January 23, 2018
Friday, February 17, 2017

‘Businessmen and bureaucrats understand that they all win if there is corruption’

Natalia Volosin
Natalia Volosin
Natalia Volosin
By Santiago Del Carril
Herald Staff

Legal expert Natalia Volosin on conflicts of interest and why they remain a constant problem for Argentina

It can be hard for journalists, let alone members of the public, to keep track of the ongoing corruption investigations inherited from the country’s previous administration, and at the same time new conflicts of interest scandals are popping up in President Mauricio Macri’s administration.

However, one young legal expert has recently become popular on social media after featuring on several TV programmes, winning praise for the way she is able to untangle the Dantesque layers of legal technicalities that often complicate such cases.

Her name is Natalia Volosin, a Yale PhD graduate who is currently finishing her dissertation on public-private relationships between businesses and government officials, which is tentatively titled “The Argentine Corruption Machine.”

In an interview with the Herald in a coffee shop just blocks away from the Pink House, Volosin explained why conflicts of interest are so endemic in the country’s society — and why so little progress has been made so far in controlling them.

In your dissertation, you argue that Argentina has gone from what you called ‘state capture’ to kleptocracy throughout its history. Could you tell me a little more about this theory?

Corruption in Argentina functions between two extreme abstract models. At one end you have what is called “capture by the state,” which means the typical system where private companies basically “contract” government officials, in exchange for some payment or financial return. Whether it’s 5, 10, 15, 20 percent it continues to change. But in return the businessman gets access to government contracts. But it’s different when there are waves of nationalisations or privatisations.

What’s the difference?

If it is a privatisation, they make (an irregular) payment to remain with the state concession of a public service such as utilities. This occurred during former President Carlos Saúl Menem’s tenure. But when it’s nationalisation, the government officials keep the business and pay a percentage to the businessmen. That is the ‘capture of the state.’

I think that Argentina has functioned as a typical model of capture of the state since Colonial times up until the Kirchner government. The relationship between private-sector companies and the state always had the same format, where they would get certain privileges and permits in exchange for a payment to the government bureaucrats. But in 2005, things changed.

How so?

(Late former president Néstor) Kirchner decides he wants to get a bigger piece of the pie, and have much more control of the money that flows from government contracts to private companies. He was brilliant in the way he understood that in Argentina, if you don’t have money, you don’t exist in politics. Not only in regard to the presidential campaign, which happens in every country, but you also need money to purchase influence: to buy judges, governors, journalists — all of that costs money.

It seems like he created satellite companies which were really owned by him. (Businessman currently jailed under corruption charges) Lázaro Báez or (Kirchnerite allied businessman) Cristóbal López are all frontmen. He really appears to have owned it all, the public and private parts. This is a type of kleptocracy model and not state capture. So when the private sector is much stronger, it’s a model similar to state capture, but when the government officials have more influence, it is more similar to a kleptocracy.

And then there are moments when there is a bilateral monopoly, when an equilibrium is reached, I think the (Carlos) Menem era was more similar to that. The Kirchnerite model is more similar to kleptocracy, and now we’ve returned to state capture with Macri’s government.

Does this model ever break?

The interesting thing is it is never goes out of these parameters — there is always a commission being paid. One side or the other wins, the important thing is that all the businessmen and state bureaucrats understand that they all win if there is corruption. Maybe a government official earns less when there is primarily state capture and the case is reverse when there is the kleptocracy model, which doesn’t suit the businessman. But either system is more convenient for both than if you were to have one without corruption. This is why there aren’t any incentives to change the system because everyone wins.

Do you think this is unique to Argentina? Doesn’t this exist in other countries like the United States?

No, but the US has a model of corruption more similar to state capture, which is less serious than in other countries or more hidden. Private companies get access to certain privileges from the state in exchange for some type of bribe. I think the Argentine model is much more similar to Brazil. It’s a machine that feeds on itself; you can’t do politics without dirty money from the private sector and the same in reverse. You can’t do business without permits, privileges and access to things the state has because it’s a very interventionist state in general. So it feeds on itself.

Do you think that part of the reason these types of conflicts of interest are endemic in Argentina is because it doesn’t have strong institutions or has less of a system of checks and balances in the country?

Argentina doesn’t have a system of checks and balances. It has a French legal system where the different branches are dependent on one another. It’s exactly the opposite. It is a hybrid system, in which it has a US-inspired constitution but with a French legal system where the executive, legislative and judicial branches each have their own functions, and don’t intervene in each other’s territory. While the Constitution has a system of checks and balances, in practice it is much more similar to the French system. For example, when the judiciary wants to stop something that the executive does, the executive pushes back and pressures them not to intervene.

What about the organisations that perform audits or controls?

Here there isn’t really anything. The only organisation that somewhat functions is the AGN (Auditor General’s Office) because the opposition always leads it. But only to a certain point. During the previous administration, when UCR Radical leader Leandro Despouy led it, the auditors were mainly from the Victory Front (FpV) and they wouldn’t let him publish reports. They wanted to remove him. It’s also not regulated well because Congress never passed the 1994 reform which would have made it more independent, establishing how long the AGN term would be etc. On the other hand, the Anti-Corruption Office can’t really control anything because it depends on the Justice Ministry and the president appoints the director. It isn’t financially independent or has its own budget. Last year, for example, it was given 19 million pesos in funds; 15 million were used to pay salaries.

And what of the reforms they want to pass in the Anti-Corruption Office?

When (Anti-Corruption Director) Laura Alonso was appointed to lead it, she said there would be a transition to make it more independent. However, it’s just words. It’s been a year or so, and it doesn’t need transition. What needs to be done is to change the law and give it independence. And name someone who makes it through a job competition. Saying it’s a transition is an excuse to not give it independence, (or) to an organisation that should have it.

Is the Public Ethics Law effective?

It doesn’t prevent any conflict of interest because it only evaluates a very small area of what is technically considered a conflict of interest for any other organisation in the world. The international community defines a conflict of interest as not only a current conflict but also a potential or hypothetical one.

The rule should be if it looks like a conflict of interest, it is one, but Argentine law doesn’t define it as such. It says if your family members are involved, for example, it doesn’t count as a conflict. To be considered one it is based on whether you have direct judicial competence. For example, Deputy Cabinet Chief Gustavo Lopetegui use to be the CEO of LAN Chile, and has a potential conflict of interest when determining policy involving Argentine airlines. In any other country this would be a conflict of interest, such as Japan, China, US, or Chile. But here, it doesn’t exist. In 2005, there was a reform written in the Anti-Corruption Office that would have made this type of issue one. But it’s been stuffed away ever since then, first by the Kirchnerites and now by Macri’s government.

What effect do the President’s decrees have when trying to create institutions that are supposed to make the government more transparent? Like how they modified the tax amnesty law via a decree.

I think this case is unconstitutional because it exceeds the regulation and violates the faculties that the president has to regulate the laws. There was a lot of hope that this government would make these changes as they won their presidential campaigns using these slogans about transparency, respecting institutions. Granted it’s much easier to do when you are the opposition than when you are in the government. But in this case, this government shows it’s much more rhetoric than actual fact.

And what do you think are the most notable conflict of interest cases facing this government?

Those affecting the president of the nation himself. The problems we have now are the same problems the US has now with Trump. In general, when you want to prevent a conflict of interest, you remove or prevent the government official who could be affected by making a certain decision be made by his or her superior. But since you can’t temporarily remove or get someone superior to the president, it becomes more complicated, especially when the president comes from the private sector with so many interests.

How about Macri’s blind trust?

It could have worked if it was done right, but it wasn’t. First because it wasn’t blind, the president knows who will administer his investments or assets. And secondly, there hasn’t been any further information released about whether the blind trust was put into effect. Then you have cases like the recent Correogate, when there are conflicts of interests that are evident to all of us. But instead of making them public, and getting a group of independent experts to examine it with the Anti-Corruption Office, they do everything wrong. A minister signs off on the proposal that isn’t competent, the Anti-Corruption Office doesn’t intervene, and we learn about it from a prosecutor who halts it. So they make an already complex case much more complicated than it really is.

What about when Macri’s cousin Angelo Calcaterra decided to sell the IECSA Construction Company, which he bought from Franco Macri (the president’s father). He decided to sell it last March because he said it would be incompatible for him to own it if he were to bid for other public works projects.

It continues to be strange. I suspect that the company is still part of the Macri family. You have the problem with him and also with (tycoon) Nicolás Caputo, who is Macri’s intimate friend and lends him money, but also has very important contracts with the state. For me, the family members and the friends close to Macri shouldn’t have access to state contracts while the president continues in office. They can operate in other provinces, but to still work with the national government demonstrates a clear conflict.

What about when Energy Minister Juan José Aranguren (also the former CEO of Energy Company Shell) sold his shares last September? Was that positive?

He should have done it a long time beforehand (he sold his shares in September but was appointed in the previous December). The Anti-Corruption Office took more than six months to decide over this issue. And they have more than 30 conflict of interest cases. If they were to take six months for each one, the government’s term will end and they will never resolve anything. They have to move much faster. I also think the Anti-Corruption Office’s ruling was technically wrong because it only suggested that Aranguren should be prudent and sell his shares.

And what is your opinion about the tax-amnesty programme and how it was implemented by President Mauricio Macri’s administration?

Tax amnesty programmes are always problematic. Argentina is a country where many laws aren’t fulfilled. And the corruption is just a part of a general problem, which is historic and linked with our economic developmental problems. So, whoever wants to improve these problems must not think of them as being isolated to a certain sector. The tax amnesty programme was successful, but the message it gives is very negative because what you are essentially saying to who pays is to continue tax evasion. While the government says it’s always the last chance, it’s never the last because all the governments implement new amnesties. And then new problems come when they allowed the family members of government officials to enter the amnesty. The laws are against family members entering the tax amnesty, but the presidential decree changed it and opened a window for them. I think it’s unconstitutional but the judiciary for now has ruled in favour of it and it’s a ruling that must be respected.

Isn’t it difficult to implement controls or prevent conflicts of interest when a large portion of business transactions are not registered? For example, property sales or even the majority of the funding used for campaigns aren’t accounted for.

Yes, it’s true an important part of the economy is not registered. So, it’s hard to know what they exactly have.

That is why sworn affidavits exist for government officials so they can account for their assets. The problem is the controls are very weak for this. You can declare a property value that has nothing to do with its real value. For example, giving the value you purchased the property for in 2001 in comparison to what it is worth now. The controls are very weak in part because of the Public Ethics Law, which was put into effect in 1999. It also doesn’t apply to the Judiciary because during Menem’s administration the Judiciary didn’t want to be controlled, so it was never really reformed.

Now each branch of the government has their own proper system of control, the Anti-Corruption Office deals with the executive branch, Congress has its own system and the judges, who are suppose to have their own, really don’t have any, because their sworn affidavits are never published.



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