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Cablegate: Argentina: Finance and Industries Secretaries On G-20

VZCZCXYZ0000
OO RUEHWEB

DE RUEHBU #1520/01 3091811
ZNR UUUUU ZZH
O 041811Z NOV 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2407
RUCNMER/MERCOSUR COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS BUENOS AIRES 001520

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EFIN ECON EINV PREL PGOV AR
SUBJECT: Argentina: Finance and Industries Secretaries on G-20
Positions

Ref: (A) Buenos Aires 1495
(B) Buenos Aires 1493
(C) Buenos Aires 1415

-------
Summary
-------

1. (SBU) GoA Finance Secretary Hernan Lorenzino confirmed he has
taken on the substantive role of formulating Argentina's positions
for the upcoming G-20 Summit in Washington and that these positions
will be coordinated with those of Brazil at the upcoming November
8-9 Mercosur Summit in Sao Paulo. GoA statements in Washington will
track closely with points raised by Economy Minister Carlos
Fernandez in his October 11 statement to the IMF International
Monetary and Financial Committee and will emphasize: (1) the need
for better macro-economic coordination between emerging market and
developed country government and central bank officials; (2) the
need to improve and better coordinate broad financial sector
regulatory and supervisory standards; and (3) the need to revisit
the role of IFIs and particularly that of the IMF in terms of crisis
support and general responsiveness to emerging economy needs.
Separately on the trade front, Economy Ministry Industries Secretary
Fernando Fraguio confirmed Argentina will not use the G-20 venue to
promote its recent protectionist response to the financial crisis as
a developing country policy model. Instead, the GoA will emphasize
the need for emerging market economies to develop individually
appropriate policy options to sustain domestic employment. Fraguio
recognized that a G-20 communique will be carefully parsed by
international financial markets and that G-20 members need to craft
a "consensual, progressive, and practical" message. End Summary

--------------------------------------------- ---
Econ Ministry, Not Central Bank, Takes G-20 Lead
--------------------------------------------- ---

2. (SBU) Finance Secretary Hernan Lorenzino called EconCouns the
evening of November 3 to advise that he will personally take on the
substantive sous-sherpa role of formulating Argentina's position
papers for the upcoming G-20 Summit in Washington. (Note: Ref B
reported on Central Bank President Martin Redrado' October 24
conversation with Ambassador during which Redrado indicated that his
Central Bank was developing substantive GoA position papers.)
Lorenzino noted that he would work on this project primarily with
his Economy Ministry colleague Political-Economy Secretary Martin
Abeles and Abeles' subordinate Pablo Baronoa, National Director for
Projects related to International Credit Organizations.

3. (SBU) Lorenzino noted that the GoA's position at the G-20 would
be coordinated closely with Brazil at the upcoming November 8-9
Mercosur Summit hosted by President Lula in Sao Paulo. He also
noted that the internal GoA positions currently being refined would
track with substantive points raised by Economy Minister Carlos
Fernandez in his October 11 statement to the IMF International
Monetary and Financial Committee (IMFC) and later amplified in his
comments at the October 27 Extraordinary Mercosur Council meeting on
the global financial crisis in Brasilia.

4. (SBU) According to Lorenzino, Argentina currently plans to
emphasize three key points: (1) the need for better macro-economic
coordination between emerging market and developed country
government and central bank officials; (2) the need to improve and
better coordinate broad financial sector regulatory and supervisory
standards; and (3) the need to revisit the role of IFIs and
particularly that of the IMF in terms of crisis support and general
responsiveness to emerging economy needs.

---------------------------
Argentina's IMFC Submission
---------------------------

5. (U) Minister Fernandez' submission to the IMFC on behalf of
Argentina, Bolivia, Chile, Paraguay, Peru, and Uruguay amplifies on
all of these points. (Text at www.imf.org
/External/AM/2008/imfc/statement/eng/arg.pdf. ) The paper calls for
"concrete" developed county actions to tackle insufficient capital
and falling asset valuations in the global financial system as well
as for coordinated developed country and IFI policy support to
create a multi-currency reserve system and more effective mechanisms
to provide liquidity to developing countries. On global financial
system regulation, it calls for better systemic prudential
regulations, clearer and more transparency accounting rules, higher
capital requirement and more effective surveillance of banks,
intermediaries, and credit rating agencies.

6. (U) On the IMF, Fernandez' submission calls for the institution
to revisit its "excessive" focus on inflationary risks and its
standard recipe for more flexible exchange rates and full capital

account liberalization in emerging market economies. Instead, the
paper argues that the Fund should focus more on promoting growth in
developing countries and promote income distribution policies aimed
at boosting consumption capacity. On specific IMF reforms, the
paper calls for the IMF to strengthen its policy guidance oversight
of developed country economies and to develop an "early warning"
system aimed at preventing the recurrence of periodic financial
crises. It calls for more emerging market country input into IMF
decision making and the development of a multilateral insurance
scheme to better shield developing country members from exogenous
shocks. Further, the statement calls for a streamlining of IMF
conditionality and a review of access limits and financing terms to
bring them into line with developing members' actual potential needs
to borrow. The paper concludes that the voice and representation of
developing countries within the IMF needs to be expanded beyond the
"modest" steps taken in the recently approved quota increase. This
includes revisiting the size and composition of the IMF Executive
Board, which it characterizes as under-representing developing
countries.

--------------------------------------------
GoA Won't Push Protectionism as Policy Model
--------------------------------------------

7. (SBU) Separately in a November 3 conversation with EconCouns,
Ministry of Economy Secretary of Industries Fernando Javier Fraguio
and Undersecretary Ariel Schale made clear that Argentina would
not/not seek to use the G-20 summit as a venue to promote the GoA's
recent imposition of non-tariff trade barriers NTBs) as any sort of
a financial crisis policy model for developing nations. (Ref A and
C detail President Kirchner's crisis-linked announcement of a policy
of "administered trade" and the GoA's imposition of a variety of
safeguard measures and NTBs.) "Our policy is not protectionist,"
Fraguio declared, "but our policy is unashamedly to protect and
sustain domestic employment. Each developing nation needs to craft
its own appropriate policy response to the crisis to sustain
employment." Fraguio said he recognized that a G-20 communique will
be carefully parsed by international financial markets and that G-20
members need to craft a "consensual, progressive and practical"
message. (Septel will report on the GoA's efforts to coordinate a
trade policy response to the financial crisis bilaterally with
Brazil and more broadly within the Mercosur trade bloc.)

KELLY

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