ARGENTINA: SPANISH AMBASSADOR PREVIEWS CFK'S

C O N F I D E N T I A L BUENOS AIRES 000118 SIPDIS E.O. 12958: DECL: 02/04/2019 TAGS: PGOV PREL ECON EFIN ETRD SP AR SUBJECT: ARGENTINA: SPANISH AMBASSADOR PREVIEWS CFK'S PROBLEMATIC VISIT TO MADRID REF: MADRID 0084 Classified By: Ambassador E. Anthony Wayne for reasons 1.4 (B) and (D). ¶1. (C) Ambassador met with Spanish Ambassador Rafael Estrella February 2 to discuss the February 9-11 visit of Argentine President Cristina Fernandez de Kirchner (CFK) to Madrid. Estrella, a well-connected former politician, offered the following thoughts on the visit. ¶2. (C) Efforts to Postpone: Estrella confided that CFK and her advisors, notably husband Nestor Kirchner, are very worried about the February visit going awry given the commercial tensions in the relationship. Twice in recent weeks, the Spanish Ambassador had to weigh in with Cabinet Minister Massa to keep the visit, already rescheduled several times (most recently in October),from being postponed once again. First, when CFK fell ill and postponed her January 11-16 trip to Cuba and Venezuela to January 18-23, the Argentines tried to postpone the trip to Spain, pointing to the President's need not to get too tired. Then, after her trip to Cuba, the Spanish Ambassador heard from his Argentine counterpart that CFK was going to postpone to March or later, expressing worry about the negative reception CFK would receive because of outstanding commercial disputes. In both cases, Estrella weighed in with Massa to argue that postponing would have more negative effects than going and would send the wrong signals to friends of Argentina in the government of Spain. He said he believes his Argentine counterpart also weighed in the second time, and the trip was salvaged. (CFK did cancel, however, another major trip also contemplated for February -- to India and South Korea, the former because of the PM's surgery.) ¶3. (C) Spanish Business and Press Hostile: Still, Estrella said, CFK is worried about her reception by Spanish business and in the press. This worry is well-founded. Spanish business and financial organizations in Spain are very upset with the GOA (he noted the tremendous fall in the Madrid stock market when the GOA announced the nationalization of private pension funds). The Spanish media is disillusioned. CFK's pre-election visit had raised hopes about better Spanish-Argentine relations, but her presidency has fallen far short of those expectations. Views within the Spanish Government, he added, are divided. The economic side of the house is very upset with the GoA, while the more political side sees the value in maintaining dialogue and trying to elicit coordination with the GoA. (Note: CFK made headlines here in August when she acidly criticized the Spanish Central Bank for rating Argentina as a country of ""elevated risk"" for investment.) ¶4. (C) Limiting Exposure: To limit contact with those critical of CFK, her staff will allow only private meetings with the heads of major Spanish companies invested in Argentina and remarks in a carefully controlled context. One of the company CEOs to meet with CFK will be Repsol, whose leader plans to go over the economic hardships currently confronting the company. ¶5. (C) Big Work Agenda: the Nationalization of Spanish-owned Aerolineas Argentinas and of the private pension funds (including the fund operated by Spanish Bank BBVA Banco Frances),the plight of other Spanish companies, including a local energy generation and distribution company and Telefonica, developments in the region, the G-20 process, and on the more positive side improved anti-narcotics cooperation are among the items on the agenda. ¶6. (C) Trade: The Spanish plan to explore restarting the Mercosur-EU trade liberalization process. Apparently, the Argentine MFA would like to see this process restart, in part to offset the very negative stance Argentina took in the Doha WTO talks. ¶7. (C) Airlines: Aerolineas Argentinas compensation talks between the GoA Transportation Secretariat and Spanish company Marsans, which used to own the airlines, continue, but it is not clear when they might come to conclusion. ¶8. (C) Pension Funds: AFJP Nationalization left the Spanish investor BBVA/Banco Frances without compensation for the expropriation of its pension fund, ""Consolidar."" There has been no progress to date in discussions with the GoA. BBVA remains most concerned about the status of Consolidar's 3,000 odd employees. It seeks to ensure that most of them are hired by the Argentine Social Security Agency (ANSES). ¶9. (C) Energy: In addition to Repsol, which had felt squeezed by GoA policies for some time, Spanish-owned ENDESA controls three important power generators in Argentina, as well as the EDESUR electricity distribution company for the southern part of Buenos Aires city and province. The GoA has been putting great pressure on EDESUR to increase production and investment, but so far its pressure has been low-key (probably because of the very public dispute over Aerolineas Argentina). ¶10. (C) Toll Roads: Two Spanish companies hold toll road concessions around Buenos Aires. One has received a needed toll rate increase, and the other has not, pending a 10% purchase by local investors. ¶11. (C) Telephones: Spanish telephone giant Telefonica faces concerns from Argentina's anti-trust authorities about its new ownership stakes in Italy's Telecom, which is also present in the country. GoA authorities are blocking Telecom from acting on this option to buy out some Argentine investors in the local Telecom operation (Madrid 84). So far, the Argentine investors (the Wertheim family) seem to have maneuvered to retain and perhaps expand their control in the local Telecom operation. ¶12. (C) Fighting Drugs: On the positive side, narcotics cooperation has significantly improved since the countries signed an MOU in 2007. Much more intelligence is being shared and arrests have moved from individual smugglers to taking down smuggling networks. ¶13. (C) G-20: On the G-20 process, the Spanish Ambassador said he was hopeful that the UK would find a way to have Spain present at the April summit and that the Spanish President would likely discuss the topic with CFK. He noted, however, that her presentation at the first G-20 meeting in November had not been very effective, and he wondered if she would again use the opportunity to tout the ""Argentina model"" rather that helping leaders find solutions. ¶14. (C) Traveling Party: There are rumors that Nestor Kirchner might accompany CFK on this trip. Also, the press is reporting that the head of the powerful CGT union confederation and the chief of the Argentine Industry Federation (UIA) might accompany CFK. WAYNE