Amnesty for undeclared dollars divides Argentina

BUENOS AIRES, Argentina (AP) — A plan to get Argentines to pull their undeclared U.S. dollars from under their mattresses and out of illegal tax havens, and deposit them in the banking system is eliciting warnings that it will turn the country into a magnet for money launderers and organized crime.

The government of President Cristina Fernandez dismisses those concerns, saying the proposal to accept these dollars without charging taxes or asking whether they were obtained legally is needed to finance the key construction and energy industries, which have stalled due to inflationary pressures and currency controls.

Critics say the real motive is to bring billions of greenbacks into the investment-starved formal economy, and thus stave off another crippling devaluation of the peso before October's mid-term congressional elections determine whether Fernandez can keep ruling with a free hand.

The proposal, which goes before the Senate next week, aims to get savers and investors to deposit undeclared dollars at Argentina's Central Bank in exchange for bonds and certificates of deposit. The bonds would pay 4 percent through 2016, while the CDs could be traded and eventually redeemed for the entire amount in dollars, as long as the holder presents evidence that the money was spent on construction or real estate.

The government says the law is aimed principally at Argentines who have bought U.S. dollars as a hedge against high inflation. Deputy Economy Minister Axel Kiciloff estimated that Argentine individuals and companies have socked away up to $200 billion in undeclared currency outside the country.

The government is trying to make up for its disappearing foreign reserves, which have fallen more than 20 percent to $39.4 billion, by bringing in these black-market savings before the legislative elections, said Alfonso Prat-Gay, a deputy for the opposition Civic Coalition and former president of the Central Bank.

But Argentina's auditor general Leandro Despouy warned senators that it could exacerbate the dollar shortage by increasing distrust among international anti-money laundering groups and holding back foreign investment even more. "This law is going to be objected to because of the opening it entails for the possibility of laundering," Despouy told a senate committee on Tuesday. He called it a huge invitation for anyone to have their money "legitimized through fictitious groups."

The Financial Action Task Force, which guides governments worldwide on money laundering controls, could conclude that Argentina is providing incentives to launderers because this would be the second amnesty the Fernandez's government has offered in five years. The last amnesty pulled about $4 billion into government coffers in 2009.

This proposal specifies that no elected officials and no one linked to crimes of money laundering, financing terrorism or tax evasion can benefit from the amnesty. But Roberto Durrieu, a lawyer specializing in the prevention of corruption and money laundering, said the law needs to include a "more specific typology of these crimes."

"There is a series of contradictions in articles of the project, and we run the risk that organized crime would see a window to enter Argentina," Durrieu told lawmakers.

Opposition politicians have noted that the proposal comes amid a federal investigation into money laundering allegations involving businessmen and financiers with close ties to Fernandez.

Lazaro Baez, a businessman close to Fernandez and her late husband, President Nestor Kirchner, has denied allegations that he became rich on public works projects through his access to the presidential couple and had cash flown out of the country on private planes. Kirchner's former personal secretary, Miriam Quiroga, meanwhile spent hours testifying before a judge and prosecutor on Tuesday after declaring in a TV interview that she saw bags of cash brought through the presidential residence.

Fernandez has rejected the criticism, and said her opponents are pressing for a peso devaluation that would devastate ordinary Argentines who lack the ability to hide funds abroad.

"Those who want to make money at the cost of a devaluation that the people will have to pay for will have to wait for another government," she said last week. "Every time there's an election, on the side there's the economy and on the other, the scandals. It's typical of every election."

The government's refusal to pay billions of dollars to foreign governments and other investors whose businesses have been expropriated or otherwise harmed by government decisions have largely closed off foreign capital markets to Argentina. The risk to future investments has raised borrowing rates to the point that poor, landlocked Bolivia can issue debt at a third of the cost of resource-rich Argentina. Meanwhile currency controls meant to stem capital flight have had the opposite effect, with dollars flowing out at an increasing rate.

The proposed bonds would help finance oil and gas development by YPF SA, the state-controlled energy company Argentina seized from Spain's Grupo Repsol last year. Repsol has gone to international courts seeking $10.5 billion for its controlling shares, which the Fernandez government has so far refused to pay, and threatened to sue any other energy company that tries to develop the Argentine oil and gas resources it discovered.

Argentina's construction sector, meanwhile, traditionally has fixed contracts and estimated building costs in dollars, and it slowed to a standstill after the Fernandez government ordered all new contracts to be made in pesos. Many buyers and sellers have found it too difficult to settle on prices in an economy where actual inflation is estimated to be rising more than twice as fast as the official rate of 10 percent, black-market trading for dollars values pesos at half their official exchange rate, and fears of a disruptive currency devaluation have grown.

In this context, the initiative seems to offer a lifeline to real estate developers.

"Any measure that looks to get dollars out from under people's mattresses and into the real, productive economy is welcomed," said Gustavo Weiss, president of the Argentina Construction Chamber.

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Argentina offers tax amnesty for undeclared cash

BUENOS AIRES, Argentina (AP) — Argentina's government announced new measures on Tuesday intended to suck up undeclared dollars in response to growing pressure to abruptly devalue the nation's currency.

Economy Minister Hernan Lorenzino said the new tax-free bonds and certificates of deposit will pull into the banking system the foreign currencies that Argentines have hidden under mattresses and spirited out to illegal tax havens.

Both measures are being sent to congress for approval, presumably because enabling people to declare cash without paying criminal penalties requires the force of law.

Argentines will need to deposit these undeclared dollars at the Central Bank, which will issue CDs for the entire amounts, Central Bank President Mercedes Marco del Pont said. The bonds will pay 4 percent interest through 2017, Lorenzino said.

The money will be used to finance energy and home construction projects, generating jobs and stimulating the economy.

Both sectors have stalled, in part because speculation about future inflation and a possible devaluation has made long-term investments in Argentina too risky.

Tax chief Ricardo Echegaray said that once approved, the amnesty will last for three months, and that any person or corporation can benefit. But he also said elected officials and anyone facing money laundering probes cannot participate.

"We have a long list of people facing charges who are not eligible," Echegaray said, and named some names beginning with Lazaro Baez, a businessman close to President Cristina Fernandez and her late husband Nestor Kirchner who is the focus of a federal money laundering investigation.

Hours earlier, Fernandez ruled out any currency devaluation while she's president, and dismissed the brewing Baez scandal as election-year politics.

But many Argentines have lost faith in the peso and in her leadership as inflation soars, Central Bank reserves drop and the economy slows, hamstrung by currency controls that make doing legal business more difficult.

A closely watched sign of the country's economic future is the illegal currency market, where Argentines are increasingly desperate to ditch their pesos as inflation climbs above 25 percent a year. Amid fears of a potential currency shock, they're now trading nearly 10 pesos for each dollar — close to half the official value of 5.2.

This "blue dollar" trading remains marginal compared to the overall economy, but it's a free market, stubbornly beyond the government's control, and as such, it's increasingly being looked at by Argentines trying to protect their pocketbooks. The central bank periodically releases dollars to rein it in, but that's risky as well, now that Argentina's reserves have dropped by more than 20 percent, to $39.75 billion.

New polls suggest Fernandez has lost more than half the support she had when re-elected in October 2011, including a 10-point ratings drop in the days since a scandal broke on April 14 over allegations that Baez spirited millions in cash out of Argentina in private planes.

A survey by the Management & Fit agency said only 29 percent approval of Fernandez's leadership, down from 64 percent when she was re-elected. That poll of 2,000 Argentines, taken just after the scandal broke, had an error margin of about two percentage points.

A separate survey about her personal image said 48 percent viewed it as positive after the scandal broke, down from 57 percent before. A total of 1,000 Argentines responded to that survey by the Ipsos-Mora firm, which had an error margin of three percentage points.

Fernandez waved away the trouble in a speech at the Casa Rosada government house Monday night.

"Those who want to make money at the cost of a devaluation that the people will have to pay for will have to wait for another government," she declared. History shows that devaluations have only hurt ordinary Argentines, while enabling the financial sector to make huge gains "off the hunger, misery and de-industrialization of the country," she warned.

"They're raising this idea again because an election period is approaching," she added. "Every time there's an election, on side there's the economy and on the other, the scandals. It's typical of every election."

That brief reference to scandals was her first comment yet about allegations that Baez had used his access to the presidential couple to make huge profits that he laundered by having aides fly the cash out of the country in mysterious trips on private planes.

The allegations, made by former Baez associates in televised interviews with investigative journalist Jorge Lanata, have made for sensational television in Argentina, and a judge agreed to open a formal investigation of Baez and his associates.

Lanata struck closer still to the president on Sunday night, interviewing Kirchner's former secretary, Miriam Quiroga, who described bags full of cash in the Casa Rosada. She said they were delivered to the southern province of Santa Cruz, where Baez based his business empire and the Kirchners have several homes. Quiroga also alleged that the Kirchners had vaults built to hold the cash.

Judge Julian Ercolini subpoenaed Quiroga to testify in the widening criminal investigation by prosecutor Guillermo Marijuan, and Attorney General Alejandra Gils Carbo ordered additional police protection for the prosecutor, who reported receiving at least two threats that his young daughters will be killed if he doesn't drop the probe.

Meanwhile, Fernandez faced a new challenge on her left flank: the launching Tuesday of a new political party by her former ally, union boss Hugo Moyano, who has become one of her toughest critics. Moyano plans to run lists of candidates under his "Culture, Education and Jobs" banner in October's midterm elections.

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Associated Press writer Almudena Calatrava contributed to this report.

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Nigeria sets up Islamic extremist amnesty group

LAGOS, Nigeria (AP) — Nigeria formed a panel that will create an amnesty program for Islamic extremists to try to quell a bloody guerrilla campaign of bombings and shootings that's killed hundreds of people across its north, the government said Wednesday.

The 26-person panel, created by President Goodluck Jonathan, has a 60-day deadline to come up with an offer for militants belonging to the Islamic extremist network Boko Haram and other groups now fighting against government forces and killing civilians with apparent impunity. A similar program in 2009 worked to halt the majority of attacks by militants in Nigeria's oil-rich southern delta, though those fighting in the north have in the past rejected the idea of overtures from the government.

Problems with the committee, however, immediately became apparent after it was announced. At least one member said he hadn't been consulted before his name was released, and the list of panelists included no member of any armed insurgent group.

The presidential committee, including police and military officials, as well as politicians and human rights activists, would "constructively engage key members of Boko Haram and define a comprehensive and workable framework for resolving the crisis of insecurity in the country," according to a statement issued by presidential spokesman Reuben Abati. The committee also would offer a "comprehensive victims' support program," though the statement offered no further details about it.

The presidency said it hoped disarming Islamic extremists would happen within two months' time, an ambitious goal that likely will be extremely difficult. The command-and-control structure of the main extremist network Boko Haram remains unclear. It also has sparked several splinter groups, including those wanting to increasingly target Western interests and who have connections to other al-Qaida-linked groups.

Boko Haram's leader, Abubakar Shekau, also has repeatedly said he would refuse any amnesty offer. Shekau's past demands included the release of all the sect's imprisoned members and instituting Shariah law across all of Nigeria, a multiethnic nation of more than 160 million people.

The idea of an amnesty, discussed in some corners by analysts, came to a head in March when the Sultan of Sokoto, one of the country's top Muslim leaders, called for it. While the sultan did not speak in specifics, others have suggested offering an amnesty deal in line with one previously given to militants in Nigeria's oil-rich southern delta in 2009. That deal offered cash payments and job training to fighters in return for them giving up their weapons and halting attacks on foreign oil companies.

The 2009 amnesty deal, however, did not stop all attacks in the delta, nor did it halt the rapidly growing theft of crude oil from pipelines there that has caused serious environmental damage. The militants in the nation's largely Christian south also attacked the commodity that fills the nation's coffers while typically not killing civilians. Those extremists fighting in the nation's Muslim north have shown no hesitation to kill civilians and security forces alike, nor does their fighting affect oil production.

Until Wednesday, the sultan was the highest-ranking official so far to publicly endorse such a plan for Islamic extremists. However, his name was absent from the list of amnesty panel members. Included on the list was Datti Ahmed, a Kano physician who heads a prominent Muslim group, the Supreme Council for Shariah in Nigeria. However, Ahmed last year publicly backed away from the suggestion that he work as a mediator after the idea leaked out and local newspapers began to publish stories about him.

Ahmed also is a controversial figure in the north, as he sparked a boycott of polio vaccines in 2003 in Nigeria after saying the vaccines were "corrupted and tainted by evildoers from America and their Western allies." That led to hundreds of new infections in children in Nigeria's north, where the disease is still active today, as well as a global polio outbreak that reached as far as Indonesia.

Ahmed did not immediately respond to a request for comment Wednesday.

Another named panelist, Shehu Sani of the Kaduna-based Civil Rights Congress, told The Associated Press that Nigeria's government never consulted with him before publicly announcing his name. Sani said he would only serve as a member if Islamic extremists told him through an intermediary that they would consider an amnesty deal and would serve on the panel as well.

"In the absence of that, we would simply be doing something hoping it would work," Sani said. "And hope is not a strategy."

The Islamic insurgency in Nigeria grew out of a 2009 riot led by Boko Haram members in Maiduguri that ended in a military and police crackdown that killed some 700 people. The group's leader died in police custody in an apparent execution. From 2010 on, Islamic extremists have engaged in hit-and-run shootings and suicide bombings, attacks that have killed at least 1,548 people, according to an AP count.

Westerners in Nigeria have been targeted as well, including an August 2011 suicide bombing at the United Nations headquarters in Nigeria's capital, Abuja, that killed 25 and wounded more than 100 others. A group of men who said they belong to Boko Haram claimed responsibility for the kidnapping of seven French tourists from northern Cameroon late February — a first for the group. Meanwhile, a Boko Haram splinter group known as Ansaru has claimed the recent kidnappings and killings in northern Nigeria of seven foreigners — a British citizen, a Greek, an Italian, two Lebanese and two people believed to be Syrian — all employees of a Lebanese construction company called Setraco.

Despite the deployment of more soldiers and police to northern Nigeria, the nation's weak central government has been unable to stop the killings. Meanwhile, human rights groups and local citizens blame both Boko Haram and security forces for committing violent atrocities against the local civilian population, fueling rage in the region.

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Jon Gambrell can be reached at www.twitter.com/jongambrellAP.

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