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


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