AMBASSADOR WAYNE VISITS ARGENTINA'S AGROINDUSTRIAL CAPITAL

UNCLAS BUENOS AIRES 002667 SIPDIS SECSTATE FOR THOMAS PIERCE, WHA FOR WHA/BSC AND WHA/EPSC USDOC FOR 4322/ITA/MAC/OLAC/PEACHER USDOC FOR 3134/USFCS/OIO/WH/MKESHISHIAN USDOC FOR 4320/ITA/MAC/WH/DAS/WMBASTIAN SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECONETRDBESPAR SUBJECT: AMBASSADOR WAYNE VISITS ARGENTINA'S AGROINDUSTRIAL CAPITAL OF ROSARIO, SANTA FE SENSITIVE BUT UNCLASSIFIED (NOT FOR INTERNET DISTRIBUTION) ¶1. (U) SUMMARY: AMBASSADOR WAYNE TRAVELED TO ARGENTINA'S AGROINDUSTRIAL CAPITAL OF ROSARIO FOR HIS FIRST TRIP OUTSIDE OF THE CAPITAL. ACCOMPANIED BY THE COMMERCIAL ECONOMIC AND AGRICULTURAL COUNSELORS, THE INFORMATION OFFICER AND THE SENIOR FSN COMMERCIAL SPECIALIST, THE AMBASSADOR MET WITH THE MAYOR, VISITED GENERAL MOTORS AND CARGILL, MET WITH BUSINESS AND CIVIC LEADERS, TOURED THE BINATIONAL CENTER AND DONATED BOOKS AND SCHOOL SUPPLIES TO A PUBLIC SCHOOL. MOST ROSARINOS EXPRESSED SURPRISE AND SATISFACTION THAT THE AMBASSADOR HAD TRAVELED TO THEIR CITY SO SOON AFTER ARRIVING AND ENCOURAGED HIM TO DO SO REGULARLY AND OFTEN DURING HIS TENURE. PRESS COVERAGE WAS EXTENSIVE AND POSITIVE. END SUMMARY. GENERAL MOTORS ¶2. (U) THE PROGRAM BEGAN WITH A VISIT TO THE GENERAL MOTORS (GM) COMPLEX ON THE OUTSKIRTS OF ROSARIO. THE CEO, MR. FELIPE ROVERA, BRIEFED THE AMBASSADOR ON GM'S OPERATIONS IN BRAZIL AND THE SOUTHERN CONE. THE AMBASSADOR THEN TOURED THE PRODUCTION FACILITIES. GM HAS A STATE-OF-THE-ART INTEGRATED PRODUCTION COMPLEX WITH A CAPACITY OF 100,000 UNITS PER YEAR THAT CURRENTLY EMPLOYS 2,000 WORKERS. IN SEPTEMBER 2006, GM ADDED A SECOND SHIFT AND HIRED 400 NEW EMPLOYEES IN ORDER TO RAMP UP PRODUCTION BY 40 PERCENT. GM ARGENTINA IS THE SECOND LARGEST AUTO MANUFACTURER AND SELLER IN ARGENTINA WITH A MARKET SHARE OF 16.5 PERCENT. EXPORTS REPRESENT 60 PERCENT OF GM'S TOTAL PRODUCTION AND ARE DESTINED TO THE BRAZILIAN, MEXICAN, CHILEAN, PARAGUAYAN AND URUGUAYAN MARKETS. ¶3. (U) GM'S COMMITMENT TO CORPORATE SOCIAL RESPONSIBITY WAS EVIDENT FROM THE NEWLY ESTABLISHED VOCATIONAL TRAINING AND ENTREPRENEURSHIP INSTITUTE IT HAD ESTABLISHED AT THE COMPLEX IN COLLABORATION WITH JUNIOR ACHIEVEMENT, AS WELL AS ITS PROGRESS IN INCREASING OPPORTUNITIES FOR WOMEN TO RISE INTO THE SUPERVISORY AND MANAGEMENT RANKS OF THE COMPANY. THE AMBASSADOR EXPRESSED APPRECIATION FOR THE IMPORTANT ROLE GM PLAYS IN THE ECONOMIC AND SOCIAL DEVELOPMENT OF ROSARIO AND ARGENTINA. ¶4. (SBU) GENERAL MOTORS EXPRESSED SATISFACTION WITH ARGENTINA'S ECONOMIC GROWTH, THE DRAMATIC EXPANSION OF ITS DOMESTIC CAR MARKET AND THE QUALITY OF ITS WORKERS. MR. ROVERA SAID THAT THE GOA CLEARLY PLACED A HIGH PRIORITY ON THE FUTURE GROWTH AND DEVELOPMENT OF THE SECTOR AND DESCRIBED GM'S STRATEGY TO TAKE ADVANTAGE OF RECENTLY EXTENDED ARGENTINA-BRAZIL AUTO SECTOR ACCORDS. AS A RESULT, GM IS CONSIDERING A VERY SUBSTANTIAL NEW INVESTMENT ON THE ORDER OF USD 350 MILLION IN ARGENTINA IN 2007 AND WILL INITIATE TALKS WITH THE GOA TOWARD THAT END BY THE MIDDLE OF JANUARY 2007. THIS NEW PROJECT WILL INCLUDE THE DEVELOPMENT OF SUPPLIERS IN ARGENTINA THROUGH JOINT VENTURES MODELED AFTER THE COMPANY'S COMPLEX IN GRAVATAI, RIO GRANDE DO SUL IN SOUTHERN BAZIL. ¶5. (SBU) GENERAL MOTORS COMMENTED ON A NUMBER OF CONCERNS, INCLUDING ACCESS TO ADEQUATE ENERGY SOURCES FOR THEIR OPERATIONS, INFORMAL PRICE CONTROLS, RIGID LABOR LAWS AND THE APPARENT INFLUENCE THAT VOLKSWAGEN AND PEUGEOT HAVE IN THE GOA. THE ENERGY SITUATION IS THE FIRM'S BIGGEST CONCERN. GM DOES NOT EXPECT ANY PROBLEMS WITH ENERGY SUPPLIES IN 2007 AND HAS INSTITUTED MEASURES TO CONSERVE ENERGY. REGARDING "INFORMAL" AUTO SECTOR PRICE CONTROLS THAT HAVE BEEN ESTABLISHED BY THE SECRETARY OF INTERNAL COMMERCE, GM SAID THAT THE GOVERNMENT HAS SHOWN SENSITIVITY AND FLEXIBILITY IN ITS DISCUSSIONS WITH THE AUTOMOTIVE MANUFACTURERS RECOGNIZING THE LEGITIMACY OF PROPOSED PRICE INCREASES IN THE FIVE-SEVEN PERCENT RANGE IN 2007 TO COMPENSATE FOR SUPPLIER AND OTHER COST INCREASES. THE FIRM IS MORE CONCERNED ABOUT ARGENTINE SUPPLIERS AND A GROWING SENTIMENT WITHIN THE ARGENTINE PARTS MANUFACTURERS ASSOCIATION (AFAC) THAT ITS MEMBERS SHOULD PUSH FOR PRICE INCREASES AND WORK WITH THE GOA TO EMPHASIZE THE IMPORTANCE OF SOURCING LOCALLY. FUNDACION LIBERTAD ¶6. (U) THE LIBERAL FREE MARKET THINK TANK FUNDACISN LIBERTAD (FL) HOSTED A LUNCHEON FOR THE AMBASSADOR DURING WHICH HE HAD AN EXCELLENT OPPORTUNITY TO GET TO KNOW THE LEADING CIVIC ORGANIZATIONS AND NGOS IN ROSARIO, INCLUDING CARITAS (CATHOLIC CHURCH) AND JUNIOR ACHIEVEMENT, AS WELL AS NUMEROUS SOCIAL SERVICE, CULTURAL, EDUCATIONAL AND PHILANTHROPIC ORGANIZATIONS. ATTENDEES DESCRIBED ROSARIO AS A VITAL AND RAPIDLY GROWING CITY, WITH ITS ECONOMY LIFTED BY FOUR YEARS OF STRONG AGRICULTURAL SECTOR GROWTH. THEY EXPLAINED HOW ROSARIO'S CIVIC AND PHILANTHROPIC ORGANIZATIONS HAVE CONTRIBUTED TO THE DYNAMIC DEVELOPMENT AND SOCIAL COHESION OF THEIR COMMUNITY, EVEN THOUGH, ABSENT GOA TAX INCENTIVES TO ENCOURAGE CHARITABLE CONTRIBUTIONS, THEIR FUNDRAISING WORK REMAINS CHALLENGING. MOST PARTICIPANTS EXPRESSED SATISFACTION THAT THE AMBASSADOR HAD COME TO ROSARIO SO SOON AFTER ARRIVING AND ENCOURAGED HIM TO RETURN REGULARLY AND OFTEN. MAYOR LIFSCHITZ 7.(U) AMBASSADOR WAYNE ALSO MET WITH ROSARIO MAYOR MIGUEL LIFSCHITZ, A MEMBER OF THE SOCIALIST PARTY WHO HAS AN EXCELLENT REPUTATION AND WORKING RELATIONSHIP WITH BUSINESS AND CIVIC LEADERS. THE MAYOR MENTIONED HE WILL BE LEADING A DELEGATION OF ROSARIO BUSINESS, CIVIC AND EDUCATIONAL LEADERS TO CALIFORNIA IN FEBRUARY TO MEET STATE OFFICIALS, COMPANIES AND UNIVERSITIES TO ENCOURAGE CLOSER TIES AT ALL LEVELS. HIS AGENDA WILL INCLUDE MEETINGS WITH STATE SENATORS IN SACRAMENTO, THE MAYORS OF SAN FRANCISCO AND LOS ANGELES, AND A PRESENTATION ON ROSARIO AT THE GREATER LOS ANGELES CHAMBER OF COMMERCE THAT IS BEING ORGANIZED BY A RECENT PAS-SPONSORED U.S. SPEAKER, CARLOS VALDERRAMA. THE MAYOR ALSO MENTIONED THAT HE HAD BEEN INVITED TO SPEAK AT A CONFERENCE IN CALIFORNIA ABOUT THE SUCCESS HIS GOVERNMNT HAS HAD IN REDUCING THE LEVELS OF SMOKING IN PUBLIC. BOLSA DE COMERCIO 8.(SBU) ONE OF THE MOST SUBSTANTIVE MEETINGS WAS WITH THE BOARD OF DIRECTORS OF THE BOLSA DE COMERCIO DE ROSARIO (BCR - STOCK EXCHANGE AND BOARD OF TRADE). IT IS A 122 YEAR OLD INSTITUTION THAT HAS 1,000 MEMBERS REPRESENTING ALL SECTORS OF THE ECONOMY. THE BOARD MEMBERS INDICATED THAT THEY WERE PROFITABLE AND CONTINUING TO INVEST IN MODERNIZATION AND EXPANSION PROJECTS DESPITE HIGH TAXES LEVIED ON AGRICULTURAL EXPORTS. THE GRAIN MARKET OPERATED BY THE BCR IS THE MOST IMPORTANT IN ARGENTINA AND OVER 60 PERCENT OF CROPS (SOY BEANS, WHEAT, ETC.),OR 40 MILLION TONS, ARE TRADED THERE ANNUALLY. THE BOARD MEMBERS RAISED A WIDE RANGE OF SUBSTANTIVE BILATERAL TRADE ISSUES, INCLUDING IPR, GMOS, AGRICULTURAL SUBSIDIES, ARGENTINA'S FOREIGN AND TRADE POLICIES, AND PLANS FOR THE ARGENTINE AND U.S. SOYBEAN PRODUCERS TO WORK TOGETHER TO INCREASE DEMAND FOR SOYBEANS IN INDIA. SUBSEQUENTLY, THE BCR OFFERED A COCKTAIL RECEPTION FOR THE AMBASSADOR DURING WHICH HE WAS ABLE TO MEET WITH TOP BUSINESS, POLITICAL AND MEDIA REPRESENTATIVES FROM THE REGION. CARGILL ¶9. (SBU) AMBASSADOR WAYNE CONCLUDED HIS VISIT TO ROSARIO WITH A PRESENTATION AND TOUR OF CARGILL'S RAPIDLY EXPANDING AND WORLD CLASS USD 300 MILLION AGRICULTURAL EXPORT PROCESSING FACILITIES AND PORTS IN VILLA GOBERNADOR GALVEZ. THE COMPLEX IS OPERATING BUT STILL UNDER CONSTRUCTION INCLUDES CRUSHING PLANTS FOR GRAINS AND OILSEEDS, A MALT PROCESSING PLANT, AND AN ADDITIONAL OILSEEDS PROCESSING FACILITY WHICH WHEN COMPLETED IN APRIL 2007, WILL HAVE THE CRUSHING CAPACITY OF 13,200 TONS PER DAY (CLOSE TO 4.4 MILLION TONS OF SOYBEANS PER YEAR) AND BE THE WORLD'S LARGEST AND MOST MODERN. CARGILL HAS OPERATED IN ARGENTINA SINCE 1947 AND HAS 3,800 EMPLOYEES, MOST OF WHOM WORK IN ARGENTINA'S PRIME AGRICULTURAL REGION, WHICH LIES WITHIN A 300 KILOMETER RADIUS OF ROSARIO. ITS ANNUAL SALES TOTALED USD 3.4 BILLION IN 2005, DERIVED MOSTLY FROM EXPORTS. ¶10. (SBU)CARGILL SAID THAT ARGENTINA IS ONE OF ITS TOP THREE TO FIVE SOURCE MARKETS IN THE WORLD AND REITERATED ITS STRONG COMMITMENT TO THE MARKET. NEVERTHELESS, THE CORPORATION DID HIGHLIGHT SOME ISSUES WHICH PRESENT CHALLENGES FOR CARGILL'S SUCCESS AND GROWTH IN ARGENTINA. ONE OF THE PRIMARY CHALLENGES POSTED WAS THE ABSENCE OF CLEAR RULES OF DOING BUSINESS IN ARGENTINA, EXACERBATED BY THE UNPREDICTABILITY OF ARGENTINE GOVERNMENT POLICIES. EXAMPLES OF THE FOREGOING WHICH HAVE HAD AN IMPACT ON CARGILL'S OPERATIONS INCLUDE A TEMPORARY BAN ON BEEF EXPORTS EARLIER THIS YEAR; THE COLLECTION OF EXPORT TAXES ON AGRICULTURAL COMMODITIES; THE IMPOSITION OF PRICE CONTROLS ON WHEAT DESTINED FOR DOMESTIC PROCESSING; AND THE FREEZING OF CORN EXPORT CONTRACTS. CARGILL OPINED THAT GOA INTERVENTION IN THE MARKETS WOULD PROBABLY CONTINUE AT LEAST UNTIL AFTER THE PRESIDENTIAL ELECTIONS IN OCTOBER 2007. ¶11. (SBU) DESPITE THE CHALLENGES CARGILL HAS FACED, IT IS VERY PROUD OF HAVING ADHERED TO A STRICT CODE OF ETHICAL CONDUCT AND ITS DEEP FAITH IN THE ABILITY OF ARGENTINA'S AGRICULTURAL SECTOR TO MEET THE WORLD'S INCREASING DEMAND FOR FOOD AND FIBER. THE FIRM PLANS TO CONTINUE INVESTING AND EXPANDING ITS OPERATIONS IN ARGENTINA. ¶12. (U) THE AMBASSADOR EXPRESSED HIS WILLINGNESS TO DO ALL THAT HE COULD DO TO ENGAGE THE GOA IN A DIALOGUE AIMED AT STRENGTHENING THE INVESTMENT CLIMATE, AS WELL AS TO HIGHLIGHT TO THE GOVERNMENT AND THE GENERAL PUBLIC THE IMPORTANT CONTRIBUTIONS U.S. COMPANIES HAVE MADE TO ARGENTINA'S ECONOMIC DEVELOPMENT AND RECOVERY. THE AMBASSADOR ALSO CONGRATULATED THE FIRM FOR ITS COMMITMENT TO SOCIAL SERVICE. PUBLIC DIPLOMACY ¶13. (U) THE AMBASSADOR TOOK ADVANATAGE OF HIS VISIT TO ROSARIO TO ENGAGE IN PUBLIC DIPLOMACY OUTREACH THAT DEMONSTRATED THE IMPORTANCE THE EMBASSY PLACES ON ACADEMIC AND CULTURAL EXCHANGES, AS WELL AS OUR INVESTMENT IN THE COUNTRY'S YOUTH. THE AMBASSADOR ANNOUNCED TWO INITIATIVES FOCUSED ON CHILDREN FROM THE PROVINCES, THE YOUTH AMBASSADORS PROGRAM TO SEND YOUNG LEADERS TO THE STATES AND THE SARMIENTO-MANN ENGLISH SCHOLARSHIPS FOR TALENTED YOUTH TO STUDY ENGLISH. THE AMBASSADOR VISITED A LOCAL SCHOOL TO MAKE A BOOK DONATION AND SPEAK TO A GROUP OF OVER 200 CHILDREN. THE AMBASSADOR ENGAGED IN A LIGHTHEARTED AND ENJOYABLE EXCHANGE WITH THE STUDENTS AND DISTRIBUTED PENS AND NOTEBOOKS INDIVIDUALLY - ALL IN FRONT OF THE LOCAL PRESS. IN ADDITION, THE AMBASSADOR HELD A ROUNDTABLE WITH FULBRIGHT ALUMNI TO EXAMINE THE POSSIBILITIES OF FUTURE ACTIVITIES TO CONTINUE EXPANDING ON THE BENEFITS THEY RECEIVED FROM THEIR U.S. ACADEMIC EXPERIENCES. HIS TOUR OF THE LOCAL BINATIONAL CENTER - ONE OF THE LARGEST IN ARGENTINA - CONFIRMED THE COMMUNITY'S ACUTE INTEREST IN STUDYING ENGLISH. 14.(U) PRESS COVERAGE OF THE OUTREACH TRIP WAS EXTENSIVE IN ROSARIO, INCLUDING THE MAIN PAPER'S FRONT PAGE AND MAJOR TELEVISION CHANNELS. SURPRISINGLY, BUENOS AIRES PRESS ALSO OFFERED POSITIVE COVERAGE. WAYNE