisors, this will not develop into a political crisis”.
Well now it has. Investigations into “Boudougate” could break the apparent immunity of high-ranking Argentine officials, with increased media attention and action from the judiciary pressuring potential culprits to stay straight. The problem will not be resolved overnight, but if the next government adopts more long-term economic strategies and enforces transparency in business, public disgust at institutionalised corruption may be a vital ingredient in eliminating a corruption culture.