Nestor Kirchner and Hugo Chavez Used Foreign Exchange Scam to Steal Millions

A corrupt bargain between Argentina and Venezuela netted millions in illicit profits, which exploited Venezuela's chaotic government-imposed foreign currency exchange regimen.

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Hugo Chavez and Nestor Kirchner collaborated on a shameful and lucrative scheme of inside self-dealing (PanAm Post).

When regimes implement foreign exchange controls there are three common denominators that are repeated in each experience. They arrive after periods of fiscal deficit and uncontrolled expansion of the money supply; they fail; and finally they serve to enrich high-ranking officials. The scam unfolds like clockwork. The recent statements of the repentant Kirchner-era official, Claudio Uberti, uncovered how Hugo Chávez and Nestor Kirchner made a fortune by exploiting the distortions in the exchange market that they themselves created.

Last Friday, Uberti, who presented himself as “cooperating witness” in search of a reduced sentence, provided details to Judge Claudio Bonadio regarding a fraudulent operation that allowed the former presidents to pocket USD $50 million each. The financial malfeasance, which will now have is day in court, is likely merely one of many, and surely is not the only one.

During 2005 and 2006, Argentina and Venezuela had several agreements involving Boden 2012 bonds. On the Kirchner side, there was an intention to increase currency reserves after canceling debt with the International Monetary Fund. Chávez, who in those days was using petrodollars to buy influence throughout the region, appeared as a benevolent millionaire, willing to collaborate with the needs of friendly governments. On the other hand, he allegedly asked for help on issues such as the entry of Venezuela into Mercosur. However, the agreements and operations had other interesting points for both leaders.

The operation that Uberti revealed, which presided over as a “parallel ambassador” to Venezuela, worked in this way:

The Chavez authorities did not keep the Argentine bonds, but automatically sold them on the international market. As a result of these liquidations, Chávez made large dollar-denominated profits. Then, that money was sold in the Venezuelan parallel market at a value higher than the official exchange rate regulated by Chavismo. With those bolivars, Chávez’s men bought the “cheap” dollars from the restricted official market. According to Uberti, a USD $500 million operation netted a profit of USD $100 million. Néstor Kirchner and Hugo Chávez then shared the spoils with impunity.

The former Kirchner official also stated that he once went to the Jorge Newbery Airport, in Buenos Aires, to pick up a bag of money that had arrived via a private flight from Caracas, which he handed over to Daniel Muñoz at Cristina Kirchner apartment in the Barrio Norte sector of Buenos Aires, which was recently raided by the courts.

Claudio Uberti, who for now is free, served between 2003 and 2007 in the Road Concession Control Body, in the Federal Planning Ministry of Julio De Vido, who is currently imprisoned for corruption. He had to resign after a scandal involving the luggage of the Venezuelan businessman Antonini Wilson, who was searched by the authorities while seeking to enter the country with USD $800,000 illegally, and in a plane where Uberti himself was traveling. It is believed that on that occasion there was a communication failure, which left the flight in question at the mercy of security agents who were not part of the illegal network set up by the government.

Both the Hugo Chavez and Nestor/Cristina Kirchner regimes have been rife with corruption, bribery, and fraud. While Chavez’s successor, Nicolas Maduro, has carefully protected the legacy of his mentor, Kirchner’s successor, Mauricio Macri, has aggressively sought to weed out corrupt officials from the former administration.

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