Argentina G-20 Update: President Previews GoA G-20

UNCLAS BUENOS AIRES 000230

SIPDIS
SENSITIVE

Treasury for Nancy Lee
NSC for Mike Froman

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EAGR PREL KSUM AR
SUBJECT: Argentina G-20 Update: President Previews GoA G-20
Positions, Sherpa Pledges Coordination, UK Officials Sound Out GoA
Priorities

Ref: Buenos Aires 168

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Summary
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1. (SBU) President Kirchner, in March 1 remarks to Argentina's
parliament on the upcoming G-20 meeting, confirmed that she will
call for the wholesale reform of Bretton Woods institutions,
including the conversion of IFIs into no-conditionality lending
sources to emerging markets. She said she will also emphasize
global coordination of macroeconomic policies in order to sustain
global demand and for joint action to regulate tax havens. GoA
Sherpa and Ambassador to the U.S. Hector Timerman clarified to
Ambassador March 2 that Argentina will state its position and
worldview clearly, but plans to work constructively and will do
nothing to undermine U.S. Summit goals. On G-20 member nation
initiatives to help the poorest, GoA Agriculture Secretary Cheppi
told Ambassador February 25 that Argentina is already working with
the Inter-American Development Bank and with countries like Spain
and Germany to provide agricultural technical assistance to other
countries and could do more if asked in the G-20 context. The UK
Embassy in Argentina reported to post on recent meetings with the
GoA on G-20 themes by UK Financial Secretary Steven Timms and
Foreign Office Minister Lord Malloch Brown. Argentine Central Bank,
Economy Minister, and Foreign Ministry leadership called for IMF
reforms to include new "light" conditionality credit facilities and
previewed a GoA proposal to be made at the upcoming mid-March G20
Finance Ministers meeting to have member nations lend reserves to
the IMF in order to allow it to leverage additional resources into
expanded no- or low-conditionality credits. On trade issues, GoA
officials reiterated the standing GoA line that Argentina will take
all necessary steps to protect domestic industrial production and
called for the G-3 to put a "very substantive" proposal on the table
to serve as a basis for credibly re-launching the WTO Doha dialogue.
End Summary.

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President Kirchner on Argentina's G-20 Agenda
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2. In her March 1 remarks to the opening of the Argentine
parliament's 127th session, President Cristina Fernandez de Kirchner
(CFK) led off with remarks on the global financial crisis, the
"fall" of conventional economic wisdoms, and the GoA's G-20
priorities. She called current global economic and financial
distress "only the tip of the iceberg," with the reigning global
economic paradigm itself in crisis. She argued that the current
economic model is based on "subordination, not cooperation, in which
rules are only enforced for weak or emerging market economies." CFK
said that, at the G-20, Argentina would reiterate the policies it
has consistently put forward since 2003, the year her husband was
elected president. These policy prescriptions included, she said,
the wholesale reform of Bretton Woods institutions as well as the
global coordination of macroeconomic policies in order to sustain
global demand. Dealing with only the immediate global banking
crisis, CFK argued, begs the broader question of how to restore
confidence in the global financial order and how to support those
emerging market economies which have reached the limits of their
debt capacity. IFI reform should include their conversion into
no-conditionality lending sources to the emerging markets which, she
said, have accounted for 75% of global economic growth in the last
10 years. CFK also called for joint action to regulated tax havens
(in her terminology, "fiscal paradises"),which she claimed shelter
over 40% of global capital.

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Ambassador Timerman on G-20 Coordination
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3. In a March 2 phone call to Ambassador Wayne, Argentine Ambassador
to the United States and designated G-20 Sherpa Hector Timerman
noted that he had very positive conversations with NSC Deputy and US
G-20 Sherpa Mike Froman and with Treasury Deputy Assistant Secretary
Nancy Lee and that he found U.S. positions very progressive.
Timerman confirmed that Argentina will state its position and
worldview clearly, but will do nothing to undermine U.S. Summit
goals. He stressed that Argentina wants to use the G-20 to
demonstrate its intent to sustain good relations with the Obama


administration and to work constructively with the United States.

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Ag Secretary on GoA Assistance to Poorest
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4. (SBU) In a February 25 meeting with Production Minister Debora
Giorgi and Agricultural Secretary Cheppi, Ambassador noted that in
the G-20 process there has been discussion of how to help the
poorest countries during the ongoing financial crisis, particularly
in agriculture, and that other countries would be looking to
Argentina to contribute. Cheppi noted that Argentina is already
working with the Inter-American Development Bank and with countries
like Spain and Germany to provide technical assistance to other
countries. He went on to say that Argentina would be in a position
to provide technical assistance on broader basis, if asked in the
G-20 context.

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UK Treasury/Foreign Office Meet with GoA on G-20
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5. (SBU) UK Embassy senior economist Andres Borenstein provided
Econoff a readout on recent G-20 meetings with GoA officials: Steven
Timms, Financial Secretary of the Treasury, met February 18 met
during a half day visit to Argentina with Central Bank President
Martin Redrado, Economy Minister Fernandez, and Foreign Ministry
External Commerce Secretary Alfredo Chiaradia. Earlier on February
11, Lord Malloch Brown, Senior Minister in the UK Foreign Office met
with Foreign Minister Jorge Taiana, Economy Minister Fernandez,
Finance Secretary Lorenzino and Central Bank Vice President Miguel
Angel Pesce.


6. (SBU) Borenstein reported that Central Bank President Redrado
confirmed to UK officials that Argentina will call for "light" IMF
conditionality at the upcoming G-20 Finance Ministers' meeting and
said Argentina would be prepared to lend GoA funds to the IMF
provided the Fund would turn these around as low conditionality
credits. (Note: Central Bank Vice President Pesce confirmed to
Econoffs Feb 25 that the GoA will propose that member nations hold
reserves at the IMF to provide it the wherewithal to leverage
additional no- or low-conditionality credit lines to emerging
economy members). Borenstein reported Redrado saying that, while
Argentina plans to actively contribute to the discussions on global
financial market architecture and regulation, such discussion speaks
to the next global financial crisis. Argentina hopes to focus G-20
participant attention on dealing with the current crisis via broader
central bank and macroeconomic policy coordination. Finally,
Borenstein reported that Redrado called for the G-3 to put a "very
substantive" trade liberalization proposal on the table in order to
serve as a basis for credibly re-launching the WTO Doha dialogue.


7. (SBU) UK Official meetings with Economy Minister Fernandez were
less substantive than those with Redrado, Borenstein said. He noted
however, Fernandez' "spirit" of engagement and his welcoming of the
UK's own call for IMF voice and quota reform and for the creation of
new and more flexible IMF credit instruments. Borenstein noted that
the UK considers the Fund's Short Term Liquidity Facility announced
in October 2008 (up to 500% of quota, three month maturity) for
eligible countries a failure since the key eligible players (South
Korea, etc.) opted for other funding sources. Borenstein also
reported that Fernandez supported the UK's call for "meritocratic"
leadership appointments to the Fund and Bank and called for an end
to US and French "hegemony."


8. Finally on Secretary Timms' meeting with External Commerce
Secretary Alfredo Chiaradia, Borenstein reported that Chiaradia
replayed the GoA's standing position on the Doha Development Round:
Argentina is not reflexively protectionist, but will take all
necessary steps to protect domestic industrial production and the
high-wage employment it generates.

WAYNE