MEDIA REACTION: LATIN AMERICA MILITARY EXPENDITURES;

UNCLAS BUENOS AIRES 001120 STATE FOR INR/R/MR, I/GWHA, WHA, WHA/PDA, WHA/BSC, WHA/EPSC CDR USSOCOM FOR J-2 IAD/LAMA SIPDIS E.O. 12958: N/A TAGS: KPAO OPRC KMDR PREL SUBJECT: MEDIA REACTION: LATIN AMERICA MILITARY EXPENDITURES; ARGENTINA AND THE IMF; STATE DEPARTMENT BACKGROUND NOTES ON ARGENTINA; 10/09/09; BUENOS AIRES ¶1. SUMMARY STATEMENT Today's key international stories are related to the deep reductions in Argentina's defense budget; Argentina's "essential" need to reach a deal with the IMF; and the State Department background notes on Argentina. ¶2. OPINION PIECES AND EDITORIALS - "Argentina, far from its neighbors in the arms race" Business-financial "El Cronista's" contributor Jorgelina do Rosario writes (10/09),"According to Centro de Estudios para la Nueva Mayoria (think tank),last year, Argentina only used 0.87% of its GDP to its defense budget, which is a 0.92% reduction vis-`-vis ¶2007. Along with Surinam, Argentina has one of the lowest military budgets in the region. "The air space control is another military issue in which the country is behind schedule... "Since the early '90s, Argentina started to suffer a strong disinvestment on military expenditures. This is why Fabian Calle, senior researcher at the Argentine Council for International Relations (CARI),describes the country as 'an anomalous case,' based on the fact that its military expenditures are below the world average military expenditures (which account for about 2.5% on world GDP). "Argentina's military weakness is a reason for 'concern' for the experts consulted by 'El Cronista.' The Malvinas islands, the dispute with Chile over the continental ice cap, the maritime control, Argentina's Antarctic territory and foreign interest in our natural resources are the potential threats posed to the Armed Forces. Jorge Battaglino, professor of the Torcuato Di Tella University believes, that the country 'should not buy (weapons) because it feels threatened but in order to prevent its military weakness.' "The political analyst pointed out, 'The interesting thing about all this is that both the left and the right wing in Argentina think that nothing should be done about this issue. A general feeling prevails among the people that there are no threats.' 'In the event of a foreign attack, expectations are that Brazil or Chile will defend us because we are losing our own military capabilities.' "... While an arms race in Latin America has been dismissed, there is an increasing concern among regional and international leaders over an increase in the purchase of weapons in the region... Except for Argentina, Latin American countries continue spending money in weapons." - "Argentina's inevitable return to the IMF" Daily-of-record "La Nacion" editorializes (10/09),"The political difficulties self-imposed by the Argentine government through its own discourse are reflected in its back and forth moves about its deal with the IMF in order to allow for its Article IV economic review. "In order to understand those obstacles, we should recall former President Nestor Kirchner's disqualifying discourse on December 15, 2005, when he announced the pre-cancellation of the country's debt to the IMF... "As a consequence of the steady increase in public expenditures, the country's fiscal surplus was gradually lost and it turned out to be a financial deficit as of the second quarter of 2009... It is now inevitable to recover the international credit. "For this purpose, there is only one road and clear rules. First and foremost, the Argentine Government should get out of its default situation with holdout bondholders and Paris Club creditors. The latter call for an IMF audit... We should say that the country's return to markets is a requisite for the recovery of private investment, which is a crucial element for growth. "This explains Economy Minister Amado Boudou's dealings with the IMF head in order to make the mentioned audit happen. It is an essential step towards the normalization of financial ties to the world. It is a first stage, although not sufficient, to access other sources of loans at reduced interest rates... One can only expect that the political restraint of a populist discourse, which demonized the multinational lending agency to which now it resorts, will be overcome." - "The US insists that Argentina should pay debts and honor judicial rulings" Ana Baron, leading "Clarin's" Washington-based correspondent, writes (10/09),"In its latest report on Argentina (Background Notes),the Department of State insisted again on the need for Argentina to solve the problem of its holdout creditors and to honor its Paris Club debt as well as the ICSID (International Center for the Settlement of Disputes) rulings on claims filed by US corporations and those of other countries due to the country's breach of contract. "According to the report, the debt Argentina still has with international creditors and a big number of claims for arbitration filed by foreign companies are the legacy of the 2001-02 economic meltdown that should be resolved. "The Department of State recalls that the Government announced in 2008 that it intended to pay debts to Paris Club creditors using Central Bank reserves. It also describes the framework set by the Economy Minister in August 2009 for the restructuring of an amount of defaulted T-bills (or Letes),which were not included in the 2005 restructuring, and the swap of inflation-related bonds. "However, the report does not include Economy Minister Amado Boudou's negotiations in New York and Istanbul to pay off the country's debts to private creditors and the Paris Club as well as to put the country's relationship Qth the IMF on a safe track again. Obviously enough, they had no time to include this point. "The Argentine Government suffered a big retreat when French Economy Minister Christine Lagarde made it quite clear during a press conference in Istanbul that Argentina will not be able to restructure its Paris Club debt without an IMF audit. "A mixture of expectation, uncertainty and skepticism prevails in Wall Street. Many agree that in the event the Government does not reach a soon agreement with holdout creditors, the rise in Argentine bonds will lose its impetus." To see more Buenos Aires reporting, visit our classified website at: http://www.state.sqov.gov/p/wha/buenosaires MARTINEZ