ARGENTINA: MEETING WITH PRO-U.S./PRO-KIRCHNER

C O N F I D E N T I A L BUENOS AIRES 001159

SIPDIS

E.O. 12958: DECL: 08/15/2018
TAGS: EAGR ECON EFIN ETRD PGOV PREL AR
SUBJECT: ARGENTINA: MEETING WITH PRO-U.S./PRO-KIRCHNER
GOVERNOR OF CHACO PROVINCE

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


1. (C) Summary: On August 13, Chaco Governor Jorge
Capitanich, a close ally of President Cristina Fernandez de
Kirchner (CFK),said the administration faces four big
challenges: 1) tackling inflation, 2) reducing subsidies; 3)
repaying the Paris Club debt; and 4) setting the future
agenda in the form of a plan for Argentina's 2010
bicentennial. In a small luncheon conversation in Chaco, the
governor argued that all four challenges could be tackled
successfully, and predicted that the government would survive
and continue to prosper, especially because the opposition is
and will remain divided and weak. The 2009 legislative
elections will likely yield a workable though reduced
pro-government majority, he argued, and the 2011 presidential
election will likely be won by a PJ candidate -- either one
of the Kirchners or someone currently aligned with them.
Ambassador Wayne's trip to Chaco marked the first visit by a
U.S. ambassador in nearly three decades. End Summary.


2. (C) Chaco Province Governor Jorge Milton Capitanich hosted
Ambassador Wayne on August 13 for a small lunch in his home
in the provincial capital of Resistencia. Capitanich is a
Vice President of the ruling Peronist Party (PJ) and is
viewed as an up-and-coming PJ leader and a possible
Presidential candidate in the future. He has staunchly
defended CFK during the agricultural crisis, but is also a
great admirer of the U.S. political system and of U.S.
political campaigns. Governor Capitanich was accompanied by
Vice-Governor Juan Carlos Bacileff Ivanoff. Ambassador Wayne
was accompanied by MILGP Officer and Polintern (notetaker).
Septel will cover other aspects of the visit to Chaco
province, located in Northern Argentina.

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Confident About CFK's Future
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3. (C) Capitanich said the current administration faces four
major policy challenges: 1) managing inflation; 2) cutting
wasteful and costly subsidies for energy, transportation, and
other public services; 3) resolving Paris Club debt and
gaining less costly access to some international financing;
and 4) setting a longer-term agenda for the country in the
context of the 2010 Argentine bicentennial. Capitanich said
he has no illusions about the difficulty of overcoming the
obstacles ahead for CFK. Nevertheless, he expressed
confidence that each can be overcome.


4. (C) On inflation, he asserted that CFK and her husband
were agreed that Internal Commerce Secretary Moreno had to be
removed from his current responsibilities and confidence
restored to the national statistics agency, INDEC. The
problem has been that the Kirchners have been trying to wait
until the opposition stops calling for Moreno's dismissal.
While it will be a challenge to restore credibility to INDEC
and then tackle inflation, Capitanich believed it doable this
year. (Capitanich argued that local Chaco inflation was
minimal, using "real statistics," unlike in other provinces,
but added that price increases and shortages had been a real
problem during the agricultural crisis because of road
blockages.) Part of the needed effort this year will be
reducing costly subsidies for energy, fuel, and transport,
which are chipping away at the fiscal balance. He asserted
that the Kirchners agree that this must be done, and will
move ahead gradually with increasing public service prices to
reduce public spending on subsidies.


5. (C) Capitanich argued that solving the Paris Club debt was
essential for Argentina to get increased access to
international financing. He said the President had received
a proposal from her staff and was considering it. He noted
that Argentina will have substantial repayments to make over
the next 2-3 years and will likely reflect that in the
proposal put forward. Ambassador noted that there will be a
difficult negotiation ahead with the Club, but stressed the
goodwill of Club members to work for a solution. He noted
the importance of Argentina putting its ideas forward
quickly. Ambassador emphasized the need to begin
negotiations by Argentines offering a reasonable proposal.
Argentina can only benefit from repaying the debt, he
concluded. Capitanich agreed. Finally, the governor argued
CFK can use the agenda for the 2010 Argentine bicentennial to
build consensus with non-governmental sectors on a longer
term vision for economic growth and addressing social needs.

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Argentina's Political Landscape
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6. (C) The key to making it so likely that CFK will succeed,
Capitanich argued, is that the opposition in Argentina is
divided and will likely remain so. The non-PJ parties are
weak and their leaders are unlikely to unite, and the PJ
dissidents are over-the-hill leaders who will never rally a
sizable plurality in the party, he said. Ambassador asked
about the role of former President Eduardo Duhalde in
Argentine politics. Capitanich, Duhalde's chief of cabinet
in 2002, mentioned not seeing him for some time, and
dismissed any chance of his political reemergence. Duhalde
may try to play "kingmaker," but he won't succeed because of
the fragmented nature of the opposition. Capitanich
predicted that Kirchner-allied legislators will win 30-35% of
the vote in 2009, which will provide a workable majority in
Congress. The current administration, he said, is poised to
win in the North and South of the country. As to the 2011
presidential elections, Macri could be strong nationally,
possibly winning as much as 25% of the vote; Civic Coalition
party leader Elisa Carrio could also gain some high numbers,
he said. However, the candidate of the current government,
be it a Kirchner or one of their allies, will likely squeak
by with as much as 35%, enough to win, he added. The
Ambassador asked about an opposition force emerging from one
of the factions in the PJ; Capitanich argued this was very
unlikely given the generational and personal differences
among dissident PJ leaders.


7. (C) Capitanich praised the strength and competency of the
Peronist movement as a political machine. Nevertheless, he
said, it is difficult to define. Peronism is a diversified
political movement. Doctrinally, it represents the
center-left, promoting the issues of the working class while
also representing a wide range of socio-economic strata. It
therefore reflects popular sentiment more accurately than the
other national party, the Radicals, he maintained.
Capitanich reiterated that in 2011, Peronism under the
Kirchner umbrella would likely emerge victorious as a result
of the opposition's chronic fragmentation.

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U.S. Elections and Bilateral Relations
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8. (C) Capitanich showed great interest in the upcoming U.S.
presidential elections, offering his views on both major
party pre-candidates. He said he admired qualities in each
candidate and shared his experiences in observing previous
U.S. campaigns including first hand. Capitanich spoke of his
great respect for American political strategists such as Karl
Rove, Dick Morris, and James Carville. He confided that he
had retained Carville's services, crediting the adviser's
insight and practical advice for his successful gubernatorial
campaign last fall in which he emerged victorious as the
underdog by a narrow margin.


9. (C) Capitanich used the discussion of U.S. politics as a
segue to argue the strategic importance for Argentina of
developing good relations with the United States. He said
that he would like to work in support of developing a
strategic, hemispheric relationship with the USG. With so
many common interests, from the basics of democracy to the
potential complementary natures of our economies, there is
much ground for expansion of the bilateral relationship and
of closer cooperation in the hemisphere, he said.


10. (C) Comment: Capitanich is a very savvy and ambitious
politician who will likely seek to return to the national
scene in 2011. He admires much about the United States and
seems to have few ideological hang-ups about the U.S. We
plan to explore ways to work more closely with him and his
province in areas of educational and cultural exchange, for
example.
WAYNE