Cablegate: Argentina: Scenesetter for Codel Dodd (Buenos


DE RUEHBU #0708/01 1442006
P 232006Z MAY 08




E.O. 12958: N/A
AIRES, MAY 28-30)

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


2. (SBU) On behalf of Embassy Buenos Aires, I warmly welcome
your May 28-30 visit to Argentina. We are looking to build
on an already positive bilateral relationship with the
six-month-old administration of President Cristina Fernandez
de Kirchner (CFK). However, the CFK administration is in the
midst of a serious domestic crisis with the agricultural
sector and its popularity has fallen sharply. This follows
another seven-week crisis over a Miami court case (see
paragraph 4), which we successfully overcame.

3. (SBU) Our overall priority objective in Argentina is to
keep chipping away at the very high levels of
anti-Americanism of Argentines by reaching out to Argentine
society as well as the government, with a special focus on
youth. Other significant areas of mutual interest and
cooperation include education and cultural exchanges, science
and technology, counter-terrorism, non-proliferation,
counter-narcotics, international crime, and regional
stability and, of course, promoting economic and commercial
interests. We have also worked hard to strengthen
Argentina's judicial and law enforcement systems. During
this visit, you will meet with the President, the Minister of
Foreign Affairs, the Minister of Planning and his Secretary
of Energy, and with the Minister of Economy. The President
told me May 21 that she will want to talk to you about the
U.S. presidential campaign, and remembers positively meeting
you during her visit to the Boston Democratic Party
convention in 2004. You will also be the guest of honor at a
lunch to discuss regional issues, and possibly at a coffee
with prominent members of Argentine civil society. We are
looking forward to meeting with you and to discussing
Argentina-specific and regional issues and priorities. End

A Recent Bilateral Low Point

4. (SBU) In December, two days after Cristina Fernandez de
Kircher's (CFK) 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 because of initial presentation and reporting
out of Miami.

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 as key members of the team slowly absorbed
our explanation and concluded it was not in their interest to
be cut off from the USG. (The GoA has an ongoing
investigation and an extradition request for Antonini Wilson
over the $800,000 in cash discovered here.) We normalized
the relationship with a great deal of behind-the-scenes work.
A new beginning occurred on January 31, when I met with CFK.
We 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 separate Congressional delegations
led by Representative Eliot Engel (February 20-23) and
Senator Richard Shelby (March 23-26); the April 10-11 visit
by WHA Assistant Secretary Shannon; the May 6-7 visit by
Southcom Commander Admiral Stavridis; and the May 21-22 visit
by FBI Deputy Director John Pistole. CFK met with Engel,
Shannon, and Pistole.

A Government Against the Ropes


6. (SBU) The GoA unexpectedly issued March 11 a decree that
increased export taxes on Argentina's main agricultural
export crops. That precipitated the worst political crisis
of either Kirchner administration since 2003. 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. The 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. The
parties continued to negotiate but made little progress on
the main issue of export taxes.

7. (SBU) On May 7, the farm groups decided to resume their
protests, this time without major roadblocks and with
promises not to provoke shortages of foodstuff. The latest
strike focused on blocking sales and exports of grains and
oilseeds, and was considered by analysts as successful in its
aims. The farm groups once again suspended the strike on May
21 to resume negotiations with the GOA. However, the first
meeting following the suspension of the strike ended abruptly
May 22, and further talks have been put off until after the
May 25 national holiday. On that holiday, which celebrates
Argentina's independence, farm groups plan a huge rally in
the city of Rosario, one of Argentina's principal urban
centers and an agricultural stronghold. The GoA's public
stance is that the current truce and ongoing negotiations are
a victory for the government, and validates CFK's hard-line
posture toward the farm groups. Most analysts, however,
consider the entire dispute to be a setback for the
government, with the vital agricultural sector more united
than at any time in a century. During this period, the
popularity of the government and the President has continued
to drop, with some polls showing her at 26-27 percent. That
drop has been fueled not just by the agricultural problems
but also by soaring inflation/prices.

8. (SBU) We provide the preceding information to you for
context as you embark on your bilateral discussions.

Background: Political Landscape

9. (SBU) 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. 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
and sees the benefit for Argentina of good ties, especially
in the economy and higher education.

Background: Economic and Commercial Landscape

10. (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 trends.

11. (SBU) While the accumulation of a substantial foreign
exchange reserve cushion (over $50 billion as of May 2008)
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 that 2007
inflation was in the 17-20% range, while the government's
official 2007 inflation number was 8.5%. Inflation levels in
the first four months of 2008 are estimated by independent
economists in the 25% range but are reported as much lower by
the government. There is ongoing public debate about
inflation measures.

12. (SBU) 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 2007 totaled $9.5 billion.
Imports from the U.S. largely comprise intermediate capital
goods which have contributed to improvements in domestic
productive capacity.

13. (U) Over 500 U.S. companies are currently operating in
Argentina and employ over 150,000 Argentine workers. U.S.
investment in Argentina is widely diversified, but heavy
investment is found in the manufacturing, information, and
financial sectors. Other major sources of investment include
Spain, Chile, Italy, France, Canada, Japan, and Brazil. 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 $7 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.

What We're Doing on Issues of Interest

9. (SBU) The greatest overall challenge we face in Argentina
is the high level of anti-Americanism in the Argentine
public. Argentina consistently registers the highest levels
of anti-Americanism in the hemisphere in public opinion
polls. Working to change these perceptions is the Embassy's
highest priority. Argentina maintains positive political
relations with the United States, but there is room for
further improvement. One of the major tasks facing the
Embassy is forging relationships of trust with a government
that has been largely inward-focused and intent on
maintaining an image as independent from our country. In
lobbying the GOA, it can be counter-productive to push an
issue too aggressively and especially in public. Argentine
officials react very negatively to perceived affronts to
their sovereignty, often winning public support for their
strong reactions. Shut off from other sources of
international financing, the GOA has turned to Hugo Chavez to
place large bond issues.

10. (SBU) Argentina, nevertheless, holds Major Non-NATO Ally
status and cooperates in regional security,
counter-terrorism, drug interdiction, nonproliferation 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). Just this month,
Argentina and the U.S. co-hosted in Buenos Aires a gathering
of all OAS States to look for ways to better implement UN
resolution 1540, which is aimed at keeping WMD from
terrorists. It is under the banner of science that the USG
and Argentina have realized some of the best examples of
bilateral cooperation, and we have a long history of
aerospace cooperation with Argentina.

Promoting U.S. Economic/Commercial Interests

11. (SBU) 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. 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 longstanding 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.

Trafficking in Persons (TIP)

12. (SBU) 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. However, the legislature recently passed fairly
comprehensive anti-TIP legislation that makes TIP-related
violations a federal crime. 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. One of our key goals this
year is to support a vigorous GoA implementation of the new
federal law and promote the prosecution of human traffickers.
However, a number of NGOs have criticized this new law as
weak on the issue of adult "consent."

Democracy and Rule of Law

13. (SBU) 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 we do
not succeed 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.

Human Rights

14. (SBU) 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 between 11,000-30,000 leftist guerrillas and
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. We recently returned
one person sought here for human rights violations and

another individual wanted by the GoA remains in Florida.
Argentines are also concerned about one particular citizen on
death row in Texas. CFK has been preoccupied with the fate
of Colombian hostage Ingrid Betancourt, lobbying Uribe and
others to work for her release. Argentina is a strong
international advocate for human rights and the USG and GOA
generally cooperate on human rights issues in international
and regional fora.

International Crime and Drugs

15. (SBU) Argentina is a transshipment and destination point
for narcotics emanating largely from Colombia, Peru, Bolivia,
and Paraguay. With its large chemical and pharmaceutical
industries, Argentina is also a major source and destination
for precursor chemicals. 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. Justice Minister Fernandez
has repeatedly stated that he wants to put top priority on
attacking drug traffickers and less priority on arresting
individual users. The Supreme Court President is working
hard to increase judicial independence and efficiency.


16. (SBU) Former President Nestor Kirchner's administration
strongly supported counter-terrorism policies during his time
in office, and his wife and successor CFK has continued the
cooperation. 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). On May 22, a local prosecutor announced charges
against former President Menem and other former officials for
mishandling the AMIA investigation in the 1990s.

17. (SBU) Argentina cooperates with the United Nations, the
OAS, its neighbors, and the United States on a number of
counterterrorism initiatives. We assist the GoA in
capacity-building, within the restraints created by Brooke
Amendment sanctions, to strengthen Argentine law enforcement
forces. We also 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. Argentina has a leading role in the
OAS Inter-American Committee Against Terrorism (CICTE),
established on Argentina's initiative in the 1990s.
Argentina has ratified all of the 12 international
counter-terrorism conventions and has been an active
participant in the 3 plus 1 tri-border area counterterrorism
mechanism, which met most recently in Asuncion, Paraguay in
January. The GOA and the USG have a Mutual Legal Assistance
Treaty that entered into force in 1993, and an extradition
treaty that entered into force in 2000.

Money Laundering, Terrorism Finance, Legal Reform
--------------------------------------------- ----

18. (SBU) The Embassy and USG agencies worked with the GoA to
pass comprehensive antiterrorism, money laundering, and
terrorism finance legislation to strengthen local enforcement
efforts. Since 2005, and largely in response to pressure
from the Financial Action Task Force (FATF), the GoA and
Argentine Central Bank have acted to fortify the anti-money
laundering and counter-terrorism finance legal and regulatory
regime, passing new legislation, amending existing laws, and
establishing stricter financial sector regulations. The
result is that Argentina currently has an adequate
legal/regulatory structure that provides the legal foundation
for the Central Bank and other law enforcement and regulatory
bodies to investigate and prosecute money laundering and
terrorism finance. The challenge now is for Argentine law

enforcement and regulatory agencies and institutions to
enforce aggressively the newly strengthened and expanded
legal, regulatory, and administrative measures available to
them to combat financial crimes.

19. (U) Argentina is not an important regional financial
center or offshore financial center. Money laundering
related to narcotics trafficking, corruption, contraband, and
tax evasion is believed to occur throughout the financial
system, in spite of the GoA's efforts to stop it. Tax
evasion is the predicate crime in most Argentine money
laundering investigations. Argentina has a long history of
capital flight and tax evasion, and Argentines hold billions
of dollars offshore, much of it legitimately earned money
that was never taxed. The large informal sector in Argentina
(as well as in most other Latin American countries) exposes
it to financial crimes.

20. (U) In 2007, the Argentine Congress passed legislation to
criminalize acts of terrorism and terrorist financing, and
establish terrorist financing as a predicate offense for
money laundering. The law, which amends the Penal Code and
Argentina's 2000 anti-money laundering law, entered into
force in mid-July 2007. It effectively removed Argentina
from FATF's follow-up process, which began in 2004 to address
deficiencies in the GOA's anti-money laundering and
counter-terrorist financing (AML/CTF) regime. With the
passage of this law, Argentina joined Chile, Colombia, and
Uruguay as the only countries in South America to have
criminalized terrorist financing.

21. (U) On September 11, 2007, President Nestor Kirchner
signed into force the National Anti-Money Laundering and
Counter-Terrorism Finance Agenda. The overall goal of the
National Agenda is to provide a roadmap for fine-tuning and
implementing existing money laundering and terrorist
financing laws and regulations. The Agenda's 20 individual
objectives focus on closing legal and regulatory loopholes
and improving interagency cooperation.

22. (U) The U.S. Department of Homeland Security's Office of
Immigration and Customs Enforcement (ICE) and the GoA have
established a Trade Transparency Unit (TTU) in Argentina.
The TTU examines anomalies in trade data that could be
indicative of customs fraud and international trade-based
money laundering, and maintains a key focus on financial
crimes occurring in the tri-border Area. The creation of the
TTU was a positive step towards complying with FATF Special
Recommendation VI on terrorist financing via alternative
remittance systems.

23. (SBU) Even with the improved AML/CTF legal/regulatory
regime, the GoA is more limited than the U.S. in its ability
to combat financial crimes. The root of the problem is the
relatively overburdened and inefficient judicial system,
which is an inquisitorial as opposed to an accusatorial
system (such as the United States has). Judges have the lead
on all investigations. The system is backed up, slow, and
prone to subornment. The result is that the GoA has
successfully concluded only two money laundering convictions
since money laundering was first criminalized in 1989, and
none since the passage of the GoA's 2000 anti-money
laundering law. Former Justice Minister Alberto Iribarne,
who left office with the change of government in December
2007, proposed sweeping reforms to create a more effective
and fair criminal justice system (one closer in design to the
U.S. system of justice). However, implementing such reforms
would be a difficult and lengthy process. Justice Minister
Anibal Fernandez told us May 21 he supports moving ahead with
judicial reform.

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