February 14, 2017 / 5:38 PM / a year ago

Argentina requests audit of deal with company owned by president's father

BUENOS AIRES, Feb 14 (Reuters) - Argentina Cabinet Chief Marcos Peña on Tuesday asked for an independent audit of a deal to resolve debt the country’s postal service incurred with the government when it was owned by current President Mauricio Macri’s father.

The deal, reached last year, has prompted conflict-of-interest allegations from opposition politicians after a federal prosecutor asked a court last week to block the agreement, characterizing it as a “forgiveness of debt” that benefited the president’s family.

In a press conference following a cabinet meeting, Peña said nothing improper had occurred but that the government had nonetheless asked the independent National Auditor General to look into the deal and reach a verdict on the allegations.

A spokesman for the auditor said it does not report to the executive branch and only opens investigations when requested by congress. The auditor’s leader is chosen by the largest opposition bloc in congress.

“We believe this is an extra assurance, because we are absolutely committed to transparent government,” said Peña, who also said the federal judiciary should name an independent panel of experts to recommend a solution.

The case stems back to 1997, when then-President Carlos Menem privatized the country’s postal service. Control of the service went to Grupo Macri, a conglomerate owned by real estate magnate Franco Macri, the current president’s father and one of Argentina’s richest men.

Former President Nestor Kirchner, who rose to power after the country’s financial crisis and 2002 debt default that plunged millions of Argentines into poverty, re-nationalized the postal service in 2003. The company had declared bankruptcy in 2001, and owed 296 million pesos to the Argentine government.

The debt was worth $296 million in 2001, but today is valued at $19.1 million.

Kirchner’s successor and wife, former President Cristina Fernandez, never succeeded in reaching a deal on the debt. Months after taking office in December 2015, Macri’s administration struck an agreement to allow the company to repay it over 15 years at 7 percent interest.

The prosecutor, Gabriela Boquin, says these terms were overly generous, given that more than a decade of rampant inflation and devaluation had eroded the peso’s value, resulting in a substantial loss to the state in real terms.

Peña said Mauricio Macri had not been involved in the debt deal.

His center-right “Let’s change” coalition is focused on maintaining its ground in midterm legislative elections this October to continue its market-friendly reform agenda. (Reporting by Luc Cohen; Editing by Dan Grebler)

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