ARGENTINA: SCENESETTER FOR ASSISTANT SECRETARY SHANNON'S APRIL 10-11 VISIT

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P 082310Z APR 08
FM AMEMBASSY BUENOS AIRES
TO SECSTATE WASHDC PRIORITY 0666

C O N F I D E N T I A L BUENOS AIRES 000441 
 
SIPDIS 
 
SIPDIS 
 
FOR WHA ASSISTANT SECRETARY SHANNON FROM AMBASSADOR TONY 
WAYNE 
 
E.O. 12958: DECL: 04/06/2018 
TAGS: PREL, PGOV, PHUM, PTER, SNAR, ECON, EFIN, AR 
SUBJECT: ARGENTINA: SCENESETTER FOR ASSISTANT SECRETARY 
SHANNON'S APRIL 10-11 VISIT 
 
REF: BUENOS AIRES 0439 AND PREVIOUS 
 
Classified By: AMBASSADOR TONY WAYNE, FOR REASONS 1.4 (B) AND (D) 
 
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Introduction 
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>consolidation of democratic institutions and stability in the

Americas." Those are all points that merit reinforcement in

your meetings and media exchanges and that we hope your

interlocutors will echo and make on their own.



4. (C) More specifically, this is probably the most

propitious time since CFK's inauguration for us to raise her

consciousness regarding the kind of things we want from

Argentina. From our perspective, in the region this should

include:



-- the positive role we expect Argentina to play in avoiding

conflict and shoring up democracy in Bolivia;



-- influencing Ecuadorian President Correa to behave more

moderately;



-- taking a more mature, balanced, and constructive position

on the Colombian conflict; and



-- positively influencing her Venezuelan counterpart. (Note:

This is the same message CFK reportedly received from Sarkozy

during her one-on-one with him April 7.)



5. (SBU) On the economy, it would be worthwhile to discuss

steps Argentina could take to address a lack of foreign

investment. The AmCham board will share their specifics with

you. You can help set the stage for Secretary Paulson's

Friday a.m. meeting with Economy Minister Martin Lousteau by

stressing the need for a concerted and serious effort on

Paris Club, bilateral investment disputes, and eventually

bond holdouts. Your interlocutors are likely to raise the

GOA's desire to revive a 1997 U.S.-Argentina Memorandum of

Understanding calling for annual high-level bilateral

consultations; this could be useful to get a more concrete

GOA commitment to the importance of relations. End

Introduction.



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Up From A Recent Low Point

--------------



6. (SBU) You recall that it took seven weeks to work through

the discord over the Miami case surrounding the suitcase

scandal. On January 31, when I met with CFK, we agreed to

put the case aside and to work to strengthen bilateral

cooperation. CFK, her ministers, and other Kirchner

administration supporters have stuck to the agreement and



kept quiet about the court case. CFK received with much

publicity Codel Engel and senior intelligence official Kerr,

while Alberto Fernandez has publicly defended bilateral

relations. Still, everyone here is aware that the

investigations (in the U.S. and, less convincingly, in

Argentina) drag on, and that information may yet emerge that

some might find unwelcome.



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A Government Against the Ropes

--------------



6. (SBU) A GOA decree issued March 11 that increased export

taxes on Argentina's main agricultural export crops

precipitated the worst political crisis of either Kirchner

administration. Argentina's four principal agricultural

organizations showed rare unity in organizing production

stoppages and blockades of Argentina's transport

infrastructure for twenty days, leading to nationwide

shortages of such staples as beef, chicken, dairy products,

and vegetables. Agricultural producers decided April 2 to

lift the strike for thirty days and hold discussions with the

GOA.



7. (C) The agricultural strike is another telling example of

poor crisis management by CFK and her advisors. What began

as a miscalculation -- it's difficult to tell which straw

will break the camel's back -- became a full-blown crisis as

CFK first eschewed conciliation with agricultural producers

and then ignored the considerable proportion of Argentines

sympathetic to them. Instead, she reverted to the rhetoric

of class warfare, utilized government-friendly unions and

"social groups" (thugs) to intimidate protestors, and railed

about unfair press coverage and prejudice against her as a

woman. Now, during what is supposed to be a period of

negotiation, we are seeing things like unionized truckers

surrounding and blockading the offices of a leading soy

producer, and talk of new commissions to review press

coverage. Since producers vowed to block Argentina's roads

again if they are unable to reach an acceptable agreement

with the government, it appears this crisis is far from being

resolved.



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Possible Deliverable: A Revived Bilateral MOU

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8. (SBU) In connection with your visit, the Argentines have

proposed reviving a 1997 MOU signed by Madeleine Albright and

then-FM Guido Di Tella during President Clinton's visit to

Buenos Aires. Under a "Special Process of Regular High Level

Bilateral Consultations," the agreement calls for yearly

meetings of delegationsled by the Secretary of State and

Foreign Minister -- or their designees. The agenda, to be

determined by both sides, should advance "reciprocal

understanding, existing cooperation and, whenever possible,

policy coordination between both states in foreign policy."

The agreement was used to convoke meetings in Buenos Aires in

1997 and in Washington in 1999, and reflected Menem's

pro-U.S. tilt. While we want to avoid promising high level

meetings we can't deliver, reviving the MOU now would

illustrate that relations are back on track, with both sides

committed to strengthening the bilateral relationship. We

could also use the MOU to encourage the MFA to broaden its

agenda with us and to speak more often to the importance of

the bilateral relationship.



9. (SBU) This MOU, and the GOA's plans to revive it, will be

the focus of your April 11 meeting at the MFA. As envisioned

by the MFA, the 90-minute meeting would occur under the

auspices of the 1997 Framework and emphasize the

intensification of the bilateral agreement. The focus at the

meeting would be reaching an agreement on a bilateral tempo

of work in 2008 in MFA/State-chaired meetings. We understand

the MFA seeks commitment to engage in one high-level

bilateral meeting in 2008 (probably involving new Deputy

Foreign Minister Taccetti, who has served before in

Washington and Houston). The MFA also seeks agreement on

two-three lower-level meetings in Washington or Buenos Aires

during the course of the year. The two sides could share

ideas on possible issues that each side may wish to discuss

at later meetings, but we do not believe the MFA intends to

agree an agenda on April 11.



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Econ Issues: Paris Club, Bond Holdouts, ICSID Cases

-------------- --------------



10. (SBU) Paris Club (PC) is back in the news again this

week, driven by discussions on the subject with Economy



Minister Lousteau during the April 4-7 Miami IDB conference

and also by CFK's April 7 meeting with French President

Sarkozy in Paris. Lousteau will see Secretary Paulson April

11 in Washington and his Finance Secretary is seeking a

longer meeting with Treasury DAS O'Neil. GoA officials state

that resolving the PC is important but not urgent, continue

to push for generous restructuring terms, reject any IMF

oversight, and refuse to use Central Bank reserves to pay

down arrears. It is unclear whether CFK lobbied the French

to support this position with other PC member countries, to

take advantage of Sarkozy's direct interest in facilitating

the financing of French company Alstom's deal with the GoA to

build a US$3 billion high-speed train between Buenos Aires

and Rosario and Cordoba. (The financing for this contract

would be cheaper with support from France's Export Credit

Agency, which will not be possible without a PC agreement.)



11. (SBU) At the March 2008 PC meeting, creditors maintained

their common resolve to reject GoA arguments for special

treatment, particularly GoA claims that it does not have the

resources to pay PC debts over a short period of time. On

April 7, PC members reiterated that an IMF program is

required for any rescheduling, and without one Argentina

should clear its arrears on a voluntary basis. If CFK or

other GoA officials raise PC during your visit, you may want

to inquire about CFK's meeting with Sarkozy and latest

contacts with the PC Secretariat (Lousteau may see the lead

Secretariat official this coming weekend at the World



SIPDIS

Bank/IMF meetings.) You can also counsel that while U.S.

Treasury officials have consistently signaled a desire to

work constructively with the GOA, the Argentines need to put

forward serious ideas that reflect the realities of their

ability to pay and the PC members' points of view.



12. (SBU) The GoA -- and particularly CFK -- continue to

reject in public any accommodation with holdout bondholders

(of debt currently totaling about $28 billion),who continue

to seek compensation through U.S. and international courts

(so far without success in attaching GoA assets). Although

Foreign Minister Taiana and Economy Minister Lousteau have

acknowledged in private that this is an issue that the GoA

must deal with, there is no question that this is a low

priority. Eventually, the GoA will want to end the standoff

because it precludes it from issuing debt under international

law. During your meetings, you may want to acknowledge that

this is not a GoA priority, but highlight that U.S. holdouts

continue their lobbying of Congress and the administration,

so we hope that the GoA will see it in its own interest to

reach an accommodation with holdout bondholders.



13. (SBU) Finally, the GoA continues to stonewall on the

settlement of numerous ICSID international arbitration claims

by multinational firms, including many energy sector players

who argue that the GoA's "pesification" and later freezing of

dollar-based tariffs in the aftermath of the 2001/2 economic

crisis effectively expropriated their assets. While the face

value of U.S. company ICSID claims alone total totals over $4

billion, many U.S. companies have suspended -- but not

withdrawn -- their ICSID suits in order to win GoA

concessions on new business opportunities. One ICSID case

filed by U.S. energy company CMS was recently the first to

finish the tortuous 5-year ICSID arbitration and appeal

process. The GoA, however, has declined to pay the $150-odd

million award to CMS, claiming that CMS must now attempt to

collect through Argentine courts. CMS is considering whether

to seek more direct USG advocacy on its behalf, citing GoA

obligations to the USG under our Bilateral Investment Treaty.

CMS recently tried (and failed) to use NY courts to seize

some GOA funds. During your meetings, you may want to

suggest that a comprehensive resolution of outstanding

international arbitration claims will help get Argentina the

new foreign capital it needs to develop its overburdened

domestic infrastructure and that the USG is under increasing

pressure from U.S. ICSID claimants to encourage the GoA to

meet its final ICSID judgment obligations.



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Public Diplomacy

--------------



14. (SBU) One of our major challenges is forging

relationships of trust with a government that has been

largely inward-focused and intent on maintaining an image as

independent from our country, often playing with local

anti-American sentiment. As you know, Argentina consistently

registers the highest levels of anti-Americanism in the

hemisphere in public opinion polls. I have made working to

change these perceptions the Embassy's highest priority.

That is why we have scheduled your social responsibility

event with underprivileged kids. We believe it is vital that



Argentines see that the U.S. has a positive social agenda as

well as creating win-win opportunities like enhanced science

or education cooperation.



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Security Issues

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15. (SBU) Argentina is, nevertheless, a Major Non-NATO Ally

and cooperates in regional security, counter-terrorism, drug

interdiction, and in contributing troops to U.N. peacekeeping

missions. The GOA has been a strong international voice on

arms control and nonproliferation issues. In the IAEA, the

GOA has voted to refer Iran's noncompliance to the UNSC. The

GOA has also endorsed the Proliferation Security Initiative

(PSI).



16. (SBU) Terrorism and Defense: Argentina was itself a

victim of international terrorist attacks in the 1990s and

has been a cooperative partner in countering terrorism,

especially in the Tri-border Area. We would like them to be

more active internationally to warn about Iranian-sponsored

terrorism, based on the 1992 and 1994 attacks. We assist the

GOA in capacity-building in the Financial Intelligence Unit,

within the restraints created by Brooke Amendment sanctions,

and to build the capacity of Argentine law enforcement

forces. We work closely with the Argentine military on

modernization, increasing interoperability, and training and

education focused on civilian control, respect for human

rights, defense resource management, strategic planning, and

science and technology. The Defense and Justice/Security

Ministers have been those most willing to publicly praise

U.S. assistance.



17. (SBU) International Crime and Drugs: Argentina is a

transshipment point for narcotics emanating largely from

Colombia, Peru, and Bolivia. Our Mission is focused on

institutional capacity-building and expanding training

opportunities for law enforcement officials, prosecutors and

judges. Justice and Security Minister Anibal Fernandez made

an announcement a month ago at a UN drug conference in Vienna

that the GOA intends to redirect its counternarcotics efforts

from the pursuit and prosecution of drug users to free more

resources for going after traffickers. We will work with

Fernandez and the relevant agencies to try to limit

unintended, negative impacts onour bilateral and regional

counternarcotics efforts as this new policy coalesces.



18. (SBU) Democracy and Rule of Law: We work with the GOA,

media and civil society to strengthen democratic

institutions, fight corruption and reinforce civilian control

of the military. We promote key reform efforts such as

ending the election of representatives by party slate lists,

increasing governmental transparency, and limiting public

corruption and strengthening the political independence of

the judicial branch. We cultivate the GOA as a partner in

the defense of democracy and the observance of human rights

in countries like Cuba, Venezuela, and Bolivia, as well as UN

peacekeeping in Haiti. As noted earlier, this is an area

where we seek more Argentine initiative.



19. (SBU) Human Rights: The Government of Argentina

generally respects the human rights and fundamental freedoms

of its citizens. The Kirchner government's human rights

policy focuses on seeking justice for the human rights

violations committed during the 1976-83 military

dictatorship, which resulted in the disappearance of

11,000-30,000 political dissidents.



20. (SBU) Human Trafficking: There is a chance that

Argentina's Chamber of Deputies will pass an anti-trafficking

legislation on the day before you arrive. Argentina is

currently on the USG's Tier-2 Watchlist for lack of progress

in providing greater assistance to victims and curbing

official complicity in trafficking at the provincial level.

We have been working hard with NGOs, lawmakers, and

government officials for the past year in an effort to push

for comprehensive anti-trafficking legislation. If the

Chamber of Deputies does pass relevant legislation, we would

seek to take advantage of your presence to publicize that

milestone.



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Commercial Landscape

--------------



21. (U) Over 450 U.S. companies are currently operating in

Argentina and employ over 150,000 Argentine workers. U.S.

investment in Argentina is concentrated in the manufacturing,

information, and financial sectors, but covers many fields.



Other major sources of investment include Spain, Chile,

Italy, France, Canada, Japan, and Brazil. U.S. investment in

Argentina is concentrated in the manufacturing, information,

and financial sectors. A range of economic experts have

identified challenges to sustaining high levels of economic

growth in the future, including: capacity constraints; the

need for substantial new investment in primary

infrastructure; potential energy shortages in the face of

high growth and domestic energy prices kept below

international market levels; increasing scarcity of highly

skilled labor; inflation and the government's heterodox

policies to contain it, including price controls.



22. (SBU) In support of U.S. companies operating in

Argentina, we are encouraging the GoA to support a more

welcoming investment climate, with greater regulatory, legal,

and tax regime consistency. You will get an understanding

for how the U.S. business community feels about the local

climate during your April 10 coffee with the AmCham Board.

We expend a good deal of effort supporting and working with

U.S. companies. Regarding ongoing WTO trade negotiations,

Argentina has staked out a hard-line position that links

acceptance of developed economy agricultural sector proposals

with more developing nation flexibility on industrial tariff

cuts. We have been urging them to adopt a more constructive

approach.



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The Media and the GOA

--------------



23. (SBU) Both Kirchner administrations have had longstanding

disputes with various media over issues such as the

pseudo-censorship implied by the federal government being a

principal source of media advertising revenues. The farm

strike marked a new escalation in the GOA's media battles.

CFK issued frequent criticisms of the media during the

strike, alleging "discriminatory" commentary and singling out

one cartoon (in Clarin) for particular attack. The GOA then

announced that it plans to set up a new watchdog entity, with

the power to levy sanctions, to check for discrimination in

the media. That proposal, not surprisingly, has prompted a

flood of editorials and protests by media associations this

week.

WAYNE