ARGENTINA: Under IMF Pressure, Senate Repeals Bank Corruption Law

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, May 9 2002 (IPS) - Yielding to pressure from the International Monetary Fund (IMF), the Argentine Senate voted Thursday to overturn a 1974 law that allowed bankers, business owners and government officials to be prosecuted for financial crimes.

Senators opposed to the repeal of the law said the decision was a “pathetic” show of Argentina’s subordination to the multilateral lending institutions, and accused the leaders of the political parties of isolating themselves from their voters for fear of becoming isolated from the world.

The revocation of the “law on economic subversion”, which must now go to the lower house, was one of the three conditions set by the IMF to renew negotiations on the disbursement of aid to Argentina, which is in the grip of its worst economic, political and social crisis ever.

The second requirement is the passage of a new bankruptcy law, which began to be debated by the Chamber of Representatives this week. The third is a commitment by the provincial governments to cut spending by 60 percent and stop issuing bonds to pay public sector salaries.

Not all of the ruling Justice (Peronist) Party senators voted to overturn the law. Several of them were opposed to the IMF’s pressure to repeal a law designed to punish corruption among bankers and the business community.

Senator Jorge Yoma of Duhalde’s Peronist Party complained that the IMF criticises corruption while demanding the revocation of a law that allowed it to be fought.

A majority of senators had originally agreed to modify the law on economic subversion, rather than overturning it, as the IMF wanted. President Eduardo Duhalde accepted the legislators’ objections and backed their decision to amend the law to meet IMF recommendations, while keeping it on the books, so bankers who have already been prosecuted do not get off scot-free.

But if the lower house approves the Senate decision to repeal the law, the charges against the bankers will automatically be dropped.

The law enabled the federal courts to investigate and prosecute bankers who allowed billions of dollars to be pulled out of the country last year, which led the government to declare a partial freeze on account-holders’ savings in December to stop a run on banks and prevent a collapse of the financial system.

The restrictions, known here as the “corralito” or “little fence”, have kept the savings of millions of Argentines frozen in the banks.

The government and the banks, in the meantime, are discussing the possibility of maintaining the restrictions on cash withdrawals through September, and forcing savers to swap their deposits for three-, six- or 10-year bonds.

Federal Judge Maria Servini warned that if the law on economic subversion were abolished, she would set prosecuted banker Carlos Rohm free “at the doors of Congress.” Other judges planned to summon dozens of bankers, even some who are currently abroad, to give depositions under that law.

The IMF’s First Deputy Managing Director, Anne Krueger, said in Washington that she hoped the law would be revoked this week, and that parliament would also reform the bankruptcy law, which is keeping banks from foreclosing on mortgages.

But in a surprise decision, a majority of senators, fearing that the agreement to modify the law on economic subversion would not gain the necessary number of votes, agreed in the early hours of Thursday morning to repeal the law, and incorporate some of the offences it is designed to punish in the Penal Code.

Financial court Judge Julio Cruciani said the decision to revoke the law “is more serious than an amnesty” for the bankers who allowed billions of dollars in capital to flee a crippled financial system.

If the law on economic subversion is overturned, crimes committed by the financial sector, “which has taken the people’s money,” will simply be forgotten, argued the judge.

Peronist lawmakers reported that Duhalde’s cabinet chief Alfredo Atanasof phoned the ruling party’s Senate leader José Luis Gioja early Thursday and asked him in the name of the president to get the law on economic subversion modified “any way he could.”

The Peronist senators closest to Duhalde thus revived a bill previously presented by provincal parties to repeal the law, which squeaked through with a vote of 32-30.

“The revocation of this law is a pathetic demonstration of the weakness of the government and the rest of the country’s institutions in the face of pressure from the international credit institutions,” Senator Carlos Maestro of the Radical Civic Union, who voted against abolishing the law, said Thursday.

“Who can really believe that Argentines urgently need this law to be overturned in order to pull out of a tremendous crisis that has everyone full of anxiety over the rise in prices, lack of jobs, soaring poverty and the confiscation of their money?” asked opposition Senator Vilma Ibarra.

Argentine lawmakers “legislate looking to the IMF rather than to the Argentine people, whose poor already number over 16 million” in a country of 36 million, said Ibarra.

But the scandal unleashed by the Senate decision, which has drawn the ire of judges and millions of citizens, throws into doubt the future of the law in the lower house.