ARGENTINA: AMBASSADOR DISCUSSES ECONOMY, FDI, & AG

C O N F I D E N T I A L BUENOS AIRES 000727

SENSITIVE
SIPDIS

E.O. 12958: DECL: 05/28/2018
TAGS: PREL PGOV EAGR ECON EFIS EINV ENRG EPET ETRD
AR
SUBJECT: ARGENTINA: AMBASSADOR DISCUSSES ECONOMY, FDI, & AG
CRISIS WITH GOVERNOR OF CHUBUT

REF: BUENOS AIRES 0131

Classified By: Ambassador E.A. Wayne for Reasons 1.4 (b,d)


1. (C) Summary: Ambassador Wayne met with Mario Das Neves,
Governor of Chubut May 23. Most notably Das Neves (protect
strictly) sharply criticized both sides for failure to
resolve the agriculture strike, specifically criticizing the
negotiations for acting in bad faith. He expressed fear that
the problems could rip the country apart and said that it did
not appear the GOA had a clear strategy to resolve the
dispute. They also discussed Das Neves's new position in the
Peronist Party (PJ) and his province's economic situation.
The governor said his new PJ position made him responsible
for coordinating PJ party strategy on the national level. He
stated that the economy of Chubut continues to grow, driven
by trade and investment, which is allowing for subsequent
improvements in education and infrastructure. Before
departing, the governor extended an invitation for the
Ambassador to revisit his province, which resulted in an
impromptu discussion of ecological challenges and the promise
of renewable energy. End Summary.

NK Ally
--------------


2. (SBU) The Ambassador congratulated Governor Das Neves both
on his gubernatorial reelection (which he won with over 70
percent of the vote) and his recent appointment to the PJ
position of Secretary of Party Coordination. The governor
described his role as "coordinating strategy" and added that
he would be made provincial president of the party at the end
of the month.

Oil, FDI, and Immigration Yield Growth
--------------


3. (SBU) The governor stated that the economy of Chubut
continues to grow, driven by exports of petroleum, aluminum,
fish, and wool. He claimed Chubut was responsible for 50% of
Argentina's petroleum exports, 90% of its aluminum exports,
and a major share of its fish and wool production. Chubut's
growth is augmented by foreign investment (about $650 million
this year),the recent ten-year petroleum concession
extension agreement, and discovery of a sizeable new oil
reserves by Pan American Energy (ref A),a joint venture of
British Petroleum and Argentine-owned Bridas Corporation. He
suggested that a new find may be confirmed in the weeks
ahead. Ambassador Wayne highlighted the positive involvement
and investment of American companies, such as General
Electric and Occidental Petroleum. Das Neves agreed, noting
that General Electric (GE) was a partner for past
infrastructure projects and could have a role in future
initiatives that would add significant value for the
province, including an upcoming energy pipeline project.
Ambassador Wayne further mentioned that the Embassy could
serve as an interlocutor with GE or other U.S. companies if
needed. He could also work with the governor to develop
exchange and cooperation with the U.S. on energy related
research and exploration. The province of Chubut could
productively develop contacts with energy-rich states such as
Texas and Oklahoma. When asked if he would be visiting the
U.S., the governor responded that he had plans to visit in
the near future.


4. (U) Economic activity is fueling job creation sufficient
to give the province 3.7% unemployment, the lowest in the
country, necessitating a significant influx of Bolivian and
Paraguayan immigrants. Ambassador Wayne marveled at Chubut's
potential for eco-tourism with its unique whale and penguin
populations. The governor agreed, but noted that Comodoro
Rivadavia, the provincial capital, is more
than 12 hours flying from North America with limited flights
available. Thus, he hoped for increased airline connections
to the capital.


5. (U) The Ambassador observed that Chubut was in an enviable
position, having a combination of extensive natural resources
and a diverse economy along with a relatively low population.
Das Neves affirmed this and noted that it has allowed him to
use revenues to improve the provincial education and health
systems.

GOA Not Addressing Root Cause of Ag Strikes
--------------


6. (C) The Ambassador noted recent quotes from Das Neves in
the press criticizing GOA handling of the agricultural
crisis. The governor (protect strictly) replied that at the
age of 57 he had seen many conflicts in Argentina and had
grown inured to a lot of "noise," but this was the worst

strike he had seen. He said that, after 72 days of a strike
interrupted several times by talks, it was fair to conclude
that (protect strictly) both sides had failed. He argued
there was bad faith and mistrust on both sides -- hardly the
conditions for successful negotiations. The public's
perception was that both sides were acting capriciously. Das
Neves notes his province is not a major soy producer or
agricultural exporter, but he feared the GOA was running the
risk of letting the farm crisis rip the country apart. The
GOA did not have a convincing peacemaking plan or
communication strategy, and he claimed he had conveyed this
earlier the same day to former president NK.

No News on Hydrocarbon Tariff Export Increase
--------------


7. (SBU) When asked about progress on the hydrocarbon tariff
dispute (ref A),Das Neves said that he was in contact with
some of the same people as the Ambassador. He claimed he
wanted to resolve the situation and ensure the continued
investment flow and new exploration in his province.

From Invitation to Environmental Discussion
--------------


8. (SBU) Before leaving, Governor Das Neves extended to the
Ambassador an invitation to revisit his province. The
Ambassador recalled his last trip fondly, saying that he
enjoyed touring the cherry farm which exported to the United
States. The governor said that recent environmental
developments were adversely affecting the cherry growing
season. He claimed Chubut's average temperatures had risen
seven degrees Celsius in the last 20 years, and snow was no
longer falling on the coast. He said the higher temperatures
were enabling wine production to move south into Chubut
territory. He went on to note that water was not an issue
thanks to the fresh water supplied by the Chubut and Chico
Rivers, and that the abundance of water in the province was
making possible significant land reclamation. Ambassador
Wayne expressed his concern about the environmental changes,
and asked about the renewable energy ventures, particularly
wind farms, that he learned about the last time he came to
Chubut. Das Neves responded that the provincial government
had a stake in the wind farm initiative, which he believed
would be very profitable and ready in 2009. He said private
companies had already contracted to buy the electricity at
higher prices needed to cover generation costs. The
Ambassador congratulated him on his progress.

Comment
--------------


9. (SBU) With NK recently naming Das Neves both PJ Secretary
of Party Coordination and provincial president of the party,
it appears the governor is back in the good graces of the
Kirchners, if indeed he ever left them. News sources
reported NK as "furious" at comments by Das Neves criticizing
the GOA, and Cabinet Chief Alberto Fernandez in particular,
for the government's response to the agriculture crisis.
WAYNE