Argentina corruption scandal roiling financial markets

Javier
Sanchez Caballero, the former CEO of the construction company
IECSA, is involved in a corruption scandal that includes former
Argentine President Cristina Fernandez.
Rolando Andrade Stracuzzi/Clarin via
AP

• More than a dozen former Argentine government officials
  and business executives have been arrested in a large scale
  corruption scandal.
• The investigation is throwing Argentina upside down
  just as it gears up for economic recovery. 
• 
  Watch
  the Argentine peso trade in real time here.
  

Just as Argentina looked poised for a shot at economic recovery,
a corruption scandal is roiling the embattled country.

More than a dozen former government officials and business
executives were arrested after police raids last week in a case
involving illegal payments for favors including public-works
contracts that took place over a decade under President Cristina
Fernandez de Kirchner.

The century bond, which marks debts due in 2117, fell to a record
low Wednesday. Its yields, which move opposite of prices, rose to
as high as 9.37%. They have jumped by about 38 basis points since
the end of July, when the corruption allegations came to light.

The Argentine peso also fell to a two-week low. It was trading
down as much as 1% to 27.6710 against the dollar around 2 p.m.
ET. Argentina’s central bank, which has been struggling to
effectively combat 30% inflation, had a day earlier
held its key interest rate unchanged at 40%. 

Last Wednesday, Buenos Aires-based newspaper La Nacion published
the notebooks of a former driver in the Fernandez administration
that detail how he transported roughly $160 million in bribe
payments from construction companies to government officials from
2005 until 2015. 

Fernandez, who was president during much of that period, has been
indicted in the case but enjoys immunity from prosecution as an
Argentine senator. Prosecutors on Tuesday
questioned President Mauricio Macri’s cousin, who is a
construction executive.

Argentina scored the largest bailout in IMF history earlier this
year after its currency hit an all-time low. The $50 billion
loan, which is part of a three-year standby program, attempts to
rein in soaring twin deficits in the country and to stabilize the
peso.

Moody’s rating agency called the scandal “credit negative for
Argentine corporations.”

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