TRAVEL NOTE: ARGENTINA'S UNDERDEVELOPED NORTHWEST

C O N F I D E N T I A L SECTION 01 OF 04 BUENOS AIRES 001984 SIPDIS SIPDIS STATE FOR WHA TOM SHANNON, JOHN MAISTO, AND CHARLES SHAPIRO NSC FOR DAN FISK TREASURY FOR DAS NANCY LEE USCINCSO FOR POLAD E.O. 12958: DECL: 09/01/2016 TAGS: PGOV PHUM PREL AR SUBJECT: TRAVEL NOTE: ARGENTINA'S UNDERDEVELOPED NORTHWEST REF: BUENOS AIRES 01930 Classified By: CDA, a.i., Michael Matera, Reasons 1.4(b) and (d) ¶1. (SBU) SUMMARY: Poloff met with leading political, economic and academic leaders August 14-19 in the politically and economically underdeveloped provinces of Catamarca and La Rioja. Poloff's meetings in Catamarca August 14-15 highlighted the province's economic potential, particularly in mining, agriculture and tourism. Catamarcan Vice Governor Colombo lamented the province's dependence on the national government. Catamarcan political and economic leaders spoke about the need to increase ties to Chile, as a cheaper way to get products to market and avoid Buenos Aires' control. Poloff's meetings August 16-19 with leading figures in La Rioja province, including Governor Angel Maza, revealed the continued warm feelings towards the U.S. in the province, a legacy of former President, and one-time La Rioja Governor, Carlos Menem. Governor Maza highlighted his proposed constitutional reform that will secure roughly a third of the seats in the unicameral provincial legislature for opposition parties and a third of the seats for women, in order to diversify La Rioja's political environment. END SUMMARY. -------------- Catamarca: Unfulfilled Potential -------------- ¶2. (SBU) Poloff's meetings in Catamarca August 14-15 highlighted the province's economic potential, particularly in mining, agriculture and tourism. However, the province suffers from a lack of investment, which is not helped by the province's unfriendly attitude towards foreign investors (See reftel). Vice Governor Hernan Colombo noted to Poloff that Catamarca has rich mining reserves, particularly in gold, aluminum and copper. Catamarca is also a major producer of olives and olive oil. Catamarca has the country's most important archeological sites, but Catamarca is little known as a tourist destination and lacks a good tourist infrastructure. The Vice Governor lamented the lack of foreign investment in Catamarca, yet at the same time defended the province's efforts to confiscate a U.S. citizen's property (See reftel.) ¶3. (SBU) Vice Governor Colombo noted the province's dependence on the national government. "The power of the central government over provinces like Catamarca is very strong." Catamarcan Undersecretary for Institutional Affairs Luis Silva told Poloff that Argentina's co-participation revenue sharing system unfairly prejudices the outlying provinces, particularly opposition-run provinces. He said that the GOA controls the majority of the spending and dispenses it in a discretionary fashion, with a bias towards President Kirchner's closest allies. (Note: Catamarca has been governed since 1991 by a Radical Civic Union (UCR)-led coalition called the Frente Civico. Vice Governor Colombo and Governor Brizuela del Moral are part of the Radicales K branch of the UCR that has aligned itself with President Kirchner. Governor Brizuela del Moral cooperated with Kirchner in the October 2005 legislative elections, but there are rumors that Kirchner is thinking of supporting a Peronist Party (PJ) candidate for Governor of Catamarca in 2007, which would complicate Brizuela del Moral's reelection efforts. It is worth noting that Brizuela del Moral is the only Radicales K Governor to have skipped both of the recent meetings of the group in San Vicente and Bariloche, sending a lower-level representative in his place. End Note.) ¶4. (SBU) Catamarcan Lower House representatives and Senators complained about U.S. agricultural policies, but also pleaded for more U.S. investments. Poloff explained that the U.S. strongly supports free trade deals with Latin America and that agricultural policy is an issue being dealt with at the global level, and one that also involves other major economic players, such as the EU and Japan. Catamarcan business leaders emphasized more the negative effects of the GOA's export tax policy on provincial agricultural revenues than BUENOS AIR 00001984 002 OF 004 U.S. agricultural subsidy policies. Julio Luis Salerno, rector of the National University of Catamarca, highlighted the University's archeological program, which is rated as the top archeological program in Argentina. ¶5. (SBU) All of the political and economic leaders that Poloff met with in Catamarca spoke about the need for the province to develop better ties with Chile. Business leaders complained that the expense of shipping their products through Buenos Aires was inordinate compared to what it would cost to ship through northern Chilean ports. Catamarca has a pass that is free of snow year-round, unlike the current principal commerce route between the two countries in Mendoza province. Business leaders blamed the GOA for keeping the province dependent on Buenos Aires and not investing in good roads to connect Catamarca with Chile. -------------- La Rioja: The Afterglow of Carnal Relations -------------- ¶6. (C) Poloff's meetings August 16-19 with leading figures in La Rioja province, including Governor Angel Maza, revealed the continued warm feelings towards the U.S. in the province, a legacy of former President, and one-time La Rioja Governor, Carlos Menem. Governor Maza noted the provinces long history of good relations with the U.S. Maza urged incoming Ambassador Wayne to visit La Rioja, noting that he offered to host former Ambassador Gutierrez in La Rioja on two occasions, who declined the offer. "Without contact and signs of U.S. friendship, populism and anti-Americanism can arise." Poloff noted to Governor Maza that this was one of the reasons for Poloff's trip to La Rioja. ¶7. (SBU) Governor Maza, echoing Catamarcan Vice Governor Colombo's comments, said that the GOA has a great deal of power over small provinces like La Rioja. "We did not support President Kirchner when he ran for President, but now we have no choice. Moreover, he was the Peronist candidate that won and we are Peronists." (Note: Governor Maza was a long-time associate of Carlos Menem, but has been aligned with President Kirchner for the past year and competed against Carlos Menem in October 2005 in National Senate elections. Maza won the election, but passed his Senate seat to his sister Ada Maza. Menem came in second place, and under Argentine electoral law, assumed the minority National Senate seat for La Rioja. End Note.) Despite his competition with Menem over the past year, Governor Maza noted no personal ill will towards Menem. In fact, a La Rioja official that works closely with the Governor told Poloff that he had never heard Governor Maza speak ill of Menem. "In one way or another, we are all children of Carlos Menem here." ¶8. (SBU) Governor Maza highlighted his proposed constitutional reform that will secure roughly a third of the seats in the unicameral provincial legislature for opposition parties and a third of the seats for women, in order to diversify La Rioja's political environment. (Note: Currently the opposition holds no seats in the provincial legislature and there is only one woman out of the 23 provincial legislators. End Note.) Although Governor Maza noted that some PJ legislators opposed the reform out of fear of their jobs, he felt it would pass in the end. Governor Maza also said that he did not plan to run for a fourth term in 2007. (Comment: Everyone Poloff spoke to in La Rioja thought Maza would in fact run for reelection, and many noted that Maza has said before that he would not seek reelection, but in the end did run. End Comment.) ¶9. (SBU) La Rioja Minister of Government and Human Rights Alberto Paredes Urquiza spoke at length with Poloff about the proposed reform of the provincial constitution. Parades Urquiza said that one of the motivations for the reform was to create an opposition in the province so that La Rioja Peronism remained unified. "Without an opposition, Peronists fight among themselves." When asked by Poloff what would prevent the PJ from splitting and wining both the majority BUENOS AIR 00001984 003 OF 004 and proposed minority seats in the provincial legislature, much as the PJ did on a national level in the last election, Parades Urquiza said there was a proposal to require at least four years of participation in a particular party in order to compete in the elections. He argued this would prevent the PJ from splitting a few months before the election and the resulting new "parties" wining the seats designated for the opposition. ¶10. (SBU) Poloff had a positive meeting with Dr. Enrique Roldan of the National University of La Rioja, and toured the modern facilities of the university. Dr. Roldan noted with pride the visit of U.S. Ambassador Todman to the university in the early 1990s and highlighted the many cooperative agreements they have with U.S. academic institutions. He professed a great admiration for the U.S. and the U.S. academic system. ¶11. (SBU) Poloff toured the modern Promas olive farm and olive oil production facilities. Company managing director Hector Olivares told Poloff that most of their production was destined for export, including the United States. One interlocutor expressed concern to Poloff about the new import tariffs the GOA had just imposed on imported olive oil. He noted that the domestic market for olive oil is actually quite small, and he feared that the import tariffs would cause a backlash from trading partners that would affect their exports. (Note: Minister of the Economy Felisa Miceli visited La Rioja while Poloff was there to announce the new import tariffs designed to protect the domestic olive industry. End Note.) ¶12. (SBU) Poloff also met with leaders of La Rioja's UCR, who would be the principal beneficiaries of the new constitutional reform. The UCR expressed optimism about their chances to again play a role in provincial politics through the constitutional reform. They said that one of the motivations for the reform was President Kirchner's pressure on Governor Maza to get in line with Kirchner's vision for a "concertacion" with the UCR. La Rioja once had a strong UCR that largely disappeared after the Ley de Lemas was passed in La Rioja in 1987. (Note: The Ley de Lemas is an electoral system that awards seats to the party that wins the most votes, summing all of the party's candidates. This system was utilized by PJ Governors in many Argentine provinces to drive out the opposition. It has been repealed in most provinces and is only currently in force in Kirchner's home province of Santa Cruz, La Rioja, and Formosa. End Note.) UCR leaders praised Governor Maza for the constitutional reform, but said he needed to follow it up with a repeal of the Ley de Lemas in order to make the political reform effective. They asked that the U.S. Embassy continue to remind the La Rioja government of this issue. ¶13. (SBU) Poloff met with Jorge Yoma's dissident Peronist Party, Frente Con Todos, which has largely disappeared since Yoma left the province to become Argentina's Ambassador to Mexico. Party leaders expressed hope that Yoma would return and compete for Governor in 2007. They said that Yoma accepted the ambassadorial appointment instead of running for reelection for his National Senate seat because President Kirchner requested that he do so and Yoma did not want to see Menem win. (Note: Yoma's conflict with Carlos Menem dates back many years and has become personal. End Note.) ¶14. (SBU) Minister of Industry, Commerce and Employment Jorge Bengolea pointed out that La Rioja grew at twice the national rate in the 1990s and still enjoys a lower unemployment rate (7.4 percent) than the country as a whole (over 10 percent). La Rioja business leaders noted La Rioja's strong farming sector, but complained that a lack of credit and water were serious problems. Like their counterparts in Catamarca, they expressed a desire to increase their ties with Chile. La Rioja also has good passes to Chile, but lacks the infrastructure and GOA support to adequately make use of the Chilean trade routes. Pollsters from the local research firm Tendencias Argentinas said that half of the La Rioja population either works for BUENOS AIR 00001984 004 OF 004 the government or depends on social assistance. "La Rioja has a culture of dependence on the state." -------------- Comment -------------- ¶15. (C) Catamarca seems to be a province with great potential that has a business community that wants to increase foreign investment and trade with the outside world. Unfortunately, provincial politics remains mired in the past, which includes frequent appeals to populist sentiment. It is difficult to expect foreign investors to line up to bring badly needed investment to the province when provincial leaders demonstrate a lack of respect for private property rights. ¶16. (C) La Rioja in many ways is bucking national trends. La Rioja has a long way to go in terms of political and economic development, but the constitutional reform is a step in the right direction. In a time when many Argentine Governors are reforming their provincial charters in order to run for reelection, La Rioja is initiating a reform to allow more space for the political opposition and women. Also, at a time when polls show Argentines have a very low opinion of the U.S. and the GOA at times resorts to anti-U.S. rhetoric, La Rioja's political and economic leaders still profess an admiration for the U.S. and a desire for stronger U.S. ties. This is a sentiment that should continue to be fostered. END COMMENT. MATERA