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Argentina’s Mystery Money

Prepared by: Stephanie Hanson
August 30, 2007


When sixty-four thousand dollars was found stashed in the office bathroom of Argentina’s economy minister in July, the resulting furor of “Toiletgate” prompted her resignation (FT). The scandal seemed barely to nick the presidential prospects of Cristina Fernandez de Kirchner, wife of President Nestor Kirchner and a popular senator in Argentina. But just a month later, a new cache (WashPost) was found, this time nearly eight-hundred thousand dollars in the suitcase of a Venezuelan businessman just days after a state visit by Venezuela’s President Hugo Chavez. The new scandal holds ramifications both for Argentina-Venezuela relations and the Kirchners’ political future.

Chavez, who offered to buy $500 million in bonds from the Argentine government on his trip to the country, denies all connection to the suitcase money and calls the affair a U.S. plot. But with allegations swirling (WashTimes) that some of the funds were destined for Cristina’s campaign, the Kirchners cannot afford to be equally dismissive. President Kirchner demanded answers from Chavez, prompting Venezuela’s state-owned oil company to launch an investigation. The Economist writes that thus far, Kirchner has used Chavez’s largesse—$4.7 billion in Argentine bonds and some $562 million in Venezuelan fuel oil—to his advantage. But the suitcase scandal has turned Argentina’s relationship with Chavez into a “political problem,” Argentine analyst Rosendo Fraga tells TIME.

Chavez is the not the only issue vexing Kirchner’s government, and by extension, Cristina’s candidacy in October’s presidential elections (ElectionGuide). Many analysts say the government underestimates the country’s inflation rate. Economists note that official figures citing 9 percent inflation reflect price-controlled goods, and say the actual rate (FT) might be closer to 15 percent. Equities Analyst Mark Turner writes in RGE Monitor’s Latin America blog that the actual rate is at least that figure, and could be as high as 20 percent. Consumers feeling the pinch in their pocketbooks now also face power cuts: An unusually cold winter has highlighted Argentina’s energy woes; electricity and fuel are both in short supply, and businesses have had to alter their schedules to ensure residential electricity, writes the University of Westminster’s Celia Szusterman. An energy crisis could hamper the banner economic growth that underpins President Kirchner’s strength in office.

These concerns notwithstanding, the popularity of both Kirchners remains strong. President Kirchner has roughly 50 percent support ratings, and opinion polls show Cristina holding a thirty point lead (AngusReid) over her closest opponents. Some analysts say Argentines are so happy to have moved beyond the economic crisis of 2001 that they can overlook all the recent financial scandals. “Take us to hell, Argentines seem to be saying,” writes Daniel Politi in Slate. “[J]ust don’t take us back to 2001.” If this sentiment carries Cristina to victory, she will likely continue the policies of her husband, albeit under more difficult political circumstances. One area of possible divergence, however, is foreign policy. While relations with Washington cooled under President Kirchner, the Economist suggests Cristina would seek to improve ties with both the United States and Europe and distance Argentina from Venezuela.

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