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.


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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.

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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."

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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