ARGENTINA: KIRCHNER TRIES TO DOWNPLAY CHAVEZ VISIT

C O N F I D E N T I A L BUENOS AIRES 001544 SIPDIS SIPDIS E.O. 12958: DECL: 08/07/2027 TAGS: PGOV PREL AR VZ SUBJECT: ARGENTINA: KIRCHNER TRIES TO DOWNPLAY CHAVEZ VISIT REF: A. BUENOS AIRES 01514 ¶B. BUENOS AIRES 00456 ¶C. CARACAS 01554 Classified By: Ambassador E. Anthony Wayne for Reasons 1.4 (b) and (d). ¶1. (SBU) SUMMARY: Argentine President Nestor Kirchner received Venezuelan President Hugo Chavez on August 6 to finalize Venezuela's purchase of US$500 million in Argentine bonds and to sign a number of energy accords, including the joint construction of a $400 million LNG receiving terminal in Argentina by GoA and GoV state-owned energy companies and the GoA's purchase of Venezuelan fuel and heating oil. The Kirchner administration tried to keep the visit low-profile, planning to host Chavez at the presidential residence for a private dinner and downplay media coverage, in reportedly in part to prevent Chavez's visit from overshadowing the annual Council of the Americas meeting in Buenos Aires. According to local press, Chavez insisted on a full protocol reception at the Casa Rosada. Chavez took the opportunity during the public announcement of the agreements and bonds to strongly criticize the USG and to praise the candidacy of First Lady Cristina Fernandez de Kirchner. President Kirchner rewarded Chavez's supportive monologue with a strong advocacy of Venezuela's membership in Mercosur. However, in contrast to Chavez's previous visits, the pre-visit press coverage was mixed. Cristina Kirchner was observed to be notably more distant from Chavez and she and key ministers made high-profile speeches at the August 7 Council of the Americas event. President Kirchner, as he has done for nearly all of Chavez's visits to Argentina, couched the relationship in terms of financial assistance, but this is the first time that the Kirchner administration has tried to downplay relations with Venezuela and positively highlight ties to the U.S. (SEPTEL covers Council of Americas event). Taken in the context of recent GOA visits to Spain and Mexico and planned forays to New York and Europe, we could be seeing a concerted effort to demonstrate a more balanced foreign policy. END SUMMARY. -------------- Energy Accords -------------- ¶2. (SBU) Argentine President Nestor Kirchner received Venezuelan President Hugo Chavez on August 6 to sign a number of energy accords, including a joint venture by the GoV's state-owned PdVSA and the GoA's state-owned ENARSA to construct an LNG receiving/regasification terminal in Argentina. Local press reports the regasification terminal would cost about US$400 million, take two years to construct and be capable of processing 10 million cubic ft/day of natural gas. (Note: Reftel A reports comments by local analysts that the market cost of a receiving/regassification terminal of this capacity is likely in the $1 billion-plus range. End note.) Venezuela also agreed to provide fuel for Argentine power generation, up to eight million barrels of fuel oil a year and one million barrels of heating oil "to minimize the effects of cold temperatures during the most critical months of the year." -------------- Final Signature on Bono del Sur Still Pending -------------- ¶3. (SBU) Chavez and Kirchner confirmed the GoV's intention to purchase $500 million in Argentine bonds, but a bond agreement was not/not signed. Post's Economic Ministry contacts declined to provide details on the $500 million transaction, aside from confirming that the GoV will package the Argentine Bonds (dollar-denominated Boden 2015s) with Venezuelan bonds to create the third tranche of the "Bono del Sur." They also confirmed that the transaction will take place at market prices (Note: the Boden 2015s are currently trading at a yield of approximately 11%, compared to the 8% yield at the time of the GoV's last purchase of Boden 2015s in February.) According to press reports, Chavez stated during his outgoing press conference the GoV would purchase an additional $500 million in Argentine debt during 2007, a reversal of his earlier statement that the current purchase would likely be the final debt deal of the year. -------------- Trying to Downplay Chavez -------------- ¶4. (SBU) Chavez's visit took place on the eve of a well-publicized Council of the Americas (COA) meeting in Buenos Aires. First Lady and presidential candidate Cristina Fernandez de Kirchner gave the closing remarks at the COA meeting. Her appearance at the meeting has been widely interpreted as an attempt to cozy up to American investors and possibly the USG. (She made a point at the end of her speech to make her way through the crowd to greet the U.S. Ambassador.) The press speculated that Cristina tried to keep the Chavez visit low-profile in deference to the COA visitors. Supposedly, she insisted that Chavez's visit be downplayed by hosting him at the presidential residence for a private meeting and soft-peddling media coverage. The GOA had worked on a low-profile schedule of activities for Chavez, which included a rarely-offered private dinner at the presidential residence and a visit to the National Institute for Industrial Technology (INTI). Originally, there were no planned press conferences or events hosted by pro-Chavez social groups. ¶5. (SBU) According to local press, Chavez's insistence on a full protocol reception at the Casa Rosada and press conferences turned into an improvised and televised event, where Chavez spoke for far longer than the pre-arranged five minute speech. The two presidents, along with their respective Foreign Ministers, publicly announced the bond deal, the signing of the nine energy accords, and the plan to build a Venezuelan financed plant in Argentina in which to convert Venezuelan liquid natural gas. ¶6. (SBU) President Kirchner rewarded Chavez's supportive monologue with a strong advocacy of Venezuela's membership in Mercosur. First Lady and presidential candidate Cristina Kirchner's suit jacket and Labor Minister Carlos Tomada's tie were both red, which made Chavez comment on their "Bolivarian" clothing. -------------- Media coverage -------------- ¶7. (SBU) In contrast to Chavez's previous visits, press coverage prior to his arrival was light, with some press saying the government purposefully downplayed it. Pre-visit press coverage was also decidedly mixed as to the pros (money) and cons (outlier) of the Chavez relationship. August 7 press articles highlighted the unusually low-profile nature of the planned schedule along with the Kirchner administration's apparent attempt to downplay the visit and its efforts to play up the success of the COA conference. Coverage after the visit focused on Venezuela's financial assistance and offers of energy assistance. The August 7 edition of Clarin, the largest local newspaper, prominently featured a large photo of Ambassador Wayne with COA President and CEO Susan Segal from the COA meeting. Clarin separately highlighted Ambassador Jeff Davidow's criticism of the GOA's public support for Chavez's March anti-USG rally during President Bush's visit to Uruguay (REFTEL B). The interview with Davidow was part of a journalist exchange funded by PAS Buenos Aires. August 8 press is dominated by coverage of the Council of Americas event (SEPTEL). -------------- Chavez's Anti-USG, pro-Cristina Rhetoric -------------- ¶8. (C) Chavez emphasized the strong relations between Argentina and Venezuela and promised to "always help" Argentina in times of need. He then took advantage of the public forum to criticize the Bush administration and the USG. He said that Bush "will exit through the back door" and wondered how it was possible that bridges collapse in a developed country. He suggested negligence on Bush's part for the disaster in Minnesota, saying that the USG was only thinking of Venezuela and about bombing Iraq at a time when poverty in the U.S. had reached 40 million. ¶9. (SBU) Chavez also used his speech to voice his appreciation for Fernandez de Kirchner's support for his administration during her July trip to Spain. He referred to her as "Presidenta" (Spanish for female President) and praised her candidacy, saying "even the rocks say that Cristina will be president." -------------- Comment -------------- ¶10. (C) President Kirchner, as he has done for nearly all of Chavez's visits to Argentina, couched the relationship in terms of financial assistance. (As one senior Argentine diplomat put it, "Chavez paid $1 billion for this ticket.") But this is the first time that the Kirchner administration has tried to downplay relations with Venezuela. Kirchner's unsuccessful attempt to limit Chavez's speech to five minutes indicates that Kirchner may have been trying to minimize Chavez's criticisms of the USG on the eve of the Council of Americas meeting in Buenos Aires. Some political analysts here have suggested that Fernandez de Kirchner's administration may try to create some distance from the Venezuelan leader. Local business leaders told Ambassador on August 7 that Fernandez de Kirchner was "visibly stand-off-ish" towards Chavez during their meetings, and her speech at the Council of the Americas conference was described by local analysts as "another step towards moderation." ¶11. (C) The downplaying of the Chavez visit may be an attempt to portray a more balanced foreign policy with regional and international press focused briefly on Argentina and the Council of the Americas meeting. Vice President and gubernatorial candidate Daniel Scioli (protect) privately told Ambassador that he did all he could to keep his distance during the visit. (Scioli, while not a Kirchner insider, is widely believed to be a major contender for the 2011 presidential elections.) ¶12. (C) Kirchner opponents, such as Ricardo Lopez Murphy and Roberto Lavagna, took the opportunity to criticize the GOA's relations with Chavez, questioning the interest rate and other financial terms of the bonds sold to Venezuela and the prospects for construction of the LNG plant, which may remain on the drawing board as has the long-promised pipeline from Venezuela to Argentina. END COMMENT. WAYNE