Cablegate: Embassy Supports Proposed Idb Loan to Argentina for Remote

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DE RUEHBU #1442/01 1781737
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R 271737Z JUN 06 ZDK
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 5044
INFO RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RHMFISS/HQ USSOUTHCOM MIAMI FL
RUENAAA/SECNAV WASHDC
RUEAHQA/OSAF WASHDC
RUEKJCS/SECDEF WASHDC

UNCLAS BUENOS AIRES 001442

SIPDIS

SENSITIVE
SIPDIS

EX-IM BANK FOR MICHELE WILKINS
OPIC FOR GEORGE SCHULTZ AND RUTH ANN NICASTRI
SOUTHCOM FOR POLAD
ARMY FOR RESEARCH AND DEVELOPMENT COMMAND
SECNAV FOR OFFICE OF NAVAL RESEARCH
OSAF FOR AFOSR SCIENTIFIC RESEARCH
SECDEF FOR DIRECTOR DEFENSE RESEARCH AND ENGINEERING

E.O. 12958: N/A
TAGS: ECON EFIN EAID TSPA AR
SUBJECT: EMBASSY SUPPORTS PROPOSED IDB LOAN TO ARGENTINA FOR REMOTE
SENSING SATELLITE PROJECT

Ref: Buenos Aires 666

1. (U) Sensitive but unclassified. Not for internet distribution.

2. (SBU) Summary: Embassy Buenos Aires supports the proposed USD 50
million IDB loan to Argentina for a remote sensing satellite as
being in the US national interest and as being an appropriate loan
for the IDB. Far from being a "classic trophy project," the loan
would develop an industry where Argentina is globally competitive
and one in which the USG and US companies have extensive military,
scientific and commercial interests. At all costs, we should avoid
giving the impression that we are opposed to the development of
Argentina's technology industry, one of the bases for the GOA's
opposition to the G-7 proposal to limit trade in radioactive
materials with Iran. Post has some sympathy for concerns about
waiving procurement rules, but they may not matter in the Argentine
context, where only one company can do the work. End summary.

3. (SBU) The IDB is preparing a USD 50 million performance driven
loan (PDL) that will support the construction and launch of a remote
sensing, L-band radar satellite, which would be Argentina's fourth
publicly-owned satellite. The document has not been submitted for
formal Board or IDB approval yet. However, the USED's office has
already begun a conversation on the loan and has indicated it has
three objections to this loan:

-- That this is a "classic trophy project," a public sector space
program that the multi-lateral development banks should not support.

-- That this should not be done under the PDL Program because
Argentina has asked for a waiver of IDB procurement rules; and

-- That this is not a policy priority in Argentina, where IDB should
focus on poverty alleviation and policy regime change.

3. (SBU) Embassy Buenos Aires supports the loan as being in the
U.S. national interest. This loan would help develop one of the few
technological areas where Argentina is globally competitive, and
also one in which the USG and U.S. private companies are working in
cooperation with Argentina and stand to gain substantially from this
project. The U.S. military has direct interests in the technology
that would result from this project going forward. Post has some
reservations about the procurement rule exception, although it may
have less relevance in the Argentine context, where there is only
one company that can do this sort of work, one which sources 90
percent of its procurement from the United States.

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A Classic Development Project
-----------------------------

4. (U) Far from being a "classic trophy project," this is a classic
development project, one aimed at developing a country's comparative
advantage. Argentina already has a highly-competitive remote
sensing satellite components production industry. While the loan
would be to CONAE, the Argentine space agency, CONAE will only
contract the work out to private or public-private companies (see
below). What is new in this loan is that instead of supplying
components to L-band sensing satellites assembled in other
countries, Argentina would produce this satellite domestically, and
thus give it the ability to compete for remote sensing satellite
business elsewhere. That fits within the IDB's Country Strategy for
Argentina, to "increase national competitiveness" and "reconstruct
human capital."

5. (U) The almost certain winner of the contract will be INVAP, a
corporation owned by the province of Rio Negro which operates on a
private sector basis, and receives no provincial funding. INVAP has
360 employees in Argentina, and two subsidiaries, one in the US
(Black Rock Technology) and one in Brazil. 90 percent of its
materials and components are purchased from the USA. INVAP has
developed nuclear reactors (sold to Australia, Egypt and Algeria);
the SAC series satellites; wind energy machinery; and robotic
components for operations in hazardous areas. It has several
partnerships with NASA and is certified to provide parts to NASA.

The US military is interested in its technology.

6. (SBU) INVAP's supply line is heavily reliant on US technology,
which not only means that US companies will receive a large portion
of the loan proceeds but also that US technology restrictions (e.g.,
Kyl-Bingaman, related to remote sensing imagery of Israel) will
apply.

7. (SBU) Post notes that Argentina's satellite technology
capabilities do not extend to building a telecommunications
satellite, where US private sector contacts tell us that INVAP does
not yet have the technical capability necessary to compete at a
world level. In remote sensing, however, Argentina can compete on
both price and quality.

---------------------------------------------
USG Interests in Argentine Satellite industry
---------------------------------------------

7. (U) NASA has an already established relationship with CONAE to
coordinate collection of Earth Observation data. The Argentine SAC-C
satellite was flying in formation with three NASA satellites
(Terra--MODIS data, Landsat-7, and EO-1). The collection of data
from different sensors at about the same time is quite an innovative
and useful approach. We can reasonably expect a new Argentine
satellite system to have the same level of coordination with NASA.
INVAP is certified as a component supplier to NASA, and NASA
receives satellite data thru the Cordoba Ground Station project.

8. (U) L-band radar, because of its wider wavelength will be very
useful for soil moisture determination and crop residue (tillage)
applications. This would help delineate the extent of a drought or
the extent of flooding for agricultural areas. For areas that are
more densely vegetated (forests, tropical rain forests, forest
plantations in Corrientes and Misiones), the L-band would be useful
for biomass measurement, and would greatly help in quantifying the
deforestation taking place in northern Argentina (see reftel).
These are remote areas, not easily accessible. Using space-based
observations to complement and augment the few point-based ground
observations would save time, and increase the efficiency and
reliability of the information. The Engineer Research and
Development Center of the US Army Corps of Engineers is interested
in Argentina's use of L-band radar to remotely measure soil moisture
and biomass.
9. (U) The Argentines, should they go forward with this project,
would have a unique asset to bring to the table for Earth
Observation. There is currently a Group on Earth Observation (GEO)
which is a world-wide effort to build a global earth observation
system to improve weather information, reduce vulnerability to
natural disasters, adapt to a changing climate, and combat
desertification. There are 64 GEO member countries. The
satellite-based L-band would be able to contribute to this effort.
10. (SBU) There is extensive interest by all branches of the US
military in INVAP technology. The US Army International Technology
Center South America (USAITC-SA) is located in Argentina to identify
Argentine technology that could be useful for US defense
applications, including INVAP. The US Army is directly interested
in INVAP sensing technology, particularly integrated and deep
drilling sensors. Two US military entities are interested in INVAP
satellite technology for Future Combat Systems (FCS). The Space and
Missile Defense Command is interested in INVAP satellite buses and,
potentially, in its L-Band radar technology.
11. (SBU) Comment: In Post's views, the US interest in Argentina's
satellite industry -- commercial, scientific and military -- should
be sufficient to support this loan. At all costs, the USG should
avoid the appearance that the USG is opposed to Argentina's effort
to develop its technology industry, an issue that Argentina already
is sensitive about as a result of the G-7 proposal to limit trade in
radioactive materials with Iran.

GUTIERREZ

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