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Cablegate: Argentina: Ex-Veep Alvarez On Mercosur, Venezuela, And

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FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 9345
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
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RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 6591
RUEHMN/AMEMBASSY MONTEVIDEO 6791
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RUEHBR/AMEMBASSY BRASILIA 6461
RUEHLP/AMEMBASSY LA PAZ SEP CARACAS 1514
RUEHSO/AMCONSUL SAO PAULO 3550
RUEHRI/AMCONSUL RIO DE JANEIRO 2382

UNCLAS BUENOS AIRES 001920

SIPDIS

SIPDIS
SENSITIVE

PASS NSC FOR MICHAEL SMART
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE
PASS USTR FOR KATHERINE DUCKWORTH AND MARY SULLIVAN
TREASURY FOR LTRAN, MMALLOY
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER
US SOUTHCOM FOR POLAD

E.O. 12958: N/A
TAGS: ECON ETRD PREL PINR VZ AR
SUBJECT: ARGENTINA: EX-VEEP ALVAREZ ON MERCOSUR, VENEZUELA, AND
DOMESTIC ELECTIONS

Ref: (A) Buenos Aires 1707
(B) Buenos Aires 1359
(C) Caracas 844

This cable contains sensitive information - not for internet
distribution.

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

1. (SBU) Former De La Rua Administration Vice President "Chacho"
Alvarez, currently serving as the President of Mercosur's Permanent
Representatives Commission, sees Mercosur's current expansion agenda
as a political effort to contain and manage Venezuela (protect). A
Venezuela within Mercosur and subject to Mercosur's democracy
clause, he said, is less likely to pursue its more ideologically
driven ALBA (Bolivarian Alternative for the Americas) trade bloc
"adventures." Mercosur continues to grapple with internal
asymmetries which concentrate the bulk of foreign capital flows to
Brazil and Argentina at the expense of Uruguay and Paraguay.
Alvarez sees Argentina's post-economic crisis normalization being
complicated by an unprecedented concentration of presidential power
and a fragmented opposition that is operating outside of traditional
political parties and so lacks national projection and broad
legitimacy.
End Summary.

---------------------------------------------
On Mercosur's Asymmetries and Expansion Plans
---------------------------------------------

2. (U) On September 21 Ambassador, PolCouns, and EconCouns met with
Mercosur President of the Permanent Representatives Commission (and
former GoA Vice President under President De la Rua) Carlos Alberto
"Chacho" Alvarez and Cabinet Chief for the Mercosur Presidency
Facundo Nejamkis. Conversation focused on Argentine pre-election
political dynamics and on Mercosur's ongoing expansion exercise.
Please protect Alvarez's comments.

3. (SBU) Mercosur continues to grapple with internal asymmetries
which concentrate the bulk of foreign investment into the bloc to
Brazil and Argentina at the expense of smaller members Uruguay and
Paraguay, Alvarez said. Uruguay's exports to Brazil, which had
averaged in the $1 billion range annually in the 1990s, are now half
of that level. It is not at all hard to understand then, Alvarez
concluded, why Uruguay is eagerly exploring TIFA links with the U.S.


4. (SBU) A Mercosur internal compensation fund will distribute
$50-60 million to Uruguay and Paraguay to address some of the large
economy/small economy differences in productivity and productive
capacity, Alvarez said. Uruguay hopes to use the bulk of its
compensation fund monies to build infrastructure links, including
electricity transmission lines, to Brazil. Paraguay, in contrast, is
exploring the use of its share of compensation funds to develop
small business capacity and productivity, particularly in the
Tri-border Area. Alvarez said he had participated at a UNDP
conference in New York earlier this year to explore how Mercosur
could contribute to the development of smaller nation member
productive capacity.

5. (SBU) On Mercosur's expansion to include new members Venezuela
and Bolivia, Ambassador noted his own experience with the European
Union was that trade bloc expansion efforts invariably divert
attention from efforts to deepen current bloc disciplines. Alvarez
agreed and called Mercosur's expansion agenda broadly political: it
would be far easier to manage the region's relations with a
fractious Venezuela embedded into Mercosur bloc disciplines. A
Venezuela within Mercosur and subject to Mercosur's democracy
clause, he said, was also less likely to pursue its more

ideologically driven ALBA (Bolivarian Alternative for the Americas)
trade bloc (Ref C) "adventures." Alvarez admitted that the
incorporation of Venezuela's increasingly centralized economy into
Mercosur's common external tariff regime would be a difficult
long-term challenge.

--------------------------------------------- ------
On Argentine Normalization and a Cristina Candidacy
--------------------------------------------- ------

6. (SBU) In the immediate aftermath of the 2001/2 economic crisis,
Alvarez said, Argentina had turned inwards to recover its sense of
balance and self-esteem. Five years later, Argentina has stabilized
economically and politically and so a likely Cristna Fernandez de
Kirchner (CFK) administration will face internal demands for a
"normalization" of Argentina's relations with the international
community. Part of this normalization process requires a strong
opposition party to call a government to account and to keep it
focused on serving the national interests. However, Alvarez
emphasized, Argentina's fragmented opposition is largely
"vanity-driven," party-less and so lacking in national projection
and broad legitimacy. This divided opposition, combined with the
unprecedented budget and patronage power that President Kirchner has
concentrated at the federal level, will make this normalization
process difficult, Alvarez concluded.

--------------------------------------------- ------
Relations with Neighbors: Hope on Papermill Dispute
--------------------------------------------- ------

7. (SBU) In its international engagements, Argentina under President
Nestor Kirchner has been "defensive," Alvarez said. CFK will be a
more open international interlocutor than her husband has been to
date, and has made clear she will engage both the USG and European
Union on common interests. Alvarez speculated that President Nestor
Kirchner could, after he leaves office, turn his energies to
improving Argentina's regional relations with Brazil, Chile and
Uruguay. Argentine/Chile relations have deteriorated, he said, over
Argentina's breach of natural gas delivery contracts.
Argentine/Uruguay relations have similarly suffered over paper mill
frictions (Ref A). With Argentina's paper mill environmental
protestors losing popular support and Kirchner himself having
requested Spanish conciliation efforts, "common sense" will prevail:
Argentina will accept the Uruguayan paper mill as a fait accompli,
demand enhanced environmental monitoring, and come to some final
accord with Uruguay before the upcoming 2009 Summit of the Americas
in Trinidad.

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Bio Note
--------

8. (U) Carlos Alberto "Chacho" Alvarez, born December 26, 1948 in
Buenos Aires, was Vice-President of Argentina during part of
President Fernando de la Rua's mandate, and currently heads the
Mercosur Commission of Permanent Representatives (CRPM). Alvarez
has a degree in history from Buenos Aires University. He was a
staff adviser to the Regional Economies Commission of the National
Senate from 1983 to 1989. That year he was elected as National
Deputy for the Justicialist Party, but he split from the party
shortly afterwards because of disagreements with President Carlos
Menem, creating an independent block known as The Group of the
Eight.

9. (U) In 1991, Alvarez joined a group of politicians of different
progressive parties, as well as former Justicialists, to create the
Frente Grande coalition party. He was again elected congressman for
the 1993-1997 period, as well as a member of the Constitutional
Convention that modified the constitution in 1994, both as a member
of the Frente Grande party. In 1994, he took part in the creation
of the FrePaSo party. In the 1995 presidential elections, he was

the vice-presidential running mate of Jose Octavio Bordon,
Argentina's current Ambassador to the United States; they won second
place.

10. (SBU) In 1997, FrePaSo joined the Union Civica Radical to form
the Alliance for Work, Justice and Education (usually known as the
Alianza). Alvarez was elected once again to the Chamber of Deputies,
this time by the Alianza. He became vice-president in the 1999
presidential elections with Fernando de la Rua, but resigned his
post on October 8, 2000, due to his disapproval of alleged
administration bribes paid to the Federal Senate to approve labor
law reforms. He retired from public life for five years until his
appointment to Mercosur in December 2005.

-------
Comment
-------

11. (SBU) Chacho Alvarez's 2000 resignation from the De La Rua
administration in protest over alleged payment of bribes won him
lasting credibility among some Argentine voters. His departure from
De La Rua's Alianza administration only a year before the nation
descended into economic and political chaos, however, has left
Alvarez his share of detractors as well. Alvarez's current position
heading the Mercosur PermReps' Committee is widely seen as a
comfortable sinecure from which to choose the best timing and
opportunity to re-enter the Argentine political mainstream. It
could well be that a Cristina Kirchner administration, more open and
internationally minded that that of her husband, could find some use
for Alvarez's Mercosur credentials.
WAYNE

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