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Cablegate: A/S Shannon and Amcham Representatives Share

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OO RUEHWEB

DE RUEHBU #0522/01 1131932
ZNR UUUUU ZZH
O 221932Z APR 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0849
INFO RUEHBO/AMEMBASSY BOGOTA PRIORITY 1744
RUEHCV/AMEMBASSY CARACAS PRIORITY 1796
RUEHFR/AMEMBASSY PARIS PRIORITY 1396
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY

UNCLAS BUENOS AIRES 000522

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV ECON EINV EPET KPAO KCOR MARR VZ AR
SUBJECT: A/S SHANNON AND AMCHAM REPRESENTATIVES SHARE
PERSPECTIVES ON GOA

1. (SBU) Summary. Assistant Secretary Shannon and
Ambassador Wayne met with members of American Chamber
(AmCham) Executive Committee to discuss the companies,
observations and concerns about the Argentine business
climate, market opportunities and challenges. AmCham
representatives were unanimous in expressing their
companies, commitment to Argentina, and all noted that their
Argentine operations are profitable. However, AmCham
representatives also expressed a uniform view that what they
described as the mercurial economic policies of the GOA are
thwarting market stability, growth and investment in
Argentina. AmCham representatives also explained that there
are many cultural and historical reasons for anti-Americanism
in Argentina, while noting that U.S. companies are often
recognized as being the best employers in the country. They
expressed their strong desire to establish a regular dialogue
with the government in which they would be seen as
participants in Argentina,s growth and in which they could
work to improve the investment climate. All participants
urged the United States to help Argentina resolve its Paris
Club debt issues, arguing that renewed access to
international capital markets would reduce Argentina's
dependence on Venezuela and promote foreign investment. End
Summary.

U.S. Companies are Doing Well in Argentina
-------------------------------------------

2. (SBU) A/S Shannon met with a group of CEO,s,
Presidents and other senior managers of the following AmCham
Executive Committee companies: Citibank, Coca-Cola, Dow
Chemical, Ford, Exxon, General Electric, Motorola,
Prudential, IBM, CHM2 Hill, Monsanto, and Cargill. The
company representatives emphasized their respective
company,s long histories in Argentina which date back from
20 to over 100 years. They all cited positive statistics
about their recent hiring, investment and profitability, and
there is a consensus view that tremendous potential exists
for doing even better.

AmCham Companies Crave Stability, Yearn for Productive
Dialogue With GOA
--------------------------------------------

3. (SBU) The AmCham members, principal concern about doing
business in Argentina is the lack of clear and constant
rules. They lamented the GOA,s frequent interventions in
the economy, and penchant for changing rules with minimal
notice and no prior discussion with the business community.
This situation has left the companies craving a sense of
stability.

4. (SBU) AmCham members expressed frustration with what they
described as the GOA,s inability or unwillingness to
articulate a long-term economic plan. AmCham companies
believe GOA economic policy is driven by how best to respond
to the crisis of the moment without any real thought to a
sustainable, long-term economic model.

5. (SBU) Company representatives also lamented that they
have no channel for dialogue with the GOA that would enable
them to influence policies that impact their respective
operations and that limit their possibilities for expanding
investment in Argentina. President Cristina Fernandez de
Kirchner campaigned as someone who would work in partnership
with the private sector; however, the AmCham representatives
said they have not yet seen evidence of such a collaborative
approach. Instead, the President makes decisions in
consultation only with a small group of advisors, and it is
extremely difficult for individual companies or industry
groups of any nationality to have access to this small group.
Lower-level officials are available for meetings, but have
minimal influence on the President and her decisions. The
AmCham representatives said they sought a dialogue in which
the GOA would see them as &partners8 in Argentina,s
growth.

Other Concerns: Energy, Labor Laws, Inflation, Price Controls
------------------------------------------

6. (SBU) Company representatives expressed significant
concern that the GOA has not developed a viable, long-term
energy policy. The demand for energy in Argentina is
growing, but GOA policies have created a difficult
environment for energy producers. A combination of import
restrictions, export taxes, and price controls has left the
energy industry with little incentive to continue investing
further in building domestic capacity.

7. (SBU) Several AmCham members expressed concerns about
cumbersome labor laws. They believe the Kirchners have an
impression that labor laws were too employer-friendly in the
1990s and so have instituted a series of employee-friendly
changes. These changes have added another level of
uncertainty for companies looking to expand and hire more
employees in Argentina.

8. (SBU) Everyone expressed concerns about inflation and the
controversy surrounding the validity of official GOA
statistics. Specifically, they mentioned the uncertainty in
the markets caused by growing inflation, the threat to
continued profitability caused by inflation, the lack of
transparency of the GOA in acknowledging inflation and the
lack of a long-term view for dealing with inflation.

9. (SBU) A corollary concern is the GOA,s willingness to
resort to &informal8 price controls. They expressed
concern about the heavy-handed tactics of some GOA officials
in not formally mandating price controls, but exerting
substantial pressure on companies not to raise prices.

Challenges to Future Investment and Growth in Argentina
--------------------------------------------- ----------


10. (SBU) A general consensus exists that U.S. companies are
committed to continuing operations in Argentina, but the
current business environment is not conducive to expansion.
The companies must compete with subsidiaries of their
companies in other countries in Latin America and from around
the world for new global investments. With an uncertain
business environment, and rising government intervention in
many sectors of the economy, they cannot realistically
compete with the subsidiaries in many other countries for
investment dollars. One CEO noted that Brazil, for example,
provides a much more stable investment climate with clear and
consistent rules, compared to present conditions in
Argentina.

11. (SBU) An additional challenge to future investment is a
lack of broad access to capital markets. The Argentine
public still does not have confidence in the domestic banking
industry and tends to make only short-term bank deposits.
This restricts the depth of the domestic capital markets.
Only large companies have realistic access to international
capital markets. Small companies do not have access to
sufficient capital to fund sustained long-term growth. In
this sense, all participants agreed that the U.S. should work
with others to encourage solutions to Paris Club debt. This
would be a key step to reopening access to international
capital and reducing Argentina's dependence on Venezuela.

12. (SBU) Some AmCham members mentioned the GOA,s
relationship with Venezuela as a disincentive to further
investment by their headquarters and wished that the GOA were
closer to more moderate neighbors such as Chile and Brazil.
AmCham representatives noted that Venezuela,s recent
decision to nationalize a large Argentine majority-owned
steel maker (SIDOR) may put stress on the GOA,s relationship
with Venezuela and present an opportunity for the U.S. to
help bring Argentina back into the fold of more responsible
Latin American countries.

USG Perspective On Dialogue With GOA
-------------------------------------

13. (SBU) A/S Shannon noted that the USG has also had
difficulty establishing a consistent and productive dialogue
with the GOA and that the USG often finds the bilateral
relationship held hostage by whatever crisis the GOA is
experiencing at that moment. The goal of the USG is to build
a stable relationship based on long-term dialogue, rather
than allowing the relationship to be defined by crisis. The
USG does not want the bilateral relationship to be focused on
our differences, but seeks a positive, forward-looking agenda
building upon our policy convergences. He acknowledged that
the companies and the USG face similar challenges in trying
to foster dialogue with the GOA because of the ways decisions
are made by this Argentine government. The USG wants to work
with the companies to promote an environment where the
presence of U.S. companies is increasingly viewed as positive
and mutually beneficial.

Reasons for Anti-Americanism in Argentina
------------------------------------------

14. (SBU) A/S Shannon invited the AmCham representatives to
discuss the reasons for persistently high levels of
anti-American sentiment in Argentina. In response, several
company representatives noted that Argentina has been going
from crisis to crisis for 80 years and that Argentines
instinctively look to blame others for their problems. The
U.S. is the biggest, most powerful nation in the world, and
it is easy for populist Argentine politicians to blame
Argentina,s problems on the U.S. The war in Iraq has
reinforced the stereotype of the U.S. having an agenda to
dominate the world without regard for the concerns of others,
and this has fostered increased anti-Americanism.

15. (SBU) Several representatives noted that many Argentines
have an ideological dispute with the U.S. conventional wisdom
concerning the role of the private sector and free enterprise
in the economy. Many Argentines do not trust the private
sector and accept that the Argentine government will have bad
relations with the private sector. The instinctive distrust
of the private sector by many Argentines extends to dislike
for the United States given its strong identification as a
champion of free markets and the private sector. The system
of public education does not teach about business or
economics, and so it is difficult to teach children about the
benefits of a strong private sector and to change stereotypes
about the United States as a redoubt of rapacious capitalism.


16. (SBU) Another factor cited by Committee members as
contributing to anti-Americanism is that Argentine society is
largely made up of immigrants from Europe and Argentines
instinctively identify more with Europe than the United
States. Argentines do not feel any strong cultural bond with
the United States and are therefore more likely to buy into
anti-U.S. sentiment.

17. (SBU) While anti-American sentiment is strong, there is
also evidence of positive changes. More and more students
now want to work for U.S. companies, and there is growing
recognition in Argentina that U.S. companies are the best
companies to work for in the country. For example, the
Ambassador cited a poll taken in late 2007 which rated six
American companies as among the top ten places to work in the
country. There have even been recent indications that the
GOA recognizes that U.S. employers improve the quality of
life of their employees and are often market leaders in terms
of providing training and career development opportunities to
their employees, offering a good working environment and
excellent salaries and benefits.

18. (SBU) A/S Shannon remarked afterward that he was
impressed at how long the U.S. companies have been present in
Argentina and how committed they are to the long term success
of Argentina,s economic and social development. He noted
that all of the companies spoke of their desire to construct
a dialogue with the GOA that will enable them to be partners
in building a better future for the country.

WAYNE

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