“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 apprehension regarding the potential collapse of extensive initiatives, which may be influenced by the “early denunciations” of corruption within the upper echelons of President Javier Milei’s national administration, is palpable among Argentina’s ‘círculo rojo’ business community. There are concerns that it may undermine the prevailing agreement on fiscal balance.
Amid the audio revelations involving Diego Spagnuolo, the former director of the ANDIS (Agencia Nacional de Discapacidad), which implicate Presidential Chief-of-Staff Karina Milei, Eduardo ‘Lule’ Menem, and other high-ranking officials, Argentina’s government faces a quiet exodus of private-sector companies that had previously sustained their public backing. Some individuals are already hesitant to defend the libertarian administration against the allegations of friendly fire. “Spagnuolo is the libertarian version of José López,” remarks a source from the upper echelons of the círculo rojo, alluding to the Kirchnerite corruption scandal linked to the former public works official, who was apprehended in June 2016 with over 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.
Consulted by BlueDollar, other members of the country’s most influential firms cautioned that “the denunciations of corruption hamstring the economic future in the medium and long term.” One business leader remarked: “The presence of officials facing allegations of bribery and dubious agreements significantly undermines the ability to maintain institutional integrity and legal security, which are essential for comprehensive projects and critical investments.”
At least two businessmen associated with the energy sector cautioned that the unfolding scandal will impact investors evaluating 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 will remain elevated due to the insufficient macroeconomic order, particularly in the absence of clarity regarding the institutional trajectory, as acknowledged by the director of a company consulted by us. This marks yet another instance of corruption allegations directed at the La Libertad Avanza administration since its inception 20 months ago, yet it stands out as one of the most significant cases. The challenge in differentiating this case (even more so than the ‘$LIBRA’ cryptocurrency situation, where Milei himself highlighted his image in an allegation of presumed fraud) lies in the fact that the core of the President’s political influence has been thrust into the limelight: “El Jefe,” or “The Boss,” as Milei refers to his sister Karina.
The apprehensions had already started to manifest at the recent Council of the Americas symposium on August 21, shortly following the leak of Spagnuolo’s self-denouncing voice messages. If she is proven guilty, it signifies the conclusion of the government.” However, swift judicial proceedings appear unlikely, as evidenced by the nation’s historical context. “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,” remarked another private-sector voice, left in shock by the revelations.
In light of the ongoing scandal, business leaders continue to express confidence in a significant victory for La Libertad Avanza in the upcoming October midterms. According to opinion polls, a favorable outcome at the ballot box is anticipated by many. “The denunciations will carry little weight because society still positively values inflation coming down,” stated a prominent figure in the business community. Nonetheless, the proprietor of a regional construction company reflected that former president “Mauricio Macri also won the midterms, but without political leadership no government can be successful.”
“The electoral risk is temporary, the corruption, not,” stated a source from the money market who provides economic analysis for a leading global bank. The expert delineated the differences among the fluctuations in interest rates, the strain on the dollar, and the government’s contention with Congress regarding public expenditure, alongside the “market mistrust stemming from the discredit incited by allegations of corruption. Without addressing whether any of this is ultimately substantiated or verified.” Firstly, there exists a sentiment that the government is failing to address effectively.
A court decision would effectively serve as a political death sentence,” he asserted. Denunciations looming over pivotal government officials present a significant challenge, leading to “the impossibility of maintaining over time the deep reforms which the country needs.” Until now, there were two unknown factors regarding the reforms: whether the government secures the necessary majority among their own ranks and allies in Congress after December 10, and whether Milei refrains from adopting a Nero-like approach, governing solely to maintain power,” stated a prominent 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.