ARGENTINA: SALTA GOVERNOR OFFERS CONSTRUCTIVE

C O N F I D E N T I A L BUENOS AIRES 001058 SENSITIVE SIPDIS E.O. 12958: DECL: 08/02/2018 TAGS: PREL EAGR EAIR AR SUBJECT: ARGENTINA: SALTA GOVERNOR OFFERS CONSTRUCTIVE CRITICISM OF GOA REF: A. BUENOS AIRES 1009 ¶B. BUENOS AIRES 994 Classified By: Ambassador E. A. Wayne for reasons 1.5 (b & d) -------------- SUMMARY -------------- ¶1. (C) In a private dinner in Argentina's northwestern province of Salta, Governor Juan Manuel Urtubey criticized the GoA and its head, President Cristina Fernandez de Kirchner (CFK),for the botched attempt to raise export taxes on agricultural goods, which led to a prolonged conflict between the GoA and the agricultural sector that was only recently resolved. Affirming his continued support for and faith in CFK, Uturbey saw a silver lining in the final outcome, stating that it renewed the people's trust in Congress and that the designation of a new, "open-minded" Cabinet Chief (Ref A) could be a positive change. He also expressed concern about the recent GoA decision to renationalize a flagship airline, noted that energy investment in his province was on the upswing, and discussed his possible participation in the August 17-19 Americas Competitiveness Forum in Atlanta, which he subsequently decided to attend. END SUMMARY. -------------- AFTERMATH OF THE FARM STRIKE -------------- ¶2. (C) Ambassador met July 28 with Governor Juan Manuel Urtubey of Salta at the Governor's residence as part of a trip to Salta July 28-29 (Septel). Urtubey, as in prior meetings (BA 948, 311),was quite candid, offering criticisms of the CFK administration, but also his support. He noted that he has been a friend of CFK for many years, dating to when he was a Diputado and she a Senator in the Argentine Congress, and worked together on a bicameral committee. He said that she spoke with him July 23 about the Senate vote which would have sanctioned the increase in agricultural export duties unilaterally imposed March 11 by the GoA. She insisted that he talk freely to her, without the deference due the President. He said he told her that the biggest problem in the process was not the message of raising taxes, but the way in which she delivered that message. He told her she needed to be more moderate and less conflictive when dealing with opposing viewpoints, and that she must engage in dialogue with those favoring other options, as well as with Congress and governors. ¶3. (C) Urtubey cited to the Ambassador several positive aspects of the resolution of the conflict, including that "people can trust Congress again" (i.e., see it as independent, rather than a rubber stamp for the President), and that it "decompressed" a very difficult social situation. He also says that an official at a large Argentine bank told him that, beginning the very next business day after the Senate vote, credit activity - which had been very slow during much of the conflict - picked up significantly. He commented on the recent change of Cabinet Chief, stating that he was a friend both of outgoing Alberto Fernandez and incoming Sergio Massa, and expressed hope that the change could "refresh" the policy-making process. He added that "Massa is more open-minded than most" in the administration. The question is whether he will have "the space to act." Urtubey said that with changes in style and some good policy decisions, he believed CFK could regain enough popularity to govern effectively through her term. "This is a chance for a new start." Interestingly, CFK's July 29 speech in Salta was delivered in a very positive style and got positive reviews from otherwise very critical business and finance figures present. At present, tourism and business are being stymied by dependence on Aerolineas Argentinas. -------------- -------------- SALTA BANKING ON NEW CIVAIR AND ENERGY INVESTMENTS -------------- -------------- ¶4. (C) Urtubey was also critical of the GoA decision to renationalize Aerolineas Argentinas (Ref B),expressing his concern that the costs were too high: "$900 million in debt, plus operating costs." He stated that governors of several northern provinces, including Salta, were working to establish a new regional airline, which would cover many areas currently served only by Aerolineas Argentinas. He said that they would be able to receive good financing terms for new aircraft from Brazil's export bank. ¶5. (SBU) Turning to energy issues, Urtubey expressed his pleasure over the new thermo-electric generator which was to be activated the next day (more details Septel),and also noted that there was significant new gas exploration going on in Salta at present. He stated that some of the exploration was to tap reserves as deep as six kilometers underground, and thought that Salta could end up doubling its proven gas reserves, which are currently 20% of Argentina's total. He attributed the new exploration to the GoA's "Energy Plus" program that allows incremental generating capacity to charge private industrial users rates closer to market norms. He said he believes that the current conflict in Bolivia is encouraging energy investment in Salta, noting that many energy companies are operating on both sides of the border. Since the facilities near the Bolivian border are essentially drawing from the same underground gas reserves, he said that companies were deciding to increase production on the side of the border that currently had the most favorable conditions, which right now is Argentina. ¶6. (SBU) In response to the Ambassador, Urtubey confirmed that he had received an invitation to attend the Americas Competitiveness Forum in Atlanta, but had not confirmed his attendance. He said it would depend on official activities related to San Martin Day, an important Argentine holiday on August 18 - the middle of the three-day conference. Ambassador explained many of the reasons Urtubey should participate in Atlanta. (Post subsequently learned that he has decided to attend. We will work with his office to coordinate his travel and participation in related events.) Ambassador also raised the possibility of Salta developing a "sister-state" relationship a counterpart in the United States, citing examples of other Argentine provinces which had done so, and offering to facilitate communications if the governor was interested in a particular state. -------------- COMMENT -------------- ¶7. (C) As in prior conversations with the Ambassador, Governor Urtubey was quite frank, and displayed his support for market-based economic policies and fully functioning democratic institutions in Argentina. He clearly sees himself as a critical ally of the current administration and a friend of the President whose barbs are meant to help CFK, not to undermine her. He could help the government in another important way -- his positive stance towards energy investment in his province could help Argentina meet its energy needs, removing an important stumbling block from the GoA's path. WAYNE