(Bloomberg) -- Argentine President Cristina Fernandez de Kirchner’s last 10 months in office were thrown into turmoil Friday when a prosecutor formally accused her of trying to cover up Iranian involvement in the 1994 bombing of a Jewish community center that killed 85 people.
The accusation could lead to a trial and calls for the impeachment of the president, who under Argentine law has immunity from criminal prosecution while in office. Fernandez has denied the allegations, while her cabinet chief has called the evidence “flimsy.”



The charges came one month after Alberto Nisman, the former prosecutor in the case, was found dead with a bullet to the head. Nisman had been due to provide evidence for the accusations to lawmakers the following day. Investigations into the two cases will add to pressure on Fernandez as she tries to revive growth in South America’s second-largest economy and repair relations with investors after last year’s bond default.
“This could be a seismic change for Argentina’s political environment,” said Carl Meacham, Americas program director at the Center for Strategic and International Studies in Washington. “You have an economic crisis on the horizon and you marry that with a political crisis, it could be a disaster for Argentina.”

Trade Ties

In a document filed to a federal court, prosecutor Gerardo Pollicita said Fernandez, Foreign Minister Hector Timerman, lawmaker Andres Larroque and other government supporters tried to remove international search warrants out on Iranian officials, in exchange for trade preferences on grains and oil. The two countries signed a memorandum of understanding in 2013 to set up a joint probe into the bombing, enabling the Iranian officials to give evidence in Iran.
Last year, Argentina defaulted on its foreign law debt for the second time since 2001 after Fernandez refused to comply with a U.S. court ruling to settle with holdout creditors. The government has limited imports to safeguard foreign reserves.
The country’s $3.25 billion of local law bonds rose 1.3 cents on Friday to a record 102.96 cents on the dollar. Bonds and stocks have rallied this year on speculation the next government will end currency controls, settle disputes with investors and tackle inflation which is above 20 percent. Fernandez and her late husband have ruled Argentina since 2003.
“You know what? The hate, the insults, the slander, we leave it to them,” Fernandez, 61, wrote on her Facebook page late Friday, in her first public comments since the charges.

Travel Plans

Fernandez traveled to the southern city of Calafate on Friday and will inaugurate a theater and hospital this weekend. She may remain in Patagonia until her birthday on Feb. 19, avoiding Buenos Aires during a planned march the day before in memory of Nisman, La Nacion reported.
The accusations form part of a right-wing strategy to wear down the government, Defense Minister Agustin Rossi wrote on Twitter.
“They’re wrong if they think that with these charges they will weaken our president,” Rossi wrote.
Cabinet Chief Jorge Capitanich early Friday said the accusations and the march to commemorate the death of the former prosecutor Nisman were part of a “judicial coup” against the president.
“The Argentine people should know that we’re talking about a vulgar lie, of an enormous media operation, of a strategy of political destabilization and the biggest judicial coup d’etat in the history of Argentina to cover up for the real perpetrators of the crime,” Capitanich said Friday.
Chief of Staff Anibal Fernandez told reporters the march is being organized by “drug traffickers,” “anti-Semites,” and prosecutors who tried to obstruct the investigation into the bombing.

Drag On

Fernandez’s Victory Front and allies hold majorities in both houses of Congress, making her impeachment unlikely before she leaves office in December.
The case is likely to drag on into next year, said Martin Galli Basualdo, a lawyer at Buenos Aires-based Cassagne Abogados. It’s not clear if she can be found guilty and sentenced while benefiting from presidential immunity, he said.
“This has never happened, it’s unchartered territory,” Galli Basualdo said by phone from Buenos Aires. To maintain her immunity after December, she will need to put herself “forward in the elections as a governor, senator or lawmaker.”
The ongoing scandal boosts opposition candidate and Buenos Aires Mayor Mauricio Macri in the October presidential elections, Eurasia Group analyst Daniel Kerner said in an e-mailed report Friday. Still, Buenos Aires province Governor Daniel Scioli, who is closest to Fernandez, remains the most likely to win a close vote, he said.

Different Theories

Nisman was appointed by Fernandez’s late husband and predecessor, Nestor Kirchner, in 2004 to investigate the bombing of the AMIA Jewish community center.
Public Prosecutor Alejandra Gils Carbo today named three prosecutors and a coordinator to replace him in the main investigation into the bombing. If those prosecutors decide Iran wasn’t involved and instead pursue other theories, such as that Syria and Hezbollah were behind the attack, the case against Fernandez would probably be dropped, said Galli Basualdo.
Charges of alleged graft against Vice President Amado Boudou haven’t resulted in his removal from office and indicate that Fernandez is likely to reach the end of her term, according to Eurasia Group’s Daniel Kerner. Boudou says he’s innocent.

Not Easy

“Proving that something illegal occurred won’t be easy,” Kerner wrote in an e-mailed report today. “This probably won’t have any short term implications in terms of” Fernandez’s position.
The attack on the Jewish center was the worst in Argentina’s history. It eclipsed a similar, unsolved bombing two years earlier of Israel’s embassy in Buenos Aires, which killed 29. Coming less than a decade after democracy was restored to Argentina following a dictatorship that used extra-judicial killings and “disappearances” on as many as 30,000 of its own citizens, the attack traumatized the nation.
While then-President Carlos Menem called the perpetrators “beasts,” neither his government nor any in the past 21 years has secured a conviction in the case.
Cut off from global credit markets, Fernandez traveled to China this month to negotiate a series of investment projects. She signed 15 agreements on issues ranging from nuclear energy to agriculture. Still, the trip was overshadowed by a tweet in which the president mimicked Chinese accents.

Graft Cases

Her administration is also embroiled in multiple court cases. Her luxury hotel business in southern Argentina is being investigated for alleged tax evasion, money laundering and embezzlement. Vice President Boudou is accused of bribery and influence peddling by an Argentine court and is the defendant in a total of 10 cases in federal courts.
The political scandals will leave Fernandez with little room to debate the economic changes needed to revive growth, Michael Shifter, president of the Inter-American Dialogue, said by phone from Washington.
“This is going to completely consume her,” Shifter said. “It’s very hard to imagine that she’s going to be able to focus on any kind of serious policy agenda.”
To contact the reporters on this story: Charlie Devereux in Buenos Aires at cdevereux3@bloomberg.net; Eric Martin in Mexico City at emartin21@bloomberg.net
To contact the editors responsible for this story: Philip Sanders at psanders@bloomberg.netWilliam Selway