• Ex-Kirchner govt official’s arrest gives Macri breathing room
  • Arrest accelerates Kirchenrismo’s decline as political force

When a man was caught hurling bags of money over the walls of a monastery in a sleepy town outside Buenos Aires last week, President Mauricio Macri benefited more than the nuns.

QuickTake Argentina

The man turned out to be former Public Works Secretary Jose Lopez, second-in-command at the Planning Ministry for more than a decade and a close collaborator of the late President Nestor Kirchner. The bags contained more than $9 million in U.S. dollars, euros, Japanese yen and even Qatari riyal. Police also seized a Sig Sauer assault rifle and several watches.

The ensuing scandal rocked the political movement that ruled Argentina for 12 years, led by Kirchner and his wife and successor, Cristina Fernandez de Kirchner, of the Peronist party. It also provided relief for Macri, who faces soaring inflation and sputtering growth as he attempts to pass economic austerity measures seven months into his government.

The president was quick to describe the case as a national embarrassment, while adding that it discredited the old way of doing politics in Argentina -- an allusion to Cristina Fernandez and Nestor Kirchner. The electorate had chosen a new route when they voted for him, Macri said.

“Fortunately, we Argentines have decided to change,” Macri said last Thursday. “We believe politics needs to be led by public servants with a vocation to give and construct.”

Economic Climate

Macri won a tight election in November, defeating Fernandez’s candidate, Daniel Scioli, by promising to root out corruption and repeal protectionist policies including currency controls and import and export limits. He also devalued the peso and removed energy and transport subsidies, while the central bank tightened monetary policy. People are beginning feel the pinch from inflation.

Consumer prices soared 40.5 percent in the 12 months through April after the government removed gas and electricity subsidies for residents of Buenos Aires, according to the city’s consumer price index.

Yet, as the statistics agency announced monthly inflation for May of 4.2 percent last Wednesday, the first results of a revamped national index after a six-month hiatus, all cameras were trained on a dazed-looking Lopez, handcuffed and dressed in a flak jacket and helmet. He was being escorted by a SWAT unit to see a psychologist, apparently suffering from hallucinations.

Focus Shift

Lopez’s downfall reflects well on Macri’s government as he seeks to portray himself as a serious alternative after the governments of Fernandez and Nestor Kirchner, said Ricardo Rouvier, director of polling firm Ricardo Rouvier & Asociados.

“It shifts the public focus onto this incredible event,” Rouvier said. That “provides some relief for the government at a moment in which there’s rising concern about the social and economic situation.”

Click here for more on the economic problems mounting up in Argentine

Macri assumed office promising that inflation would slow to 25 percent and growth would recover in the second half of the year. Since then, he has pushed back the time line and backtracked on some of the measures, saying there will be costs to correcting years of mismanagement.

Damage Limitation

The details of Lopez’s detention have gripped Argentina. Lopez attempted to bribe police before running into the convent and telling the nuns that he had planned to donate the money to them, according to the provincial security minister Cristian Ritondo.

Lopez visited the convent once a year, according to Alba Martinez, a 95-year-old resident nun interviewed on Radio La Salada who said he seemed "a bit crazy" that night.

On attending court last Thursday, Lopez tried to bang his head against a wall and shouted for cocaine. The lawyer he hired is also a part-time Cumbia singer with a penchant for posing in her underwear.

Fernandez, who already faced a string of cases involving alleged money laundering, tax evasion and embezzlement, moved to distance herself from Lopez last week. In a Facebook post, the former president said the money must have come from private industry. “It wasn’t me,” she said.

Argentinians are skeptical. According to a poll by Management & Fit and published in Clarin, 63 percent believe Fernandez knew Lopez was taking money.

Fernandez tried to counter-attack, warning against these “grotesque and scandalous” events “hiding the economic and political plans that are wreaking havoc in the majority of social and economic sectors of our society.”

Panama Papers

Macri may have to tread carefully. He also faces an investigation about several offshore companies connected to his father’s construction conglomerate revealed in the so-called Panama papers. More recently he repatriated 18 million pesos ($1.3 million) he held in the Bahamas.

While the Lopez case buys Macri some time to get the economy back on track, it could also prove damaging if businessmen with links to Macri are shown to have illegally profited from government infrastructure projects, said Sergio Berensztein, director of political consultancy Berensztein.

“In principle this gives the government some oxygen because the issues of the rise in energy tariffs, lack of growth, 4 percent inflation recede into the background,” said Sergio Berensztein, “But this is a Pandora’s box because undoubtedly there could be uncontrollable dynamics that affect the government.”

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