(C) WHA A/S VALENZUELA MEETS WITH ARGENTINE OFFICIALS,

C O N F I D E N T I A L BUENOS AIRES 000011 SIPDIS E.O. 12958: DECL: 2035/01/08 TAGS: PREL ECON PHUM AR SUBJECT: (C) WHA A/S VALENZUELA MEETS WITH ARGENTINE OFFICIALS, OPPOSITION AND BUSINESS LEADERS DURING HIS DEBUT VISIT REF: BUENOS AIRES 1311 CLASSIFIED BY: Alexander Featherstone, ADCM, State, Front Office; REASON: 1.4(B),(D) ¶1. (C) Summary: WHA A/S Arturo Valenzuela met with Argentine Cabinet Chief Anibal Fernandez and Acting Foreign Minister Victorio Taccetti during his December 15-17 visit to Buenos Aires. Valenzuela explained the U.S. position on Honduras, exchanged views on other regional developments, and praised Argentine efforts to combat terrorism, narco-trafficking, proliferation, and other problems. The GOA officials assured him of their desire to strengthen cooperation with the USG. Valenzuela also met with AmCham leaders who voiced optimism about 2010 but repeatedly expressed concern about the need for clear rules and rule of law. During his visit, Valenzuela met former Cabinet Chief Alberto Fernandez, who offered his assessment of the Kirchners, and he met separately with leading presidential contenders, including the estranged vice president, Julio Cobos; the mayor of Buenos Aires, Mauricio Macri; Peronist dissident Francisco de Narvaez, who bested former president Nestor Kirchner in the June 28 mid-term congressional elections; and former president Eduardo Duhalde. The opposition leaders criticized the Kirchners for their combative style, insular decision-making, counter-productive economic policies, and the erosion of Argentina's rule of law. Press coverage and GOA reaction to A/S Valenzuela's visit was reported reftel. End summary. Cabinet Chief Stress Law Enforcement Cooperation -------------- -------------- ¶2. (C) Valenzuela, accompanied by Ambassador and DCM, called on influential Cabinet Chief Anibal Fernandez for a positive, 45 minute discussion, during which Fernandez focused heavily on the areas of bilateral cooperation falling into his previous portfolio as Minister of Justice, Security and Human Rights, emphasizing robust GOA actions against drug and human trafficking and terrorism. Valenzuela emphasized that the United States viewed Argentina as a partner in many areas of bilateral cooperation. He specifically asked that the Minister give thought to the challenges the region faced in Bolivia and how it might engage, underscoring that the United States was working for dialogue and seeking positive accomplishments from a government that had clear democratic legitimacy following President Morales' reelection. Fernandez agreed on the importance of working with Bolivia and described his own conversations with Bolivian Government (GOB) officials to encourage cooperation on counter-narcotics and other security issues. He noted that the GOB had pushed Argentina to address the flow of coca processing precursor chemicals from Argentina to Bolivia, and that Argentina accepted its responsibility in this area and was taking steps. Fernandez suggested the government was open to further outreach with Bolivia. ¶3. (C) Fernandez further described GOA actions to disrupt ephedrine trafficking, shutting down a hole in the law that had allowed 20 metric tons to be imported into Argentina from 2006 to 2008 for purposes of diversion to Mexico and the United States. The change of law, he asserted, had brought the trade to a virtual halt. Fernandez made a case for the GOA's initiatives to treat most drug users as victims and provide help to them rather than incarceration, but he emphasized that strong bilateral cooperation against drug trafficking would continue. Valenzuela offered to share experiences from the United States on programs to reduce drug demand. He pointed to the length of Argentina's borders as a particular challenge, comparing them to the length of the U.S.-Mexican border. ¶4. (C) Turning to the issue of international terrorism, Fernandez underscored President Cristina Fernandez de Kirchner's (CFK) firm commitment to bring to justice those responsible for the 1992 and 1994 terrorist bombings in Buenos Aires. He noted that she continued her strong diplomacy aimed at the Iranian masterminds of the attack, and suggested that Argentina continued to fear terrorist reprisals for its forceful diplomacy. Fernandez added that he personally was known as a particularly strong voice against anti-Semitism. ¶5. (C) Valenzuela ended the meeting by laying out U.S. views on events in Honduras, with an emphasis on the efforts the USG had made to build consensus within the OAS on ways forward. He shared a hope that Argentina would give the U.S. position greater consideration. Fernandez emphasized that the position taken by Argentina was explicitly not "pro-Zelaya" but was meant to express the government's concern with any arbitrary interruption of democratic government. The complaints about Zelaya's own violations of law or democratic practice, he emphasized, should have been resolved via the Honduran justice system. MFA: Keep Relations Warm and Productive -------------- - ¶6. (C) Acting Foreign Minister Victorio Taccetti welcomed A/S Valenzuela and stressed the GOA's desire to continue the productive and fruitful relations it had enjoyed with A/S Shannon. Valenzuela outlined President Obama's vision of a stable, prosperous Americas with social inclusion, and said it would require focusing on shared interests. Taccetti agreed that the United States shared many values, like non-proliferation, and concerns, such as Iran's sponsorship of terrorism and its nuclear development efforts. Valenzuela conveyed the USG's appreciation of the GOA's ongoing responsible stance in thwarting proliferation efforts. Taccetti said the GOA had also sought a moderating position within UNASUR to tamper pressure from some UNASUR members to criticize the U.S. Defense Cooperation Agreement (DCA) with Colombia. Valenzuela recalled Washington's efforts to explain the DCA, including a letter co-signed by Secretary of State Clinton and Secretary of Defense Gates to their regional counterparts. Taccetti noted that the impression was often that "the Empire often acts first and explains later," as happened with the USG's announcement of the return of the Fourth Fleet to the region. Bolivia -------------- ¶7. (C) Taccetti said the MFA wanted to draw Valenzuela's attention to the situation in neighboring Bolivia, which was undergoing profound change after years of social division and exclusion. Valenzuela said there was dialogue with the Evo Morales administration despite the GOB's expulsion of DEA from Bolivia, and he stressed that U.S. counter-narcotics cooperation with Bolivia depends on the effectiveness of U.S. counter-narcotics cooperation with Bolivia's neighbors. Valenzuela said that in Washington's new paradigm for regional relations, there was a greater focus on demand reduction efforts. He noted that cocaine consumption was growing not in the U.S., but elsewhere. Honduras -------------- ¶8. (C) Taccetti said the crisis in Honduras was worrisome and did not offer any easy ways out. He claimed that Paraguayan President Lugo was particularly worried that the coup in Honduras, if left unpunished, might embolden the military in Paraguay. Valenzuela agreed that the coup must not be legitimized. He recalled that the USG and GOA had worked together to get the de facto regime suspended from the OAS and to reinstate President Zelaya. The U.S. position had been clear throughout: the coup had been a grave, unacceptable mistake, and Zelaya was the legitimate president of Honduras. Still, Valenzuela noted, the de facto regime did not feel completely isolated by the international community. The Liberal International, for example, had offered Micheletti a vice presidency; German Christian Democrats and Spanish conservatives (PP) had also engaged with the de facto regime leaders. Valenzuela noted that Catholic prelate Maradiaga, with Vatican support, had been perhaps the most hardline of all in offering succor to the de facto regime. Valenzuela then emphasized that the November 29 elections were necessary but not sufficient to resolve the crisis. Taccetti said the GOA's bottom line was that the Honduras coup could not be viewed as gratis -- its leaders must be punished. Valenzuela said it was encouraging that President-elect Lobos had called for the de facto regime to depart and a unity government to cover the gap until his January 27 inauguration. Haiti -------------- ¶9. (C) On Haiti, Taccetti said he thought there had been "too many elections" leading to voter fatigue. He expressed concern that MINUSTAH was "digging in," and the UNSYG Special Representative HC)di Annabi was growing too attached to his palatial residence there. Taccetti said the international community had to redouble its efforts at institution-building in Haiti (particularly with the HNP police force) so that it could turn the country back over to its people and exit. Valenzuela said that NGOs there also had to move beyond assistance to capacity-building. He said Haiti's "winner-takes-all" political culture was holding it back, but there was some optimism that the labor-intensive tourism sector could be the engine for Haiti's economic development. Scorecard Diplomacy -------------- ¶10. (C) Taccetti raised the GOA's unhappiness with the USG's proliferating report cards on how other countries addressed issues. He took issue with the State Department's annual report on Trafficking in Persons (TIP) and Argentina's place on the Tier Two Watch List. He said other countries such as Italy had a much worse TIP problem than Argentina but were not on the Watch List. Valenzuela explained that these reports were often mandated by the U.S. Congress and were Capitol Hill's way of ensuring that the executive branch would track and monitor these issues of great concern to legislators. American Business Community Voices its Concerns -------------- -------------- ¶11. (SBU) A/S Valenzuela met with several members of the American Chamber of Commerce in Argentina's (AmCham) Executive Board including Merck, Sharpe & Dohme, Nextel, DuPont, Duke Energy, General Motors, American Express, Prudential, Coca Cola and IBM. An overwhelming majority agreed that 2009 was not as bad as they had anticipated and most are optimistic about a solid recovery 2010, mostly due to the world economic recovery rather than the GOA's own economic policies. Many explained that they faced several challenges in the market such as labor and union demands for continued salary increases, rule of law, transparency, corruption, inflation, overregulation, and price controls. Company representatives believed that such challenges have created an anti-business climate that has precipitated a lack of confidence among foreign investors. The most extreme case being the energy sector in which Duke detailed the GOA's subsidy program which provides power to consumers at one-third the average market value. Most concerning, commented Duke, was the GOAs inability to pay energy companies the subsidies thus forcing Duke to hold large amounts of debt. General Motors explained that they continued to have success in the Argentine market and believed that much of this was due to the fact that 75% of their autos are exported to Brazil making the current trade dispute between the two markets worrisome. Nextel explained that the IT sector was generally in a better position than others, but that the communication sector is suffering from a lack of clear regulation. However, they too expressed concerns, specifically in regards to increase taxes, which have directly resulted in a 30% decrease in profits. In general, those companies with minimal dependency on unions, more external clients and in sectors that are less regulated are in a better position to endure the current challenges of - and benefit from - the Argentine market. Company representatives, excluding Duke and Prudential, agreed that 2010 would offer more opportunities and better profits than 2009, due to the recovering world economy rather than the GOAs poor economic policies. Former Cabinet Chief Offers Insider Views -------------- ¶12. (C) Ambassador hosted former Cabinet Chief Alberto Fernandez to a breakfast with A/S Valenzuela at the Residence. The cordial meeting focused on Fernandez's expectations for the next two years in Argentina as well as past and present aspects of the bilateral relationship. He described the Obama Administration as holding out great opportunities for improved Argentine-U.S. and Latin American-U.S. relations. On the political front, he anticipated difficulties, as the Presidential couple was not practiced at ruling with a strong opposition such as now occupied the Congress. Between the irascible nature of the first couple and the "madness" of the opposition, Argentina was in for a rough season. Bilateral Relations: Nestor Kirchner Meant "Hegemonic" in a Good Way -------------- -------------- -------------- ¶13. (C) Fernandez described himself as having little contact with the ruling circle, including none whatsoever with his former boss Nestor Kirchner (NK) since the June mid-terms, but he shared an interest in seeing relations between the CFK government and Washington improve. He insisted that most Argentines viewed President Obama very favorably. Fernandez lamented that CFK's initial call from then President-elect Obama had reputedly gone poorly, based on his own perception from Washington that she had been seen as "all talk and no listening," and that she was now suffering from the popular perception that U.S. relations with Argentina's neighbors (including, in particular, Chile and Brazil) were much more positive. This was particularly painful for CFK because, he confided, she had been an early advocate of then Senator Obama's candidacy within their inner counsels, though she had very positive views on Senator Clinton as a candidate as well. ¶14. (C) Valenzuela recognized that there was still strong positive potential in the relationship, but said that CFK's decision not to receive him, though understandable from a protocol perspective, meant that he could not carry back a personal case from her to Washington for enhancing high-level ties. Valenzuela also said that Argentina's strong statements against any recognition of positive elements in the recent Honduran presidential vote had been perceived as a direct criticism of the exhaustive U.S. efforts to build consensus toward a viable way forward. ¶15. (C) Fernandez speculated that many even in the Obama Administration held a critical view of Argentina due to the wide publicity given events targeting former President Bush at the ill-fated 2005 Summit of the Americas en Mar del Plata, Argentina. As an insider in those preparations, he wanted to set the record straight. First, he emphasized, the GOA had encouraged that the Hugo Chavez-led anti-Bush rally be held at a soccer stadium to avoid violence and disorder in the streets. They had helped organize it to prevent something worse but had come across simply as organizing an anti-Bush rally. Second, NK had begun his bilateral meeting with President Bush with a factual reference to the importance of the United States, describing it as "hegemonic." This was not really pejorative in the Spanish, Fernandez argued, but had come across that way in the English. President Bush's reaction to the turn-of-phrase had effectively ended the meeting. Finally, he said, Argentina had deferred a decision on the Summit's draft communiquC) endorsing the Free Trade Area of the Americas because it knew the proposal would not achieve consensus, not because it sought to torpedo the U.S. priority. Politics: The Unexpected Turn of Events -------------- --- ¶16. (C) Fernandez described the current political and economic climate in Argentina as difficult and not at all what he and the Kirchners anticipated when they planned for the future at the end of former President Nestor Kirchner's term. Fernandez said he had advocated President Cristina Fernandez de Kirchner's candidacy to succeed her husband in 2007 in the anticipation that the government would be challenged more in the second term and that having NK available to run again 2011 would force a caution on opposition within and outside the Peronist coalition. Had NK succeeded himself, Fernandez said, they believed that the political positioning for 2011 would have begun immediately, increasing governance challenges. He had likened having NK stepping aside to holding a great soccer player like Lionel Messi on the bench, available to turn the tide of a game. Unfortunately, he joked, Kirchner had never really stayed on the bench and had instead remained in the game and undermined his standing. ¶17. (C) The CFK term had been marked by unexpected negative turns, including the Antonini-Wilson suitcase scandal immediately after her inauguration, continuing with the farm crisis of 2008, the international economic crisis, and finally the major reversals in the June 2009 mid-term elections. Of these negative events, he claimed they had foreseen only the international economic crisis, but that CFK had expected Argentina to be more immune to it than was the case. ¶18. (C) Fernandez offered positive comments on NK and CFK but said that, beginning with the farm crisis, they had manifested a devastating inability to see those opposing their policies in anything but political terms. They had seen the farm groups as mobilizing against their power rather than as mobilizing to defend their economic interests. The persistent use of a political calculus had lead to a steady decline in CFK's popularity. Asked by Valenzuela who within the Administration could present or advocate alternative points of view to the President and her husband, Fernandez said that unfortunately there were few if any; most acted as government employees unwilling to risk their jobs by challenging the first couple's views. ¶19. (C) Asked by the Ambassador whom he would back in 2011 national elections, Fernandez said he was leaning toward supporting a third force in politics outside of Peronism and the current opposition. He said that the leading politicians in the country would likely "pulverize" each other before 2011, including the Kirchners, Buenos Aires Mayor Macri, and former President Eduardo Duhalde. He had doubts that Peronist Senator Carlos Reutemann would insert himself. Of Vice President Julio Cobos, he expressed the view that Argentines were more favorably inclined to him as an opposition voice with limited power than as a potential President. Fernandez said he would look among governors for new leaders and mentioned only Salta Governor Uturbey specifically. Vice President Cobos: Looking to Rebuild -------------- ¶20. (C) Valenzuela met with Vice President Julio Cobos, who is estranged from the Kirchners and currently the leading contender to succeed them in Casa Rosada. Cobos brought with him former congressional leader Raul Baglini, widely believed to be Cobos's chief advisor; Senator Ernesto Sanz, newly elected leader of the Radical Party (UCR); well known Radical stalwart Rodolfo Terragno; and Roberto Villambrosa, widely believed to be a potential foreign minister in a Cobos administration. ¶21. (C) With Cobos, Valenzuela explained the U.S. position on Honduras. Cobos advisor Terragno pointed out that the international community needed to stop recognizing the legitimacy of Honduran President Zelaya's claim to office beyond the January 27 end of his mandate. Turning to Argentina, Cobos said the country needed to recover credibility, institutionality, separation of powers, checks and balances. He said the opposition was divided, but so were the Peronists -- which meant there was an opportunity to forge with some Peronists a common agenda prioritizing education and social investment, crime and security, energy, rule of law, and other issues. Terragno said they needed a non-aggression pact between the government and opposition, but together they could work to guarantee contractual sanctity, which in Argentina would be a novelty. Sanz said there was a growing political space for a positive agenda geared at improving Argentina's investment climate. Cobos said he was concerned about U.S. sanitary and phytosanitary measures that keeping Argentine beef and lemons out of the U.S. market, and he emphasized the importance of continuing to provide GSP benefits to Argentine exports. The DCM urged the GOA to address the grievances of U.S. companies who had not been paid the damages awarded to them by the International Court for the Settlement of Investment Disputes (ICSID),since these companies could get Argentina's GSP benefits suspended. A/S Valenzuela said the GOA needed to take action to restore confidence in Argentina, and he relayed the concerns about rule of law expressed to him by leaders of U.S. business operating in Argentina. Macri: Expecting a Difficult 2010 -------------- ¶22. (C) A/S Valenzuela, the Ambassador and the DCM engaged with Buenos Aires City Mauricio Macri, the center-right leader who is widely expected to run for president in 2011, regarding the current political panorama and the 2011 presidential race. Former Ambassador to the U.S. Diego Guelar accompanied Macri. ¶23. (C) Macri said Argentina faces a difficult year ahead and expressed concern that the Kirchners were pushing Argentina towards becoming a Venezuela-like state. Nonetheless, he noted that since the June midterm elections, the Argentine public has demonstrated that it is tired of the government's confrontational approach. He said recent polls show a decline in approval ratings for both ruling party and opposition officials, noting that the public is tired of the Kirchners' approach while blaming the opposition for not pushing them to change course. ¶24. (C) Macri noted that the key question that is being debated in political circles today is the role of the state. Valenzuela said he was struck by several trends, which appear to be operating in Argentina as well as in many Latin American countries. First, he noted that those who win power, tend to achieve all control. Secondly, there seems to be a preference to see those who are governing, fail. Finally, weak institutions contribute to these trends. Macri replied that the Kirchners have been "brutal" in their push to do whatever it takes to win and maintain power. He added that Argentina is on the extreme end of the pendulum regarding the weak state of its institutions. He said that during the Kirchner era judges have been terrorized, the business sector is worse off, journalists have been discredited, and police have become increasingly corrupt. He added that the "the level of impunity is so high" that a sense of what is right and wrong has been lost. What is needed, Macri noted, is for an established system of rules and regulations within an independent judicial branch. Under the Kirchners, all institutions and sectors have worsened except for the Supreme Court, which has achieved independence. Macri cited the true challenge to be tapping into Argentina's potential despite the isolation the Kirchners have imposed. Macri on Other Presidential Contenders -------------- ¶25. (C) Macri handicapped the presidential race for Valenzuela. The Mayor cited the most likely top three candidates to be Cobos, NK, and an independent backed by Macri's Republican Proposal party (implicitly referring to his candidacy) and Peronist dissidents. He speculated that a push for NK's candidacy would create a fracture within the Peronist party. He said that while NK might achieve 20% or 25% in the first round, he did not see him winning a second round, given his low approval ratings. As to Cobos's candidacy, Macri noted that the UCR remained deeply divided over whether to reincorporate Cobos, let alone make him the UCR candidate. ¶26. (C) As to other possible candidates, Macri said Civic Coalition leader and former 2007 presidential candidate Elisa Carrio's chances are particularly unlikely given she would be following an unpopular female president. As to Peronist dissident Colombian-born Francisco De Narvaez, Macri thought it would be difficult for him to overcome the constitutional ban on foreign-born candidates. Macri predicted that Santa Fe Governor Hermes Binner of the Socialist Party might be hard-pressed to bridge the gap from provincial to national-level recognition. However, the Mayor believed that if Peronist Senator Carlos Reutemann from Santa Fe decided to run, Peronist leaders would switch their support en masse from NK to Reutemann. Macri speculated that former President Eduardo Duhalde could be a candidate, but has lost much of the power he once had. National deputy and former Governor of Buenos Aires Province Felipe Sola and the former Governor of Misiones Ramon Puerta also have lost much influence. On the Radical Party -------------- ¶27. (C) As to Radical party leadership changes, Macri referred to the Radical's party new President Ernesto Sanz as "very modern, pro-capitalist, and a better candidate than Cobos." He noted that the Radical party has traditionally been highly institutional and anti-capitalist. De Narvaez -------------- ¶28. (C) A/S Valenzuela met with Peronist dissident, congressional deputy and multi-millionaire businessman Francisco De Narvaez, who told Valenzuela he intended to run for the Peronist Party's presidential nomination in 2011 to reverse Argentina's "profound decadence." Amid generalizations about the need to restore normalcy and optimism to Argentina, he repeatedly let drop that he enjoyed "excellent relations" with VP Cobos and remarked on their compatibility. De Narvaez said he wanted Argentina to return to international financial markets, but his top priority was fighting crime and enhancing security. He spoke at length of narco-trafficking and the violence it brought with it, and claimed the GOA was in a "state of denial" about crime and poverty in the country. He claimed he could reduce poverty by one third within ten years. He said he saw himself, Santa Fe Senator Carlos Reutemann and maybe Buenos Aires Mayor Macri as the leading options for the Peronists. Valenzuela noted that Argentina had yet to meet the enormous productive potential of its educated workforce and resource wealth, and his astonishment that Chilean per capita GDP had surpassed Argentina's. De Narvaez stressed the need for rule of law in Argentina, and said the Argentine business class needed to take responsibility for putting Argentina on the right course. De Narvaez's advisor, congressional deputy Gustavo Ferrari, said the Kirchner administration's refusal to comply with court orders was deeply disturbing and undermined Argentina's rule of law. Eduardo Duhalde -------------- ¶29. (C) In a separate meeting, Eduardo Duhalde, the Peronist strongman who preceded Nestor Kirchner as transitional president (2002-03) who has since announced his candidacy for the Peronist presidential nomination, spoke at length of the need to rebuild Argentine institutions. He said he was particularly hoping to put in place a two-party system that would be able to strike bipartisan agreements on five or six basic themes, such as personal security and the business climate. He said the country was in dire need of clear rules and lamented Argentina's long decline. "Poverty did not exist in Argentina before 1974," he claimed, as he identified several areas (such as forestry and mining) where Argentina was currently exploiting only a small fraction of its potential. Duhalde claimed he was working to cultivate a new generation of leaders and said it was an unfortunate myth that the Radicals (UCR) were unable to govern. He claimed he had contrived to get UCR leaders to re-engage with Vice President, whom the UCR had expelled when he had joined the Kirchner ticket in 2007. Valenzuela noted that he was struck by Argentina's lack of national cohesion, and by the discouragement of the American company representatives with whom he had met the previous day. Duhalde said he encountered on a daily basis the pessimism and anxieties of the business community. Switching to the issue of narco-trafficking, Duhalde praised what he viewed as the Obama Administration's "paradigm shift" toward prevention and demand reduction, and he specifically lauded Secretary of State Clinton's acknowledgement in Mexico that narco-trafficking was a demand-driven issue. Valenzuela noted that drug consumption was generally not increasing in the United States, and he explained that eradication and interdiction were necessary elements along with demand reduction in the new strategy of co-responsibility. ¶30. (SBU) Press coverage and GOA reaction to A/S Valenzuela's visit was reported reftel. ¶31. (U) WHA A/S Valenzuela has cleared this cable. MARTINEZ MARTINEZ