Cablegate: Argentina: Codel Dodd Discusses Region With


DE RUEHBU #0760/01 1551851
P 031851Z JUN 08



E.O. 12958: N/A

1. (U) Summary: The Ambassador hosted a lunch with
ambassadors and private sector employees in honor of Senator
Christopher Dodd and Representative Xavier Becerra. The
group discussed the region's efforts at integration, pointing
to the benefits of closer relations that have developed and
the challenges of reducing poverty and increasing social
justice. Regarding Argentina, participants expressed concern
about the poor state of political parties and the
government's ability to handle inflation and the farm strike.
Participants expressed great interest in the U.S. elections
and what they could mean for policy towards the region. End

Latin America Today

2. (U) The Ambassador welcomed and introduced Senator Dodd
and Representative Becerra. Senator Dodd fondly recalled a
trip he took to many different South American countries,
including Argentina, in the 1960s at the end of his Peace
Corps service in the Dominican Republic. Dodd asked the
guests to address what Latin America wanted and how to
improve relations with the region. Representative Becerra
said the region has experienced many changes and asked how
the participants saw the relationship with the United States.
The participants expressed a great interest and curiosity in
the U.S. elections.

3. (SBU) Economist Miguel Alberto Kiguel said that the
current situation in Latin America is encouraging, with low
inflation, budget surpluses, and good foreign policy.
Macro-economic policy lessons have been learned -- fiscal
surplus, etc. But the micro-economy is still a big
challenge. The region is in a unique situation to address
poverty, income distribution, and investment in the social
sector. Nevertheless, political analyst and professor Carlos
Escude said that many countries in Latin America have adopted
populist policies to address some nagging social ills. By
way of explanation, Escude said he was born in an Argentina
where 10% of the population was poor; that number rose in
2001 to 50% and now hovers around 30%. While some countries
have higher levels of absolute poverty, Escude emphasized
that none have experienced such growth from limited to
widespread poverty in the way that Argentina has. Escude
noted the region's high concentration of wealth was one of
the biggest problems. UN Economic Comission for Latin
America (ECLAC) Director Bernando Kosakoff agreed that Latin
America needs to generate wealth, and reiterated that the
main challenge for the region is addressing the unequal
distribution of income. Economic analyst Rogelio Frigerio
pointed out that some leaders have employed populist rhetoric
but still play by democratic rules of the game. These
"realistic populists," he predicted, would fare better than
their counterparts with more authoritarian tendencies.

4. (SBU) Former Ambassador to the United Nations Arnoldo
Listre noted that it was important to recognize there had
been positive changes in the Southern Cone, and specifically
cited the very good relations between Argentina, Brazil, and
Chile as a new and positive development that has contributed
to regional stability. Mercosur, he said, had prevented
cross-border disputes from leading to larger
political-military confrontations in the Southern Cone just
as effectively as the European Union had in Europe.
Brazilian Ambassador Mauro Vieira added the relationship
between Argentina and Brazil was economically very strong and
of considerable strategic importance for Brazil. He
emphasized the importance of multilateralism, and noted that
Brazil shares borders with all countries in South America
except Chile and Ecuador. Vieira insisted that trade
agreements with Mercosur had to be with the bloc, and not
with individual countries.

Regional Solidarity

5. (SBU) Director of the Institute of International Commerce
at the BankBoston Foundation Felix Pena emphasized the
importance of identifying areas for regional cooperation. He
criticized U.S. policy in the region for not unequivocally
endorsing regional integration schemes like Mercosur. Pena
specifically cited the economy, energy, and narcotrafficking
as areas to explore. He said it was difficult to understand
the region as one because of each country's individual
history. Frigerio disagreed on regional solidarity, arguing
that the region was dividing more than uniting, especially in
terms of macroeconomic policies. On the subject of economy,
Escude claimed that Latin America had signed many free trade
agreements, but not ratified many of them. He observed that
the most successful thing the region has been able to achieve
is avoiding conflicts that develop into war.

U.S.-South America

6. (SBU) Colombian Ambassador to Argentina Jaime
Bermudez-Merizalde said the key to a strong bilateral
relationship was expanding ties further than the military and
security realm and focusing on initiatives with social
impact. Bermudez said that it was precisely the populists'
focus on social issues that helped them win elections. He
suggested the U.S. work on programs to combat the populists'
social discourse, and to seek to broaden its message and
dialogue beyond elites. Kiguel said that opening the U.S.
economy to Latin America would be interpreted as a concrete
effort to improve relations. Listre said there was no
strategic threat to the United States in the region and
because of this the U.S. would not prioritize Latin America
in its foreign policy. Listre urged ratification of the free
trade agreement with Colombia and warned that failing to do
so would send a bad message to the region as Colombia was the
U.S.'s closest friend: what you do will be read as how you
treat your friends, he said.

U.S.-Argentine Relations

7. (SBU) Pena said the challenge was to deepen the
relationship between U.S. and Argentina which he said he
thought was possible with work. President of the La Plata
University Foundation Fernando Maurette said Argentina's
political parties exist nominally, but they lack the spirit
and values you need in a participatory democracy and "do not
exist" in the same way that they do in the United States and
Europe. He said that U.S. legislators should reach out more
often to their counterparts in the region, claiming that
Argentine legislators conversed frequently with counterparts
in France, Great Britain, and Brazil, but not with those in
the United States. This kind of interaction can help
strengthen Argentina's democracy and bilateral relations.
Maurette pointed out new actors were emerging in the regional
sphere, like China, who have expanded their role in the
region's defense and energy arenas. Kosakoff mentioned that
American businesses participate in the Argentine economy but
aren't provided many incentives to integrate fully into the
economy. We need to treat them as partners in our
development. He felt U.S. companies could play a bigger
positive role in Argentina's development. The Ambassador
noted many U.S. companies are eager to be more active
participants in Argentina's development and have very good
CSR programs to help local communities.


8. (SBU) Pena brought up the case of President-elect
Fernando Lugo in Paraguay and said that the region -- and the
United States -- had to help him succeed in his efforts to
forge a moderate leftist path, following the examples of
countries like Chile and Uruguay. Senator Dodd asked Vieira
what Lula thought of Lugo, and Vieira replied that Lula wants
to collaborate and sees the relationship with Paraguay as

Inflation, Inflation, Inflation

9. (SBU) Senator Dodd asked the guests what were some of the
problems facing Argentina today. Frigerio replied that
inflation was destroying the economy and attacking a pillar
of the economy. Kiguel said that inflation was officially
reported at 8%, but in fact was at least 20-25%. He said
that burgeoning inflation has had two serious effects -- it
has hurt people's purchasing power because the salaries can't
keep up with inflation, and it has destroyed access to
credit. He said this was a serious problem. Kosakoff said
that inflation was hurting investment because investors don't
know what will happen. The government needs to resolve these
problems -- specifically energy, inflation, and
infrastructure -- to head off a major crisis.


10. (SBU) Dodd asked whether the GOA would reach an
agreement with the striking agricultural sector. Kosakoff
said the burgeoning global demand would maintain upward
pressure on food prices. The question is how to generate
more capacity. Argentina can be a player, and the government
can resolve the situation without bringing the country to
another crisis.


11. (SBU) The commentators were cautiously hopeful about the
future of U.S. relations with Latin America. Their emphasis
on regional solidarity tended towards the Southern Cone and
Mercosur countries. Most were pessimistic about Argentina's
internal problems, which one guest argued were not so large
they could not be fixed, but their solutions required
political will and consensus which has heretofore been

12. (U) This cable was cleared by the codel after departure.

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