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Cablegate: Argentina: John Deere Concerned On Impact of Agricultural

VZCZCXYZ0009
RR RUEHWEB

DE RUEHBU #0553/01 1191708
ZNR UUUUU ZZH
R 281708Z APR 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0892
INFO RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000553

SIPDIS

STATE FOR ECON WHA/BSC
USDA FOR FAS/OA/OSTA/OCRA/ONA/OGA/OTP/OCBD/OAO/OFSO

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EAGR AR ECON EINV
SUBJECT: ARGENTINA: JOHN DEERE CONCERNED ON IMPACT OF AGRICULTURAL
STRIKE

Reftel: Buenos Aires 540 and previous

1. (SBU) SUMMARY: John Deere Company executives met Ambassador on
April 1, the day before Argentina's agricultural sector strike was
suspended for 30 days. While business has been good, executives
indicated concern over future business due to the uncertain policy
environment and expected decreased profitability of the agricultural
sector. Of immediate concern was whether buyers would
follow-through on orders of over 400 units of farm machinery made at
ExpoAgro (Argentina's largest farm technology show). Although
follow-up with John Deere Argentina executives indicates that 90
percent of those sales will occur, the company expects new sales to
be very difficult. They expect a return of the strike on May 2, as
negotiations between the Government and the agricultural sector are
deteriorating (reftel). END SUMMARY.

------------------
JOHN DEERE COMPANY
------------------

2. (SBU) Ambassador met with Argentine and U.S. executives of John
Deere Company on April 1, the day before Argentina's agricultural
sector strike was suspended for 30 days. The meeting was requested
by John Deere to review their Argentina and South America business,
and to discuss larger bilateral concerns, including political,
economic, agricultural, and trade issues. Most of the discussion
revolved around the business environment in the wake of the
Government's increase in agricultural export taxes on March 11, and
the subsequent farm strike (Refs). John Deere participants
included: Charlie Stamp, Vice President, Deere & Company; Aldo
Torriglia, President, Industrias John Deere Argentina; Miguel Angel
Di Stefano, President, John Deere Credit Argentina; Aaron Wetzel,
Vice President, John Deere Latin America; Gilberto Zago, Director,
Institutional Relations, John Deere Latin America; John Rauber,
Director, International Affairs, Deere & Company; and Nalu Ribeiro
Biasus, General Counsel, John Deere Brasil.

----------------------------------------
BUSINESS WAS VERY GOOD... UNTIL MARCH 11
----------------------------------------

3. (SBU) John Deere executives indicated that their business had
been growing steadily and strongly in Argentina over the past
several years. Less than two weeks prior to the Government's export
tax policy change, the company signed sales contracts for over 400
units of farm machinery at ExpoAgro (Argentina's largest farm
technology show). The executives were concerned about possible
cancellations of those sales by customers due to the uncertain
agricultural policy environment and expected loss of profitability
by the agricultural sector.

4. (SBU) John Deere executives said that deliveries of new
equipment had been suspended during the strike -- both out of
respect for the farmers' position, and for fear that equipment could
be damaged by picketing producers angered at any appearance of
non-support. The strike also created logistical problems with
deliveries of raw materials to their diesel engine production plant
in Rosario.

----------------------------------------
JOHN DEERE - A LONG HISTORY IN ARGENTINA
----------------------------------------

5. (U) John Deere products were first introduced in Argentina in
1894. Industrias John Deere Argentina S.A., a subsidiary of Deere &
Company, of Iowa, has been manufacturing locally since 1958. The
plant is located in the Province of Santa Fe, near the city of
Rosario. It specializes in the production of high power diesel
engines for distribution in Argentina and for agricultural machinery
produced in Brazil. In the past ten years, over 60 million dollars
have been invested in new production machinery.

6. (U) John Deere employs 400 at its factory and relies on a network
of 350 Argentine suppliers of production materials and services.
The distribution network includes 56 strategically located dealers
with more than 400 employees.

-------
COMMENT
-------

7. (SBU) Subsequent contacts with John Deere Argentina indicate that
logistical problems encountered at the plant quickly normalized
after the rural agricultural producers' strike was suspended on
April 2. In addition, John Deere Argentina's President, Aldo
Torriglia, indicated that more than 90% of the previously mentioned
400 sales will in fact go through. He said that April sales have

been good, but the company expects new sales to be difficult after
May 2, when the current 30-day suspension of the farm strike ends
and the agricultural strike is expected to resume.

WAYNE

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