Updated 2 months ago

Tale of ‘El Caballo’ lays bare Argentina’s culture of corruption

For a quarter century, one man ruled the Rio Parana, the mighty Mississippi of Argentina.

His name is Omar Suarez. Along the Parana, the nation’s pipeline for key exports including soybeans, corn and wheat, he is better known as El Caballo: a hard-charging horse.

Little moved down the river unless Suarez, a union boss, received tribute, authorities say. For crews and companies alike, El Caballo epitomized the culture of corruption that has held back Argentina’s economy for decades.

Today, the story of El Caballo is, in a way, playing out across the country. President Mauricio Macri is working to stamp out ingrained graft that has long thwarted foreign investment. His effort is part of a broader attempt to break with Argentina’s painful history of misguided economics, populist Peronism and international default.

The task is enormous. Since succeeding the scandal-plagued Cristina Fernandez de Kirchner in 2015, Macri has eased trade tariffs and restored Argentina’s access to capital markets. But he has struggled to deliver the quick economic revival he promised. With legislative elections looming, 2017 could be a pivotal year.

Macri has embarked on a campaign to persuade unions — powerful players for generations — to loosen their rules and surrender their fiercely guarded prerogatives. He needs labor peace to fend off a general strike, as well as routine pickets and roadblocks that impede commerce. Unionists say militancy is required amid bounding inflation, but it drives up the cost of labor and shipping and discourages investment.

With so much at stake, Suarez, 66, might seem like a footnote. But his story, laid out in court documents and interviews with people who dealt with him, underscores Macri’s challenges.

Unions like Suarez’s Somu have engaged in outright crime, authorities say. Suarez was imprisoned in September on charges of illegal association with criminal intent, coercion and fraud, and Somu was taken over by the government last year. Suarez’s lawyer, Luciano Munilla, didn’t respond to three messages left at his office seeking comment on the case.

Sebastian Planas, a tugboat operator, says El Caballo tried to shake him down in 2010 for $100,000. He summoned Planas to a 7 a.m. meeting where, with bloodshot eyes, he spoke of how his rivals once would have been “liquidated.” Planas managed to duck that demand, but by year-end, he’d taken on two Somu men to work at his ferry terminal in Buenos Aires. In 2012, he began paying $20,000 a month to the union’s charitable foundation.

El Caballo was so bold he issued threats in the presence of a Labor Ministry official, Planas says. “It’s as if a mafioso were extorting you in front of a prosecutor.”

During the Kirchner years, Suarez’s merchant-marine union amassed power. Prosecutors say the union collected millions in return for moving goods down the Parana, delaying shipments and elevating shipping rates to as much as triple the global average.

“For all intents and purposes, it was a cartel,” says Jorge Metz, the government undersecretary who oversees ports and rivers.

Suarez ran the union for 24 years. Along the way, he amassed properties that included a seaside estate with a ship converted into a guest house. He said it was a vacation destination for union members.

Suarez routinely threatened businessmen and forced some international shipping companies to abandon Argentina, according to court documents.

“There are companies that have told me that El Caballo threatened them to the extent that they had to leave the ports,” says Gladys Gonzalez, a lawmaker participating in the court-ordered intervention in Suarez’s union.

Among the many crimes of which Suarez is accused in a 120-page complaint is the use of “ghost” crews. Foreign companies that shipped natural gas were forced to use their own sailors while simultaneously paying union members.

The pretext was that Suarez’s men couldn’t speak English and the money would go for lessons, prosecutors said.

In fact, the money went to a union foundation that redirected it to San Jorge Maritima, a company of which Suarez was a director, according to the complaint. The companies passed the costs on to the state-run energy company, Enarsa, and eventually to consumers.

Most documentation was destroyed before a judge ordered the takeover of the union’s affairs. But investigators found that in just two years, two boats delivering natural gas paid an additional $5 million to San Jorge Maritima for the non-existent English classes.

Investigators have uncovered at least nine foreign bank accounts in Suarez’s name: four in Switzerland, as well as in Montevideo, Asuncion, Caracas and Panama. That may represent only a fraction of the take.

The profit came from a chokehold on the Parana, the main artery of Argentina’s economy since the 16th century. Today, roughly 80 percent of the soybeans, corn and wheat that Argentina exports travels via Rosario, the river’s largest port.

Given the union’s hold, only about 30 merchant-marine vessels ply the 3,500-kilometer river network connecting Argentina with Brazil, Paraguay and Uruguay. In Argentina, transporting goods by ship adds roughly 30 percent to the cost of those products, compared with a global average of 9 percent, says Metz, the ports secretary. Macri is pushing for regulations that could save $500 million a year, Metz says.

The court-ordered takeover of Somu in February 2016 was meant to install caretakers to normalize its activities and allow new leaders to emerge. Elections to replace Suarez may not happen until April 2018, La Nacion reported last month, citing Labor Ministry sources it didn’t name.

The president is engaging with other unions directly. A Jan. 31 accord persuaded oil workers to concede extra pay they receive while traveling to and from work. The government is in talks with unions in the auto, metalworking and agricultural-machinery industries as well. Transport Minister Guillermo Dietrich is negotiating with unions in the trucking industry, the most powerful of all, with the ability to make the country grind to a halt if they strike.
Overshadowing it all is the lesson of El Caballo.

“We want to encourage free supply,” Metz says. “What does this mean? That there are no oligopolies or cartels or mafias that regulate the system.”

As for Planas, the tugboat operator, he canceled his monthly protection payments as soon as the government took over the union and fired the Somu men at his ferry terminal.