Yesterday, Minister of Economy Hermán Lorenzino and head of the Mint, Katya Daura, led a 60-day intervention of the Compañía de Valores Sudamericana SA (CVS, formerly known as Ciccone). The intervention was decided by the executive, which also drafted a bill to expropriate the money-printing company.

The expropriation bill will begin to be debated tomorrow at 11am by a plenary meeting of the Senate commissions of Budget and Constitutional Matters. It is expected that it will be debated on the floor next week.

The large debt the company has with tax agency AFIP will be taken into account when calculating the price to be paid for the expropriated company. As that debt is estimated to be higher than the value of the company’s assets, Lorenzino said he expects the expropriation will not cost the state any money.

Lorenzino also explained that the intervention was done to “protect workers’ rights” as well as to keep the company going.

The CVS is in charge of printing sensitive material such as bank notes. Lorenzino believes that government intervention of the company will “ensure the sovereignty of the state in the production of security papers”.

Ciccone was the former name of the printing company that filed for bankruptcy in July 2010. The subsequent lift of the bankruptcy and the role that then economy minister and now vice-president Amado Boudou had in it are being investigated. Judicial sources told local newspaper Infobae that the decision to expropriate the company should not have any effect on the investigation.

Vice President Amado Boudou with President Cristina Fernández de Kirchner on inauguration day (photo/ Casa Rosada)

The ‘Boudou case’ -also known as the ‘Ciccone case’- has been doing the rounds in the mainstream media and filling up Clarín and La Nación front pages for weeks. However, last week’s press conference by vice-president Amado Boudou elevated the case’s public impact with potentially significant political and institutional consequences.

The case has snowballed into a messy tangle of crossed accusations, and now all involved -accusers, accused and judges- are suspected of something. Here are the basic clues to understanding ‘Boudougate’.

The Accusations

The former Ciccone Calcográfica, now Compañía de Valores Sudamericana (CSV), is one of two printing companies in the country with the capacity to produce sensitive material such as bank notes, cheques, identity documents, lottery tickets and other high security documents. The company filed for bankruptcy in July 2010 and the judge hearing the case allowed its competitor, Boldt SA, to rent the printing installations of the broke company. The duopoly then became a monopoly controlled by Boldt, which prompted the government to intervene.

In September 2010, an investment company called The Old Fund paid over $500,000 to lift Ciccone’s bankruptcy and keep the company (another firm, London Supply, also put up $1.8m but quickly changed their mind and withdrew the offer). The Old Fund later negotiated with the tax office, AFIP, the terms to repay the company’s debts and were awarded a flexible plan with low interest rates and long-term financing. The company started operating again and in March 2012 secured a contract with the Central Bank to print 400 million bank notes for an estimated $170m.

Where does Boudou come in? In a fairly unusual move, when AFIP was drafting the payment facilities, it asked the then-economy minister for his approval. He replied asking the tax office to accept the ex-Ciccone’s proposed payment plan and supported rescuing the company due to its strategic importance and in line with the government strategy to protect jobs.

According to the judge overseeing the case, Daniel Rafecas, Boudou’s intervention could have been motivated by one of three reasons: 1) to protect the company for its strategic importance in the printing of bank notes and to save thousands of jobs (the reason given by the then-minister in his letter to AFIP); 2) to intervene in the “trade war” between Ciccone and Boldt, against Boldt, for political reasons (this company is linked to former president and opposition figure Eduardo Duhalde and has been heavily involved in the gambling industry through contracts with the Province of Buenos Aires since 1993); or 3) to favour his childhood friends at The Old Fund.

The prosecutor Carlos Rívolo is trying to prove that Boudou is somehow linked to The Old Fund, and that he violated article 256 of the penal code, which reprimands public servants who, abusing their position, intervene in negotiations with the objective of obtaining benefits for themselves or a third party.

The Evidence

The owners of The Old Fund are unknown at this stage, and discovering their identity is key to the investigation. Rumours in the media suggest that it could even be the Ciccone family, the former owners of the printing company, that is behind the fund.

During negotiations with AFIP and the lifting of Ciccone’s bankruptcy, The Old Fund was represented by its director Alejandro Vandenbroele, who paid the required $500,000. However, Vandenbroele’s declared income at AFIP makes it impossible for him to have that amount of money, which has led the prosecutor to accuse him of money laundering. He has replied that the money was not his, as he is only the director of The Old Fund but not a shareholder.

Carlos Rívolo, prosecutor in the 'Ciccone case' (photo courtesy of http://www.gustavosylvestre.com)

The prosecution is now seeking evidence that Vandenbroele and Boudou are friends. The connection was alleged by Vandenbroele’s ex-wife, Laura Muñoz, who claims that her ex is Boudou’s front man. The case started being investigated by judge Rafecas and prosecutor Rívolo in February, after two lawyers pressed charges against the vice-president based on Muñoz’s declaration to the press. Her testimony, however, is legally invalid as spouses cannot testify against each other in court. Furthermore, Muñoz and Vandenbroele separated in 2009, a year before The Old Fund bought Ciccone, and she has admitted to not knowing Boudou in person. Both Boudou and Vandenbroele have stated that they have never met in person.

Another possible link being investigated is that of businessman José María Núñez Carmona, friend and associate of Boudou. Guillermo Gabella, director and shareholder of Boldt, declared that after The Old Fund took over Ciccone, Núñez Carmona met with him and demanded “on behalf of Boudou” that Boldt return the equipment they rented when Ciccone went broke. “We bought Ciccone and we want the installations back,” he allegedly told Gabella. Núñez Carmona denies this, and a third person present at the meeting, Lautaro Mauro (employee of Buenos Aires governor Daniel Scioli) declared that the meeting was set up by Gabella to talk to Núñez Carmona about getting payment for some debts the state had with Boldt, who had printed out the forms for the 2010 census. Núñez Carmona subsequently sued Gabella for perjury.

Núñez Carmona does not seem to otherwise have any direct relation with The Old Fund, except for the fact that he is friends with Vandenbroele. This is the clue that was being followed last week, when an apartment owned by the vice-president was raided. The Puerto Madero property was rented out to Fabián Carosso Donatiello, a lawyer who lives in Spain and who is also friends with Vandenbroele. According to Vandenbroele, he found out through Núñez Carmona that Boudou was renting out the apartment and let his friend know.

The raid found that Vandenbroele had paid for some of the apartment’s bills and had liaised with the building administration. Whilst Vandenbroele claims that he was just doing his friend, who lives abroad, a favour, the prosecutor is trying to establish whether he was the actual tenant and had used Carosso Donatiello’s name as a screen. Another question is why Carosso Donatiello would rent such an expensive apartment he would only use in his sporadic visits to the country. Whilst the confirmation of this suspicion would not in itself prove any specific wrongdoing by Boudou, it would serve to establish a connection between the vice-president and the director of The Old Fund, one which so far they have both denied.

The Politics

Since the beginning of the case, the government has claimed that it is all a political operation propped up by media groups Clarín and La Nación, who have effectively come to replace the political opposition. It has also pointed at Ciccone’s rival Boldt for its political connections and their interest in protecting the commercial interests of the company against competition.

In similar previous cases, the government has mainly kept its mouth shut until media allegations died down. But the press conference given by Boudou last week, after his apartment was searched, marked a change in strategy and created tremendous public exposure of the case, ensuring that it will remain in the news cycle for some time.

A furious vice-president summoned the press to the Senate and did not spare criticisms for anyone. After reaffirming his innocence, he accused Boldt, Clarín’s executive officer Héctor Magnetto, and judge Rafecas of being part of a “mafia” that plotted against him and set up a “media soap opera”.

He said that judge Rafecas was running a “news agency”, after it became known that the raid on his apartment was leaked to the press and that there was a Clarín photographer waiting at the building when the gendarmería arrived. The judge denied having leaked the information but the government accused him before the Discipline Commision of the Council of Magistrates. An online message exchange between the judge and a friend, who happened to be one of Núñez Carmona’s lawyers (though he is not working in this particular case) became public this week and complicated his situation before the Council. The exchange happened during the early stages of the investigation and Rafecas admitted that he may have behaved inapropriately by discussing details of the case. He now risks being sanctioned or even impeached. Carlos Rívolo, the prosecutor, was also challenged for the leaks by Núñez Carmona’s defence, who asked for the raid to be declared null and void.

During the press conference, Boudou also denounced former attorney general Esteban Righi and his law firm for offering him to use their influence to “improve his relationship” with the federal justice. The denunciation was followed through with a lawsuit and Righi’s resignation. The president of the stock exchange, Adelmo Gabbi, is also being sued by Boudou for allegedly bribing the vice-president on behalf of Boldt.

Boudou carried out the press conference alone. Many wondered at the time whether this was a symbol of his status within the government, and whether the president had abandoned him to his fate. The support received after the press conference by members of the government indicates that this may not be the case, and that President Fernández may have been aware of -and approved- Boudou’s accusations and the change in strategy.

However, whilst many government officials have come out in support of Boudou, they have also defended Rafecas and Righi against his accusations, suggesting that the government’s opinion on certain aspects of the case is divided.

As the case unfolds and the investigation advances, responsibilities will be determined. But regardless of whether the accusations against Boudou are true or not, at this point it is difficult to predict the political fallout from the case. Not only will it have a big impact on public opinion -which does not tend to follow the legal rule of “innocent until proven guilty”- but it could also have repercussions within the governing party in the internal race towards the 2015 presidency.

Lead image by Santiago Trusso

Vice President Amado Boudou has sued attorney general Esteban Righi and the president of the Stock Exchange Adelmo Gabbi.

The attorney for the Vice President, Eduardo Durañona, issued a formal complaint this morning, in which he ratified Boudou’s statement issued on Thursday against Righi and Gabbi.

Boudou currently faces allegations of embezzlement in connection with the “Ciccone case”. He is suspected of having used his influences to lift the printing company out of bankruptcy while serving as Economy Minister in 2010. The second in command has denied any link with Ciccone which now operates under the name Compania de Valores Sudamericana (CVS).

During a Senate press conference last Thursday, Boudou issued a series of allegations against Righi’s law firm, accusing them of offering him to “improve his relationship” with the federal justice. He also denounced media group Clarín and newspaper La Nación for their coverage of the case. He has accused them of acting like an “anti-government mafia.” Boudou also criticised Adelmo Gabbi who allegedly offered him a bribe on behalf of Boldt, a rival company of Ciccone.

Since the conference, various sectors have challenged Boudou, questioning his decision not to report the incidents at the time, since they linked to possible allegations of corruption.

Investigations are currently underway to assess whether the Vice President has erred in pursuing negotiations incompatible with his public role. The case is overseen by judge Daniel Rafecas and the prosecutor Carlos Rívolo, who ordered a raid on Boudou’s Puerto Madero apartment last week.

Government officials and party colleagues have vocalised their support of Boudou. Frente para la Victoria Senator Aníbal Fernández stated that the “media operation against Boudou was shameful,” and urged the Vice President to “resist” the allegations.

Opposition politicians have criticised Boudou for directly attacking those in charge of investigating his case. Several politicians have publicly asked the Vice President to take a “leave of absence” while the investigation is ongoing.

Following the raid on his home by gendarmerie officials on Wednesday, today Vice-President Amado Boudou defended himself against claims against him of embezzlement.
The vice-president denounced the recent raid as a brutal “attack on establishments” and strongly criticised national media.

A home owned by Boudou in Puerto Madero was raised yesterday as part of an investigation to see if the vice-president saved a printing company, Ciccone Calcografica, from bankruptcy in 2010, in exchange for printing of money.

Speaking in Congress of the Nation, the vice-president named the links that have surfaced between Alejandro Vandenbroele and himself as a “mafia media attack,” a direct reference to Clarin’s Group CEO Héctor Magnetto.

“It’s unfortunate and a shame that in place of looking after issues of Argentines, we are focusing on the Argentina of Magnetto, La Nación and Perfil,” he said, in reference to the 13 people killed yesterday in a storm that hit Buenos Aires.

“I never took any action to favour Ciccone Calcografica,” affirmed the vice-president.

Members of the opposition have called for Boudou to take a leave of absence, the vice-president praised President Cristina Fernández de Kirchner’s administration, for “never [lowering] its arms.”

Mexico, Japan, the United States, and the EU condemned Argentina at the World Trade Organisation (WTO) today on their import policy.

Around 40 countries, including many in Latin America, issued a statement on the “continuing and growing concern about the nature and application of trade restrictive measures taken by Argentina.” The signatories declared the behaviour is “unbefitting of any WTO member”.

Due to a new system, which came into affect 1st February, most imports have to be pre-approved or rejected before they come into the country.

“It appears that this new system is operating as a de facto import-restricting scheme on all products,” Michel Punke, US ambassador to WTO told Reuters.

The statement also condemns the “lack of transparency”, and inappropriate tactics by Argentine officials, raising concerns for exporters and potential exporters.

“Many companies have reported receiving telephone calls from Argentine government officials in which they are informed that they must agree to undertake such trade balancing commitments prior to receiving authorisation to import goods,” Punke continued.

Since 2008, Argentina has increased the number of products that require licences to sell, including computers, mobiles, and textiles. The government claims the policy protects local Argentine industry and maintains balance of trade.

Vice president Amado Boudou defended the policy, claiming it ”helps all Argentines. When we take care about certain products crossing the border, it’s because we’re looking after jobs.”

Rumors about a possible constitutional reform to allow Argentine president Cristina Fernández de Kirchner to run for a third term in office sparked a vivid debate among media and political groups today.

Vice-president Amado Boudou’s alleged hints about the likelihood of “not waiting for three years push a constitutional reform through” were picked up by all main Argentine newspapers. His words were part of a speech delivered to a meeting of government supporters yesterday night in Mar del Plata.

During a morning interview with Radio 10, Boudou stressed the informal nature of the gathering and dismissed the claims. He said that the initiative “is not part of the Government’s agenda”, and eventually accused some of the media of carrying on a “strong political operation”.

Yet, the vice-president – who handed back power to President Fernández on Wednesday – left the door open for future possible revisions in government policies.

“One can’t say what tomorrow will bring. There are things that are not part of the agenda that might be there the day after. We just know what is today’s plan,” Boudou said.

Talks over the possibility of so-called ‘indefinite re-election’ have made the headlines since the beginning of 2011. An Argentine president cannot be re-elected more than two consecutive times. President Carlos Menem enhanced the last constitutional reform in 1994, allowing him to run for another term in office.

El Cronista reports that “the lack of a strong opposition to the Government makes disputes over 2015 presidential elections acquire the status of official”. The paper also learned from sources close to President Fernández that she has made no signs to open a discussion over the issue.

Vice President Amado Boudou has responded to British Prime Minister David Cameron’s comment in which he accused Argentina of colonialism over the Falklands/Malvinas Islands by saying that it was “an ignorant and dumb outburst”.

Boudou, who is acting president until Cristina returns from recovering after thyroid surgery, said: “This is a strange outburst that falls outside any reasonable analysis.” He then added: “Everybody knows how the United Kingdom acted with colonialism. There are signals and consequences in every continent of what colonialism did to those people, the subjugation, and it saddens us to listen to this fallacy.”

Foreign Minister Héctor Timerman has also responded with anger to Cameron’s comment. “It catches one’s attention to hear such statements when Great Britain and Colonialism are synonymous,” he stated. “The accusations made are hard to understand when it is Argentina [that is] the victim of British colonialism as the United Nations has said.”

“Instead of calling the National Security Committee, Great Britain should call UN’s Secretary General Ban Ki-moon and respond positively to all resolutions issued by the UN calling Britain to open dialogue with Argentina in order to find a pacific solution to Argentina’s claims of sovereignty over the Malvinas Islands,” the foreign minister said.

Interior Minister, Florencio Randazzo, has also said that Cameron’s comments were “totally offensive, especially coming from Great Britain.”

“For us there’s no discussion: the Malvinas are Argentine” he reiterated.

Tensions are rising between the two countries as, according to British newspaper The Times, David Cameron has approved “contingency plans” for a “rapid increase” of the military presence in the islands ahead of Prince William’s visit in February.

Shortly before the 30th anniversary of the war, the Duke of Cambridge will be deployed to the Falklands/Malvinas for six weeks for military training as a search and rescue pilot.

Back in November when news broke of Prince William’s visit to the islands, an official from the ministry of foreign affairs, Sebastian Brugo Marco, branded the move as a “provocative act.” Britain’s chief of armed forces, David Richards, denied his accusation, saying “it wasn’t and isn’t designed to be.”

It’s Friday again!

And are you- agh, what’s the point? You’re either in Pinamar, Punta del Este, your home country or some other boring place and you don’t give a shit about any of the things I have to say.

“I’m on vacation so I don’t need to keep up with what’s going on!” you are probably saying.

Well, fuck you.

And you better not complain later about not understanding current events. I did all I could, and yet you chose to abandon me.

This is what you needed to know, but completely ignored:

• 

  Say goodbye to the Subte kids! It’s for rich spoiled students and hipsters now. (Photo/Wikipedia)

  President Cristina Fernández de Kirchner had thyroid surgery two days ago in order to have a cancerous tumor removed. Despite the media circus involving Government officials standing on stage and solemnly announcing that “everything is ok” every 24 hours while idiots cheer in the back, let me just say that the surgery went fine and she’ll be back on her feet in no time. In the meantime Vice-President Amado Boudou is acting president so no monkey business.

• Man, does Río Negro have a PR problem right now! You know, Río Negro? That province you probably never cared about even though it contains extremely popular tourist destinations like Bariloche and the Cerro Catedral and the Las Leñas ski resorts. The recently jinxed province, which had somehow managed to stay off the scandal radar has had four shocking, major seemingly unrelated incidents that have the entire Argentine population wondering what the fuck is going on in there:

• On January 1st, a few hours after celebrating the arrival of the new year, news outlets broke the shocking news that the governor of the province, recently-elected Carlos Soria, had been shot in the face and killed by his wife in their bedroom during a confusing “domestic accident.” Details are still sketchy about the nature of the fight and all we know is that the wife is the only suspect in the murder and is currently under suicide watch. This is the third death of a high-ranking Government official in the last two weeks under strange circumstances, and something is starting to smell bad.

• Two hours after the strange murder, the mayor of Catriel, a town also located in Río Negro, went missing. Vanished into thin air. Poof! He was nowhere to be found, and even though authorities combed the area for two days, the guy just wouldn’t show up. Even more unsettling was a mysterious text message he sent his wife a few hours after disappearing that read “estoy” (“I am”). So everyone was going crazy, saying that it was the Rapture, the end of times, that people had begun disappearing (just like the Bible says will happen), and others were saying he was probably “just hiking the Appalachian trail.” But the excitement about the imminent arrival of the End of Times soon evaporated when the mayor was found alive and kicking in Santa Cruz, of all places. What he was doing and why he disappeared is mysteriously being kept under wraps. Not that we care, anyway.

• Río Negro, not content with being a total attention whore by now, also decided it would be a great idea to scare tourists even more by abducting a 49-year old German guy who was travelling in the Laguna Azul area. The man, who remained missing until yesterday, was found “exhausted but in good state.” Apparently the guy had just wandered off and got lost. Which is great news, since I totally suspected aliens.

• And of course, let’s not forget the ordeal that this Australian girl went through also in Río Negro last week, when authorities first announced she had been raped, but later upgraded her status to un-raped. I’m telling you, either that place is cursed or this is the worst case of guerrilla marketing in like, ever.

• Remember when a few weeks ago the taxi rates went up and I told you to start taking the subway? Well scratch that! It seems it’s gonna have to be the bus. Starting today, the subway fare costs $2.50 pesos, a 127% increase from the $1.10 pesos that it used to cost. In short, the National Government has transferred the management of the Subte services to the City, and the City doesn’t have enough money to continue subsidizing it, so it has to basically doubled its price. Time to dust off that bike of yours! It’s gonna be a loooooong summer, I tell ya.

• In other news: it’s official, we’re in Hell.
  

  The streets of Buenos Aires currently feel like you’re being submerged in a bowl of boiling hot water while funny-looking devils poke you in the face with a spear. (Photo/Wikipedia)

• You know how you, since you come from the first world where everything is done by robots, money no longer exists and everyone is happy, are always judging the Argentine society in silence but with airs of superiority and going *tsk tsk* with your head whenever you see something that is culturally different? Well this time you may have a point, especially if you were going “*tsk tsk*” at the idiots who like to ride on the roof of (or with half of their bodies hanging from) the train. Eight people ended up getting seriously injured after falling from a moving train in Palermo on Wednesday. One of them lost his leg. Tragic, but it was bound to happen.

• My colleagues from the media, otherwise know as “vultures”, were soon to arrive at the scene of the accident, and while interviewing a passenger who was riding that train, the entire country was able to witness on live television the absolute and unashamed lack of first-aid skills and interest in the community of the local police. Please watch this video after reading this because it’s either funny or sad, depending on how mean of a person you are. Not only the person being interviewed faints and falls into the asphalt like a sack of potatoes, but the media and the police just stand there, looking at her, going “Hmm. She would appear to have fainted…”. As seconds go by and no one comes to assist her, the news anchors begin to yell at the correspondent, urging her to tell the police to help the sick woman. “At least check her pulse, for Christ’s sake!” Their response? Sticking a lollipop in her mouth. But since she’s probably already dead, they leave it on her chest. The lollipop falls on the asphalt and gets all kinds of bacteria from all the dog shit, cigarette butts and spit covering the city streets but they go “still good man!” and place it on her chest again so she has something to suck on when she wakes up, even though she may catch some horrible bacterial infection and die in three days. “Who’s the asshole that left a lollipop over her chest?!” one of the news anchors says. Buenos Aires’ finest indeed.

• Supreme ruler of the world’s privacy and connoisseur of all of our dirty secrets Mark Zuckerberg decided to take some time off from playing with “The Facebook” and fly to Punta del Este to spend a few days yelling at strangers from his bedroom window. And since Argentines consider Punta to be practically theirs (even though it’s in Uruguay) they’re all “did you now Mark (they call him “Mark”) chose Punta to rest? That’s so cool and stuff!” It is, until you learn that on top of spying on your profile preferences, he’s also a demanding little bitch.

• Great news, everyone! Now that foreign corporations have realized that Argentina is profitable again, these kind-hearted people (after all, they are people, according to the US Supreme Court) have decided to make the sacrifice of returning to the country more than a decade after getting away from the sinking ship before it went completely under water. So, now that the crisis is gone and everyone they fired back in the 90′s is probably dead, they are coming back with a vengeance. We’re still waiting for Pizza Hut to open so we can get some of that cheese-injected crust (Yum! That doesn’t look disgusting at all!), but in the meantime, Wendy’s just opened its doors in Belgrano! So let’s all go clog our arteries with their cholesterol-y and fucking delicious cheeseburgers. Because we only live once. Except for James Bond. He lives twice, apparently.

• And let’s not forget KFC is also landing in Buenos Aires this year! Can’t wait for this baby to go down into my stomach. Hmmmm! Instant pleasure. And death.

• Oh, and now this is happening in Argentina. I’m telling you, it’s either the Rapture of those fucking Mayans have been right all along. I know you don’t believe me now, but when the fabric of the universe begins tearing itself up, creating a quantum paradox in the space-time continuum that causes it to regurgitate itself into a big puddle of protoplasmic goo, I’m sure you’ll go “you know what? I think Adrian was right.” Word!

• But not all is grim in Argieland, since it seems Big Brother is doing really, really, really bad in the ratings and the Telefe network is now desperate. It’s so fucking bad that the host, television superstar Jorge Rial, has quit after three seasons of doing the superb job of beating that dead horse to a pulp. And in the middle of the season! So now producers have been left scrambling to find a suitable face that has the power of magically attracting Argentine viewers who seem to have finally come to their senses and stopped watching this vomited hairball of a show. Don’t worry, I’m sure all the contestants will have no trouble finding a new job that suits them. Like cashiers at Wal-Mart or extras in some brazilian porn movie. Best of luck to all of you!

• And since 2012 is poised on being a tragic year, the Dakar Rally has also taken its toll. So far there’s been one racer killed, a father and son who were following the race from the air also died after their plane crashed, a racer was found in a coma and the idiot who sold his only apartment to enter the race lost in like three days after a truck run over his bike. So he’s now homeless and still a loser.

President Cristina Fernández de Kirchner underwent a three and half hour operation yesterday to extract a cancerous thyroid gland. Doctors say that the surgery went well and that there were no complications.

The president was accompanied by her children and other close family members.

Fernández de Kirchner will remain in the Hospital Austral in Pilar until she is released on Saturday. It is expected that she will recover at her home in the presidential residence in Olivos until at least the 24^th of January.

As part of her treatment of the cancer that was discovered two weeks ago, the president will receive radiation therapy.

Vice President Amado Boudou is taking over the presidential duties until Fernández de Kirchner’s return to office.

President Cristina Fernández de Kirchner’s second term starts now. And with it comes a new budget bill for 2012, which is due to be debated this week in Congress.

Former Economy Minister Amado Boudou, now Vice President, stands with President Cristina Fernández de Kirchner in Congreso (Photo courtesy of CFK Argentina)

The key word for the President’s second term appears to be ‘continuity’. The issues remain very much the same, and so does the government’s approach to tackling them. This is perhaps best shown by her recent cabinet shift in which Economy Minister Amado Boudou moved up to the role of vice president, making way for Finance Secretary Hernán Lorenzino to step in as his successor—a man whose President Fernández de Kirchner says is “protecting the interests of all Argentines”.

Carola Sandy, economist at US-based Credit Suisse Group, believes that the appointment of a man with the support of the Argentine banking sector, including that of Central Bank chief Mercedes Marco del Pont is, “a sign the economic policy of recent months will continue”. She added that “he gives continuity to Minister Boudou’s policies”, which means that recent measures to contain capital flight and to rein in public spending, via the cutting of utilities subsidies, may well be extended.

However, President Fernández de Kirchner’s landslide election victory on 23rd October does not mean her job is going to get any easier; rather that she will be able to tackle the mounting problems in the economy more decisively and with a stronger mandate. Mariel Fornoni, Director of locally-based pollster Management & Fit believes that the president is in a position to press ahead with measures to fix the problems in the economy, however unpopular they may be. “She has the political capital to do that now,” Fornoni commented in a recent interview with Bloomberg news.

At this point last year, with Congress controlled by opposition parties and negotiations on a budget for 2011 collapsed, the president decreed that the framework of the previous budget would be used, with additional spending at the discretion of the executive branch.

In the end, the consequences were minor in another year of strong economic growth. But with the global economic downturn set to hit Argentine exports (the government is forecasting real GDP growth of 5.1% year-on-year in 2012, down from 8.3% for 2011), a new budget to deal with new problems is necessary.

Top on the agenda over the coming twelve months will be to tackle one of the world’s highest inflation rates, paying down further debt, and the need to continue making largely-unpopular spending cuts.

According to the budget’s parameters, inflation will run at 9.4% in 2012, down slightly from 9.7% for this year. However, private-sector estimates continue to clash with those of national statistics agency (INDEC), with the former arguing that the government is grossly underestimating inflation, and that in reality is easily surpassing 20% annually.

In an attempt to reign in high inflation, Argentina looks set to defy market expectations of a rapid devaluation of the currency, which could prove to be counterproductive and serve to exacerbate inflationary pressure in the domestic economy, and instead opt for a strategy of moderate nominal depreciation over the medium-term.

Meanwhile, government expenditure will slow as subsidies are reduced. The draft for next year’s budget shows that public spending – which has been a strong driver of GDP growth in recent years – will rise by 20% in 2012, around half of what is has risen in 2011. That said, this year was an election year and as such should be regarded as something of an exception.

Finance Secretary Hernán Lorenzino, filling some big shoes, is sworn into his new job by President Fernández de Kirchner (Photo courtesy of CFK Argentina)

Another key issue is Argentina’s outstanding debt load, where negotiations are ongoing. With the issue becoming all the more salient with the global economy in the doldrums at present, Argentines will be comforted to know that their own debt load is in safe hands with Minister Lorenzino, as he has plenty of experience in the issue having spearheaded a programme to help Argentina restructure defaulted debt in his previous post.

Argentina has been busy paying off the fallout from its record sovereign default back in 2001 and negotiations with the Paris Club of creditor nations to settle the outstanding US$6.3bn (plus interest) of defaulted debt are ongoing. At a meeting of economic policy makers in Buenos Aires last month, Boudou was eager to point out the pro-active way in which Argentina is dealing with its own debt problem: “Some of the measures being taken [in the developed world] can worsen the problem, instead of solving it.”

Next year’s budget outlines plans to continue withdrawing from the central bank’s foreign currency reserves to pay down debt for a third consecutive year in 2012, rather than attempting to return to resume global debt sales for the first time in a decade. Last year’s budget bill stipulated the use of up to US$7.5bn from the coffers, while in 2012 the administration has requested congressional approval in the budget bill for US$5.7bn of reserves to be ring-fenced to go towards this purpose.

In short, it seems that under the draft 2012 budget Fernández de Kirchner is set to largely continue with the expansionary fiscal policies that characterised her first term in office. A closer look at the numbers, however, shows that the coming year will not be without gradual policy adjustments – in particular the cap on fiscal spending—as Argentina attempts to tackle with its own issues against the backdrop of a worrying global macroeconomic climate.

But this is something the government seems well prepared for. At a speech given at an aluminium plant in Buenos Aires province on 30th November, President Fernández de Kirchner commented: “During a period in which the world seems like it is crumbling and is beaten down by speculation, we in Argentina have come to insist that our vision is one of growth.” She continued: “During these difficult times, we have to redouble our efforts in every sector to protect what we have achieved.”