SCENESETTER FOR SECRETARY SOLIS' VISIT TO ARGENTINA, OCTOBER 6-8

UNCLAS BUENOS AIRES 001095 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PREL ELAB PGOV ECON ETRD AR SUBJECT: Scenesetter for Secretary Solis' Visit to Argentina, October 6-8 ¶1. (SBU) On behalf of Embassy Buenos Aires, I warmly welcome your October 6-8 visit to Argentina. I will have been in the country a little less than three weeks when you arrive, and I am honored to have you among my first visitors. The Government of Argentina will also be extremely interested in the first visit by an Obama Administration cabinet member to Argentina. The GOA is interested in deepening relations with the United States and values high level contacts with the administration. ¶2. (SBU) Even in the company of ministers from throughout the hemisphere, your visit is certain to generate attention and press. Most of that press we expect to be positive, but we will also draw your attention to our separate message on an ongoing labor dispute involving U.S. company Kraft Foods, a dispute that has generated critical comments in Argentina about the U.S. role. ¶3. (SBU) I look forward to hosting you and some of your party to dinner at my residence on October 7. We plan to include leaders from organized labor as well as some private sector and civil society representatives. I would also plan to participate in your bilateral meeting with the Argentine Minister of Labor Carlos Tomada. I hope that you will have the chance to meet President Cristina Fernandez de Kirchner, who I understand is planning to open the Labor Ministerial. While I understand that meeting may focus on regional labor issues, it will be a good opportunity to encourage Tomada to play a role in addressing issues like trafficking-in-persons and child labor in Argentina while underscoring our support for the full application of labor rights, something worth underscoring following the dispute at Kraft foods. ¶4. (U) Please let me know personally if there is anything else we can do to meet your needs while in the country. In the meantime, I have asked my Embassy staff to make every effort in support of you and your team while in Argentina. I hope that your meetings will be a significant success. I am providing the following background material on Argentina to help you prepare for your visit. -------------- Political Context -------------- ¶5. (SBU) You arrive in Argentina three months after the ruling Victory Front (FpV) suffered an electoral defeat in the June 28 congressional mid-term elections. In the wake of the global economic crisis, President Cristina Fernandez de Kirchner (CFK) asked the Congress to move up the congressional mid-term elections from October to June, purportedly so that Argentine politicians could get past electoral politics and focus on the crisis. The elections were portrayed by many as a referendum on the President Fernandez de Kirchner and her politically active husband and predecessor as President, Nestor Kirchner. The FpV and allies won only about 30% of the vote nationwide and lost their working majority in both houses of Congress. In the key race in the country's largest population center, Buenos Aires Province, Nestor Kirchner led his party's candidate list but lost by 2.4 percentage points to the ticket headed by multimillionaire Peronist dissident Francisco de Narvaez. Kirchner won a seat in Congress, but the second-place finish was a clear setback. Ruling party candidate lists also placed second or worse in major provinces like Santa Fe, Cordoba, and Mendoza, but the opposition victories were shared among different national coalitions and provincial movements. ¶6. (SBU) A week after the FpV's defeat, CFK made a number of cabinet changes. In an effort to regain political momentum, the government initiated a round of talks in mid-July with opposition political parties, the farm sector, as well as the country's 23 governors and the mayor of Buenos Aires City. The dialogue provoked little in the way of consensus policies but did exacerbate splits in the opposition. ¶7. (SBU) In August, the CFK administration launched a major push to reform the country's antiquated media laws. The initiative, which would limit ownership of multiple television and radio broadcast channels by single groups, was seen as a challenge in particular to the large Clarin Media Group, which has been consistently critical of the Kirchners. The government is pressing to pass the bill prior to the seating of the new, opposition-controlled Congress in December, but dissents by some ruling-party Senators may require the government to compromise on the legislation, including on issues of media ownership and on government influence over broadcast content. Also in August, the Government secured congressional approval to extend for one year special executive powers over the economy, including the ability to set agricultural export taxes. ¶8. (SBU) CFK took office on December 10, 2007, succeeding her husband. CFK is an experienced politician, having served in the Chamber of Deputies and later in the Senate during her husband's first term. She won the 2007 presidential election with 45% of the vote over a divided opposition. Having campaigned on themes of change and continuity, she retained most of her husband's cabinet and agenda. During CFK's first year in office, however, she suffered a sharp drop in popularity due to a four-month conflict with the farming sector over agricultural export taxes, a conflict that is still simmering. Since then other factors, including a gradual economic decline, perceptions of rising crime, and political disillusionment among certain segments of the population, have contributed to continuing political difficulties for the President. Her approval ratings now range between 26% to 30%. ¶9. (SBU) Looking ahead, CFK's major policy challenges are to maintain government programs, prevent job losses, prevent a major slip in the GOA's finances, and address public concerns over poverty and crime and the resulting deterioration in personal security. Meanwhile, the opposition's challenge is to unify and present a clear policy alternative. Presidential elections will occur in ¶2011. Bilateral Relations -------------- ¶10. (SBU) Bilateral relations are good but sometimes delicate. For example, in December 2007, two days after President Fernandez de Kirchner was inaugurated, the GOA reacted negatively to news reports concerning a federal case in Miami against three Venezuelans and an Uruguayan who were arrested on charges of operating in the United States as Venezuelan agents. Charges and testimony in the case alleged events that were embarrassing for the GOA. We agreed at the end of January 2008 to put the case behind us and to work to strengthen bilateral cooperation, which we have done in part by reviving a special consultative process that quickly led to agreements in areas such as alternative energy, nanotechnology, and national park administration. We also agreed to promote greater parliamentary exchanges. The election of President Barrack Obama also changed significantly the approach of CFK and her advisors toward the U.S. Government, though areas of friction remain. ¶11. (SBU) Argentina cooperates with us and multilateral partners in regional security, counter-terrorism, drug interdiction, nonproliferation 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 International Atomic Energy Agency, the GOA has voted to refer Iran's noncompliance to the UN Security Council. The GOA has also endorsed the Proliferation Security Initiative (PSI) and the Global Threat Reduction Initiative (GTRI). Recently, Argentina and the U.S. co-hosted in Buenos Aires a gathering of all OAS States to look for ways to better implement UN resolution 1540, which is aimed at keeping WMD from terrorists. It is under the banner of science that the USG and Argentina have realized some of the best examples of bilateral cooperation, and we have a long history of aerospace cooperation with Argentina. Economic Context -------------- ¶12. (SBU) Argentina, once one of the richest countries of the world, has experienced much economic and political instability over the last 70 years, culminating in a profound political and economic crisis in 2001-2002 that was comparable to our Great Depression and included Argentina's default on $82 billion in debt, the largest sovereign debt default in history. Many Argentines are at a loss to explain how their country, blessed with rich natural resources, fertile land, and low population density, fell so far short of its potential. Some blame the military dictatorships, which predominated between 1930 and 1983. Others blame corruption and a series of populist measures taken since 1944. Many Argentines blame external factors, particularly the IMF and alleged U.S. insensitivity to their plight for the last crisis. ¶13. (U) Argentina's economy sustained a robust recovery following the 2001/2002 economic crisis, with five consecutive years of over 8.5% real growth in gross domestic product (GDP). Argentine GDP reached US$ 320 billion in 2008, approximately US$ 8,150 per capita. The economic expansion created jobs, with unemployment declining from over 21% in 2002 to 7.3% as of the fourth quarter of 2008. Poverty levels also dropped. According to government statistics, 15.3% of the population in the 31 largest urban areas remained below the poverty line in the second quarter of 2008, down from over 50% in the immediate aftermath of the economic crisis. ¶14. (U) Argentina benefits from rich natural resources, a highly educated population, a globally competitive agricultural sector, and a diversified industrial base. Argentina's post-crisis move to a more flexible exchange rate regime, along with sustained global and regional growth, a boost in domestic aggregate demand via monetary, fiscal, and income distribution policies, and favorable international commodity prices and interest rate trends were catalytic factors in supporting renewed growth between 2003 and ¶2008. A higher tax burden, improved tax collection efforts, and the recovery's strong impact on tax revenues supported the government's successful efforts to maintain primary fiscal surpluses since 2003. ¶15. (SBU) Although Argentina continued its strong expansion in 2008, with GDP growth estimated at 7%, many economists expect a sharp deceleration of economic activity in 2009, largely due to the impact of ongoing global financial turmoil and the resulting slowdown in world economic output. In addition to the challenges posed by global economic trends, economic experts have identified a range of other potential challenges to sustaining high levels of growth in the future. The government has introduced measures to stimulate the economy and maintain jobs. ¶16. (U) Argentina's exchange rate policy is based on a managed float. Market analysts have considered the peso's real exchange rate undervalued in previous years. The previous undervaluation, along with historically high global commodity prices, helped lift export volumes and values to record level, resulting in an estimated $12.6 billion trade surplus in 2008. Foreign trade was approximately 39% of GDP in 2008 (up from only 11% in 1990)and plays an increasingly important role in Argentina's economic development. Exports totaled approximately 21% of GDP in 2008 (up from 14% in 2002),and key export markets included MERCOSUR (23% of exports), the EU (19%),and NAFTA countries (10%). ¶17. (SBU) Two-way trade in goods with the U.S. in 2008 totaled about $13.3 billion (according to the U.S. International Trade Commission). Total two-way trade in services in 2008 was $3.4 billion, according to the Bureau of Economic Analysis, U.S. Department of Commerce. Total two-way trade in services in 2007 (the latest data available) was $4.0 billion, $5.0 billion, $3.5 billion in U.S. exports to Argentina, and $1.5 billion in U.S. imports from Argentina, according to the Bureau of Economic Analysis, U.S. Department of Commerce. The production of grains, cattle, and other agricultural goods continues to be the backbone of Argentina's export economy. High technology goods and services are emerging as significant export sectors. A decline in global commodity prices and slower global (and Argentine) growth levels in 2009 is expected to reduce Argentina's trade surplus levels in the medium term. ¶18. (U) Around 500 U.S. companies are currently operating in Argentina, employing over 155,000 Argentine workers. U.S. investment in Argentina is concentrated in the manufacturing, information, and financial sectors. Other major sources of investment include Spain, Chile, Italy, France, Canada, Japan, and Brazil. Continuing Argentine arrears to international creditors and a large number of international arbitration claims filed by foreign companies are legacies of the 2001/2002 economic crisis that remain to be resolved and adversely affect Argentina's investment climate. Outstanding debts include over $28 billion in default claims by international bondholders and approximately $8 billion owed to official ("Paris Club") creditors. President Fernandez de Kirchner announced in September 2008 that the government intends to pay Paris Club creditors and seek a settlement with international holders of untendered Argentine government debt. However, neither of these initiatives has moved to fruition as of this writing. The government in late 2008 nationalized Argentina's private pensions system, which affected two U.S. companies that had been running pension funds. The Labor Scene -------------- ¶19. (SBU) Argentina has a strong and politically well-connected labor movement. At the national level, the General Confederation of Workers (CGT),headed by Hugo Moyano since 2004, is recognized as the exclusive legitimate representative of trade federations and trade unions. The International Labor Organization has rejected Argentina's internal regulations granting exclusive authority to one confederation as violating Convention 87 on Freedom of Association. A smaller and more radical national organization, the Argentina Worker Central (CTA),continues to petition for government recognition. At stake are both influence and access to state resources, for example government provided health benefits that are channeled through the labor confederation structure. The CTA has a broad definition for membership, including in its ranks the unemployed and informal workers, which the CGT does not. The CGT is divided into several factions. Moyano is viewed as a strong political supporter of the Kirchners and their policies, a position not shared uniformly among CGT affiliate federations in different sectors. ¶20. (SBU) At the factory level or occupational sector level, Argentine law recognizes one union as the legitimate representative for collective bargaining purposes, as well as for the mandatory retention of dues by the employer. The Government will give a basic legal registration to all other unions, but only the one showing a plurality of membership will be given full recognition. Often there is a contest at the shop level between CGT and CTA affiliates, and this was one significant dynamic at the labor action at Kraft foods. The initial demand for benefits and then the subsequent protests at the plant were led by a smaller, unrecognized affiliate of the CTA. DOL Report on Child and Forced Labor -------------- ¶21. (SBU) The Government of Argentina conveyed its strong objection to us over the publication in August of the Congressional Department of Labor Report on Goods Produced with Child and Forced Labor. That report listed 11 product areas as produced with child labor, one of which, garments, was on the forced labor and the forced child labor listing. Most products were agricultural, including grapes, blueberries, and yerba mate, the herbal base of the Argentines national variation on tea. The report did not generate significant press coverage, but may well be raised in private during your visit. ¶22. (SBU) Although we noted that the report carried no threatened sanctions, the GOA objected on several grounds. First, that the report unfairly identified entire sectors rather than specific companies suspected of violations. They fear that this could subject exporters with good labor practices to consumer boycotts that might target products included on the list. Second, the government strongly objected to being identified in the first tranche of a partial global list, which meant that other countries' products might be favored even though they might also have problems that were simply not reported on to this point. Third, Argentina believes the entire report to be illegitimate because unilateral, arguing that its policy is to respond only to reports by appropriate multilateral organizations such as the ILO. ¶23. (SBU) The Government took umbrage because it takes pride in its relatively welcoming policies toward legal and illegal immigrants from countries in the region, many of whom nonetheless end up working in informal labor situations vulnerable to exploitative labor practices. Finally, Argentina believes it is paying a cost for being welcoming to the work of NGOs on labor issues, since these organizations provided much of the material for the report. They warned that this type of reporting by the U.S. Government was ultimately counter-productive to getting positive results against child labor and forced labor. Trafficking in Persons (TIP) -------------- ¶24. (SBU) Argentina is 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. However, the legislature last year passed fairly comprehensive anti-TIP legislation that makes TIP-related violations a federal crime. Argentina is a source, transit, and destination country for men, women, and children trafficked for the purposes of commercial sexual exploitation and forced labor. According to the International Organization for Migration, 80% of trafficking victims in Argentina are Argentine, most of whom are trafficked for the purpose of sexual exploitation. Bolivians and Peruvians are trafficked into the country for forced labor in sweatshops and agriculture. Argentine efforts to combat trafficking have focused on prevention and training of security and government officials. ¶25. (SBU) One of our key goals in the Embassy this year is to support a vigorous GOA implementation of the new federal law and promote the prosecution of human traffickers. We supported this with a week-long conference for judges and prosecutors September 21-25, and have dedicated resources for continuing technical assistance. We will also encourage the GOA to provide more uniform services to trafficking victims, an area of weakness listed in the TIP report. Some NGOs have criticized this new law as weak on the issue of adult "consent," but the Justice Ministry has been vigorous in arresting traffickers and freeing minor and adult victims. Promoting U.S. Economic/Commercial Interests -------------- ¶26. (SBU) In support of U.S. companies operating in Argentina, we are encouraging the GoA to maintain a more welcoming investment climate, with greater regulatory, legal, and tax regime consistency. We expend a good deal of effort supporting and working with U.S. companies. We are working closely with the GoA and the Paris Club of sovereign creditors to resolve longstanding arrears to the USG, and are encouraging the GOA to resolve claims of U.S. holders of defaulted Argentine bonds. Regarding currently stalled WTO trade negotiations, Argentina has staked out a 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 flexible approach. We have also encouraged the GOA to uphold its G-20 pledge to refrain from implementing protectionist measures in response to the international financial crisis. Anti-Americanism and Public Diplomacy -------------- ¶27. (SBU) The greatest overall challenge we face in Argentina is the high level of anti-Americanism in the Argentine public. Argentina consistently registers the highest levels of anti-Americanism in the hemisphere in public opinion polls. Working to change these perceptions is the Embassy's highest priority. We believe we have found a formula for success through substantially increased media outreach, focused attention on youth, greatly expanded English language teaching program, and augmented involvement with NGOs and community activities. We seek to use all available resources, from visiting American rock groups and sports heroes to Nobel Prize winners and U.S. companies, to carry the positive agenda forward. ¶28. (SBU) The election of President Obama has given our public diplomacy efforts a big boost. He rates very highly in opinion polls and the President of Argentina has made clear her hope to build a good relationship with him. Argentina maintains positive political relations with the United States, but there is room for further improvement. One of the major tasks facing the Embassy 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. Democracy and Rule of Law -------------- ¶29. (SBU) We work with the GOA, media, and civil society to strengthen democratic institutions, fight corruption, and reinforce civilian control of the military in a manner that respects Argentine leadership on these domestic issues. We promote key reform efforts such as increasing governmental transparency, limiting public corruption, and strengthening the political independence of the judicial branch. While we do not succeed on every issue, we continue to cultivate the GoA as a cooperative partner in multilateral fora, and seek Argentina's cooperation in the defense of democracy and the observance of human rights in countries like Cuba, Honduras, Venezuela, and Bolivia, as well as UN peacekeeping in Haiti. Human Rights -------------- ¶30. (SBU) The Argentine government 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 between 11,000-30,000 leftist guerrillas, political dissidents and related family members. It does not, however, focus on bringing to justice armed guerrilla groups who also committed significant but smaller scale human rights abuses during the same period (known as "the Dirty War"). To date, the courts have indicted an estimated 508 persons for crimes against humanity, and sentenced 32 former officials of the military regime, including a military chaplain. We recently returned one person sought here for human rights violations and another individual wanted by the GoA remains in Florida. ¶31. (SBU) The USG and GOA generally cooperate on human rights issues in international and regional fora. The GOA has not been a strong advocate for reform in Cuba and has publicly pressed for the United States to end its trade embargo and other restrictions. International Crime and Drugs -------------- ¶32. (SBU) Argentina is a transshipment and destination point for narcotics emanating largely from Colombia, Peru, Bolivia, and Paraguay. With its large chemical and pharmaceutical industries, Argentina is also a major source and destination for precursor chemicals. Argentine law enforcement agencies cooperate closely with their USG counterparts on drug interdiction efforts, fugitive arrests, and information sharing, which has resulted in increased drug seizures and successes against trafficking organizations. This Mission is focused on institutional capacity-building and expanding training opportunities for law enforcement officials, prosecutors and judges in order to improve internal security and decrease international drug and criminal activity in Argentina. Cabinet Chief Fernandez has repeatedly stated that he wants to put top priority on attacking drug traffickers and less priority on arresting individual users, and the Argentine Supreme Court in August issued a ruling decriminalizing the personal possession of small amounts of marijuana. One challenge to a more effective policy against international crime is Argentina's judicial system, which remains inefficient despite halting efforts at reform. Terrorism -------------- ¶33. (SBU) Under both Kirchners, Argentina has supported counter-terrorism policies. 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 (where Argentina, Brazil, and Paraguay meet). In November 2007, Argentina succeeded in getting Interpol's General Assembly vote to issue international capture notices for five current and former Iranian officials wanted in connection with the 1994 terrorist bombing of the Buenos Aires Jewish Community Center (AMIA). The GOA issued sharp protests when one of those indictees, Ahmad Vahidi, was named in August to be Iran's Minister of Defense. President Fernandez de Kirchner repeated strong statements about the Vahidi nomination and about Iran's obligation to surrender the suspects for fair trial in Argentina during her remarks at this year's United Nations General Assembly. MARTINEZ