ARGENTINA: SCENESETTER FOR PM/DAS MICHAEL COULTER AND THE POL/MIL BILATS

C O N F I D E N T I A L BUENOS AIRES 002711

SIPDIS

SIPDIS

PM/RSAT FOR JEFFREY BURNETT

E.O. 12958: DECL: 12/01/2016
TAGS: MARR, PARM, PREL, PGOV, PTER, AR
SUBJECT: ARGENTINA: SCENESETTER FOR PM/DAS MICHAEL COULTER
AND THE POL/MIL BILATS

REF: BUENOS AIRES 621

Classified By: CDA Michael Matera for Reasons 1.4(b) and (d).

1. (C) Summary: The U.S. Embassy in Buenos Aires, warmly
welcomes you and your official delegation to Argentina
December 15 for a discussion of bilateral political-military
issues. The Kirchner administration continues to be a valued
and positive partner on a wide range of security issues, from
non-proliferation and military to military relations, to
counterterrorism and counternarcotics. Argentina serves as a
stabilizing force in the region and can continue to help the
United States achieve its hemispheric security goals. The
long-term success of Argentine efforts, however, depends on
U.S. engagement, training and assistance.

2. (C) Your visit comes at a time when the MoD is pushing to
complete an intense restructuring of the Argentine Armed
Forces, and the Ministries of Foreign Affairs and Defense are
reevaluating their commitment and ability to participate in
the Proliferation Security Initiative. Brooke Sanctions
limit the USG's ability to provide some forms of assistance.
Some of the issues I believe we should focus on, or be aware
of, for the December 15 Pol-Mil bilats are: a) recognize and
encourage the strong and cooperative relationship we enjoy on
the range of security issues; b) encourage Argentina's
continued strong support for PKO, particularly MINUSTAH; c)
seek mechanism(s) under which U.S. forces can conduct
bilateral combined exercises on Argentine territory; and d)
find a way to keep Argentina (and the military) engaged in
PSI, recognizing their limited capacity. END SUMMARY.

Non-Proliferation and PSI
--------------
3. (U) The GOA has been a strong international voice on arms
control and nonproliferation issues. On Iran, the GOA voted
to refer Iran's noncompliance to the UNSC at the September 24
IAEA Board of Governors meeting. Argentina remains the only
country in South America to have endorsed the PSI Statement
of Interdiction Principles (in March 2005).

4. (U) Initially, and despite its relative isolation,
Argentina was an enthusiastic participant, involving itself
as much as possible in PSI over the last two years. (Note: A
complete history of Argentina's involvement in PSI can be
found in ref. A, http://www.state.sgov.gov/p/wha/buenosaires.< /a>
End Note). However, for many fiscally challenged countries
like Argentina (and elsewhere in the region),full
participation is constrained by tight government budgets in
general and very tight military spending in particular. This
especially applies to events that take place well outside the
region. The ability of the GOA to participate in a given
meeting or exercise is directly related to its distance from
Argentina.

5. (C) There is also a political aspect to the problem.
Although neither the MFA nor the MoD have the resources to
send the kind of delegation the OEG is expecting, the MFA has
always been more enthusiastic about PSI than the MoD
leadership -- although the MoD has always said the right
things. The MFA's Office of International Security (DIGAN)
continues to quietly work this issue, and other relevant
agencies are interested as well. At least for the time
being, however, Argentina will likely be unable to
participate as envisioned. From our conversations here, it
is clear that there are strong interests at many levels to
continue active participation in PSI, but the full political
commitment from the leadership is lacking. Ambassador
Kelly's Office of International Security, Space and Nuclear
Affairs at the MFA has identified this as an issue they would
like to discuss at the bilats, and I recommend we take them
up on it and discuss options/scenarios for keeping the GoA
engaged as effective partners.

Armed Forces Mission
--------------
6. (C) The primary mission of all three services of the
Argentine military is to protect the country's territorial
integrity. With the possible exception of the political
instability in neighboring Bolivia, there are no immediate
threats to Argentina. The country is at peace and has
transparent, well developed military cooperation with Brazil,
Chile and with its smaller neighbors Paraguay and Uruguay.
Argentina,s only territorial dispute concerns the
Falkland/Malvinas Islands. The GOA while stating that thQ
resolution to the Falkland/Malvinas dispute cannot be solved

militarily, still maintains its claims to the islands and its
maritime spaces. This is compounded by President Kirchner
being more politically provocative about the Argentine claim
than any of his post-dictatorship predecessors.

Mil-Mil and Civ-Mil Relations
--------------
7. (C) We have excellent relations with the Argentine
military and a sound working relationship with the MoD.
Despite some policy differences with the MoD leadership
(primarily over the issue of joint exercises),we have
maintained an active program with the MoD and military. We
should avoid short term reactions to the current political
situation. Mil-Mil relations overall remain excellent in
spite of recent difficulties over the past several years in
executing programs with the Argentine Army. Pressure to
reduce programs and resources and to stifle/discourage
engagement with the Argentine Military is counterproductive.
Now more than ever it is important to maintain professional
contact with the Argentine military. This is the time when
the USG should be augmenting our available tools, resources
and efforts to obtain our long term security interests.
Brooke Sanctions currently limit our ability to provide FMF
and EDA but the Milgrp is otherwise fully engaged on other
security assistance issues, including IMET, although the MoD
is currently not sending students to any WHINSEC courses for
political reasons.

8. (C) Argentine Civ-Mil relations are strained and
unproductive. The Pol-Mil bilats take place at a time when
the Argentine MoD (Nilda Garr) is attempting to complete an
intense restructuring of the military under a 1988 law on
restructuring the Armed Forces. The MOD has focused her
organization on 1) financial economies of scale and
operations, 2) "jointness," and 3) peacekeeping operations.
This reorganization, however, is taking place with little
Service input, creating great uncertainty. MilGrp and DAO
are trying to be constructive partners through this change.
The MoD is seeking assistance in strategic planning, defense
resource management, and developing and providing strategic
guidance over the military. They are also looking for shared
experiences on military transformation and strengthening
&jointness8 as they undertake the task of restructuring and
modernizing the Armed Forces.

"New Threats"
--------------
9. (SBU) The MoD is adamant that the military not be involved
in addressing the &new transnational threats8 of terrorism,
narcotrafficking, transnational crime, etc. The Minister of
Defense incorrectly perceives the U.S. as trying to force our
strategic vision on the region and to push the military to
take on these missions. Under the restructuring, the mission
of the Armed Forces will be very traditional, i.e. defending
the country against aggression by another state. The MoD
also envisions a disaster preparedness/response/humanitarian
assistance role for the Armed Forces. As a result, MilGrp
focuses CT and CN programs on the Prefectura (Coast Guard)
and Gendarmerie (National Guard equivalent),which fall under
the authority of the Ministry of Interior.

Possible Arms Acquisitions
--------------
10. (SBU) MoD Garre recently completed a trip to France,
Ukraine and Russia, ostensibly to discuss possible weapons/
weapons systems purchases. The MoD has disavowed any
specific plans, at this time, to make any significant
purchases but it appears that the Russians are anxious to
open up the Latin American market, to include establishing
arms/equipment production facilities in a number of
countries. Progress with Argentina would be a significant
step in that direction. Brooks Sanctions preclude Foreign
Military Financing (FMF) and Excess Defense Articles (EDA),
although Foreign Military Sales (FMS) is available and a
viable option the MoD should consider when looking at new
equipment and systems.

Strong on Peacekeeping
--------------
11. (U) Argentina makes a significant contribution in
numerous UN and regional PKO missions. The Argentine
military has approximately 1000 troops and paramilitary
forces deployed to peacekeeping missions, principally in
Haiti (550),Cyprus (270),and in Kosovo (165). They have
developed combined peacekeeping deployments with Chile,
Paraguay and most recently Peru. These countries augment

Argentine forces in Cyprus. Argentina has developed, with
significant U.S. assistance, the premier peacekeeping
training facility (CAECOPAZ) in Latin America. Argentina and
Chile recently signed an agreement to form a combined
peacekeeping brigade and will be standing up the joint
headquarters in January 07.

Exercises and Legal Protections for U.S. Forces
-------------- --
12. The U.S. has not held a major exercise in Argentina since
2003 due to lack of legal protections. The GoA has said no
to administrative and technical immunities but has offered
functional immunities. Southcom has finally agreed to accept
the functional immunities, and Mission is waiting for DoD and
State determination on this issue. Argentina will host
UNITAS (a major multinational naval exercise involving
significant U.S. forces) in May 2007. SouthCom has OK,d
the GoA offer of functional immunities for this primarily
offshore exercise, but agreement of State and DoD is pending.
There is no possibility that this Argentine administration
will sign an Article 98 agreement.

CT Cooperation
--------------
13. (SBU) President Kirchner's administration has strongly
supported counter-terrorism policies since taking office in
May 2003, and cooperates with the United Nations, the OAS,
its neighbors, and the United States on a number of
counterterrorism initiatives. Argentine security forces have
been especially vigilant in monitoring illicit activity and
its potential links to Islamic radical groups in the TBA,
though there is no credible evidence that operational
terrorist cells exist in Argentina. Argentina has a leading
role in the OAS Inter-American Committee Against Terrorism
(CICTE),established on Argentina,s initiative in the 1990s.
Argentina has been a member of the Egmont Group since July
2003, and has ratified all of the 12 international
counter-terrorism conventions and has been an active
participant in the 3 plus 1 regional CT mechanism which just
met in Buenos Aires December 5-6. The GOA and the USG have a
Mutual Legal Assistance Treaty that entered into force in
1993, and an extradition treaty that entered into force in
2000.

ADDITIONAL BACKGROUND
--------------
14. (U) Argentina was once one of the richest countries of
the hemisphere, achieving a GNP per capita that was among the
highest in the world in the early 20th century. However, the
history of Argentina over the last 70 years has been one of
economic decline and political instability. Many Argentines
are at a loss to explain how their country, blessed with rich
natural resources, a fertile land and manageable population
numbers, could have fallen so far. Some blame the military
dictatorships, which predominated between 1930-1983; others
blame Peron and "Peronism;" and a significant number blame
external factors: the IMF, the U.S., and, to a lesser extent,
Europe, especially following the 2001-2002 economic crisis,
the worst in Argentine history. The election of left of
center Peronist Nestor Kirchner in 2003 marked a significant
shift in Argentine foreign policy, aligning the country more
closely with its MERCOSUR partners and less closely to the
U.S. That said, Kirchner has cooperated closely with the
U.S. on a number of issues, including counter-terrorism and
narcotics, and regional problems like Bolivia and Haiti.

Political Landscape
--------------
15. (U) Kirchner is widely perceived to be the strongest
Argentine President since the return to democracy in 1983,
and he faces a weak and divided opposition. Argentines give
Kirchner much of the credit for the country's Phoenix-like
recovery from its 2001-2002 economic crisis, an event
equivalent to our Great Depression. Political interest is
focusing increasingly on next year,s presidential elections.
It is widely thought that, if he chooses to run, Kirchner
will win reelection easily. There has been some speculation,
including from the president himself, that he will not be a
candidate and that his wife, Senator Cristina Fernandez de
Kirchner, will stand in his place. Potential opposition
candidates include former Finance Minister Roberto Lavagna,
businessman and president of the Boca Juniors soccer team
Mauricio Macri, and the counter-left national congresswoman
Elisa Carrio.

16. (U) Argentina has played a positive role in promoting

human rights and democratic institutions in the hemisphere,
particularly in Haiti and Bolivia. Along with a number of
its neighbors, Argentina currently has 575 peacekeeping
troops in Haiti in support of MINUSTAH, reflecting its
traditionally strong support of UN peacekeeping operations
and commitment to Haiti.

Economic Situation
--------------
17. (U) Argentina has had an impressive economic recovery
since suffering the worst economic crisis in its history --
including the largest sovereign default in history and a
devaluation of its currency -- in 2001-02. An export-led
boom triggered three consecutive years of 8.8-9.2% real GDP
growth beginning in 2003, with GDP reaching $182 billion in
2005, approximately $4,700 per capita. The Kirchner
Administration has ably managed the nation's public finances
and achieved large budget surpluses. Industrial and
construction activity are growing rapidly, and tourism has
boomed, with a record high of an estimated 3.7 million
foreign tourists visiting in 2005. Economic expansion is
creating jobs and unemployment dropped from 20.4% in the
first quarter of 2003 to 10.2% in the third quarter of 2006.
Investment in real terms jumped 22.7% in 2005. Poverty has
also fallen from the post-crisis level of 60 percent, but
remains stubbornly high. During the first half of 2006, 31%
of the population was living below the poverty line.
Argentina negotiated a debt exchange with 76% of its
creditors in 2005 (paying 30 cents on the dollar),and paid
off its nearly $10 billion debt to the IMF on January 3, 2006.

18. (U) Argentina,s impressive recovery, which has led to
improvements in key socio-economic indicators, can be
attributed to a number of factors. First, following a decade
of market reforms, the economy was fundamentally sound except
for the high level of indebtedness. Second, the adoption of
a market-based exchange rate regime in early 2002 and the
combination of high commodity prices and low interest rates
catalyzed Argentina,s export-led boom. Exports are at
record levels and Argentina,s trade surplus totaled $11.3
billion in 2005. Foreign trade equaled approximately 38% of
GDP in 2005 (up from only 11% in 1990) and plays an
increasingly important role in Argentina's economic
development. The government has maintained a primary fiscal
surplus and continues to accumulate reserves, which exceeded
$30 billion in October 2006. Argentina should continue to
perform well in 2007 with GDP growth projected at 7% and
inflation in the 7-10% range. Nevertheless, slowness in
addressing public service contract renegotiations, capacity
constraints, potential energy shortages in the face of high
growth and distorted energy prices, inflation and the
government's heterodox policies to contain it (including
pressure on the private sector to maintain price controls),
and a still-weak investment climate are potential obstacles
to sustaining the recovery.

MATERA