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Cablegate: Argentine Perspective On Kirchner's Venezuela Visit

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DE RUEHBU #0360/01 0542029
ZNR UUUUU ZZH
R 232029Z FEB 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 7370
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 5962
RUEHCV/AMEMBASSY CARACAS 1086
RUEHMN/AMEMBASSY MONTEVIDEO 6202
RUEHSG/AMEMBASSY SANTIAGO 0205
RUEHBR/AMEMBASSY BRASILIA 5809
RUEHLP/AMEMBASSY LA PAZ FEB SAO PAULO 3182
RUEHRI/AMCONSUL RIO DE JANEIRO 2166

UNCLAS BUENOS AIRES 000360

SIPDIS

SIPDIS
SENSITIVE

WHA FOR WHA/BSC, WHA/AND AND WHA/EPSC
E FOR THOMAS PIERCE
EB/CBA FOR FMERMOUD, DENNIS WINSTEAD
EB/IFD/OIA FOR WSCHOLZ, MTRACTON
EB/IFD/OMA FOR AHAVILAND AND ASIROTIC
PASS NSC FOR JOSE CARDENAS
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE
PASS USTR FOR EEISSENSTAT, SCRONIN
TREASURY FOR RALBANO AND LTRAN
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER
US SOUTHCOM FOR POLAD

E.O. 12958: N/A
TAGS: EINV ECON ENRG EPET AR VZ
SUBJECT: ARGENTINE PERSPECTIVE ON KIRCHNER'S VENEZUELA VISIT

Ref: Buenos Aires 311

-------
Summary
-------

1. (SBU) Deliverables from President Kirchner's February 21-22 visit
to Venezuela included $750 million in bond financing, a $135 million
rescue package for emblematic Argentine dairy cooperative SanCor, a
raft of largely symbolic bilateral MOUs that included creation of a
regional development bank and joint oil exploration in the Orinoco,
and some compelling economic nationalist theater. Local media
coverage of Kirchner's trip was extensive, highlighting his comment
that Argentina "will not contain Venezuela." Media also favorably
noted Kirchner's meeting with Venezuelan Jewish community leaders in
the face of overt GoV support for Iran. GoA contacts emphasized to
us that Argentina's relationship with Caracas remains eminently
pragmatic and largely commercial; that we can expect continued
substantive but low key cooperation with the U.S.; but that in a
pre-election year where populist appeals to the center-left will be
an integral part of the Kirchner administration's campaign strategy,
we can also anticipate periodic populist expressions of "Bolivarian
solidarity" with Chavez (who is reported to be planning a return
visit to Buenos Aires in early March). END SUMMARY

---------------------
Seventeen Agreements...
---------------------

2. (U) President Kirchner visited Venezuela February 21-22,
accompanied by Planning Minister De Vido, Economy Minister Miceli,
Foreign Minister Taiana, Santa Fe province Governor Obeid (where
dairy cooperative SanCor is based), Finance Secretary Chodos, and
numerous other federal government officials, parliamentarians and
Argentine agricultural private sector representatives. All
delegation events were built around the signing of a series of
bilateral GoA/GoV accords in Puerto Ordaz, with the exception of
Kirchner's separate meeting with representatives of the Venezuelan
Jewish community.

3. (U) The two Presidents signed seventeen separate agreements
during the visit, including joint cooperation agreements between the
two countries' Ministries of Planning, Economy, and Foreign Affairs,
and specific agreements on science/technology cooperation. They
also signed agreements on phyto-sanitary standard cooperation,
electricity technology cooperation, low-income housing construction
technology cooperation, and communication technology cooperation.
In addition, MOUs were signed for the transfer of Argentine
compressed natural gas technology for bus and car transportation.
According to local media reports, President Chavez plans to repay
Kirchner with his own visit to Argentina, possibly in early March.

-------------------------------
Development Banks and Oil Deals
-------------------------------

4. (SBU) Kirchner and Chavez also signed an MOU to create a "Bank of
the South" development bank that, according to local media, would be
designed to supplement and eventually supplant "conditioned and
paternalistic" multilateral development bank (World Bank and IDB)
infrastructure project funding in the region. (Note: GoA contacts
report no/no discussion during the visit of plans for either GoV or
GoA capital contributions to the new development bank. End Note).
As anticipated (reftel), Kirchner and Chavez also signed an
agreement to have GoA national oil company ENARSA jointly exploit
with GoV-owned Petroleos de Venezuela (PdVSA) an upstream
exploration block in Venezuela's Orinoco region. (Note: Independent
energy analysts here see any GoA/GoV petroleum exploration agreement


in Venezuela as largely symbolic, given that ENARSA brings little to
the table in the way of financial resources. End Note). Local
media is also reporting that, as a result of this successful visit,
Argentina will allow Chavez to expand PDVSA activities in Argentina
by facilitating the purchase of local oil company RHASA, together
with a network of 150 gasoline stations in Buenos Aires.

--------------------------------------------- -----
Debt Financing and SanCor Dairy Cooperative Rescue
--------------------------------------------- ------

5. (SBU) The most significant single announcement was the planned
February 26 launch of a $1.5 billion second tranche of the "Bono del
Sur." The bond will be a bundle of $750 million of Argentine Boden
15 bond, with a $750 million Venezuelan fixed-coupon issue. (Note:
As in the prior Bono del Sur issue, there will be no cross default
clauses and international financial markets will trade the two
issues independently. End Note). Finally, an agreement was signed
whereby the GoV's state-owned Banco Nacional de Desarrollo Economico
y Social de Venezuela (BANDES) will provide a $135 million
assistance package to Argentina's second largest dairy cooperative,
SanCor, in exchange for long term payments in the form of powdered
milk and technology transfer. (Note: The financially troubled diary
cooperative was to have been sold to a Soros-linked investment fund
before this GoV offer was accepted by SanCor in the fall of 2006.
End note).

--------------------------------------------- ---
Polemics: Argentina Will Not "Contain" Venezuela
--------------------------------------------- ---

6. (SBU) During the agreements signing ceremony, Kirchner commented
"we are and will be absolutely respectful, both of us, of the
relations and internal situations in our countries...It is said that
some countries should 'contain' others, that Lula and I should
'contain' Chavez. That is absolutely wrong. Together with our
brother, President Chavez, we are building integration in South
America for the dignity of our peoples." Local Argentine media took
Kirchner's remark as a response to comments made during the February
8-9 visit to Argentina of Undersecretary Burns and Assistant
Secretary Shannon (septels) that the U.S. could work well with

SIPDIS
governments like Argentina and Brazil but that Venezuela was
"another matter." In response to Kirchner's comments, local media
reports that Chavez said "they have failed and will fail -- the
travelers from the North who are coming to the South to try to
divide us, to sow discord."

-----------------------------------------
Comment: Economic Nationalism on Display
----------------------------------------

7. (SBU) Local media coverage of Kirchner's visit was extensive,
highlighting his "we will not contain Venezuela" comment as a
gratuitous populist slap at the U.S. that will have little impact on
ongoing and pragmatic GoA efforts to improve bilateral GoA/USG
relations. Media also favorably noted Kirchner's meeting with
Venezuelan Jewish community leaders, in the face of overt GoV
support for Iran, as another step in GoA efforts to smooth some of
Chavez' rough foreign policy edges.

8. (SBU) The Venezuelan rescue package for dairy cooperative SanCor
was originally presented by the GoV last fall as a helping hand by a
"brother Bolivarian republic" to prevent an emblematic Argentine
dairy cooperative from falling under U.S. control. Similarly, local
media and some GoA Economy Ministry contacts speculate that
President Kirchner's February 6 criticism of Embassy advocacy on
behalf of a U.S. investment fund's efforts to purchase a minority
stake in Argentina's electricity transmission grid was linked to


this Kirchner/Chavez meeting. "It was a throwaway gesture for
Chavez, who applauds any affirmation of economic nationalism and
especially those that attack Washington," said one GoA Economy
Ministry official. Such populist theater may play well here in a
pre-election year, but the cost to Argentina in terms of attracting
needed foreign investment capital is real.
9. (SBU) Beyond the SanCor rescue, the theater of economic
nationalism played out in the largely symbolic agreements signed on
the creation of (yet another) regional development bank and of joint
ENARSA/PDVSA oil exploration in the Orinoco. The GoV agreement to
purchase $750 million of GoA debt -- on top of $3.5 billion it
purchased last year -- was arguably the only concrete GoV
deliverable that President Kirchner took away from this visit. The
GoV's PDVSA, in turn, gets expanded access to the Argentine retail
petroleum market. On their return from Caracas, our Planning,
Economy and Foreign Ministry contacts emphasized that Argentina's
relationship with Caracas remains eminently pragmatic and largely
commercial. We can expect continued substantive but low key
cooperation with the U.S. But, in a pre-election year where
populist appeals to the center-left will be an integral part of the
Kirchner administration's campaign strategy, we can also anticipate
periodic expressions of "Bolivarian solidarity" with Chavez.
WAYNE

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