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Cablegate: Argentina: Scenesetter for the U.S. Delegation To

VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0466/01 1011920
ZNR UUUUU ZZH
R 101920Z APR 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0764
INFO RUEHUNV/USMISSION UNVIE VIENNA 0184

UNCLAS BUENOS AIRES 000466

SIPDIS

SIPDIS

FOR THE U.S. DELEGATION TO THE JOINT STANDING COMMITTEE ON
NUCLEAR ENERGY COOPERATION FROM EMBASSY BUENOS AIRES

E.O. 12958: N/A
TAGS: KNNP IR AR
SUBJECT: ARGENTINA: SCENESETTER FOR THE U.S. DELEGATION TO
THE JOINT STANDING COMMITTEE ON NUCLEAR ENERGY COOPERATION

1. (U) This telegram is sensitive but unclassified, and not
for Internet distribution.

------------
Introduction
------------

2. (SBU) Embassy Buenos Aires warmly welcomes the U.S.
delegation to the Joint Standing Committee on Nuclear Energy
Cooperation (JSCNEC), hosted this year by the Government of
Argentina. Our bilateral nuclear relationship with Argentina
is an important point of engagement with the GoA. As you
know, we have a long history of nuclear cooperation with the
GoA, culminating in the recent transfer of most of
Argentina's U.S.-origin high enriched uranium to U.S.
facilities. Argentina has repeatedly announced an ambitious
program to increase its reliance on nuclear power and expand
its nuclear infrastructure, national goals that underscore
the importance of continued dialogue and cooperation in this
area. We are looking forward to meeting with you during your
time in Argentina.

3. (SBU) One of your principal Argentine counterpart
organizations, The National Commission on Atomic Energy
(CNEA), is currently undergoing a difficult period of
transition. The current President, Norma Boero, is a nuclear
fuels specialist who the GoA appointed in January amid a
corruption scandal involving former CNEA Pesident Jose
Abriata and former General Manager Ruben Calabrese. Abriata
is currently the subject of an ongoing investigation.
Calabrese remains at CNEA, but without executive
responsibilities. Boero has stated that one of her early
management priorities is to "clean house" within CNEA. She
maintains the GoA's stated goals of maintaining a uranium
enrichment capacity, completion of the mothballed Atucha II
reactor, development of the CAREM reactor, and the
construction of a fourth reactor. Of note, during an early
April official visit to France, President Cristina Fernandez
de Kirchner (CFK) spoke with French President Nicholas
Sarkozy about the possible sale of a fourth generation French
design reactor to Argentina. However, many within the
Argentine nuclear sector have voiced skepticism about the
GoA's ability to realize such an ambitious set of goals,
given budgetary issues and competing priorities. End
Introduction.

----------------------------
A Recent Bilateral Low Point
----------------------------


4. (SBU) In December, two days after CFK's inauguration, the
GoA misinterpreted and over-reacted to news reports
concerning a federal case in Miami against some Venezuelans
and an Uruguayan who were arrested on charges of operating
and conspiring to operate in the United States as agents of
the Venezuelan government without notifying the Attorney
General as required by law. During the proceedings in Miami,
allegations surfaced that undeclared cash brought into Buenos
Aires in August 2007 from Venezuela had been destined for a
presidential campaign. The statements were not made by the
USG, but rather by one of those arrested. They were
misinterpreted here as reflecting the USG's views.

5. (SBU) CFK reacted angrily to the implication that she had
been the intended recipient of the cash that was intercepted
by GoA officials. She publicly interpreted the Miami arrests
as directed against her government and characterized the case
as a "garbage operation." Her ministers and the Argentine
Congress made similar statements. However, the rhetoric
gradually subsided, and the relationship normalized with a
great deal of behind the scenes work. A new beginning
occurred on January 31, when Ambassador Wayne met with CFK.
The principals agreed at that meeting to put the case aside
and to work to strengthen bilateral cooperation. Since that
time, there have been several important visits by U.S.
officials to Buenos Aires, most notably this week's visit by
WHA Assistant Secretary Tom Shannon.

------------------------------
A Government Against the Ropes
------------------------------

6. (SBU) A GoA decree issued March 11 that increased export
taxes on Argentina's main agricultural export crops
precipitated the worst political crisis of either Kirchner
administration. Argentina's four principal agricultural
organizations showed rare unity in organizing production
stoppages and blockades of Argentina's transport

infrastructure for twenty days, leading to nationwide
shortages of such staples as beef, chicken, dairy products,
and vegetables. There were massive protests in support of
the strike in the countryside and in Buenos Aires, and
GoA-organized counter-protests in Buenos Aires, including one
attended by an estimated 100,000 individuals. On April 2,
agricultural producers decided to lift the strike for thirty
days and hold discussions with the GoA. Those groups vowed
to block Argentina's roads again if they are unable to reach
an acceptable agreement, so the crisis is not resolved. The
GoA's public perspective is that the truce is a victory for
the government, and validates CFK's hard line. Most
analysts, however, consider the dispute to be a setback for
the government, with the vital agricultural sector more
united than at any time in a century.

7. (SBU) We provide the preceding information to you in order
that you may have some context for the state the GoA finds
itself as you embark on your bilateral discussions.

8. (SBU) You should also know that Argentina holds Major
Non-NATO Ally status and cooperates in regional security,
counter-terrorism, drug interdiction, and in contributing
troops to U.N. peacekeeping missions. The GoA has been a
strong international voice on arms control and
nonproliferation issues. In the IAEA, the GoA has voted to
refer Iran's noncompliance to the UNSC. The GoA has also
endorsed the Proliferation Security Initiative (PSI) and the
Global Threat Reduction Initiative (GTRI). It is under the
banner of science that the U.S. and Argentina have realized
some of the best examples of bilateral cooperation. For
example, we have a long history of aerospace cooperation with
Argentina, and you are all aware of the GoA's work with NNSA.


--------------------------------------
What We're Doing on Issues of Interest
--------------------------------------

9. (SBU) Terrorism: Argentina was itself a victim of
international terrorist attacks in the 1990s and has been a
cooperative partner in countering terrorism, especially in
the Tri-border Area. On November 7, 2007, Argentina
succeeded in getting Interpol's General Assembly vote to
issue international capture notices for five current and
former Iranian officials and one Lebanese Hizballah member
(who was reportedly killed in Syria February 13) wanted in
connection with the 1994 terrorist bombing of the Buenos
Aires Jewish Community Center (AMIA). The Embassy and USG
agencies worked with the GoA to pass comprehensive
antiterrorism, money laundering, and terrorism finance
legislation to strengthen local enforcement efforts. We
assist the GoA in capacity-building in the Financial
Intelligence Unit, within the restraints created by Brooke
Amendment sanctions, to build capacity of Argentine law
enforcement forces, and work closely with the Argentine
military on modernization, increasing interoperability, and
training and education focused on civilian control, respect
for human rights, defense resource management, strategic
planning, and science and technology.

10. (SBU) International Crime and Drugs: Argentina is a
transshipment point for narcotics emanating largely from
Colombia, Peru, and Bolivia. Argentine law enforcement
agencies cooperate closely with their USG counterparts on
drug interdiction efforts, fugitive arrests and information
sharing, which has resulted in increased enforcement. This
Mission is focused on institutional capacity-building and
expanding training opportunities for law enforcement
officials, prosecutors and judges in order to improve
internal security and decrease international drug and
criminal activity in Argentina.

11. (SBU) Democracy and Rule of Law: We work with the GoA,
media and civil society to strengthen democratic
institutions, fight corruption and reinforce civilian control
of the military. We promote key reform efforts such as
ending the election of representatives by party slate lists,
increasing governmental transparency, and limiting public
corruption and strengthening the political independence of
the judicial branch. While it does not side with us on every
issue, we continue to cultivate the GoA as a cooperative
partner in multilateral fora, and seek Argentina's
cooperation in the defense of democracy and the observance of
human rights in countries like Cuba, Venezuela, and Bolivia,
as well as UN peacekeeping in Haiti.

12. (SBU) Human Rights: The Government of Argentina
generally respects the human rights and fundamental freedoms

of its citizens. The Kirchner government's human rights
policy focuses on seeking justice for the human rights
violations committed during the 1976-83 military
dictatorship, which resulted in the disappearance of
11,000-30,000 political dissidents. It does not, however,
focus on bringing to justice armed guerrilla groups who also
committed human rights abuses during the same period, known
as "the Dirty War", albeit on a much smaller scale. To date,
the courts have convicted three former officials of the
military regime, including a military chaplain.

13. (SBU) Human Trafficking: Argentina is on the USG's
Tier-2 Watchlist for lack of progress in providing greater
assistance to victims and curbing official complicity in
trafficking at the provincial level. Argentina is a source,
transit, and destination country for men, women, and children
trafficked for the purposes of commercial sexual exploitation
and forced labor. According to the International
Organization for Migration, 80 percent of trafficking victims
in Argentina are Argentine, most of whom are trafficked for
the purpose of sexual exploitation. Bolivians and Peruvians
are trafficked into the country for forced labor in
sweatshops and agriculture. Argentine efforts to combat
trafficking have focused on prevention and training of
security and government officials. Draft anti-trafficking
legislation is currently being considered by the Argentine
Congress, with the debate focused on the issue of victim's
consent. The Senate version of the bill makes trafficking in
minors a federal crime, but considers a victim's consent
relevant in the case of adult trafficking victims. The
Embassy has worked with NGOs, lawmakers, and government
officials in an effort to push for comprehensive
anti-trafficking legislation. The government has told us
they intend to get a first federal law passed in the next
couple of months.

-------------------------------
Background: Political Landscape
-------------------------------

14. (SBU) Cristina Fernandez de Kirchner (CFK) took office on
December 10, 2007, receiving the presidential sash from her
husband, Nestor Kirchner. He completed his
four-and-a-half-year term as the most popular Argentine
President since the return to democracy in 1983. CFK has a
long history in politics, having served in the Chamber of
Deputies and most recently in the Senate. She won the
October 28 election with 45% of the vote over a divided and
largely ineffective opposition, and she enjoys a strong
majority in both houses of Congress. Having campaigned on
the seemingly contradictory themes of change and continuity,
she has retained most of her husband's cabinet. Apart from
the agricultural dispute, CFK's major policy challenges will
be to contain inflation, attract and boost investment --
particularly in Argentina's energy sector -- and to restore a
sense of law and order to an electorate increasingly
concerned about crime and security. And, in spite of her
pique over the Antonini Wilson case, CFK has also made clear
that she would like to improve relations with the United
States.

---------------------------------------------
Background: Economic and Commercial Landscape
---------------------------------------------

15. (U) Following the 2001-2002 economic crisis, 2003-2006
real GDP growth averaged over 8%, and Argentina's GDP in 2007
grew at an estimated rate of 8.5% to $255 billion, roughly
$6,500 per capita. This impressive economic recovery has
also led to improvements in key socio-economic indicators,
with unemployment down from a peak of over 20% in 2002 to
8.8% during the third quarter of 2007 and poverty levels down
from a post-crisis high of over 50% to a (still-worrisome)
25% range. The five-year-long economic recovery can be
attributed to a number of factors, including a post-crisis
move to a flexible exchange rate regime, sustained global and
regional growth during this period, the government's efforts
to boost domestic aggregate demand via monetary, fiscal, and
income distribution policies, and favorable international
commodity price and interest rate trends.

16. (U) While the accumulation of a substantial foreign
exchange reserve cushion (over $46 billion as of December
2007) and expanded tax collections have helped insulate
Argentina's economy from external shocks, the Central Bank's
policy of maintaining an undervalued exchange rate and
negative real interest rates has contributed to substantial
inflationary pressures. Private sector analysts estimate
inflation is in the 17-20% range for 2007, although the


government's official 2007 inflation is 8.5%. There is
ongoing public debate about inflation measures. To help
control inflation, the government largely froze key public
utility tariff rates since 2002 and, since 2005, has
negotiated price stabilization
agreements on a sizable basket of essential consumer goods.
The combination of Argentina's undervalued currency and high
global commodity prices have lifted Argentine exports to a
record $55.4 billion in 2007. Major 2007 Argentine export
markets were Mercosur (22%), the EU (18%) and NAFTA (11%).
Argentine 2007 imports totaled $44.8 billion, with the major
suppliers Mercosur (36%), the EU (17%) and NAFTA (16%).
Total U.S.-Argentina two-way trade in 2006 (the latest year
available) amounted to $8.9 billion. Imports from the U.S.
largely comprise intermediate capital goods which have
contributed to improvements in domestic productive capacity.

17. (U) Over 450 U.S. companies are currently operating in
Argentina and employ over 150,000 Argentine workers. U.S.
investment in Argentina is concentrated in the manufacturing,
information, and financial sectors. Other major sources of
investment include Spain, Chile, Italy, France, Canada,
Japan, and Brazil. U.S. investment in Argentina is
concentrated in the manufacturing, information, and financial
sectors. A range of economic experts have identified
challenges to sustaining high levels of economic growth in
the future, including: capacity constraints; the need for
substantial new investment in primary infrastructure;
potential energy shortages in the face of high growth and
domestic energy prices kept below international market
levels; increasing scarcity of highly skilled labor;
inflation and the government's heterodox policies to contain
it, including price controls. Continuing Argentine arrears
to international creditors (including over $20 billion in
default claims by international bondholders, including U.S.
citizens, and over $6 billion owed to official creditors,
approximately $360 million of which is owed to the U.S.
government) and a large number of arbitration claims filed by
foreign companies, including U.S. companies, are legacies of
the 2001/2002 economic crisis that remain to be resolved and
adversely affect Argentina's investment climate.

18. (SBU) Promoting U.S. economic/commercial interests: In
support of U.S. companies operating in Argentina, we are
encouraging the GoA to support a more welcoming investment
climate, with greater regulatory, legal, and tax regime
consistency. You will get an understanding for how the U.S.
business community feels about the local climate during your
coffee April 10 with the AmCham Board. We expend a good deal
of effort supporting and working with U.S. companies. We are
working closely with the GoA and the Paris Club of sovereign
creditors to resolve long-standing arrears to the USG and are
encouraging the GoA to resolve claims of U.S. holders of
defaulted Argentine bonds. Regarding ongoing WTO trade
negotiations, Argentina has staked out a hard-line position
that links acceptance of developed economy agricultural
sector proposals with more developing nation flexibility on
industrial tariff cuts. We have been urging them to adopt a
more constructive approach.
WAYNE

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