AMCHAM ARGENTINA'S EXECUTIVE BOARD DISCUSSES LOCAL

UNCLAS BUENOS AIRES 000388

SIPDIS
SENSITIVE

USDOC FOR 4321/ITA/MAC/OLAC/ROSEN
STATE FOR ECON WHA/BSC

E.O. 12958: N/A
TAGS: ETRD ECON WTRO AR
SUBJECT: AMCHAM ARGENTINA'S EXECUTIVE BOARD DISCUSSES LOCAL
ENVIRONEMNT WITH AMBASSADOR

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Summary
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1. (U) On March 17, 2009, Ambassador Wayne met with Executive Board
Members from the American Chamber of Commerce in Argentina. Present
at the meeting were representatives from IBM, Dow Chemical, WalMart,
Cargill, Ford, GE, and Duke Energy. The companies noted challenges
they face due to the significant decline in domestic demand,
inflation-driven demands for salary increases that are squeezing
margins, strong labor unions, increasing GoA non-tariff
protectionist measures, customs inefficiencies, and the overall
unpredictability of current GoA administration. The Board also
noted GoA pressures to slow member companies' remittance of
dividends to parent companies in the United States. They agreed on
the importance of strong collaboration with the Embassy in the areas
of Intellectual Property Rights (IPR),Corporate Social
Responsibility (CSR),forced child labor, and education. End
Summary.



2. (SBU) On March 19, Ambassador Wayne hosted members of the Board
of the American Chamber of Commerce in Argentina. This was the
first meeting of the executive Board under the leadership of the
newly elected AMCHAM President, Rolando Meninato, who is also the
President of Dow Argentina. Mr. Meninato assumed this position from
Juan Bruchou, President of Citibank Argentina, and it is expected
that he will lead the Board in a very different manner due to the
lower profile that Dow attracts in the market.

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Sales Slow
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3. (SBU) Members voiced concerns regarding the global economic
crisis and its direct effects on their sales in Argentina. Many
agreed that January and February 2009 showed similar profits as the
same months of 2008 but that, by the end of February, a dramatic
downturn in demand became evident. WalMart believed that the second
quarter will be a difficult period, with expectations that the third
quarter could be worse still. However, WalMart confirmed they are
moving forward with expansion plans in Argentina, noting their
newest WalMart store scheduled to open in Buenos Aires in April

2009. There was a general consensus that a majority of the firms
represented were currently operating in the red. When asked if they
believed that the current crisis would drive many U.S. firms out of
Argentine market, all replied "no," referring to the rich history of
commercial relations that exist between the United States and
Argentina and the ability of companies to manage the current crisis
based on lessons learned from past Argentine crises.


4. (SBU) Several of the companies, including Ford, WalMart, and
Cargill, explained that additional pressures such as demands by
local unions for significant salary increases over the past two
years were squeezing margins. Many joked that the GoA's typical
reaction to this challenge is to tell companies to simply accept
reduced profitability. Ford explained that they had success in
convincing the GoA to allow decreases in salary as an alternative to
lay-offs. They also clarified that they have a very "proactive"
relationship with the GoA, an exception to the rule that they
attributed to the automotive sector's significant (indeed, almost
totemic) importance to the Argentine political class and
manufacturing sector.


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Imports and Protectionism
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5. (SBU) Other board members stated that navigating Argentine
Customs is a constant challenge, with significant delays for
clearance a common phenomena. Many U.S. companies have complained
to Emboffs that it can take up to 60 days for product to be cleared
by Customs. When asked if the November 2008 creation of a new
Production Ministry was effective, all agreed that it had no impact
on business as all decisions are in the hands of a few key GoA
players, none of which occupy positions in this new Ministry. This
led to several comments regarding Argentine Commerce Secretary
Guillermo Moreno's direct contact with companies and his continued
insistence on price controls. All were amazed at the level of
detail with which he conducts business, often personally calculating
the "appropriate" cost of products himself.


6. (SBU) Several members commented on current trade frictions
between Argentina and Brazil after Argentina recently enacted import
restrictions on several Brazilian goods. Ford stated that President
Fernandez de Kirchner reviews the automotive sector trade balance

daily and so is very aware of the situation for both automobiles and
parts. He stressed that Ford currently received better treatment
that many other firms as they currently do not have problems
importing component parts from either Brazil or Mexico. Others
stressed that such restrictions are conducted on a sector-by-sector
basis with many "voluntary" side agreements to restrain trade
negotiated. All agreed that, when able, the GoA would enact
whatever policies it deems necessary to support local manufacturers,
impacting those foreign companies in direct competition with local
firms.

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Access to Dollars and Dividends
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7. (SBU) Several of the companies explained that their U.S. parents
are demanding accelerating dividend remittances. Dow stated that
Secretary Moreno, in an effort to retain scarce foreign currency
reserves in Argentina, has questioned company officials as to why
their dividends must be returned to the United States. Company
representatives further stated that the GoA has attempted to
correlate the amount a company is "allowed" to remit to the United
States with its level of exports. Cargill explained that they take
a proactive approach with Moreno concerning this issue, which seems
to have worked thus far.


8. (SBU) Regarding access to dollars, all agreed that the GoA is
working to control money flows and has its own staff assigned to
each bank in order to closely monitor the situation. Many believed
that dollar purchases in excess of 25 million dollars were being
denied as the Central Bank has increasingly limited access to
dollars. EMBOFFs have heard this from other private sector sources
as well.

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G-20, Summit of the Americas
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9. (SBU) The Board was very interested to hear of the recent phone
call that took place between Presidents Obama and Fernandez de
Kirchner as they were hopeful for greater open dialogue between our
two countries. They were optimistic that the upcoming G-20 and
Summit of the Americas would be venues for expanded bilateral
dialogue. Each clarified that they were not planning on attending
the Private Business Forum being organized on the margins of the
Summit of the Americas held in Trinidad and Tobago later this month.


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Future Collaboration
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10. (SBU) All agreed that increased future collaboration in the
areas of IPR, CSR, forced child labor issues, and education were
essential. Regarding IPR, Amcham CEO Alejandro Diaz spoke of the
importance of encouraging Argentina to ratify the Patent Cooperation
Treaty (PCT),which allows an applicant to request a patent in one
contracting country for use in other signatory countries. The
Ambassador mentioned that he was very pleased to work with AMCHAM on
this year's NGO fair and was confident that it would be another
successful effort. He also elaborated on the idea of working with
the Ministry of Labor and AMCHAM members on highlighting best
practices in the area of forced child labor. AMCHAM President
Meninato replied that members would be happy to do so.


11. (SBU) The Ambassador also stressed the need for U.S. companies
to highlight their CSR, job creation and investment activities in
Argentina and generate proactive press strategies. He encouraged
all to generate releases on positive issues, especially highlighting
what many considered small investments and expansions.

WAYNE