“If the reforms are questioned for being pushed by a government accused of corruption, they will never be long-term,” concludes one of Argentina’s top businessmen.
The fear of the failure of far-reaching measures, which could be affected by the “early denunciations” of bribery in the highest circles of President Javier Milei’s national government, is real among Argentina’s ‘círculo rojo’ business establishment. Some fear it could even topple even the consensus over fiscal balance.
Dogged by the audio revelations of Diego Spagnuolo, the ex-director of the ANDIS (Agencia Nacional de Discapacidad) agency for the disabled, affecting Presidential Chief-of-Staff Karina Milei (President Javier Milei’s sister), Eduardo ‘Lule’ Menem and other top-ranking officials, Argentina’s government is now suffering the silent stampede of private-sector companies, which until now had maintained their public support. Some are already reticent about defending the libertarian administration from the accusations of friendly fire.
“Spagnuolo is the libertarian [version of disgraced former public works secretary] José López,” comments one source from the top circles of the círculo rojo, referring to the Kirchnerite corruption scandal involving the disgraced public works official, who was in June 2016 with more than US$8 million and weapons in his possession.
“At that time, it was tossing [dollar-laden] bags – now it is denouncing himself for bribery. Neither one nor the other are the masterminds of corruption but only the tip of the iceberg,” the source continued.
“We do not know how all this will end but it is infuriating how all the effort made to balance the books in Argentina – with the entire political spectrum accepting that fiscal order is positive and should be sustained, irrespective of the party in government – can be squandered by this presumed conduct. Kirchnerism met its end with that photo – we hope that this does not happen now because it would be to start all over again from zero, with the risk of populism returning,” the business leader concluded.
Other members of the country’s most powerful firms, consulted by Perfil, warned that “the denunciations of corruption hamstring the economic future in the medium and long term.”
One business leader said: “The existence of officials accused of administration with bribes and spurious agreements leaves little room for upholding the institutions and respect for legal security, fundamental for in-depth projects and the most important investments.”
Investments on hold?
At least two businessmen linked to the energy sector warned that the developing scandal will affect investors studying opportunities. “The planned investments for next year have been totally frozen until the judicial situation is clarified,” said one, revealing there is a “strong fear” of the denunciations plunging the government and its model into “crisis.”
Argentina’s country risk hate “will stay high because macroeconomic order is not enough if clarity as to the institutional path is lacking,” the director of a company consulted by Perfil hastened to confess.
This is not the first denunciation of corruption faced by the La Libertad Avanza government since taking office 20 months ago, but it is one of the most important. The problem distinguishing this one (even more than the ‘$LIBRA’ cryptocurrency case, where Milei himself exposed his image in an accusation of presumed fraud) is that the heart of the President’s political power has been moved into the spotlight: “El Jefe,” or “The Boss,” as Milei calls his sister Karina.
These fears had already begun to be felt at the recent Council of the Americas symposium on August 21, a few hours after the voice messages of Spagnuolo denouncing himself were leaked.
“If she is proven guilty, it’s the end of the government. But rapid court action is improbable, as the country’s history has shown. If the doubts are not dissipated, the damage will be irreparable because nobody is going to trust measures which could be repealed in the future for considering them to have been decided by an administration riddled with corruption,” said another private-sector voice, left in shock by the revelations.
Electoral risk temporary?
Despite the developing scandal, business leaders remain confident that there will be a La Libertad Avanza landslide in the October midterms. Citing opinion polls, many believe the result at the ballot-box will be favourable. “The denunciations will carry little weight because society still positively values inflation coming down,” offered one leading business voice.
Nevertheless, the owner of a local construction firm recalled that ex-president “Mauricio Macri also won the midterms, but without political leadership no government can be successful.”
“The electoral risk is temporary, the corruption, not,” affirmed a money market source who analyses the economy for one of the most important banks in the world. The professional made a distinction between the volatility of interest rates, the pressure on the dollar or the government’s battle with the Congress over public spending and “market mistrust from the discredit triggered by the suspicions of corruption.”
“Without mentioning if anything in all this turns out to be true and proven. In the first place, there is a feeling which the government is not managing to clear. The second thing would be a court decision tantamount to a political death sentence,” he discharged.
The big problem is denunciations hanging over key members of the government, creating “the impossibility of maintaining over time the deep reforms which the country needs.”
“Until now there were two unknown factors about the reforms: that the government clinches the necessary majority between their own people and allies in Congress after next December 10 and that Milei does not turn into Nero, governing to stay in power,” said one leading businessman.
“Now there is a third, which is already out of government control and linked to the actions of the political caste, but without [having] the political skills to confront it,” lamented the source, a confessed defender of libertarian measures until now.
Comments