ARGENTINE CABINET CHIEF SUPPORTS IMPROVED

C O N F I D E N T I A L BUENOS AIRES 000520

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/14/2018
TAGS: PREL PGOV ECON EINV EPET KPAO KCOR MARR VZ AR
SUBJECT: ARGENTINE CABINET CHIEF SUPPORTS IMPROVED
COOPERATION

Classified By: Ambassador E. Anthony Wayne for reasons 1.4 (B) and (D).


1. (C) Summary. Argentine Cabinet Minister Alberto
Fernandez told A/S Shannon on April 10 that he firmly supports
the improvement in bilateral dialogue and cooperation, saying
"we need to have good relations with the USG." Fernandez
placed high priority on attracting U.S. investment and on
resolving Paris Club debt issues. A/S Shannon and
Ambassador Wayne explained the U.S. desire to help, but that
Argentina needs to put forward a serious Paris Club offer.
Fernandez agreed to meet with the leaders of the AmCham to
discuss the investment climate and to work on some specific
commercial issues. AF predicted that a solution would be
found to the disagreement with Argentina's agricultural
sector, but said the government would face more such
protests. On Colombia, AF urged the USG to support a
humanitarian release of hostage Ingrid Betancourt. On
Venezuela, AF said Chavez took the GOA by surprise with his
decision to nationalize Sidor, the steel company owned 60%
by Argentina's Techint group. The Ambassador urged AF to
meet with Northrop Grumman on its bid to supply Argentina
with 3-D radars. At the Ambassador's request, AF agreed to
look into the GOA's delay in signing a production contract
with Lockheed Martin. AF welcomed news of upcoming visits
by Southcom Admiral Stavridis by the USS George Washington and by
FBI Deputy Director Pistole, and said he hopes to visit
Washington in May. End summary.

Bilateral Relations on an Upswing
--------------


2. (C) A/S Secretary Thomas Shannon lunched April 10 with
Argentine Cabinet Minister Alberto Fernandez (AF) at the
Casa Rosada. Argentine Ambassador to the U.S. Hector
Timerman and Ambassador Wayne accompanied. Timerman opened
with an enthusiastic recounting of the very warm reception
which President Bush had given him the day before while
presenting his credentials in the White House. Timerman
was clearly elated with the letter the President presented
to him as well as the manner in which the President showed
interest in his family history and broke protocol to look
at the book of his father's experience in prison which
Timerman had brought as a gift.


3. (C) A/S Shannon noted that President Bush's reception
of the new Argentine Ambassador and the warm reception that
he was receiving bode well for building the mature
relationship which Alberto Fernandez (AF) has said many
times before that Argentina seeks. He explained that we
should find a way to normalize government-to-government
conversations between Argentina and the United States so we
could maintain and build solid relations. As part of this
effort, we planned to agree with the Foreign Ministry on a
mechanism to maintain dialogue and a work plan on a wide
variety of themes.


4. (C) AF said that he agreed fully with A/S Shannon's
comments. All countries have differences of opinions, AF argued,
but "no country in the world today can afford to be cut off
from the United States." Plus, in the case of Argentina, we work
together very well in the fight against terrorism and drug
trafficking, and now with the passage of a federal law
against trafficking in persons (TIP),hopefully we can add this
area to the list of good cooperation. A/S Shannon offered
his congratulations on the passage of the anti-TIP law and said
he hoped we could share with Argentina some lessons we have
learned in our own efforts to fight trafficking.


5. (C) Turning to economic themes, AF said he looked forward to
working with the USG on financial and commercial matters. He
said he knows that the USG and the IMF are not one and the same,
but unfortunately too many people in Argentina treat the two as
synonymous and place blame on the USG for the IMF's advice and
stance during and following the 2001/2 economic crisis. But,
Argentina wants to work with the USG to solve problems and to

create opportunities, especially by attracting more U.S.
investment and for this we need good channels of
communication. Argentina is working hard to develop
mechanisms for better communication and cooperation with
Brazil, AF said. For example, President Kirchner (CFK) would
call President Lula April 10 to try to coordinate on President
Chavez' decision to nationalize the Sidor steel plant. This GoV
decision came as a surprise, AF said, and the GOA would
coordinate its response with Brazil, as the Brazilians are also
investors in the plant. He noted that Argentina is well-
represented in the United States. Ambassador Timmerman has the
full confidence of the President, and the new Consul General in
Miami is also a well-trusted member of the "Calafate Group," an
exclusive informal grouping of early supporters of Nestor Kirchner.

Paris Club
--------------


6. (C) A/S Shannon explained that we want a fluid and
frank dialogue with Argentina. He then described the
record of U.S. work in the hemisphere over the past seven
years, and that President Bush wants to turn over a good set
of productive regional relations to his successor next
January. AF returned to the desire to have more U.S.
investment and to solve the Paris Club debt issue. A/S
Shannon indicated that, in his meeting earlier in the day
with the directors of the American Chamber of Commence, they
all indicated a desire to work well as partners
with the GoA and that they saw the importance of Argentina
and Paris Club working out a solution that would help
Argentina attract more financing and would open the way for
subsequently addressing other investment and debt issues,
such as the bondholders. The USG wants to help in finding
a solution in the Paris Club process, the A/S said, as it
would be good for the United States as well as Argentina to put
the problem behind us. Economy Minister Lousteau's April 11
meeting with Treasury Secretary Paulson and his team would
be a good opportunity to discuss possibilities.


7. (C) The Ambassador explained that it was important that
Argentina present a serious proposal to the Paris Club that
recognized the realities of the Paris Club perspective and need
for consensus among its members, as well as the legal and
other limits of key PC creditors, including the USG. There
are several ways forward, including a voluntary payment
plan, but right now there is probably a gap between what
Argentina would like to do and what PC members would like
to receive. A serious first offer is important and, with
goodwill, a way can be found forward. AF said that
Argentina could not accept an IMF role in an agreement for
many reasons, but a role by allowing the IADB or another
institution (e.g. OECD) to play an oversight role could be
acceptable and provide some of the third-party expertise sought.
He noted that Argentina will have very heavy repayments of
debt during 2009-2011 which would limit repayment
possibilities, whereas after 2011 Argentina could handle
additional repayments more easily. He said that CFK had
conveyed a similar message while visiting Paris, and
Lousteau will share it with Treasury Secretary Paulson at their
April 11 meeting.

Antonini-Wilson
--------------


8. (C) AF said that the controversy over the
Antonini-Wilson case and the trial in Miami is contained,
but CFK is still very sensitive about it. She felt
unfairly caught in the middle between the U.S. and
Venezuela. After all, it was Argentine officials who found
the money, and in the GoA view, the initial statements by
U.S. prosecutors were in error. AF said they do think
"mafiosi" were involved, but "we mean the business people
doing shady deals involving Venezuela", not the USG. These
guys do shady things here and in Florida, AF said. A/S

Shannon explained that this is an independent judicial
process which has its own dynamic, with two of the four
under arrest pleading guilty. But there is no question
that U.S. authorities were and are very concerned about the
efforts of the Venezuelan government to make illegal
acquisitions and engage in other questionable operations in
Florida.

U.S.-Argentine Mechanism
--------------


9. (SBU) Ambassador Timmerman explained that the United States
and Argentina would revise a long dormant mechanism for high-
level bilateral dialogue between the two governments. A/S
Shannon said that this would not only be about foreign policy
issues, but also cover economic matters as well as science and
technology, for example. Ambassador Wayne explained that we had
established dialogues like this around the world, and shared
his experience in creating a wide-ranging dialogue with the
European Union in the 1990s. He said we would need AF's
support to get other ministries to participate; he agreed
to do so.

Disagreement with the Agricultural Sector
--------------


10. (C) AF shared his perspectives on the serious dispute
between the government and the rural sector over an
imposition of higher export taxes. He noted that the rural
sector in general exports without adding a great deal of
value to the agricultural goods it sells. The government
therefore believes it is in the interest of Argentina to
impose export taxes so that money can be reinvested in
other, higher value-added sectors and in public infrastructure.
AF argued that, as international commodity prices rose, the
government felt that it needed to capture more of the higher
prices to use elsewhere and proposed a sliding tax, which, he
argued, was designed so farmers would still realize additional
profit. But farmers had already calculated and planned on the
profit they were going to make and thus were angered when the
government announced the new system. "They had won the lottery,
and we were taking their winnings away," AF noted. He added
that the rural sector also has a relatively small number of
big producers and many smaller producers with smaller
margins. The government now realizes it should not impose
the same export taxes on them as it does on the big producers.


11. (C) In an apparent moment of frankness, AF said he had
warned before the decision to impose the taxes that this
was not a good time to do it as people's expectations were
so high, but the decision was made to go ahead. The debate
right now, he said, is all about the margin of
profitability. And the situation is complicated because
"not many people in the rural sector -- or in general --
pay their income taxes fully". AF predicted that through
dialogue with the farm sector a solution would be found,
with the focus on collecting from the biggest 5,000
producers. But he noted that this did not mean there would
be an end to problems for the government. Many people have
different expectations these days. This is not a period of
economic crisis any more. Others will be more willing to
express their claims and challenge the government.

Conflict with the Press
--------------


12. (SBU) Ambassador Wayne asked about the President's
criticisms of press coverage during the Agricultural strike,
particularly of the largest daily, Clarin and its sister TV news
channel. (Comment: The government has since indicated that it
will strengthen monitoring of the media for discrimination, and
Nestor Kirchner and allies have mounted a campaign against
Clarin.) AF said that Clarin has very capable journalists,
editors, and managers, but the problem is that it has too

much power. The Clarin group controls too many media of
communications (press, TV, radio and cable). In addition, he
continued, it wants to take a big position in broadcasting
through cell phones. That is just too much concentration of
power to influence public opinion, he concluded, and the
government is reacting to that.

Investment Climate
--------------


13. (SBU) Returning to his meeting with the U.S. Chamber
leaders, A/S Shannon said that the business leaders clearly see
opportunity and potential in Argentina, but they also see a
number of serious obstacles to more investment. They want to
have a dialogue with the government in which they could be seen
as partners in improving the climate for investment and thus
allowing more investment to come. AF said that as he had told
the Ambassador a few days earlier, he would be very happy to
meet with the AmCham leaders in the next couple of weeks to
initiate a better dialogue. CFK wants more U.S. investment, in
part because "we don't see a large corruption problem with U.S.
companies" as had been the experience with European companies,
he said.

AF Visit to the U.S.
--------------


14. (SBU) A/S Shannon said he hopes that AF will
reschedule his visit to the U.S. at his convenience.
Ambassador Timmerman suggested that AF should call on
relevant committee chairs of the House and Senate and on
senior officials at State and the White House (given his
chief of staff role). Ambassador Wayne recommended a call
on Commerce Secretary Gutierrez and possibly at Treasury,
too. AF said he would like to visit in May and added "we
need to have good relations with the United States."

Venezuela
--------------


15. (C) In response to a question from A/S Shannon,
AF said that President Chavez did not consult or even
inform the GoA about his decision to nationalize the Sidor
steel plant (which is 60% owned by the Argentine company
Techint),to the GoA's great concern. A/S Shannon explained
how he had several times tried to establish better
relations and cooperation with Venezuela, focusing on
concrete issues like stopping drug traffickers. But he had
been rebuffed each time. He said he could only conclude
that anti-Americanism has become so important for Chavez'
domestic standing that he is not interested in better
relations. AF said that CFK had a number of times in
private questioned Chavez' behavior, but he wondered why
Chavez did not want to cooperate in fighting drugs because
he had not shown any sympathy for trafficking when talking
to or working with the GoA. "Perhaps it is just the
symbolism of cooperation with the United States that he does
not want to accept," AF said. A/S Shannon said that might be
it, but there should be a basis for communication and for
working on important problems between the U.S. and Venezuela.

Colombia
--------------


16. (C) A/S Shannon asked what CFK had discussed with
President Sarkozy about the Colombia hostage situation
during her visit to Paris earlier in the week. AF said the
focus was on Ingrid Betancourt, and added that he hoped
President Bush would be willing to call President Uribe in
support of an effort to free her. This would be a good
public sign from the USG as it would show care for the
humanitarian aspects of this conflict. AF noted that the
Argentines have the impression that Uribe does have a great
deal of concern for Betancourt's situation. Shannon then
provided a detailed description of the situation in
Colombia, noting the deep lack of confidence between the

government and the FARC, the FARC's past manipulation of
Colombian governments using hostages, and recalling the
number of victims of FARC violence, as well as the very
high popularity of Uribe's tough stance on the FARC.


17. (C) AF said that the GoA is not and never will be
sympathetic to the FARC, but Betancourt is a symbol of
humanitarian need, and right now it seems that she is not being
freed because the government of Colombia will not halt its
offensive against the FARC, with the U.S. supporting that stance.
AF again urged a U.S. public statement in support of a
humanitarian effort. A/S Shannon said that we have said a
number of times that we support releases of hostages, but
the government of Colombia has to be involved and consulted
in any international humanitarian effort. Ambassador Timerman
noted the example of the Israelis who have often released
hundreds of prisoners to get a soldier back, and urged that
the U.S. see support for a humanitarian release as consistent
with its human rights leadership.

U.S. Visits and Commercial Issues
--------------


18. (SBU) Ambassador Wayne noted that the USS George Washington
would be in Argentine waters the first week of May and that we
would be inviting AF and CFK to fly aboard. SouthCom Admiral
Stavridis will also visit that week. In the middle of May,
Deputy FBI Director Pistole will also visit. AF welcomed the
visits. Wayne reminded AF that he had had to cancel his meeting
with Northrup Grumman (NG) during the ag crisis, but NG still
hopes to compete to sell radars to Argentina. AF said he is
favorable disposed to NG's quality and offered to meet with them
with the Defense Minister present in the next two weeks if a
senior company official can visit. (Subsequent press reports
indicate that the GOA will allow NG to compete for the sale
as a "gesture" to the United States; we are in the process of
confirming.) Wayne informed AF that Lockheed Martin was going
to have to shutdown operations very soon in Cordoba if the President
does not sign the contract agreed upon last October. AF said
that if the Ambassador sent him the specifics, he would
address the problem.


19. (SBU) Finally, the Ambassador briefed AF on the excellent
cooperation between the U.S. Department of Homeland Security and
GoA to return thousands of pounds of Argentine fossils seized in
the U.S. He suggested, and AF agreed, that we find a way to
celebrate this cooperation once the fossils arrive in
Argentina.


20. (U) WHA A/S Thomas Shannon cleared this cable.
WAYNE