Argument

Cristinanomics

Argentina’s crazy plan to save the economy through money laundering.

Argentina's President Cristina Fernández de Kirchner has hit on a novel way to try to alleviate her self-inflicted economic free fall and acute shortage of hard currency -- invite money launderers from around the world to put their dollars in Argentine banks with no questions asked.

That's not, of course, the official plan. But this month's move is the latest in a series of steps that seem more rooted in magical thinking than in economic reality that have pushed Argentina ever closer to financial ruin and international pariah status. The government-sponsored amnesty to allow any amount of dollars from anywhere in the world to find a home in Argentina, with no questions asked, was passed into law last Wednesday. The justification is the need for hard currency because the current economic policies have drive up the value of the "blue-" or black-market dollar to 10 pesos while the official exchange remains pegged at 5 pesos.

In recent months, the Fernández de Kirchner government has imposed import and export policies that have led to chaos, shortages, massive capital flight, and a 20 percent fall in foreign reserves. The president has ramped up her attacks on the independent media while spending hundreds of millions of government dollars on advertising to shore up official media outlets, while moving aggressively to neuter the independent judiciary that has consistently blocked her worst impulses from becoming law.

In its foreign relations, Argentina, through expropriations and contempt for international law, has antagonized traditional allies such as Brazil, Spain, and the United States -- while growing ever closer to Iran, a U.S.-designated state sponsor of terrorism allied with Venezuela and Cuba. Argentina has become a major way station for Bolivian and Peruvian cocaine headed to West Africa and then onward to Europe, while the government's anti-U.S. rhetoric has grown increasingly strident. The International Monetary Fund has threatened to suspend Argentina for falsifying economic data in order to hide the impending collapse.

The architects of these unorthodox policies are a group of messianic young presidential advisers and government officials known as "La Cámpora," who believe they are the vanguard of a transformational generation that will help Argentina regain its rightful place as a world leader. Their leader is Máximo Kirchner, the president's son. One of the Camporista's leaders is Cecilia Nahón, appointed ambassador to the United States at the end of last year.

As a matter of policy, Camporistas do not speak to independent media, choosing instead to use government-controlled social and traditional media to spread their message and attack their enemies. No government official, including members of congress, responded to interview requests for the report that informed this article, or for the article itself.

The Camporistas take their name from Héctor José Cámpora, an unconditional ally of the late dictator Juan Domingo Perón and of the armed radical left wing of Peronist movement that became the Montonero guerrillas. Cámpora served as president for 49 days in 1973, just long enough to sign an amnesty to allow Perón, then living in exile, to return and run for president.

Most of the Camporistas cut their political teeth in radical university politics in the early 2000s as the country in 2001 defaulted on some $100 billion in sovereign debt and fell into chaos. Now they offer a blend of Marxism, Fascism, and utopian policies that has led to Argentina's free fall rather than its rebirth. The group, with Máximo's support and the president's ear, has taken over many of the most important government revenue sources, including the national airline, Aerolineas Argentinas, which, since being re-nationalized, loses $2 million a day and operates with virtually no accountability or oversight, according to airline audits and investigative reports.

Nahón's mentor and co-author of many academic publications, Axel Kicillof, was the CFO of the airline as it imploded, and is the architect of the 2012 expropriation of the Spanish oil company YPF, whose oil production has dropped sharply since the takeover. Kicillof, now deputy minister of economy, and Nahón also helped engineer the "nationalization" of billions of dollars in private pension funds, now also under control of Camporistas.

It is this casual disregard for the rule of law and the rules of economics that make the decision to open the financial sector to billions of dollars in suspicious money so alarming. Earlier this year, before the law was proposed, the State Department had already expressed concern that "money laundering related to narcotics trafficking, corruption, contraband, and tax evasion occurs throughout the financial system." Senior members of the Fernández de Kirchner government are currently involved in a widely reported roiling money laundering scandal in which the president's deceased husband and predecessor as president, was allegedly involved.

The president's own auditor general asked the Senate not to pass the law "because of the opening it entails for the possibility of laundering," he said, and called the measure a huge invitation for criminal groups to have their money "legitimized through fictitious companies."

But with vital midterm elections coming up in October -- and The Project, as the Camporistas call their long-term plan of political domination (their motto is "Let's go for everything"), at risk -- it is unlikely the Fernández de Kirchner government will modify its course. With her popularity sliding, corruption scandals simmering, and inflation rising, she is likely to continue to pour money into failed policies to stave of collapse until after that vote.

Fernández de Kirchner has decided to operate outside the rule of law and international standards of accountability and transparency. It is time for the United States and others to begin treating her government as the rogue state it has become.

Maxi Failla/AFP/Getty Images

Argument

A Body in Search of a Head

The EU can't get its act together when it comes to a common foreign policy. But it's common economics that's screwed the Syrian rebels.

Appalled by what he called the "utopian myth" of a supranational state, Charles de Gaulle insisted that Europe must always remain a community of sovereign nations. A half century later, as the European Union is whipsawed by the effects of a single monetary policy -- imposed by the nation that de Gaulle once saw as France's junior partner -- and a singularly incoherent foreign policy, Europe confronts the tragic realization that the general was both right and wrong: The continent is both a supranational state whose fiscal austerity policy borders on the dystopian, and a group of nations whose various conceptions of common security are downright chaotic.

In 1958, de Gaulle's turn towards Europe, and in particular West Germany, was driven by his desire to maintain France's independence on the world stage. Lacking the financial and military means to carry out this imperative -- and recognizing that the projection of French influence depended on a solid European pedestal -- the president of the newly created Fifth Republic had no choice but to accept wholeheartedly the European Economic Community, which had been born the preceding year. But with a distinctly Gaullist proviso: While all the members were equals, some were to be more equal than others.

As the travails of President François Hollande reveal, this rule still holds fast -- but France is now its victim. Despite calls from the left wing of his own party to challenge Germany's insistence on rigid austerity measures, Hollande has had little success in parrying the dictates from Bonn and Brussels. While he sought to portray the European Union's decision to allow France two more years to bring the country's deficit down to 3 percent as a victory for Paris over Berlin, his critics -- on the left as well as the right -- dismissed the move as little more than a reprieve. Jean-François Copé, leader of the neo-Gaullist Union for a Popular Movement, recently lamented that France has "become isolated and her voice inaudible" in European affairs.

Much to Hollande's frustration, Germany has proved as unyielding in foreign policy as it has in monetary policy. Last week, the foreign ministers of the European Union voted unanimously to lift the arms embargo on Syria. But far from the deliberate policy of a European Union united in its horror at the carnage wrought by Bashar al-Assad's regime, the embargo's expiration was the product of a fractured and fractious institution -- one divided over France and Britain's desire for a more active role in Syria. Faced with the prospect of watching all of the European Union's existing sanctions against Syria expire at the end of the month -- which Paris and London, in a bit of brinksmanship, threatened to allow if the arms ban was not lifted -- proponents of the embargo had no choice but to agree.

Following the March meeting of heads of state at the European Council, Hollande warned that not making a choice on Syria would be the worst of all possible choices. "The greatest risk lies in doing nothing. It is only by taking a decision that risks are reduced," he said. But Germany did make a decision: It rejected France and Britain's push for the European Union to authorize arms deliveries to the rebel forces in Syria. Depending on one's perspective, this marked either a step forward or step backward from Berlin's position on Operation Serval, the name given to France's unilateral military intervention in Mali at the start of the year. Merkel's government applauded the French decision, but provided only logistical support for the operation. One French former minister for European affairs, the conservative Pierre Lellouche, lamented this perceived stinginess: "For years we have kept repeating the usual diplomatic niceties about the friendship between France and Germany. But the truth of the matter is that we are diverging more and more. On the great questions of foreign policy, each time we need Germany, she is nowhere to be found."

In fact, Germany is always to be found as far as possible from its Nazi past. The German political scientist Hans-Peter Schwarz has identified the two extremes that modern Germany has swung between: a Bismarckian, then Hitlerian "obsession with power" and a post-WWII "forgetting of power." In 2011, with its abstention from the U.N. resolution to intervene militarily in Libya, Germany drove home its determination to embrace the latter. Critically, Merkel's position reflected public opinion: While a large majority of Germans favored NATO intervention in Libya, an even greater majority insisted that Germany abstain from participation.

The vote to drop the arms embargo is, in this respect, less a robust and calibrated policy decision than confirmation of the impossibility of Europe elaborating, much less pursuing a common policy. Alain Frachon, editorial director of Le Monde, recently noted the obvious: "Europe does not have a Syrian policy." This is all the more disconcerting, he added, "since the region is in Europe's backyard. Europe is once again divided on a matter which requires it to act."

Equally disconcerting, however, is the underlying conviction that this amounts to a failure of EU foreign policy. Such a claim gives the European Union too much credit: In effect, the organization has never had a foreign policy. As the French diplomat Pierre Henri d'Argenson notes, it is time to rid ourselves of the "myth of a European power" that substitutes itself for the individual prerogatives of individual states: "This will never happen because there will never be a European army. No one will ever die for a European flag, and there will never be a European cemetery."

What is surprising about d'Argenson's remark is not that it is original -- there never has been a there when it comes to a "European" foreign policy -- but instead that it still continues to surprise. The barbarity shown by Bashar al-Assad's regime in Syria has galvanized many of the same voices, such as Bernard-Henri Lévy's, that urged the earlier intervention in Libya. Or, perhaps for other observers, the moral dissonance is too great between the fecklessness shown by the EU's foreign affairs office and forcefulness shown against its own member when it comes to economic and financial affairs.

A joke made the rounds in 2009 when Catherine Ashton was named High Representative of the Union for Foreign Affairs and Security Policy. Phone calls to her office were routed to a voice mail that said: "I am not in right now, but if you wish to know Germany's position, please press 1; France's, please press 2," and so on down the line.

In the case of the arms embargo, the joke is ultimately on the Syrian rebels. For now, France has no intention of sending weapons to opposition forces. (Nor, for that matter, does Great Britain.) Despite his claim that acting in Syria is the most effective way of mastering the chaos, Hollande seems determined to make haste slowly. All the more so as the battle France is fighting on the economic front has grown even more desperate. Just last week, responding to the European Commission's proposal for structural reforms France needs to undertake, Hollande replied that it was "not the place of the Commission, but rather sovereign states to make these decisions."

De Gaulle dixit. 

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