Argentina: First Husband's Dollar Purchases Revealed,

C O N F I D E N T I A L BUENOS AIRES 000061

SIPDIS

E.O. 12958: DECL: 2020/02/02
TAGS: PGOV ECON EFIN AR
SUBJECT: Argentina: First Husband's Dollar Purchases Revealed,
Scrutinized

REF: BUENOS AIRES 25; BUENOS AIRES 13

CLASSIFIED BY: Tom Kelly, DCM; REASON: 1.4(B),(D)


1. (SBU) Summary: Following a late January press reports that
presidential spouse Nestor Kirchner (NK) had purchased just under
US$ 2 million in US currency in October 2008 -- confirmed by GOA
sources February 1 -- opposition politicians and political
commentators have raised a new alarm about alleged illicit
enrichment by the first couple. At issue is whether NK and
President Cristina Fernandez de Kirchner (CFK) may have benefitted
from currency fluctuations based on their ability to affect or at a
minimum better anticipate changes in the exchange rate based on
"inside information." Many legal scholars have since been quoted
in the press expressing doubt that grounds exist for criminal
charges against the NK, but many lament what could be a serious
ethics breach. In an unprecedented email issued by the Casa Rosada
in the name of NK on February 2, the former President says that he
used the dollars to complete a hotel purchase in Santa Cruz
province a couple of weeks later; accusations that he benefitted
from the dollar's subsequent rise against the peso, he argues, are
therefore groundless. The scandal has the potential to cause the
first couple further political damage. End Summary.



Dollar Purchases Revealed

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2. (U) The issue of currency purchases by members of the Kirchner
Administration came to the fore amidst the ongoing saga surrounding
the replacement of Central Bank President Martin Redrado (refs A
and B). According to Clarin, Redrado on January 24 had threatened
to reveal "lists of the friends of power who have bought dollars."
The implication of impropriety brought a sharp response from
Cabinet Chief Anibal Fernandez, who pointed out that Redrado was
obligated to reveal any information he might have on illicit
activities in any case. Redrado's lawyer soon denied his client
had made the statement to Clarin in the first place, though the
newspaper is sticking to its story.




3. (U) On January 28 a website and then press reported details on
dollar purchases, with daily Clarin giving most attention given to
purchases of almost US$ 2 million by former President/first spouse
Nestor Kirchner (NK) in October 2008. Other politicians and
friends of the Kirchners were also listed as making major
purchases, including Buenos Aires Governor Daniel Scioli, Tucuman
Governor Jose Alperovich, and labor leader Hugo Moyano. On
February 1, Cabinet Chief Fernandez and Economy Minister Amado
Boudou acknowledged NK's foreign exchange purchase but noted that
it was entirely legal, within the laws allowing citizens to
purchase up to US$ 2 million during a month. CFK made similar
public comments. Still, press articles emphasized that the peso
declined significantly against the dollar in October 2008 and in
subsequent months, suggesting that NK and his allies had purchased
the dollars for gain.




4. (SBU) "La Nacion" presented its own analysis on February 2,
saying that between 2005 and 2008 NK had made currency purchases
that would have produced U.S. 1,681,903 in profit since then. The
article, by Gabriel Sued, suggests profits based on year-to-year
exchange rate changes during each calendar year, but lacks details
on exact dates of purchases, suggested dates of reconversion to
pesos, and the amounts of the various purchases.



Criticism Follows

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5. (SBU) The opposition immediately went on the attack, with Civic
Coalition Deputy Juan Carlos Moran saying he would pursue criminal
charges. Although he acknowledged the purchase of currency was
within the bounds of the law, he cited article 268 of the criminal
code, which calls for up to six years in prison for "public
officials" who utilized for personal gain privileged information
E


obtained in their official capacity. Radical Deputy Ricardo Gil
Lavedra called the alleged use of inside information an "enormously
immoral" act.




6. (U) Prominent daily "La Nacion" on February 2 featured three
columnists digging into the revelations. Journalist Daniel Della
Costa noted that NK's flight to dollars just as the global economic
crisis deepened did not reflect a particularly high regard for his
wife's management of the economy. Manuel Garrido, head of the
Transparency Program at the leading think tank CIPPEC (Center for
the Implementation of Public Policies for Equality and Growth),
noted the obvious concerns about objective economic policy making
by a first couple with so much personal wealth apparently riding on
currency rates. And columnist Marcos Aguinis cagily noted that the
purchase of so many dollars by NK did not fit well with the
"progressive" ideology he espoused.



Scholars Doubt There is a Case

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7. (SBU) Most legal scholars raised doubts about whether a criminal
case could be pursued against NK. The purchase itself was legal,
they noted, and there was not yet any evidence of intervention to
either move exchange rates or of NK's possession of particular
inside information of a peso depreciation against the dollar. A
smaller point was that NK was not, in fact, a public official.
Nonetheless, the scholars all lamented a significant ethical
failing. Large dollar purchases by someone so close to power and
to policy information was a significant violation of public trust
(moreover, some noted, NK was widely considered a key economic
policy decision-maker for his wife's administration, even if the
role was not formal).



A Plausible Explanation Emerges

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8. (SBU) In an indication that the Kirchners under the political
threat posed by the story, NK took the unprecedented step of
issuing his own explanation directly to the press in the form of an
email on February 2. In the short but seemingly rational response
to "bad intentioned" stories in the press, Kirchner said that on
November 6, 2008, he had purchased significant equity in a hotel
ownership entity, "Hotelsur, S.A.," which owned the Hotel Alto
Calafate. To effect this purchase in dollars he had made three
dollar currency purchases during the month of October. Because the
dollars were almost immediately spent, he underscored, there was
"no possibility of a profit on the currency" exchange.



Comment: A Nice Story if He Can Stick to It

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9. (C) Although it does not explain away all of the dollar
purchases alleged to have taken place since 2005, or his close
allies' contemporaneous zeal for the greenback, NK's explanation of
his October 2008 dollar purchase could enable him to dodge this
bullet - if the details can be corroborated. The Argentine public,
much of it still on summer vacation, could still come around to the
currency purchases issue if further discrepancies arise, but NK's
explanation may suffice to diminish the story's political
durability. Nonetheless, NK's currency purchases, both as
president and then as first spouse, will again remind the public of
how much the Kirchners' wealth has grown since he took power in

2003. In a best-case scenario (for the Kirchners),the corruption
and "illicit enrichment" charges may stall, and many Argentines may
shrug their shoulders at behavior they have come to expect from
those in power, but even then, we suspect it will create another
negative notch in the Kirchners' public image leading up to 2011
national elections. In a worst-case scenario, this scandal could


irredeemably undermine the already devalued Kirchner currency.
MARTINEZ