U/S BURNS IN ARGENTINA: DISCUSSES U.S. INVESTMENT

C O N F I D E N T I A L BUENOS AIRES 000403 SIPDIS SIPDIS DEPT. FOR P HEIDE BRONKE WHA FOR TOM SHANNON,BSC AND EPSC NSC FOR JOSE CARDENAS AND JUAN ZARATE USDOC FOR 4322/ITA/MAC/OLAC/PEACHER USDOC FOR 3134/USFCS/OIO/WH/MKESHISHIAN USDOC FOR 4320/ITA/MAC/WH/DAS/WMBASTIAN E.O. 12958: DECL: 03/01/2017 TAGS: PREL EINV ENRG ETRD EPET PGOV BL VE AR SUBJECT: U/S BURNS IN ARGENTINA: DISCUSSES U.S. INVESTMENT INTERESTS, BIOFUELS, BOLIVIA AND VENEZUELA WITH PLANNING MINISTER DE VIDO Classified By: Ambassador E. Anthony Wayne for reasons 1.4(b)and(d) ¶1. (C) Summary. U/S Burns and A/S Shannon, accompanied by Ambassador, met February 9 with Minister of Planning and Infrastructure Julio De Vido and discussed the public controversy over Embassy support for a proposed U.S. company's investment, broader investment concerns, and respective plicies toward Venezuela. U/S Burns noted concerns of some U.S. companies regarding Argentina,s uncertain regulatory environment and our unpleasant surprise at President Kirchner's public response to press stories regarding a commercial advocacy case for U.S. investment firm Eton Park. De Vido noted the good mechanism for communication he enjoyed with the Embassy and blamed the incident on the local press. U/S Burns raised concerns about Hugo Chavez, negative influence in South America and discussed the USG,s desire to work with Argentina, Brazil and other democratic countries in the region to promote stability and democracy in Bolivia. De Vido detailed Argentina's plans for economic ties with Caracas. U/S Burns also extended an invitation to De Vido to visit Washington. End Summary. ¶2. (U) U.S. Participants: Under Secretary for Political Affairs Nicholas Burns Assistant Secretary for Western Hemisphere Affairs Thomas Shannon Ambassador E. Anthony Wayne William McIlhenny, Member, Policy Planning Council (S/P) Heide Bronke, P Special Assistant David Alarid, Acting Political Counselor Juan Avecilla, Notetaker Argentine Participants: Minister for Planning and Infrastructure Julio De Vido Ministry General Coordinator Claudio Uberti U.S. INVESTMENT PROSPECTS IN ARGENTINA -------------- ¶3. (SBU) U/S Burns and A/S Shannon, accompanied by the Ambassador, met with Argentine Minister of Planning and Infrastructure Julio M. De Vido on February 9. The Minister began by highlighting U.S. investment in Argentina and noted that several U.S. companies had signed recent deals and were investing in Argentina,s energy sector, including that of a USD 50 million agreement between ENARSA (Energia Argentina Sociedad Anonima) and GX Technologies for offshore oil exploration. The Minister also said that several U.S. energy companies are seeking business opportunities throughout Argentina, including Apache, AES in Santa Fe Province, Duke Energy in Rio Negro Province, and GE in Chubut Province. ""THE LETTER"" -------------- ¶4. (C) The Under Secretary and Ambassador expressed their disappointment over the public manner with which GOA dealt with the Argentine media,s publication of a commercial advocacy letter the Embassy had sent the Minister the prior week on behalf of U.S investment fund Eton Park,s interest in buying a share of Argentine power distribution company (Transener) from Brazil's Petrobras. The U/S said that the Ambassador was doing his job of advocating on behalf of an American business and was surprised by President Kirchner,s negative criticism about being pressured by a foreign country. The Under Secretary stressed that such open criticism of foreign investment could affect American businesses, opinion about Argentina,s business climate. De Vido said that he did not need to explain his President,s comments, but noted that his office enjoyed good relations with the Embassy and that the Embassy and the Ministry had a good mechanism for quietly resolving such issues. De Vido said he had considered the letter as coming from a friend and not as pressure, but he had shredded it given the tendency of things to leak to the press in Argentina. He said the GOA regulatory body had issued a negative opinion on the proposed Eton Park investment on February 7, which may have sparked the press story. He said he hoped the incident would not interrupt the good working relationship with the Ambassador and that he looked forward to continuing roundtables with the Ambassador and U.S. businesses, similar to the one the Ambassador recently hosted with aviation companies. Both parties agreed to put the matter to rest and to consider it a ""misunderstanding."" BIOFUELS AND A PIPELINE -------------- ¶5. (SBU) The Minister said that Argentina is searching for alternative energy and hopes that five percent of Argentina,s fuel will come from biofuels by 2010. According to the Minister, they plan to construct 40-50 small biofuel distillers throughout the country, each to group four or five smaller farmers. He acknowledged that Argentina,s biofuel development was not as advanced as that of Brazil or the U.S. U/S Burns explained the basis of the biofuel initiative with Brazil, with its focus on research and development and the aim of stimulating regional markets in North, Central and South America, and the Caribbean. The U/S noted that the intention was to start with Central America and the Caribbean, but that the U.S. had joined Brazil,s international forum to take the concept global and create worldwide demand and markets. The U/S explained that the United States had promising new biofuel technologies with ""enormous promise"" and hoped that private investment could help Argentina and other countries, beyond Brazil, improve their ethanol-based industries. BOLIVIA AND VENEZUELA -------------- ¶6. (C) The discussion turned to Bolivia and Venezuela with the U/S noting our desire for good relations and open channels of communication with President Morales. He said, however, that relations with Venezuela were completely different. U/S Burns said that the U.S. was willing to engage with Venezuela, but that Chavez was not interested in talking to the U.S. A/S Shannon explained that the USG was interested in a positive and constructive relationship, focused on concrete issues, such as counter terrorism, counter narcotics, and trade and energy issues, with both President Chavez and Bolivian President Morales. A/S Shannon noted that we have tried reaching out to Venezuela but have been rebuffed on several occasions. The Under Secretary noted that he viewed Brazil and Argentina as ""guarantors of stability"" in the region, but warned that Venezuela,s growing influence was more of a ""danger here (South America) than in the United States."" ¶7. (SBU) De Vido explained that the GOA had good relations with Chavez based on economic and commercial issues. He described the 2004 ""fiduciary exchange"" agreement the countries signed in which Argentina would buy winter fuel oil and Venezuela would, in turn, use these revenues to buy Argentine agriculture products, tractors, healthcare supplies, and other industrial products. This agreement had grown from USD 200-300 million in 2004, to USD 800 in 2006. He also described the joint exploration deal between ENARSA/PDVSA in the Ayacucho area of the Orinoco Basin. He said this was the largest of Argentina,s ventures with Venezuela, noting that the potential yield from the venture could equal Argentina,s known petroleum reserves. De Vido said that they were looking to partner with private companies as well. Finally the Minister also described plans (with a laser pointer on the map) to build an oil pipeline linking Venezuela with Brazil, Argentina and Bolivia by 2015. The Minister noted several pending gas pipeline issues with Bolivia. ¶8. (C) De Vido noted that these were very ""particular"" times politically in Venezuela. He said, ""We would not say that Venezuela was not a democracy, although it is not like the U.S., Argentina or Brazil. Each democracy is different."" He further opined that he understood U.S. concerns with Venezuela and that the GOA too had been surprised by his radical rhetoric, but that he did not see Chavez as a danger, that he was mostly talk, but that he needed to be contained. Bringing Chavez into MERCOSUR, De Vido said, was just such an effort. He noted the growing common interests between Brazil and Argentina -- much like the U.S. and Canada and the U.S. and Mexico -- but asserted that a three-way dialogue was necessary. The Minister suggested that a tripartite dialogue between Argentina, Brazil and the U.S. was the best bet for guaranteeing regional stability. He urged the U/S and A/S to consider organizing such a three-way discussion. ¶9. (U) The Under Secretary closed the meeting by inviting the Minister to visit the United States in the near future, perhaps when he traveled to Atlanta to participate in Secretary Gutierrez' competitiveness forum. SIPDIS WAYNE =======================CABLE ENDS============================