BUENOS AIRES, Argentina – Just weeks after public outrage forced Argentine President Mauricio Macri to annul an executive order that forgave his father’s $4.5 billion debt to the Argentine State, he has now suspended a wife-ranging concession given to an airline company that recently purchased his wealthy family’s local subsidiary.
Recently, Macri’s government tried to remove regulations in the nation’s aviation industry and allow for more competition for the internal market. As such, he went before the National Civil Aviation Administration (ANAC) to present his plans.
The ANAC approved Macri’s proposals, clearing the way for more foreign companies, especially the so-called “budget” airlines, to operate throughout the expansive country.
The issue arose when Argentine journalists scrutinized the documents released by the aviation body; it was revealed that the Colombian airline Avianca, which operates in almost every country in the Americas (and Spain and the UK), was one of the companies given a concession.
The difference, however, was that Avianca was put at the front of the line and essentially given its right to operate without going through the time-consuming bureaucratic procedures. Furthermore, the guarantee of flying 26 important national and international routes connecting destinations in Argentina was superimposed over the all the routes that Aerolíneas Argentinas, the national airline, already carried (unlike any of the other airlines).
The other airlines that were also given concessions were made to go through these procedures, which would have ensured that Avianca would have had an advantage in establishing a presence in the Argentine market several months before anyone else.
In addition, Avianca was given a preferential base at Buenos Aires’ primary domestic airport, Jorge Newbery, at the expense of Aerolíneas Argentinas that saw their space shrink to make room for the newcomer. Carlos Martín Cobas, a former MacAir employee and current logistics head of Macri’s Secretary General Office, was the charge responsible for ordering these moves.
Once the special privileges afforded to Avianca were revealed, federal prosecutor Jorge Di Lello opened a case in which he asked that Macri, his father Franco Macri, Transport Minister Guillermo Dietrich and ANAC head Juan Pedro Irigoin, among others, were to be investigated for their roles in the “alleged irregularities” in the concession process.
The reason for the conflict-of-interest aspect and the subsequent investigation is because Avianca very recently purchased MacAir, the airline established by the Macri family. Thus, MacAir became Avian Líneas Aéreas (held by Avianca Argentina) while the controlling partners and executives all remained the same, including close Macri ally and Avianca Argentina head Carlos Colunga.
Furthermore, it is alleged that the agreement of the sale of MacAir to Avianca included a section that illegally stipulated the guaranteed future concession of the flight routes in Argentina by Macri’s government to the newly-named Avian.
The generous concessions granted to Flybondi, Argentina’s first domestic low-cost airline, also raised suspicions of conflict-of-interest issues: Richard Gluzman, the co-owner of Flybondi, was the vice-president of Pegasus, an investment and real estate company that was presided over Mario Quintana, Macri’s deputy Chief of Cabinet.
In two other companies, Enflex SA and Entertainment SA, based in Spain, Gluzman and Quintana repeated their roles of vice-president and president. Both men also appear in documents as co-founders in 2004 of another investment firm, Gustos y Aromas SA.
Flybondi’s other owner, Gastón Parisier, is the founder of business-gifts company BigBox, of which Lucas Werthein is a partner. Werthein is a high-ranking advisor on the board of the State agency Regulatory Agency of the National System of Airports (ORSNA), which regulates, controls and supervises the airports of Argentina.
Finally, another important connection to Macri was made clear in that Juan Pedro Irigoin, the head of ANAC, is the brother of Jorge Irigoin, a former manager of the Macri family’s holding group SOCMA. In its decision, ANAC approved every single route requested by Avianca and and 70 percent of Flybondi’s requests, something that was not afforded to the three other companies which received only small percentages.
Despite all the dubious circumstances, including revelations that the head-of-state spent some $1.5 million of taxpayer money to fly private jets to public events instead of the presidential plane as required by law, Macri and Dietrich denied all allegations and said there was no conflict-of-interest issues with Avianca or Flybondi.
Once more federal prosecutors and judges followed suit in opening investigations and even charging Macri and his allies with illicit association and influence peddling over the conflict-of-interest generated by the concessions, Macri sent his Chief of Cabinet Marcos Peña to hold a press conference in which Peña announced the decision to temporarily leave the planes of Avianca and Flybondi grounded.
“The President does not want there to be any doubts or suspicions in relation to the flights, and as such, we have made the decision to put a temporary halt to the flights of the two companies while allowing the others to move forward,” Peña said. The others he referred to are American Jet, Andes and Alas del Sur.
Furthermore, the national government announced that Avianca and Flybondi will be allowed to begin their operations once a conflict-of-interest law is passed. The issue for Macri detractors, however, is that this law will be drawn up and signed into law via executive decree by that same government.
The development comes just weeks after Macri, in response to the overwhelming public response and anger to his executive order that forgave his father’s $4.5 billion debt to the Argentine State, annulled the decree.
In the midst of an economy heavily slowed by a drop in industrial production, rising inflation, an increase in joblessness, a rise in poverty and growing divide between rich and poor, Macri, no stranger to controversy, forgave SOCMA’s multibillion dollar debt to the State.
In the 1990s, SOCMA, whose main industries included construction, real estate, automotive production, waste collection and other services, branched out and purchased the national mail service known as ENCoTel (and later ENCoTeSA). The company was privatized in 1997 by then-President Carlos Menem and purchased by SocMa, who then renamed it Correo Argentino. In a short time, SocMa mismanaged the company and began accruing debt as early as 1999. After mass layoffs, the company had stopped paying its tens of thousands of employees by July of 2001.
Prior to privatization, ENCoTeSA had over 20,500 employees and no public debt. By 2001, however, SocMa had cut the workforce to less than 13,000 which led to them being overworked, a situation compounded by the fact that the company eventually stopped paying its employees. The company went from being debt-free to virtual bankruptcy, which resulted in necessary monetary aid from the government.
In 2003, Néstor Kirchner assumed the presidency and terminated the 30-year concession contract with SocMa. He then nationalized the company, naming it the Official Mail Services of the Republic of Argentina but he kept Correo Argentino as its trademarked name. In its first year of functioning under State control, Correo Argentino registered a profit and has managed to stay successful since then in competition with several smaller, private companies.
When SocMa left Correo Argentino in ruins in 2001, it owed a debt of over $300 million to the national government as the peso was pegged to the dollar. SocMa, which was still worth billions, offered only to pay off a small fraction of the outstanding debt; this meant that the taxpayers would have to pay the remainder and Kirchner rejected this notion. Thus, the debt, transferred in bonds to Macri’s four children, remained unpaid.
With the peso not being pegged to the dollar since 2002, the value of the debt, when coupled with inflation and the new exchange rate, has climbed to just under $4.5 billion. Macri signed the decree that forgave this debt, but with the strong backlash, decided to cancel the plan (even though he denied allegations of wrongdoing), much like the current controversy surrounding the airline concessions.