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