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Cablegate: Argentina: Scenesetter for Fbi Deputy Director

VZCZCXYZ0008
RR RUEHWEB

DE RUEHBU #0648/01 1361829
ZNY EEEEE ZZH (CCY AD926F93 MSI3049-695)
R 151829Z MAY 08 ZDS
FM AMEMBASSY BUENOS AIRES
TO RHMCSUU/FBI WASHINGTON DC
RUEHC/SECSTATE WASHDC 1042

UNCLAS E F T O BUENOS AIRES 000648

NOFORN
SENSITIVE
SIPDIS

C O R R E C T E D COPY -- CORRECTING PARA 8 MARKING


FOR FBI DEPUTY DIRECTOR JOHN PISTOLE FROM AMBASSADOR TONY
WAYNE

E.O. 12958: N/A
TAGS: PREL PGOV PHUM PTER SNAR ECON EFIN BEXP AR
SUBJECT: ARGENTINA: SCENESETTER FOR FBI DEPUTY DIRECTOR
JOHN PISTOLE

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

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

2. (SBU) On behalf of Embassy Buenos Aires, I warmly welcome
your May 21-22 visit to Argentina. We are looking to build
on an already positive bilateral relationship with the
five-month-old administration of President Cristina Fernandez
de Kirchner (CFK). However, the CFK administration is going
through a serious domestic crisis with the agricultural
sector and its popularity has fallen. This follows its seven
week crisis which is over the Miami court case which we
successfully overcame.

3. (SBU) Current significant areas of mutual interest and
cooperation include counter-terrorism, counter-narcotics,
international crime and regional stability, but also science
and technology, education and cultural exchanges and, of
course, promoting economic and commercial interests. 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. We have also
put priority on helping to strenghthen Argentina's judicial
and law enforcement system. It is based in part on our model
but is not as independent as it was designed to be and
suffers many ineffeciencies and a tremendous backlog. During
this visit, you will meet with the the President, Minister of
Justice and Security, the Deputy Director of Argentina's
Intelligence Service and the Chief of the Argentine Federal
Police. You will also visit the Argentine-Israeli Mutual
Association, site of the 1994 terrorist bombing, and its
directors. We are looking forward to meeting with you during
your time in Argentina and US and to discussing US
international law enforcement priorities. End Introduction.

----------------------------
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 Staes 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 cutoff from the USG. (However the case clearly remains
very sensitive and its revelation could easily reopen old
wounds. They still have 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 the April 10-11 visit by WHA Assistant Secretary
Shannon, the May 6-7 visit by Southcom Commander's Adm.
Stavridis, and the March 5-6 visit by the FBI's Tom Fuentes.

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

6. (SBU) Without consultation, a GoA decree issued March 11
that increased export taxes on Argentina's main agricultural
export crops. This 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 with little progress on
the main issue of export taxes. On May 7, the farm groups
decided to continue their protests, this time without major
roadblocks and promises not to provoke shortages of
foodstuff. The GoA's public perspective is that the truce
and ongoing negotiations are 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. During this period the popularity of the
government and the President has continued to drop and is now
somewhere in the 30-40% range according to various polls.
This drop is fueled not just by the agricultural problems but
also by soaring inflation/prices.

7. (SBU/NF) 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.

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

8. (SBU) Anti-Americanism: 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. Yet, overall, Argentina
maintains positive political relations with the United
States, but 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. This financial dependence has increased given
recent events on the economic scene.

9. (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 last
week, Argentina hosted with US a gathering of all OAS States
to better implement UN resolution 1540 and 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.

10. (SBU) Terrorism: Former President Nestor Kirchner's
administration strongly supported counter-terrorism policies
during his time in office, and his wife and successor
Christina Fernandez de Kirchner 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).

11. (SBU) Argentina cooperates with the United Nations, the
OAS, its neighbors, and the United States o a number of
counterterrorism initiatives. 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. Argentina has a
leading role in the OAS Inter-American Committee Against
Terrorism (CICTE), established on Argentina,s initiative in
the 1990s. Argentina has been a member of the Egmont Group
since July 2003, and has ratified all of the 12 international
counter-terrorism conventions and has been an active
participant in the 3 plus 1 TBA counterterrorism mechanism,
which just met 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.

12. (SBU) International Crime and Drugs: Argentina is a
transshipment and destination point for narcotics emanating
largely from Colombia, Peru, Bolivia, and Paraguay.
Argentina, with its large chemical and pharmaceutical
industries, 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. In the area or anti-money
laundering and counter-terrorism finance, the Mission is
working through diplomatic channels and via bilateral
technical assistance and training programs to encourage
Argentine law enforcement and regulatory bodies to enforce
existing laws and regulations more aggressively. Justice
Minister Fernandez has just announced 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. He will be in Washington meeting with colleagues
during your visit.

13. (SBU) Human Trafficking (TIP): 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 ofwhom 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 law and prosecution. Minister
Fernandez is in charge of implementation for the executive
branch. A number of NGOs have criticized this new law as
weak on the issue of adult "consent."

14. (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.

15. (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 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 remains in Florida. The Argentines also remain
concerned of these citizens (Soldano) on death row in Texas.
President CFK has also been preoccupied with the fate of
Columbian hostage, Ingrid Bettancourt, 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.

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

16. (SBU) Cristina Fernandez de Kirchner (CFK) took office on
December 10, 2007, receiving th 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
---------------------------------------------

17. (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 keysocio-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.

18. (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 "true" 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 we reported as much lower by
the government. 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
2007 totaled $9.5 billion. Imports from the U.S. largely
comprise intermediate capital goods which have contributed to
improvements in domestic productive capacity.

19. (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 $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.

20. (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. 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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