Argentina is adding another notch to its expropriation belt, this time with money printing.
Following a quick series of debates and decision-making in Congress, the Argentine state became the brand new owner of the Compañía de Valores Sudamericana (CVS), formerly Ciccone Calcográfica. The acquirement of this mint puts the responsibility of peso printing in the hands of the government, declaring minting to be a matter of national interest.
“The state considers recovering the capacity to print the nation’s money to be of prime importance,” said the governmental document released upon announcement of the expropriation plan.
The law appears at a time when vice-president Amado Boudou is in the spotlight for a scandal involving the ex-Ciccone. A federal judge is investigating Boudou for allegedly helping the company out of bankruptcy last year. Influence peddling, illegal enrichment, tax evasion, and money laundering are at the forefront of the accusations.
The timeliness of the expropriation has opposition outraged, saying the nationalisation of the mint is only a means of protecting Boudou. Meanwhile, the government is in a race against inflation.
The Bill, and a Story
On the 7th August, Minister of Economy Hernán Lorenzino and head of the CVS mint, Katya Daura, led a 60-day intervention of CVS, simultaneously announcing a bill to expropriate the company.
The expropriation makes CVS, which prints sensitive material such as bank notes, the second money printing company owned by Argentina. La Casa de Moneda prints peso notes, passports, stamps and official forms.
Lorenzino said the intervention was meant to “protect workers’ rights” as well as to keep the company going. He added that the government’s intervention of the company will “ensure the sovereignty of the state in the production of security papers”.
The bill entered its first day of debate in the Congress on 8th August. Just ten days later, following a debate presided over by Boudou in his role as president of the Senate, the upper house passed the bill with a vote of 44-20. A week later, on Wednesday 22th August, the bill was passed into law by the Chamber of Deputies, by 145 votes against 77.
Frente para la Victoria (FPV) Senator Aníbal Fernández spoke about the government’s purpose of expropriating CVS, saying it “is to recuperate sovereignty in the printing of legal tender.”
And now, full ownership of CVS will be handed over to the Argentine state, in turn cancelling the company’s tax debts, recovering its property, and converting the company’s employees to government workers.
Employees will retain labour rights, union affiliation, and their collective bargaining agreement.
The price to be paid for CVS will be decided, as in previous instances, by a valuation tribunal. However, the plan is to take into account the $250m in debt owed to tax agency AFIP. Because the amount is higher than the value of CVS’s assets, Lorenzino said he expects the expropriation will not cost the state any money.
According to the expropriation law, Lorenzino and Daura will be in charge of the mint. The two are known to be close allies of Boudou, raising potential complications and questions about the Boudou investigation’s overlap with the expropriation.
Judicial sources told local newspaper Infobae that the expropriation will not affect the investigation of Boudou and others.
The issue of Boudou’s alleged involvement with the company featured prominently in the parliamentary debate. Swaying from the opposition, senator Luis Juez, member of the Frente Amplio Progresista (FAP), voted in favour of the bill, saying, “there is no reason why the prosecutors and judges cannot get to the bottom of the matter.”
FAP submitted a similar expropriation bill in April, as did the Union Civica Radical, both of which voted against the expropriation in Congress.
Opposition has been resonant in recent weeks, with dissident Peronist deputy Eduardo Amadeo saying, “the measure shows its need to cover up a million-dollar case of corruption.”
Deputy Patricia Bullrich of the Unión por Todos party, believes the seizure of CVS is meant to protect Boudou.
“Because Boudou bought the company through figureheads (people who conceal these kinds of purchases by government officials) and today this purchase is so evident, that the government can’t find a way to continue covering the scandal. It wants to do it by purchasing silence,” she said in an interview with the Argentina Independent.
Santiago Drangosch, a member of the Partido Liberal Libertario, says the situation is like “a script for a movie.”
Drangosch, who is against the expropriation, saying it goes against property rights and the constitution, questions what will happen with the debts Ciccone owes, and believes this decision is the “final destruction of all that’s institutional”.
In a case nicknamed by the press as ‘Boudougate‘, vice-president Boudou found himself in a financial scandal with ties to shell company The Old Fund and the ex-Ciccone press.
According to a timeline report in La Nación newspaper, in July of 2010, a judge requested Ciccone’s bankruptcy following the company’s severe debt. In September 2010, The Old Fund gave the company $2.3m to rise out of bankruptcy. In turn, The Old Fund’s president, Alejandro Vandenbroele, became president of the ex-Ciccone.
The scandal came to light this February when Vandenbroele’s ex-wife told the press that Boudou was part-owner of CVS. Boudou denied associations with or knowledge of Vandenbroele, though it was later found out that Vandenbroele had paid some bills at an apartment of Boudou’s in Puerto Madero, leading to suspicions that Vandenbroele was living there.
As evidence and information began to leak, more instances of a monetary relationship between Boudou and The Old Fund began to reveal themselves. In 2010, The Old Fund supposedly paid for several trips for Boudou’s friends, including a trip to the World Cup in South Africa for Boudou’s friend and Vandenbroele’s business partner, Jose María Núñez Carmonia, and a trip to the United States for Boudou’s brother.
When Boudou joined Cristina Fernández de Kirchner as vice-presidential candidate in the election race, their party, FPV, allegedly paid $1.9m to CVS to print primary election ballots, and $2.9m for the presidential election ballots in October.
A written report presented by prosecutor Jorge Di Lello accuses the vice-president of a “vertiginous and unjustified increase in personal wealth,” while Boudou was economy minister from July 2009 to December 2011.
President Fernández has not made any comments regarding the matter, and has stood by her cabinet.
In the bill to declare the company “of public interest and subject to expropriation,” the government did not mention the scandal, or open files in business and criminal justice.
Boudou denies allegations saying he is the victim of a “media and judicial conspiracy.”
Money in Argentina
Until recently, Argentina’s state-owned mint, Casa de la Moneda, administered by the Ministry of Economy, was solely in charge of printing Argentina’s paper money.
In November 2010, following a rising inflation that unofficial sources placed at 25% annually, and an inability to keep up with the demand for pesos, Argentina sought temporary help from Brazil’s Casa da Moeda mint. The company printed 130 million $100 notes, and another three billion $100 notes the following January. This was the first time Argentina sought help from Brazil in regards to money printing.
Despite the scandal surrounding CVS and Boudou, the Central Bank of Argentina went ahead in March with contracting CVS to print money. The first CVS-produced bank notes were released this May.
Though the possibility of printing $200 bills has been presented, President Fernández and the government have refused to print bills of a higher denomination. Critics say it is because there is a denial of inflation, and a fear of soaring prices reminiscent of past hyper-inflations.
“It’s because of inflation that people require more bills,” says Maximiliano Castillo, who is the director of economic research company ACM in Buenos Aires. “The government doesn’t want to print bills of higher denomination.”
Supporters of the new law believe the government makes a valid point with the expropriation. Senator Fernández said control of the printing is something “the state should have never given away.”
Instead of Argentina now working with both a state-owned and a private company, it is expected that the Casa de la Moneda will absorb CVS and its resources, resulting in one state-owned mint to cover all of the country’s currency printing needs.
Across the world, countries have various means of currency production, some relying on state-owned companies, others on private companies, and yet others on a mix of both.
Australia’s state-owned Note Printing Company prints the country’s own polymer banknotes, as well as some banknotes for countries like Chile. Meanwhile, in Canada, two private companies — BA International Inc and Canadian Bank Note Company — produce bank notes, and the state-owned Royal Canadian Mint produces coins. In the United Kingdom, the Bank of England plus seven retail banks are capable of printing banknotes.
Bullrich speaks to the opposition’s standpoint saying, “The state already has a company to make money, why would it need two? I see nothing positive in buying a company to perform a function that is already met by another company.”
Meanwhile, Senator Fernández said, the purpose of the expropriation was to “avoid that business that should be handled by Argentines, be handled by others.”
What do Argentines think about the expropriation of CVS? Click here to find out.