ARGENTINE PUNDITS: RESTORING PUBLIC CONFIDENCE KEY

C O N F I D E N T I A L SECTION 01 OF 03 BUENOS AIRES 001980

SIPDIS

SIPDIS

E.O. 12958: DECL: 10/03/2017
TAGS: PGOV PREL ECON KLAB KCOR AR
SUBJECT: ARGENTINE PUNDITS: RESTORING PUBLIC CONFIDENCE KEY
CHALLENGE FOR NEXT GOVERNMENT

REF: BA 1862

Classified By: Ambassador E. Anthony Wayne for reasons 1.4 (b) and (d)


1. (C) Summary. A group of top political and economic
analysts maintain that the main challenges facing Argentina's
next administration are restoring confidence in public
institutions; reining in inflation and labor demands for
higher wages; and improving juridical certainty to attract
greater investment. They expect a first-round victory for
Senator Cristina Fernandez de Kirchner (CFK) in the upcoming
presidential election, and feel that the most relevant
question now is whether she will capture a credible
percentage of the vote that will simultaneously provide her
with political legitimacy in the eyes of the public and ward
off potential cries of electoral fraud from the opposition.
Some of them doubt that CFK will finish her term. They
suggest that the USG could enhance prospects for a better
bilateral relationship with a CFK-led government through
early engagement with key players in her Cabinet. This, they
say, would enhance the CFK team's understanding of U.S.
priorities in Argentina and Latin America. End summary.


2. (C) Ambassador Wayne hosted a lunch on October 1 in
honor of visiting Brazil/Southern Cone Office Director Milton
Drucker. Participants included: Rosenda Fraga, Executive
Director, New Majority Unon; Diana Mondino, Director of
Institutional Relations at the Argentine Center for
Macroeconomic Studies; Manuel Mora y Araujo, Executive
President of the polling firm Ipsos-Mora y Araujo; Graciela
Romer, President of political polling and consultancy firm,
Graciela Romer and Associates; and Eduardo Van der Kooy,
leading editorialist for Argentine daily, Clarin.

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CFK Win Predicted, But Will it be a Credible Outcome?
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3. (C) Our Argentine interlocutors forsee a first-round win
for Senator Cristina Fernandez de Kirchner (CFK) in the
upcoming presidential election. The most relevant question
now, they debated, is whether she will capture a credible
percentage of the vote that will simultaneously provide her
with political legitimacy in the eyes of the public and ward
off potential cries of electoral fraud from the opposition.
Van der Kooy stated that it is a mistake for CFK to act as if
the upcoming elections are a "coronation". If CFK only
captures 42 percent of the vote, she will lack the political
legitimacy necessary to successfully deal with the unions in
the next round of government negotiations over wages. If she
captures 48 percent of the vote, however, the opposition will
claim electoral fraud, he predicted.


4. (C) Romer explained that while there have been claims
under previous governments of electoral fraud in lesser
developed provinces like Formosa and Chaco, they have never
before extended to Argentina's more developed provinces or
its national elections, as she alleged they do today. Claims
of fraud in Cordoba (ref A),coupled with alleged GOA
manipulation of economic data, have contributed to a climate
of public distrust in government institutions. The Kirchners
have underestimated the damage that this (especially the
manipulation of data from INDEC, the national statistics
agency) has caused. Restoring public confidence will be one
of CFK's main challenges, she concluded to the agreement of
others.

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Some Find CFK More Interested in Monologue than Dialogue...
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5. (C) Office Director for Brazil and Southern Cone Affairs
Milton Drucker indicated that much has been said about CFK's
willingness to engage in dialogue with the United States, but
that her visit to New York seems to indicate a greater
interest in talking rather than listening. Fraga agreed,
adding that CFK has made no effort to understand how the
United States works. When the Ambassador asked what the USG
could do to improve U.S.-Argentine relations under a CFK
administration, Fraga suggested early USG engagement with key
players in her Cabinet to enhance their understanding of U.S.
priorities in Argentina and Latin America. Romer noted that
CFK is trying to fashion herself as a progressive
intellectual rather than a traditional Peronist figure. She
expressed concern that CFK could have a tendency to conduct
foreign policy based on whim or ideology -- something
Argentina can not afford.

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...Others Expect CFK Outreach to Sectors K Scorned

BUENOS AIR 00001980 002 OF 003


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6. (C) Mora y Araujo has a more optimistic view of
Argentina's foreign policy under CFK, suggesting that she
will work to improve public relations with sectors that her
husband has publicly scorned, such as the Catholic Church and
press. He said that he expects CFK to have a stronger
Cabinet and to delegate more to her Ministers. He also
thought she is interested in trying to find more consensus
among social sectors and the government. Both Mora y Araujo
and Romer expected CFK to engage Mercosur more actively and
work to ease tensions with Uruguay over the Botnia pulp mill
dispute.

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CFK Foreign Policy: Change in Style more than Substance
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7. (C) Turning to a discussion on CFK's likely foreign
policy priorities, Fraga asserted that there would be a
change in style, not substance, under CFK. Mondino argued
that resolving Argentina's arrears to the Paris Club is a
"serious issue" that the next administration must resolve in
order to restore Argentina's credibility with the
international financial community and access resources and
investment needed. Fraga, however, said that he did not see
CFK tackling the issue. He added that CFK is unlikely to
change her husband's policy of engaging Venezuela, noting
that she passed up the opportunity to say anything to
distance herself from Venezuela during her recent visit to
New York. Rather, CFK said that Argentina has different
friends than Venezuela-- in an allusion to Venezuela's close
relationship with Iran. Mora y Araujo indicated that the
GOA's flirtation with Venezuela has its limits, as the
Argentine public will not tolerate CFK supporting Venezuelan
President Chavez. He added that CFK is a strong advocate of
democracy and appears to be more comfortable defending
democracy than her husband -- particularly on Cuba. He also
thought it very important that CFK had started to build a
good relationship with Mexico's President Calderon. This, he
told the Ambassador, is part of CFK's effort to build in more
options for Argentines.

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The Challenges Ahead
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8. (C) The Ambassador asked about Argentina's domestic
challenges in the near-term. Mora y Araujo stated that
improving juridical certainty is key to attract greater
investment. Mondino stated that there are three
inter-related problems facing the Argentine economy in the
near-term: 1) cash flow; 2) inflation; and 3) the potential
for labor conflict. She noted that Argentina's fiscal
surplus is declining, limiting the GOA's ability to govern
via patronage politics. Inflation has eroded real wages
fueling ever-increasing labor demands to boost wages in order
to keep pace with inflation. GOA policies to keep the
Argentine peso artificially low, combined with government
manipulation of economic data has resulted in a de facto
dollarized economy. She stated that the Argentines no longer
know what the peso is worth-- rent and other transactions are
quoted in dollars and there has been a 15-17 percent increase
in the number of dollar-denominated bank accounts opened in
recent months. All agreed that labor unrest would be one of
the early challenges CFK would face as President. They also
speculated whether CFK would be able to complete her mandate,
with Van der Kooy observing that there is no great love in
Argentine society for either of the Kirchners. He added that
neither have really connected with the people in general, or
the unions in particular -- Peronism's traditional base.


10. (C) Romer observed that the next administration will
have to work hard to regain the public trust. She argued
that Argentines have adopted a cynical attitude towards
politics and are only voting for CFK because there are no
viable alternatives. She concluded that it is not that
Argentines are apolitical, but rather, Argentina is in
"stand-by" mode waiting to see what the new administration
will bring and whether viable alternatives materialize.

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COMMENT
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11. (C) The opinions expressed at the lunch reflect what we
have been hearing lately from different quarters, including
the opposition, political wonks, financial analysts, and
corporate executives. The fact that some of these top-drawer
pundits question whether CFK will finish her mandate suggests

BUENOS AIR 00001980 003 OF 003


that she will face a tough political environment.
WAYNE