Scenesetter for Codel Engel Visit to Argentina, January 5-7

UNCLAS BUENOS AIRES 001414 SENSITIVE SIPDIS CONGRESSIONAL AFFAIRS BUREAU PLS PASS FROM AMBASSADOR MARTINEZ TO CONGRESSMAN ENGEL E.O. 12958: N/A TAGS: PREL OREP PGOV ECON ETRD ELAB PHUM PTER KTIP SUBJECT: Scenesetter for Codel Engel Visit to Argentina, January 5-7 ¶1. (SBU) Mr. Chairman, on behalf of Embassy Buenos Aires, I warmly welcome you and your delegation to Argentina. I will have been in the country for about four months when you arrive, and I am honored to have you among my first Congressional visitors. The Government of Argentina is interested in deepening relations with the United States and values high level contacts with members of Congress. I am especially pleased that you will have the opportunity to meet with President Cristina Fernandez de Kirchner. ¶2. (SBU) I look forward to hosting you and the other members of your delegation at a reception at my residence on January 5. 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 to support you and your delegation 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 -------------- ¶3. (SBU) You arrive in Argentina as President Cristina Fernandez de Kirchner (CFK) begins the second-half of her four-year term. New Members of Congress were sworn-in in early December, following June 2009 mid-term elections that were broadly perceived as a setback for the President and her husband and predecessor, Nestor Kirchner (NK). The Kirchners now face what is for them the novel challenge of governing without majorities in either Chamber of Congress, though their Peronist Party (PJ)-dominated Victory Front (FpV) coalition remains the largest bloc in both chambers, and on some issues they will likely be able to forge enough alliances to approve some legislative initiatives. ¶4. (SBU) The FpV and other Kirchner allies won about 30 percent of the vote nationwide in the mid-terms. In the province of Buenos Aires, Argentina's largest and the home to millions of lower-middle class and poor voters in the outer suburbs of Buenos Aires, NK led the FpV ticket but placed second to "dissident" Peronist and multi-millionaire Francisco de Narvaez. Ruling party candidate lists also placed second or worse in major provinces like Santa Fe, Cordoba, and Mendoza. The opposition victories were shared among different national coalitions and provincial movements. ¶5. (SBU) In a bid to regain political momentum, the CFK administration launched a number of controversial measures before the outgoing Members of Congress stepped down in December 2009. One expensive measure was to purchase the rights to broadcast national soccer league games on public television (games had previously been made available under a pay-per-view contract). Another, launched in August 2009, was to reform the country's antiquated media laws. ¶6. (SBU) The new media law restricts the number of television and radio broadcast channels that single groups may own. This was perceived to be a blow against the large Clarin Media Group, which has been consistently critical of the Kirchners. Of note, three separate federal courts have ruled against the law since its passage, putting its application on hold. One ruling in response to an appeal launched by Clarin Group deems the law's requirement that companies sell their excess television and radio broadcast licenses as a potential infringement of property rights. The Government will have to appeal the rulings, and it is anticipated that the media law will ultimately be reviewed by the Argentine Supreme Court. ¶7. (SBU) A final initiative, passed in December, was a political reform bill that would require open primaries and participation thresholds for all parties wishing to contest presidential and national Congressional elections. The initiative was passed into law under the outgoing Congress with virtually no opposition-party support and with very little inter-party dialogue. ¶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 slowing of the economy in 2008 followed by a sharp recession in 2009, 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 hover around 20%. One casualty of the agricultural export tax vote was the President's relationship with her Vice President, Julio Cobos, who cast a tie-breaking vote against the government's proposal. ¶9. (SBU) Argentine politicians are already focused on presidential elections in 2011. Conventional wisdom is that Nestor Kirchner will stand for president as the FpV candidate, and his various institutional resources will likely make him competitive. Much will depend on how the main opposition currents in the country coalesce. Leading potential candidates include CFK's estranged Vice President Julio Cobos (former governor of Mendoza),Buenos Aires Mayor Mauricio Macri, and Peronists Eduardo Duhalde (the 2002-03 caretaker president) and Santa Fe Senator Carlos Reutemann. As in the past, one of many charismatic provincial governors may also emerge as a leader. -------------- 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. Both governments have since made efforts to improve the bilateral relationship, in part by keeping the focus on the many areas of practical cooperation between our governments such as science and alternative energy, counter-drug cooperation, and nuclear non-proliferation. 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 a strong international voice on arms control and nonproliferation issues. In the International Atomic Energy Agency, the GOA has voted consistently 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. The USG and Argentina have realized some of the best examples of bilateral cooperation under the banner of science, and we have a long history of aerospace cooperation with Argentina. -------------- Anti-Americanism and Public Diplomacy -------------- ¶12. (SBU) The greatest overall challenge we face in Argentina is the high level of anti-Americanism among 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. ¶13. (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. -------------- Economic Context -------------- ¶14. (SBU) Argentina, once one of the richest countries in 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 $82 billion in debt, the largest sovereign debt default in history. Many Argentines are at a loss to explain how their country, blessed with rich natural resources, fertile land, and low population density, fell so far short of its potential. Some blame the military dictatorships, which predominated between 1930 and 1983. Others blame corruption and a series of populist measures taken since 1944. Many Argentines blame external factors, particularly the IMF and alleged U.S. insensitivity to their plight for the last crisis. ¶15. (U) Argentina's economy sustained a robust recovery following the 2001/2002 economic crisis, with five consecutive years of over 8.5% real growth in gross domestic product (GDP). Argentine GDP reached US$ 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. ¶16. (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, most importantly, 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. ¶17. (SBU) Although Argentina continued its strong expansion in 2008, with GDP growth at close to 7%, 2009 saw a sharp deceleration of economic activity, with most analysts projecting a contraction of 2-3%. This recession was largely due to the impact of ongoing global financial turmoil and the resulting slowdown in world economic output. Due to a healthier international economic climate and a rebound in commodity prices that is expected to continue in 2010, many analysts project growth in the range of 3-5% of GDP in 2010, as compared to government projections of up to 7%. Many private analysts also expect inflation to accelerate somewhat in 2010 to the 17-20% range, up from the 12- 15% consensus figure for ¶2009. [Post Comment: The government economic statistics agency is viewed by private analysts as having consistently understated inflation and other economic measurements for the past several years. The agency's inflation measure for 2009 is expected to come in well under 10%. End comment]. ¶18. (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%). ¶19. (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. -------------- Promoting U.S. Economic/Commercial Interests -------------- ¶20. (SBU) 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. We expend a good deal of effort in support of U.S. companies operating in Argentina, and encouraging the GoA to maintain a more welcoming investment climate, with greater regulatory, legal, and tax regime consistency. As an example of the types of problems faced by companies operating in Argentina, the government in late 2008 nationalized Argentina's private pensions system, which affected two U.S. companies that had been running pension funds. Earlier this month, at a roundtable with US-based companies operating in Argentina, A/S Valenzuela heard that 2009 was not as bad as anticipated, and that the outlook for 2010 was good. The company representatives mentioned that things could be better with improvements to the business climate, specifically in the area of rule of law. Valenzuela repeated this comment to the press which gained widespread media attention and the GOA's heated rebuttal. ¶21. (SBU) 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. These 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. The Government has initiated the process of making a new debt exchange offer for those bondholders who did not participate in the initial 2005 attempt to restructure Argentina's debt. The offer is now scheduled to move forward in the second week of January. If this offer succeeds, the government has indicated that it might initiate discussions with the Paris Club and the International Monetary Fund to resolve more of its debt issues. ¶22. (SBU) 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. -------------- The Labor Scene -------------- ¶23. (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, and while a December 2009 court ruling determined that the government cannot provide exclusive authority to one union, no changes have yet been implemented. 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 a strong political supporter of the Kirchners and their policies, a position not shared uniformly among CGT affiliate federations in different sectors. ¶24. (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 a local food-processing plant owned by Kraft. The initial demand for benefits and then the subsequent protests at the plant were led by a smaller, unrecognized affiliate of the CTA. -------------- Trafficking in Persons (TIP) -------------- ¶25. (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. ¶26. (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 public statements in support for opening shelters for victims of trafficking, funding 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. -------------- Human Rights -------------- ¶27. (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 526 persons for crimes against humanity, and sentenced 52 former officials of the military regime, including a military chaplain. ¶28. (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 -------------- ¶29. (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 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 An????bal 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 that suggested the decriminalization 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 -------------- ¶30. (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 indicted, 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 MARTINEZ