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Cablegate: Argentina: Scenesetter for Codel Meeks

VZCZCXYZ0013
RR RUEHWEB

DE RUEHBU #1676/01 3451714
ZNR UUUUU ZZH
R 101714Z DEC 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 2654
INFO RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 001676

SENSITIVE
SIPDIS

FOR REPRESENTATIVE MEEKS FROM AMBASSADOR E. ANTHONY WAYNE
DEPARTMENT FOR H AND WHA/BSC

E.O. 12958: N/A
TAGS: OVIP CODEL ECON PREL BEXP AR
SUBJECT: ARGENTINA: SCENESETTER FOR CODEL MEEKS

1. (SBU) Introduction: On behalf of Embassy Buenos Aires, I
warmly welcome your visit to Argentina December 16-18.
With the administration of President Cristina Fernandez de
Kirchner, we are looking to build on a strong and positive
bilateral relationship. We are working together in
significant areas of mutual interest and cooperation in
counter-terrorism, counter-narcotics and regional stability.
During your meetings with President Kirchner, senior cabinet
members, and the congressional leadership, you will have the
opportunity to discuss a range of bilateral and regional
issues and reinforce our positive agenda as well as to give
some gentle nudges of areas where we look for improved
cooperation. End Introduction.

-----------------
Political Context
-----------------

2. (SBU) You arrive shortly after Cristina Fernandez de
Kirchner (CFK) will have completed her first year as
president, having taken office on December 10, 2007. She
succeeded her husband, Nestor Kirchner, who retains a high
profile in government policy and decision-making. CFK has a
decades-long history in politics, having served in the
Chamber of Deputies and most recently in the Senate. She won
the 2007 presidential election with 45% of the vote over a
sharply divided opposition. Having campaigned on the
seemingly contradictory themes of change and continuity, she
retained most of her husband's cabinet and much of his
confrontational style. During her first year in office, she
suffered a severe drop in popularity and approval ratings,
which now hover in the high 20s, due in large part to her
handling of the protracted March - August conflict with the
very popular farming sector over a government proposal to
increase export duties on soy and other agricultural
products. In coping with the sudden downturn in global
commodity prices that had fueled Argentina's 2002-2008
economic recovery, CFK's major policy challenges will be to
maintain employment levels, attract and boost investment, and
restore a sense of law and order to an electorate
increasingly concerned about crime and security. She faces
congressional elections in October 2009.

3. (SBU) Bilateral relations are strong but underwent a
rough patch in December of last year. Two days after CFK was
inaugurated, 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. The accused were
recently convicted and are just now being sentenced. During
the proceedings in Miami, allegations surfaced that
undeclared cash brought into Buenos Aires in August 2007 from
Venezuela had been destined for the 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.

4. (SBU) President Fernandez de Kirchner reacted angrily to
the allegation that she had been the intended recipient of
the cash that was intercepted by GOA airport 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, and the relationship normalized due to a great deal
of behind-the-scenes work. We agreed at the end of January
to put the case aside and to work to strengthen bilateral
cooperation, which we have done in part by reviving a special
consultative process that has already resulted in agreements
in new areas such as alternative energy, nanotechnology, and
national park administration. We also agreed to promote
greater parliamentary exchanges, so your visit will help in
that regard. However, during the trial of the only defendant
not to plead guilty in Miami, the government remained
standoffish to close public cooperation with us as the
allegations that the money was for CFK's campaign were
repeated and amplified. The local Argentine investigation
into this remains stalled and they seek the extradition from
the U.S. of the prime prosecution witness in the Miami trial.


----------------
Economic Context
----------------

5. (SBU) Argentina, once one of the richest countries of the
world, has experienced much economic decline and political
instability over the last 70 years, culminating in a profound
political and economic crisis of 2001-2002 that was
comparable to our Great Depression. A financial panic in
November 2001 led to bloody riots, forcing President De La
Rua to resign. Argentina defaulted on $88 billion in debt,
the largest sovereign debt default in history. Many
Argentines are at a loss to explain how their country,
blessed with rich natural resources, fertile land, and low
population density, fell so far short of its potential. Some
blame the military dictatorships, which predominated between
1930 and 1983; others blame corruption and a series of
populist measures taken since 1944; and a significant number
of Argentines blame external factors, particularly the IMF
and alleged U.S. insensitivity to their plight.

6. (U) Argentina's economy sustained a robust recovery
following the sever 2001/2002 economic crisis, with five
consecutive years of over 8% real growth in gross domestic
product (GDP). Argentine GDP reached U.S. $ 261 billion in
2007, approximately U.S. $ 6,630 per capita, with investment
increasing an estimated 14.4% for the year and representing
approximately 23% of GDP. The economic expansion created
jobs, with unemployment down from over 21% in 2002 to 8.0% in
the second quarter of 2008. Poverty levels also dropped.
According to government statistics, 20.6% of the population
in the 28 largest urban areas remained below the poverty line
in the first quarter of 2008, down from over 50% in the
immediate aftermath of the economic crisis.

7. (U) Argentina benefits from rich natural resources, a
highly educated population, a globally competitive
agricultural sector, and a diversified industrial base.
Argentina's post-crisis move to a more flexible exchange rate
regimen, along with sustained global and regional growth, a
boost in domestic aggregate demand via monetary, fiscal, and
income distribution policies, and favorable international
commodity prices and interest rate trends were catalytic
factors in supporting renewed growth between 2003 and 2007.
The economic resurgence also enabled the government to
accumulate substantial official reserves (over $45 billion as
of early November 2008) to help insulate the economy from
external shocks. A higher tax burden, improved tax
collection efforts, and the recovery's strong impact on tax
revenues supported the government's successful efforts to
maintain primary fiscal surpluses since 2003.

8. (U) Argentina has continued to perform well in 2008, with
full-year real GDP growth projected at about 7%, according to
the Argentine Central Bank's consensus survey. 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 energy prices maintained by the
government below international market levels. Other
challenges include the increasing scarcity of skilled labor,
inflation (8.5% in 2007 according to official statistics, but
estimated by independent analysts to be significantly
higher), and the heterodox policies employed to contain
inflation. These include pressure on the private sector to
limit price increases on some consumer goods, delays in the
renegotiation of public service tariffs, export trade taxes
and export bans. Recent global financial turmoil and rapid
declines in world commodity prices also threaten Argentina's
ability to continue its rapid rate of economic expansion.
The government has recently introduced a series of measures
to stimulate the economy and maintain jobs.

9. (U) Argentina's exchange rate policy is based on a managed
float, and the 2009 budget estimates the average exchange
rate at 3.19 pesos to the dollar. Market analysts have
considered the pesos's real exchange rate undervalued in
previous years, though it is now under substantial pressure
and has depreciated significantly in recent weeks, currently
trading around 3.46 pesos to the dollar. The previous
undervaluation, along with historically high global commodity
prices, helped lift export volumes and values to record
level, resulting in an $11.2 billion trade surplus in 2007.
Foreign trade was approximately 39% of GDP in 2007 (up from
only 11% in 1990) and plays an increasingly important role in
Argentina's economic development. Exports totaled
approximately 21% of GDP in 2007 (up from 14% in 2002), and
key export markets included MERCOSUR (23% of exports), the EU
(18%) and NAFTA countries (11%).

10. (U) Two-way trade in goods with the U.S. in 2007 totaled
about $9.7 billion (according to both U.S. and Argentine
government statistics). Total two-way trade in services in
2007 was $4.0 billion (according to the Bureau of Economic
Analysis, U.S. Department of Commerce). The production of
grains, cattle, and other agricultural goods continues to be
the backbone of Argentina's export economy. High technology
goods and services are emerging as significant export
sectors. A decline in global commodity prices and slower
global growth levels in the second half of 2008 is expected
to reduce Argentina's trade surplus levels in the medium term.

11. (U) Nearly 500 U.S. companies are currently operating in
Argentina, employing over 155,000 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. Continuing Argentine arrears to
international creditor and a large number of arbitration
claims filed by foreign companies are legacies of the
2001/2002 economic crisis that remain to be resolved and
adversely impact Argentina's investment climate.
Outstanding debts include over $20 billion in default claims
by international bondholders and between $7 and 8 billion
owed to official creditors. President Cristina Fernandez de
Kirchner announced in September 2008 that the government
intends to pay debts to Paris Club creditors using Central
Bank reserves. She further announced that the government
would consider a proposal from private banks on the
settlement with international bondholders of untendered
Argentine government debt. These plans were temporarily
shelved by mid-October because the global financial crisis
closed off international financing that Argentina had hoped
to attract from its initiative. The government recently
approved to nationalize Argentina's private pensions system,
which affects two U.S. companies who had been running pension
businesses. The government has also recently accused a U.S.
energy firm of violating Argentine law.

--------------------------------------------- ---------
Anti-Americanism, Bilateral Relations, Strategic Goals
--------------------------------------------- ---------

12. (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. We believe we have found a formula for
success through substantially increased media outreach,
focused attention on youth, and augmented involvement with
NGOs and community activities. We seek to use all available
resources, from visiting American rock groups and sports
heroes to Nobel Prize winners and U.S. companies, to carry
the positive agenda forward.

13. (SBU) 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 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, totaling billions of dollars.

14. (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). Recently,
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
--------------------------------------------

15. (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)
---------------------------

16. (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," but the Justice
Ministry has been vigorous in arresting traffickers and
freeing victims in recent months.

-------------------------
Democracy and Rule of Law
-------------------------

17. (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
------------

18. (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. 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
-----------------------------

19. (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.

---------
Terrorism
---------

20. (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).

21. (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.
WAYNE

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