Argentines poured into the streets of Buenos Aires this week to demand answers in the mysterious death of prosecutor Alberto Nisman, but foreign businesses there are in the process of vanishing.
Welcome to the world’s newest mafia state.
Nisman was found dead in his apartment one day before he was scheduled to testify against powerful Argentine officials, including President Cristina Fernandez de Kirchner. Government officials, noting that the apartment was locked and that a gun and shell casing were found near Nisman’s body, have called it a suicide. Many who knew Nisman have rejected the idea out of hand, and the large demonstrations in Buenos Aires make plain that there is widespread skepticism about the official story. Given that Nisman had received prior death threats, and had a guard of 10 federal police officers at the time of his death, it is not hard to see why observers are dubious about the suicide theory.
The accusations about which Nisman would have testified centered on Argentine officials’ actions in the wake of two bombings in the early 1990s, especially a 1994 attack on a Jewish community center that killed 85 people. Nisman, who spent a decade investigating the case, claimed that Kirchner and others actively covered up Iran’s involvement in order to preserve Argentina’s “commercial, political, and geopolitical interests.” The Kirchner government has strongly denied the allegations.
This would not be the first time Argentina’s government has shown a casual attitude toward international justice, especially when commercial interests are involved. A few years ago, the government seized a majority stake in the country’s main oil producer, YPF, from Spain’s Repsol, and initially refused to compensate the company for the value of its shares. Eventually, Buenos Aires begrudgingly paid about half of the initial estimated value in exchange for Repsol’s agreeing to drop its lawsuits.
Argentina also found itself under the censure of the International Monetary Fund two years ago, when the IMF demanded it implement reforms due to the systematic misrepresentation of its economic data. The country unveiled a new consumer price index and revised growth figures in response, but as recently as last fall, the gap between Argentina’s forecasts and the IMF’s remained significant. Argentina blamed the IMF’s inaccuracy.
And, of course, there is the periodic saber-rattling over the Falkland Islands. Today’s residents are perfectly satisfied with their current government, but the promise of potential oil production keeps Argentina primed to claim that the islands should be under its control. Argentina has accused the United Kingdom of making “aggressive moves” in a part of the world that has been under British administration for well over a century. This sounds odd, to say the least, coming from a country that has shown itself willing to seize anything that will hold still long enough.
Investors outside the country seem to finally be receiving the message that Argentine respect for the rule of law is flimsy at best. By the third quarter of 2014, investment in the country by foreign businesses had plunged to levels last seen in the years immediately following Argentina’s massive debt default in 2001. The government then paid many creditors as little as 30 cents on the dollar. Some creditors who refused such an extreme haircut are still involved in legal wrangling to try to secure payment. There is very little evidence, if any, that dealing with Argentina today will not create similar headaches for foreign investors going forward. If anything, Nisman’s death is a warning that things are getting worse.
Maybe, just maybe, foreign executives are coming to realize that the rule of law in Argentina means roughly what it means in Russia. If you believe the initial explanation that Nisman’s death was a suicide, you probably also believe that Vladimir Putin’s troops are not intervening in eastern Ukraine.
Pity the poor Argentines, but only up to a point. Being a deadbeat nation can have its advantages, but it also has its drawbacks - one of which is that when you are abused by your own government, you get relatively little sympathy from citizens of other nations whom you have already stiffed. Mismanaged economies in places like Russia and Argentina create misery for millions of innocent people who have done nothing to deserve it, but those governments still act in their people’s names.
Until Russians and Argentines break free of the mafiosi who control the levers of power in their states, they are likely to do most of their suffering alone. Foreigners of all stripes, not just investors, can find better places to put their time, energy and capital to work.