Identifier
Created
Classification
Origin
07BUENOSAIRES2059
2007-10-17 20:29:00
CONFIDENTIAL
Embassy Buenos Aires
Cable title:  

REDUCED EXPECTATIONS: ARGENTINA SEEKS LOW PROFILE

Tags:  EFIN ECON EINV AR 
pdf how-to read a cable
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DE RUEHBU #2059/01 2902029
ZNY CCCCC ZZH
P 172029Z OCT 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 9501
INFO RUCNMRC/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 0677
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 BUENOS AIRES 002059 

SIPDIS

SIPDIS

TREASURY FOR CLAY LOWERY, NANCY LEE, AJEWEL, WBLOCK, LTRAN
NSC FOR JOSE CARDENAS, ROD HUNTER
PASS FED BOARD OF GOVERNORS FOR RANDALL KROSZNER, PATRICE
ROBITAILLE
PASS EXIM BANK FOR MICHELE WILKINS
PASS OPIC FOR JOHN SIMON, GEORGE SCHULTZ, RUTH ANN NICASTRI
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER

E.O. 12958: DECL: 10/16/2017
TAGS: EFIN ECON EINV AR
SUBJECT: REDUCED EXPECTATIONS: ARGENTINA SEEKS LOW PROFILE
AT IMF/WORLD BANK ANNUAL MEETINGS

REF: BUENOS AIRES 1809

Classified By: Economic Officer Chris Landberg for Reasons 1.4 (b,d)

Summary
-------
C O N F I D E N T I A L SECTION 01 OF 03 BUENOS AIRES 002059

SIPDIS

SIPDIS

TREASURY FOR CLAY LOWERY, NANCY LEE, AJEWEL, WBLOCK, LTRAN
NSC FOR JOSE CARDENAS, ROD HUNTER
PASS FED BOARD OF GOVERNORS FOR RANDALL KROSZNER, PATRICE
ROBITAILLE
PASS EXIM BANK FOR MICHELE WILKINS
PASS OPIC FOR JOHN SIMON, GEORGE SCHULTZ, RUTH ANN NICASTRI
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER

E.O. 12958: DECL: 10/16/2017
TAGS: EFIN ECON EINV AR
SUBJECT: REDUCED EXPECTATIONS: ARGENTINA SEEKS LOW PROFILE
AT IMF/WORLD BANK ANNUAL MEETINGS

REF: BUENOS AIRES 1809

Classified By: Economic Officer Chris Landberg for Reasons 1.4 (b,d)

Summary
--------------

1. (C) The GoA delegation to the annual IMF/World Bank
meetings, led by Economy Minister Miguel Peirano and Central
Bank President Martin Redrado, will arrive in Washington
under instructions from President Kirchner not to say or do
anything controversial, given the proximity of Argentina's
October 28 presidential elections. Peirano and Redrado will
participate in debates on IMF reforms, and Peirano said he
looks forward to joining the regional meeting organized by
Treasury, but they will otherwise limit their engagement on
sensitive Argentine-related issues. There are signs of a
possible thaw in GoA-IMF relations, and GoA officials
continue to indicate interest in moving forward Paris Club
negotiations. The Economic Ministry is also quietly
exploring the possibility of resuming World Bank budget
support adjustment lending under an IMF endorsement
Nevertheless, Peirano and Redrado will limit their engagement
on these and other potentially controversial issues. Both
indicated, however, that they look forward to meeting their
USG counterparts. End Summary.

GoA Delegation's Objective: Lay Low
--------------

2. (C) Minister of Economy and Production Miguel Peirano and
Central Bank President Martin Redrado arrive Washington for
the October 20-22 annual IMF/World Bank meetings under
explicit instructions from Argentine President Nestor
Kirchner to maintain a low profile prior to the October 28
presidential elections. According to Economy Ministry
contacts, Kirchner instructed Peirano that he wants "no
movement on any issue," including on Paris Club, prior to the
elections.


3. (C) Peirano asked Ambassador October 17 to pass the

message to Washington that he looks forward to meeting USG
officials, and hopes to develop constructive relationships
with them for the work that lies ahead. He is pleased to
have been invited to participate in the regional Finance
Ministers' meeting with Treasury Secretary Paulson on October

20. However, he emphasized that he will have to avoid
discussion during this trip of difficult or potentially
controversial issues (i.e., Paris Club, bond holdouts). His
main concern is to avoid saying or doing anything that
creates headlines back in Buenos Aires, just days before
elections.


4. (C) Redrado gave the same message to Ambassador on October
16, commenting that he and Peirano will keep Argentina "low
on the radar screen." Redrado added that the word from on
high was to "keep our teeth tightly locked until the 29th."
He said the Argentine delegation will focus on multilateral
and international items, avoiding more controversial
bilateral issues. He cited, for example, working on the new
mandate and agenda for the new IMF Managing Director and
Chair of the IMFC (International Monetary and Financial
Committee).


5. (C) Peirano will speak at the October 20 IMFC meeting on
behalf of the southern cone group -- Argentina, Bolivia,
Chile, Paraguay, Peru, Uruguay. He will reiterate these
countries' support for reforming the IMF quota (voting)
structure (including purchasing power parity in the quota
calculation and redistributing quota from developed to
developing countries). He will also likely call for the
approval of the Reserve Augmentation Line (a line of credit
of 300 to 500% of a country's quota, with minimal
conditionality),and may support other members'
recommendations for the IMF to cut costs.

Kirchner Warms to a Strauss-Kahn-led IMF
--------------

6. (C) The Kirchner administration has yet not relinquished
its public anti-IMF rhetoric. Indeed, Minister Peirano was

BUENOS AIR 00002059 002 OF 003


mobilized to publicly blast IMF Managing Director Rodrigo De
Rato October 16, following De Rato's recent comment that the
GoA needed to address the growing inflation problem in
Argentina. Cristina Fernandez de Kirchner's presidential
campaign is currently running television ads that celebrate
the GOA's ability to make the IMF irrelevant in Argentina
(kindergarten students are asked what the IMF is and give
predictably random answers -- e.g., "a place where there are
many animals.") Nevertheless, GoA officials, including
President Kirchner, appear to see an opportunity for
rapprochement with the IMF after Dominique Strauss-Kahn takes
over as Managing Director.


7. (C) Econ Ministry contacts confirm that Kirchner came away
from Strauss-Kahn's early September visit to Argentina
(reftel) with the impression that Strauss-Kahn supported the
GoA's position on IMF reform and also supported both the
creation of the Reserve Augmentation Line and the idea of
Argentina's accessing it to clear Paris Club arrears. French
Embassy organizers of Strauss-Kahn's visit did not fully
corroborate the GoA's version of events -- particularly with
regards to the use of the Reserve Augmentation Line to clear
Paris Club arrears. Nevertheless, they did confirm the
rapport between Kirchner and Strauss-Kahn.


8. (C) Subsequent to the meeting, Kirchner -- who tends to
personalize institutional relationships -- has privately
displayed greater willingness to work with the IMF. The
Argentine press has highlighted that Economy Minister Peirano
will bring to the annual meetings a message of
reconciliation, not hostility, for the first time since
Argentina's 2001 default. Economy Ministry contacts confirm
other press reports that the GoA delegation will cautiously
explore ways to engage with the IMF in the Paris Club
process, without submitting to formal IMF conditionality.
(Comment: Economy Ministry contacts cite the GoA's recent
commitment in writing to contribute to the effort to clear
Liberia's arrears to the IMF as further proof of a budding
reconciliation between the GoA and IMF. End Comment.)

Paris Club -- Goal is to Move the Chains
--------------

9. (C) GoA officials pushed an ambitious timeline for
resolution of the Paris Club situation during the UNGA
meetings in September. A prime example was Foreign Minister
Taiana's request to Secretary Rice for assistance with
completing a Paris Club deal before the next government takes
office on December 10. In contrast, Peirano's delegation
heads to Washington with modest expectations of continuing
low-profile discussions and clarifying aspects of GoA
arguments. For example, Peirano's staff will provide
Treasury an outline of Argentina's financing constraints,
which inhibit the GoA's capacity to pay down Paris Club
arrears -- at least all at once.

GoA Interest in World Bank SAL
--------------

10. (C) According to new World Bank Country Director in
Argentina, Pedro Alba, the GoA has informally expressed
interest in having the Bank resume fast-disbursing structural
adjustment (budget-support) loans. GoA officials are aware
that this would require IMF written endorsement of the
lending program, and Alba reportedly responded that reaching
an agreement with the Paris Club would also help with
negotiating a structural adjustment lending program. It is
possible that the GoA delegation will continue informal talks
along these lines while in Washington. Alba commented that
the only feasible World Bank adjustment lending program would
include GoA commitments to eliminate price distortions,
improve both fiscal and monetary policies, and repair the
statistical agency.

Comment
--------------

11. (C) According to Post's GoA contacts, Peirano believes
that he has the inside track on being named Economy Minister
under a Cristina Fernandez de Kirchner administration, so
long as he avoids making egregious public mistakes between

BUENOS AIR 00002059 003 OF 003


now and December 10, when the next administration takes
office. From his perspective, therefore, the timing of the
IMF/World Bank meetings is unfortunate. It offers numerous
opportunities for Argentine press correspondents to embarrass
him just one week prior to the elections. His advisors note
that Peirano's worst-case scenario would be for him to meet
with a high-level USG or other G-7 official, who then
responded publicly to press questions by criticizing GoA
economic policies (similar to De Rato's recent comments about
high inflation). This would likely end Peirano's political
career. Therefore, while Peirano and Redrado will
participate in the debate on IMF reforms, Post does not
believe the GoA delegation will engage on any
Argentina-specific issues, such as Paris Club, holdout
bondholders, ICSID cases, or post-election economic reforms.
End Comment
WAYNE