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Cablegate: Ambassador Meets Argentine Business Leaders

VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0792/01 1141023
ZNR UUUUU ZZH
R 241023Z APR 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 7929
RUCPDOC/USDOC WASHINGTON DC
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 6114
RUEHCV/AMEMBASSY CARACAS 1198
RUEHMN/AMEMBASSY MONTEVIDEO 6381
RUEHSG/AMEMBASSY SANTIAGO 0359
RUEHBR/AMEMBASSY BRASILIA 5974
RUEHGT/AMEMBASSY GUATEMALA 0193
RUEHLP/AMEMBASSY LA PAZ APR VILNIUS 0029
RUEHSO/AMCONSUL SAO PAULO 3256
RUEHRI/AMCONSUL RIO DE JANEIRO 2199

UNCLAS BUENOS AIRES 000792

SIPDIS

SIPDIS
SENSITIVE

USDOC FOR 4322/ITA/MAC/OLAC/PEACHER
PASS NSC FOR JOSE CARDENAS, ROD HUNTER
PASS USTR FOR EEISSENSTAT, SCRONIN

E.O. 12958: N/A
TAGS: ECON EINV PREL VZ AR
SUBJECT: AMBASSADOR MEETS ARGENTINE BUSINESS LEADERS

1. (U) The following cable contains business-confidential
information and should not be distributed via internet.

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

2. (SBU) Association of Argentine Businessmen (AEA) Directors, a
who's who of Argentina's business elite, are generally upbeat on
Argentina's medium term economic and business prospects. In an
April 18 lunch with the Ambassador, they supported greater GoA
engagement with the USG on trade issues, but doubted the likelihood
of substantive progress prior to elections. They decried the short
term, opportunistic orientation of Argentine businesses -- including
their own -- that leads them to focus on quick returns and
investment in primary commodity production rather than in more
complex value added production. To help Argentine business and
government leaders better understand the global competitive
environment in which Argentina operates, they suggested that the USG
highlight the success of US and Argentine firms who have made long
term investment commitments here and in Brazil pay off. Ambassador
noted that the "Americas Competitiveness Forum" in June would be a
good place to explore these issues more in depth. AEA Directors
were pleased to see the USG expanding its competitiveness dialogue
beyond the NAFTA countries. On biofuels, they said that it would be
good if Argentina were to participate more fully in the cooperation
that the U.S. and Brazil had initiated. On Venezuela, AEA Directors
argued that the USG should regard incidents like Chavez's March 9
anti-imperialist rally in Buenos Aires and related GoA populist
statements as inconsequential and more show than substance. End
Summary

-----------------------------------------
A Who's Who of Argentina's Business Elite
------------------------------------------

3. (SBU) On April 18, Ambassador Tony Wayne, accompanied by DCM,
Economic Counselor and Commercial Counselor, met over lunch with key
members of the Board of Directors of AEA (Association of Argentine
Businessmen), the premier private sector organization that
represents the views of Argentine business leaders. Participants
included: Paolo Rocca, majority shareholder and President of
Techint, Argentina's largest and most diversified industrial
conglomerate with engineering, construction and services firms,
including Tenaris, a world class steel producer; Luis Pagani,
President of ARCOR, the world's largest producer of hard candies and
a major supplier to Wal-Mart in the U.S; Aldo Roggio, Chairman of
Roggio Holding, an infrastructure and services conglomerate whose
investments include Buenos Aires Metro and Sanitation Services and
the Rio de Janeiro Metro; Sebastian Bago, CEO of the leading local
pharmaceutical firm in Argentina, Laboratorios Bago, which has a
strong presence in Latin America and employs 4,800; Juan Bruchou,
President of Citibank for Argentina, Uruguay and Paraguay, as well
as President of both the Argentine Banking Association and the
American Chamber of Commerce in Argentina; Carlos Miguens, head of
the Bemberg Group, a major investment company with interests in
mining and energy; Hector Magnetto, head of Grupo Dominio that
controls Grupo Clarin, publisher of the largest Spanish-language
daily newspaper in the world and owner of Argentina's leading cable
television company; Eduardo Elsztain, Argentina's biggest real
estate developer and Treasurer of the World Jewish Council; and
Jaime Campos, Executive Director of the AEA.

4. (SU) AEA Directors said they felt it important that Argentina
and the United States enjoy a friendly and productive relationship
which they said both sides needed to work harder to achieve. While
they recognized that some current GoA economic policies were
inappropriate for dealing with challenges like inflation, they
agreed that the economy was healthy and would continue to perform
well in the medium term, especially given the country's budget and
trade surpluses, the strong world economy and demand for Argentine
commodities and the relatively debt-free status of Argentine
consumers and producers. They recognized that GoA spending had
increased significantly during this electoral season, but were not
overly concerned about the prospect of over-heating given the strong
fiscal and foreign currency reserve situation the GoA enjoys.

5. (SBU) Notwithstanding Argentina's spectacular and now five-year
strong economic recovery, some business leaders called themselves
justifiably cautious. Techint's Rocca (whose company has
progressively diversified the bulk of its assets outside of
Argentina over the past decade) called his company in "survival"
mode in regard to his holdings in Venezuela and Bolivia. In
contrast, Eduardo Elsztain called Argentina's economic crisis
experience an "asset" that had tested the Argentine people, the
economy and political system, and has prepared them to take
advantage of the current economic cycle. International capital
markets certainly favor Argentine investment, he said, noting that a
recent $150 million bond issue by his real estate company IRSA was
five times oversubscribed.

6. (SBU) AEA Directors supported greater GoA engagement with the USG
on finance, trade and investment issues, but said that an election
year was not really the best time to move forward aggressively on
such a dialogue. They said that the generally negative public
perception of the U.S. in Argentina made the U.S. an easy target for
election rhetoric. Nevertheless, they seemed optimistic that this
could be overcome, especially after the elections.

--------------------------
Concern on Competitiveness
--------------------------

7. (SBU) A number of AEA Directors decried the short term,
opportunistic orientation of Argentine businesses -- including their
own -- that leads them to focus on quick returns rather than on
investment in long term infrastructure development. It also leads
them to focus on investment in primary commodity production rather
than on investment in more complex value added production.
Ambassador asked how we can best encourage the GoA and both domestic
and foreign investors to take a longer term market view. Responses
included highlighting the success of U.S. and Argentine firms who
have made long term investment commitments here pay off. It would
also be helpful, they argued, if the USG could help demonstrate more
clearly successful U.S. company operations in other countries,
especially Brazil, as a means of helping Argentine business and
government leaders to understand more clearly the competitive
environment in which Argentina operates. Ambassador and Commercial
Counselor noted that the "Americas Competitiveness Forum" that
Secretary of Commerce Gutierrez will host in June would be a good

SIPDIS
place to explore these issues more in depth. AEA Directors were
pleased to see that the USG was expanding its competitiveness
dialogue beyond the NAFTA countries and expressed interest in
receiving more information about it. Mr. Rocca mentioned that
U.S.(anti-dumping) prohibitions on imports of certain steel products
over the last decade and a half were not helpful to his company.

------------------------------
What is Argentina to the U.S.?
------------------------------

8. (SBU) Arcor's Pagani spoke of a perception, strengthened
following the recent POTUS tour, that Argentina is a distant second
to Brazil in terms of U.S. Southern Cone priorities. On biofuels,
they said that it would be good if Argentina were to participate
more fully in the alliance that the U.S. and Brazil had initiated.
Ambassador explained that the goal was not to exclude anyone, but
rather to engage Brazil in exploring ways that its extensive and
highly successful alcohol fuels program could help the region to
become more energy secure. Interestingly, the business people felt
that the growing importance of biofuels would make U.S. agricultural
subsidies less of an impediment to future trade negotiations as
world demand for grains expands.

9. (SBU) Business leaders noted the unfortunate negative connotation
that the term "Washington Consensus" engenders among policymakers
and voters in the region as a set of neoliberal economic policies
that did not produce positive results for the countries that
implemented them. They opined that the USG should seek to craft a
new consensus that includes the economic policies that are contained
in the "Washington Consensus," but which also includes other
policies that would make the package more attractive to Latin
American policymakers and voters.

----------------------
The Venezuela Question
----------------------

10. (SBU) Speaking about the issue of Hugo Chavez, AEA Directors
asked whether the USG would allow things like the Chavez's March 9
anti-imperialist rally in Buenos Aires during President Bush's visit
to Uruguay to serve as impediments to our bilateral relationship.
They suggested that the USG should recognize such events and GoA
populist statements for what they believe they really are -
relatively unimportant and inconsequential events that are much more
show than substance. Mr. Rocca said that he felt that these kinds
of events could be averted through dialogue and was optimistic that
his assets in Venezuela would not suffer the same fate as AES and
Verizon. (Note: Rocca is a 50% stakeholder in a Venezuelan steel
company that Hugo Chavez threatened to nationalize this week. End
Note.)

WAYNE

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