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Cablegate: Chavez' Economic Deliverables to Argentina --

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DE RUEHBU #0489/01 0731820
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O 141820Z MAR 07
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UNCLAS BUENOS AIRES 000489

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON ENRG EAGR ETRD AR VZ
SUBJECT: CHAVEZ' ECONOMIC DELIVERABLES TO ARGENTINA --
PAYMENT FOR RALLY STOP

REF: A. BUENOS AIRES 465
B. BUENOS AIRES 427
C. BUENOS AIRES 284
D. BUENOS AIRES 360

Summary
-------
1. (SBU) Presidents Kirchner and Chavez oversaw the signing
of a number of bilateral economic accords and commercial
agreements during Chavez' March 9 visit to Argentina
(reftels). This was the "substantive" side of Chavez' visit
to Buenos Aries and the focus for the GoA. The two
Presidents agreed to include Bolivia in the "Banco del Sur"
and to create an organization of natural gas exporters.
Other agreements covered enhanced energy and agricultural
cooperation and increased commercial opportunities for
Argentine companies. The agreements expand on accords the
two Presidents signed during Kirchner's visit in February to
Venezuela (Ref B), and are largely symbolic. Nevertheless,
GoA officials claim the closer relationship with Venezuela
has brought real economic benefits, including a doubling of
exports to Venezuela since 2005, and expected to reach over
$800 million in 2007. End Summary.

Eleven, no, Ten, Accords
------------------------
2. (SBU) According to local press, Presidents Kirchner and
Chavez presided over the signing of eleven economic and
commercial accords on March 9, during Chavez' pass through
Buenos Aires as part of his shadow "anti-Bush" tour (see
reftels). The two governments later issued a list of ten
agreements. The two Presidents signed agreements to invite
Bolivia to join their concept for a regional development
bank, "Banco del Sur," and also to create the "Organization
of Gas Producers and Exporters in South America (OPEGASUR).

3. (SBU) Venezuela's national oil company PDVSA signed three
agreements with Argentine companies to produce vehicles,
buses, motors and other equipment that operate on natural
gas. PDVSA also agreed with Argentina's "Grobo Group" on a
$400 million program to expand agricultural production in
Venezuela. The two sides also signed scientific and
technological cooperation agreements on agricultural and
cattle production, and agreed to create an Agricultural
technology institute, and to construct two reproductive
biotechnology facilities in Venezuela.

4. (SBU) GoA officials justify their tighter relationship
with Venezuela as economically pragmatic. The Argentine
private sector is benefiting, with exports to Venezuela
increasing from $513 million in 2005 to $793 million in 2006;
exports are expected to exceed $800 million in 2007. (Note:
Argentina's imports from Venezuela decreased from $32 million
in 2005 to $25 million in 2006.)

Bolivia Joins "Banco del Sur"
-----------------------------
5. (SBU) Kirchner and Chavez welcomed Bolivia into the "Banco
del Sur," their new concept of a regional development bank to
rival the IFIs. However, GoA and GoV negotiators have yet to
agree on the details of how to organize or finance the bank.
As reported Ref B, the press reports that the two governments
are considering committing reserves to capitalize the bank.
However, at least for Argentina this would require
Congressional approval to change the Central Bank's charter.
(Comment: this would also create a public perception problem
for Argentina with Paris Club countries, since the GoA has

argued that the Central Bank's charter keeps the GoA from
using official reserves to pay arrears to Paris Club
creditors. End Comment).

Energy Agreements -- Repeats and Pie in the Sky
--------------------------------------------- --
6. (SBU) The three agreements that involve compressed natural
gas (CNG) technology transfer (for automobiles and buses) to
Venezuela were minimalist expansions on earlier MOUs signed
in Caracas (Ref B). According to ex-GoA Energy Secretary
(and current private energy consultant) Daniel Montamat, the
fourth agreement -- to create a South American natural gas
exporter/producer association -- is largely symbolic, and
Chavez' response to the U.S./Brazil biofuel agreement.

Argentina Sells Agricultural Know-How to Venezuela
--------------------------------------------- -----
7. (SBU) PDVSA agreed to invest $400 million to expand
Venezuela's crop production with Argentine technical
assistance. Grobo Group, one of Argentina's largest
agricultural companies, will manage the project. Grobo will
begin by planting soybeans on 10,000 hectares of PDVSA land,
increasing production to 100,000 hectares by year four, and
eventually reaching one million hectares. (Comment: the
project may have trouble getting off the ground, given
Chavez' stated opposition to GMO soybeans, which comprise
about 95% of Argentine soybean production. Grobo is
aggressively pro-biotech. End Comment).

8. (SBU) The two sides signed several other accords to
promote agricultural production and research in Venezuela,
using Argentine technical expertise. They agreed to enlarge
four potato research centers and build two biotechnology labs
focused on cattle reproduction. They also agreed to create
an agricultural technological institute in the Bolivar area,
with the Argentine Institute of Agricultural Technology (INTA
-- equivalent to USDA's Agricultural Research Service)
providing technical assistance. (Comment: Post's contacts
comment that these projects support Chavez' stated interest
to double Venezuela's cattle stock in five years, with the
longer term goal of becoming self sufficient in dairy and
beef production. End Comment).

Comment
-------
9. (SBU) These accords, along with prior agreements signed in
Venezuela and during the Rio Mercosur Summit, form the
blueprint for the future of the Kirchner/Chavez relationship,
with Kirchner selling the political support of one of Latin
America's premier countries to Chavez in return for economic
benefits -- financed by Venezuelan oil. Many of the
agreements are not fully developed, such as the Banco del
Sur, or are even unrealistic, such as the South American
natural gas organization. However, others -- particularly
Venezuela's purchase of Argentine bonds and Argentine
agricultural companies' exports to Venezuela -- have tangible
value for both Argentina and Venezuela. Kirchner's continued
support for Chavez will remain rooted in this economic and
commercial pragmatism, while also parlaying his support of
Chavez' brand of populism to appeal to the Argentine left
during the election cycle. End Comment.
WAYNE

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