A R2.1 billion corruption scandal in Argentina is roiling its financial markets
- 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.
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 detailed how he transported roughly $160 million (R2.1 billion) 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, was extended in attempt 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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