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Banco Macro shares plummet as corruption scandal roils Argentine markets

Banco Macro SA on Aug. 7 led a broad market selloff in Argentina as separate corruption scandals weighed on investor sentiment.

The Merval index on the Buenos Aires stock exchange sank 3.85% on Aug. 7 as of 5:30 pm local time. Argentine banks saw some of the sharpest declines in the selloff. Banco Macro saw its shares fall 7.09% in trading in Buenos Aires and 7.94% in New York, while Grupo Financiero Galicia SA and BBVA Banco Francés SA were also markedly lower.

The market turbulence followed news of the so-called notebook scandal in the Latin American country with alleged ties between corporations and politicians during the former Kirchnerism government, El Cronista reported.

Coincidentally, Aug. 7 also saw former Argentine Vice President Amado Boudou sentenced to 5 years and 10 months in prison for his involvement with illicit transactions with printing company Ciccone Calcográfica.

Jorge Brito, the former chairman of Banco Macro, took a leave of absence in November 2017 after accusations that he was involved in the scandal, despite denying any involvement. In June 2018, two U.S.-based law firms launched investigations into claims made by Macro investors that the bank may have issued materially misleading information regarding the case, after media reports indicated Brito was accused of being a middleman in Boudou's criminal activity.

Scandal spills over to corporations

In the more recent notebook scandal, several businessmen have been arrested after notes written by a driver for a high-ranking official during the governments of Néstor and Cristina Kirchner were found. The notebooks, which were seen by La Nación, describe a complex bribery ring where influential businessmen made payments to politicians during the years 2003 to 2015.

The CEO of natural gas provider Albanesi was one of the 13 business leaders arrested, which led the company to cancel an upcoming bond sale. The value of an outstanding bond issued in 2016, meanwhile, plunged 22%, adding pressure across local securities markets, according to El Cronista.

Moody's on Aug. 6 called the bribery investigations a credit negative for Albanesi and Electroingeniería SA, both of which employed executives now under arrest.

The rating agency also warned that the scandal could spill over to other Argentine corporations.