Argentina’s G-20 Delusion Post date : 11.19.2014 8:00 am President Kirchner and her cabinet are reportedly in a celebratory mood after the conclusion of the G20 summit in Australia. According to the Kirchner government’s version of events, Argentina won the support of the G20 who came together in Brisbane to deliver a ‘historic’ ‘anti-vulture message’ in ‘full support’ of Argentina’s position on debt restructuring. Of course, as is sadly often the case in Buenos Aires these days, the gap between what President Kirchner says, and what the world does, is often substantial. So as a service to our readers we thought we could help close that gap by providing some context. The source of President Kirchner’s excitement is the G20 Leader’s Communique, released at the end of the summit to summarize what was discussed and resolved at the meeting. The 2014 communique ran to 2,335 words, not including the annex. Of those 2,000+ words, only one sentence, comprised of 17 words, touches upon issues which could in some tangential way be read as relevant to Argentina’s default: “We welcome the progress made to strengthen the orderliness and predictability of the sovereign debt restructuring process.” Isolation can lead to a warped sense of reality. And so, when you’ve been as ostracized by the international community as President Kirchner has, it’s easy to see how 17 vague words in a memo could somehow be construed as a ‘win’ worth celebrating. No matter that those words made no reference to Argentina. Nor to the so-called vultures. Nor to US legal rulings and Argentina’s contempt of court. Nor to RUFO or the countless other gimmicks that Argentina has claimed preclude them from settling with their creditors. No matter either that this ambiguous sentence seems awkwardly, almost randomly, stuck onto the end of a paragraph that is headed, “Building a stronger, more resilient global economy” and otherwise has very little to do with the sovereign debt issue. In reality, these 17 words represent the bare minimum that the G20 could have given President Kirchner. A passing mention, an afterthought, to the effect of, “yes Cristina, we acknowledge you, but frankly we’re not that interested.” Not that President Kirchner seems to have gotten that message. She seems especially thrilled with an additional bullet point that didn’t even make it to the main communique but was buried deep in an annex at the end of the document: “Given the challenges litigation poses and in order to strengthen the orderliness and predictability of the sovereign debt restructuring process, we welcome the international work on strengthened collective action and pari passu clauses. We call for their inclusion in international sovereign bonds and encourage the international community and private sector to actively promote their use. We ask our Finance Ministers and Central Bank Governors to discuss the progress achieved on this and related issues.” President Kirchner thinks this bullet point bolsters her case. In fact, it only highlights what a problem child Argentina has become for the international community. For starters, with regard to the “challenges litigation poses,” the ratings agency Moody’s conducted a study that found that out of 34 modern restructurings, Argentina’s is the only one that has led to “persistent litigation” because Argentina “was and remains unique in its unilateral and coercive approach.” In other words, Argentina’s behavior is the only reason the G20 is even having to address this issue. Second, to the extent that the bullet mentions any specific efforts, its praise is reserved for proposed changes to contract rights that are to be made going forward. It says nothing about the contractual promises that Argentina made to bondholders – including the strong pari passu clause, the broad waiver of sovereign immunity, and the agreement to submit in any disputes about the bonds to the judgment of New York courts. The bullet also references proposals that have come from private-sector groups, such as the proposals made by the International Capital Markets Association. The overall takeaway from this language is: ‘These matters are properly left to sovereign borrowers and their private-sector creditors – this is not really the G20’s problem (but, just to placate Argentina, we’ll agree to “discuss” it).’ When you add it up, it’s not exactly a full throated endorsement of Argentina’s tactics. Rather, it only provides further evidence that the G20 is doing the bare minimum to make Kirchner and Kicilliof go away without ignoring them entirely. There is of course a more straightforward way for President Kirchner to win the support of the international community. Instead of making up good news, she could sit down with creditors and negotiate a fair resolution. That would generate headlines worth reading. 335 Kicillof’s friend Diego: the Russian and Venezuelan connections Post date : 11.18.2014 1:03 pm Yesterday, we reported on Diego Marynberg and the private bond transaction with the BCRA favoring his trading company, Latam Securities, a maneuver allegedly ordered by Axel Kicillof and his inner circle at the Economy Ministry. When Juan Fabrega confronted Kicillof about the curious insider maneuver, according to published reports, Kicillof instrumented Fabrega’s downfall at the BCRA. Kicillof’s friend Diego Marynberg currently lives in New York and has luxurious offices that face Central Park. From there, the young Marynberg (he is 44, a year older than Kicillof) runs his operation, which has been linked to two of the Kirchner government’s most valued political and commercial allies: Russia and Venezuela. It so happens that Diego was named as a witness in a 2012 legal dispute in London, involving two Russian-owned investment funds, Otkritie and Threadneedle, and several former employees of Otkritie. Threadneedle was accused of selling Argentine sovereign bonds to Otkritie at falsified prices, thereby defrauding Otkritie of US$175 million. Marynberg testified that he was in contact with the defendants about serving as an intermediary in the sale of 1.65 billion bond warrants. He also claimed that when he learned that Threadneedle was planning on carrying out the maneuver at an off-market price, he withdrew from the transaction. He was not charged with any wrongdoing. Nonetheless, Marynberg’s involvement in that case is noteworthy for a number of reasons. First, it demonstrates that among all the financiers capable of serving as an intermediary for a bond trade, Marynberg was singled-out by an obscure Russian fund that was plotting a fraud. And second, although he was charged with no wrongdoing, Marynberg’s involvement may have gone beyond the ultimately fruitless conversations about serving as an intermediary. Otkritie’s lawyers were concerned exclusively with the fraud committed against their clients, but they also alluded to the collaboration of other actors who enabled the crime: Argentinean Warrants are a relatively thinly-traded security and that it is implausible that the co-conspirators obtained the volume of Warrants used in the Fraud without the help of still-unknown co-conspirators. The commercial court of London awarded Otkritie $150 million in damages in 2014 over the fraud that momentarily starred Diego Marynberg. Diego also has an ownership stake in Venezuela’s second largest banking institution: Mercantil Servicios Financieros CA, or Banco Mercantil. Mercantil Servicios Financieros is also the owner of a Florida subsidiary, Commercebank. The precise scope of his ownership of Banco Mercantil is unknown. Media reports have described him as the owner (rather than one shareholder among many) through his fund Geo Equity Opportunities I Ltd, domiciled in the British Virgin Islands. According to Bloomberg News, the fund’s principal asset is Banco Mercantil. Marynberg is also the owner or officer in numerous companies whose names are English analogs of Mercantil Servicios Financieros. But despite his ownership, neither Geo nor Marynberg have been mentioned in the Venezuelan press, which is dominated by the Maduro government, a close ally of Cristina Kirchner. None of the officers or board members who have been revealed to date can be otherwise tied to Marynberg. The same Bloomberg report that labeled Marynberg the owner of Banco Mercantil also refers to Geo as a US$90 million fund, far less than Banco Mercantil’s value. WikiLeaks cables show that Banco Mercantil employees were in regular contact with the US embassy during the Chávez era, and were occasionally critical of the Venezuelan regime. However, Marynberg appears to have forged a productive relationship with Chávez and his successors. In a rare interview with Infobae in 2006, Kicillof’s favored financier hailed the potential of the Venezuelan economy and said market skepticism of chavista policies was exaggerated. Diego’s ties to the Venezuelan government have also been juicy for his firm Adar Capital Partners, which is registered in the British Virgin Islands, a well-known tax haven, and is a member of the International Swaps and Derivatives Association (ISDA). The Central Bank of Venezuela (BCV) hired Adar to negotiate a contract with Goldman Sachs for a gold swap in 2013. It is unclear why Venezuela’s Central Bank hired Diego’s firm for this task, given the lack of evident background in gold markets for either the firm, or for Diego. It’s also unclear why Venezuela couldn’t negotiate directly with Goldman Sachs, thus cutting out any role for Adar as a middleman. Adar was to receive a 0.25% commission. Given that the transaction value was in excess of US$1.8 billion, that meant a US$4.5 million payday for Marynberg. Extracting phenomenal profits from his close friendships with political insiders is a great business for the young Argentine Economy Minister’s favorite financier. And his reputation seems to be one of a skillful operator for deals that are carried out away from the public eye. 335 Meet Diego Marynberg Post date : 11.17.2014 1:30 pm Financier Diego Adolfo Marynberg has recently emerged as a new face in the complex web of alleged corruption in Argentina. But who is he? Marynberg has a very colorful past and maintains an intensely low profile. We know from news reports of his close relationship with Argentina’s Economy Minister Axel Kicillof. These same reports have highlighted allegations by Argentine prosecutors of illicit enrichment and money laundering. All of this came to light recently when Juan Ricardo Mussa filed a formal criminal complaint, accusing Marynberg of conspiring with Kicillof for illicit enrichment and money laundering. The complaint urges the court to investigate allegations that while Marynberg informally advised Kicillof on Argentina’s debt situation, he set up a fund called Latam Securities that acquired US$200 million in Argentine bonds as a kind of political speculative maneuver. Kicillof, according to a report by Clarin reporter Marcelo Bonelli, “intervened in favor of Latam to have the Central Bank of Argentina (BCRA)” sell Marynberg those bonds “in a direct and advantageous manner.” According to Bonelli, it was then-BCRA President Juan Fabrega’s discovery of the maneuver, and his confrontation with Kicillof about it, that led to Kicillof’s “operation” to oust Fabrega, who resigned in October and was replaced with a Kicillof crony, Alejandro Vanoli. Another investigative reporter, Daniel Santoro – whose family has faced intimidation by agents of the Kirchner government as recently as this year – confirmed from business community sources that the US$200 million bond operation favoring Latam took place. For Kicillof’s part, sources at the Economy Ministry have claimed that Kiciloff “ doesn’t know Marynberg.” Really? Let’s take a closer look at the web of relationships. In January 2014, Marynberg hired Jorge Pepa, a New York-based Argentine investment banker, to head his team at Latam Securities. Pepa has a longtime association with Kicillof and his Deputy minister, Emmanuel Alvarez Agis, who Pepa was in regular contact with during 2014 after he arrived at Latam Securities. In fact, La Poliítica reported that in 2013 Pepa used his connections at his former employer, Union Bank of Switzerland (UBS), to collude with Marynberg and Kicillof to set up a “money trail” for the insider bond maneuver. These activities were allegedly carried out with the knowledge of Economy Ministry officials who had direct access to the plans and actions that President Cristina Kirchner would be taking each day, according to court filings. Marynberg’s past dealings raises questions about why Argentina’s Economy Minister would allow himself to be so closely linked to all of this. We’ve dug a little deeper into Marynberg’s past and this is some of what we’ve found: After serving as an advisor to Argentine Central Bank boss Javier González Fraga in the early 1990s, Marynberg’s first brush with publicity came in a string of banking collapses in the late 1990s. In 1996, Lausanne, Switzerland-based Socimer International Bank acquired a 30% stake in Argentina’s Banco Patricios, which was owned by Alberto Szpolski, Marynberg’s father-in-law. Socimer owned Banco Medefin, another troubled Argentine bank. Marynberg then became a director of Socimer and its subsidiary firms in Argentina. All three banks had collapsed by 1998, and a judicial investigation uncovered massive irregularities in favor of family members of the bank’s owners, and as criminal indictments began to be issued, Diego fled Argentina. As Mussa’s criminal complaint filed in October details, Marynberg was named, though not charged, in a fraud case filed in Argentina stemming from the banks’ collapse. Two former clients sued Socimer broker Pablo Stabholz for US$200,000, alleging that he had transferred bonds issued by the local manufacturing firm Alpargatas to a bank in Miami, and then to his own accounts in New York. Marynberg told Argentine prosecutors that he had advised the clients to transfer their money to Miami, but he was not charged in the case. Nonetheless, according to the indictment the prosecutor in the case believed that Marynberg had conspired with Stabholz, taken the money himself, and used his subordinate Stabholz as a scapegoat. The judge acquitted Stabholz. Though the decision was appealed, and the court re-opened the case, it appears there has been no further judgment. If the prosecutor was right, Marynberg got away with the money, and with impunity. This is a familiar story. Why would Argentina’s Economy Minister engage in such maneuvers with a character like Marynberg who, despite his extremely low profile in recent years, has been at the center of very shady cases involving bank and securities fraud. It’s clear that Marynberg benefits from this relationship. Here’s our question: What does Kicillof get? 335 Argentina’s Economic Data Improves Upon Reports of Potential Settlement Post date : 11.17.2014 8:30 am Last week, the Financial Times reported on the declining gap between the value of Argentina’s peso to the U.S. dollar – the so-called “blue dollar” rate. This summer, following Argentina’s decision to default on bonds after losing its appeal at the Supreme Court, the blue dollar rate reached an all-time high. This currency gap has been closing in recent days. But let’s take a look at what’s driving these mildly positive trends: From last week’s news coverage of the economic situation in Argentina, it seems clear that the main driver is market expectations that Argentina will negotiate a settlement with its creditors once the RUFO clause expires. The FT noted this very dynamic in its story. We’ve written about the RUFO clause before, and we still maintain that it’s nothing more than a smokescreen concocted by Argentina’s lawyers at Cleary Gottlieb aimed at preventing any negotiation with creditors. Nevertheless, if Argentina’s leaders are truly eyeing a settlement with creditors once RUFO expires, that’s a good thing. Clearly, many investors and news commentators are taking reports of this possibility at face value and are expecting Argentina to come to the negotiating table at year’s end. Chatter to this effect has picked up in recent weeks, accompanying the uptrend in Argentine economic indicators. “Creditors who own bonds left over from Argentina’s default in 2001 are growing increasingly confident the government will negotiate once a clause that it says prevents a settlement expires next month.” – Bloomberg News, November 13 “Many investors expect the government to settle with the hedge funds early next year.” – Wall Street Journal, November 13 ” … market players are optimistic that negotiations with Argentina’s so-called holdout creditors will resume in January, which could lead to a deal by March or April. That would enable Argentina to borrow on the international capital markets again, putting an end to its dollar drought and the need for an abrupt currency adjustment.” – Financial Times, November 13 It’s absolutely clear that market expectations for a settlement are driving the recent positive trends in Argentina. Moreover, the mild economic benefits that have accrued to Argentina in recent weeks based on growing expectations of a settlement pale in comparison to the benefits that Argentina could see if they actually came to the table and achieved a settlement in January. As Claudio Loser of the Inter-American Dialogue has pointed out, these benefits include: – 1% growth in GDP – Up to $70 billion in lower interest costs – Billions in savings for businesses – Lower inflation – No need for capital controls – An improvement in real wages Clearly, markets are sending a strong signal to Argentina: Do the right, rational thing, negotiate a fair resolution, and reap the benefits of a normalized relationship with the rest of the developed world. 335 New Carlos Molinari Money Trail Player Card Featured in Clarin Today Post date : 11.13.2014 2:02 pm Today, Fact Check Argentina released four new “Player Cards” as part of the “Follow the Money” campaign to expose money laundering within Argentina. Check out our new set here in English and here in Spanish! Our Follow the Money campaign has generated a huge following since we launched it last month. We appreciate the great response from both our loyal readers and new members of the FactCheckArgentina community. For our new members, there are several great ways to get involved today in our Follow the Money Campaign: – Sign up to receive our email alerts. – Keep sending us tips and information through our tip line – Follow us on Facebook and Twitter. Our Facebook and Twitter following have each doubled since the start of the Follow the Money campaign and we are receiving tons of new tips each day—keep them coming! Your information is valuable and we have used your tips to help source new Player Cards! Congratulations to this week’s addition to our Player Card series: Aerolíneas Argentinas, Carlos Molinari, the Báez-Kirchner Hotel Deals and Banco de la Nación Argentina. This week, we would also like to give a special shout out to real estate magnate and Kirchner confidant Carlos Molinari. Clarin reported on our new card set today, and included a great picture of our Molinari Player card. Molinari must be extremely busy, because he is involved in at least 25 construction corporations in both Argentina and Florida. Check it all out here. Molinari-EN-PSD Molinari English On November 7, Molinari was indicted for his connection to the K Money Trail scandal and, according to news reports, could be sentenced to 10 years in prison. Molinari also has strong connections to other players in the Argentina Money Laundering scandal, including Lázaro Báez and Leonardo Fariña. News reports state that Molinari paid for Fariña’s wedding to model Karina Jelinek— the two are now separated and Fariña is doing time for his dealings with Báez. Molinari’s son, Matías, has taken over the family’s flagship Real Estate Investments SA and was a business partner with Federico Elaskar. In Miami, the two ran SGI Ventures LLC, which is part of the money laundering ring. Stay tuned for our next set of player cards—the name Federico Elaskar might just pop up again; our tip line contributors seem to have a lot to say about him. Want to find out more about the state-run money pit that is Aerolíneas Argentinas? Or the incredibly profitable and fishy Báez-Kirchner Hotel Deals? Or what about Banco de la Nación Argentina that both “safeguards” Argentina’s people’s money while apparently enabling Argentina’s money laundering? Check out the Follow the Money page. 335 Page 1 of 1512345...10...»Last » Latest from Twitter Latest from YouTube Latest News The mysterious big house that one of those indicted in the Baez case bought from himself to move millions Post date : 11.18.2014 1:12 pm Obsession at Olivos over Lázaro Báez and his aftermath Post date : 11.17.2014 4:24 pm Judiciary asks U.S. for information about the accounts of Lázaro Báez Post date : 11.14.2014 2:56 pm
Posted on: Wed, 19 Nov 2014 15:04:53 +0000
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