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Cablegate: Ambassador Wayne Visits Argentina's Agroindustrial Capital

VZCZCXYZ0014
RR RUEHWEB

DE RUEHBU #2667/01 3341943
ZNR UUUUU ZZH
R 301943Z NOV 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 6642
RUCPDOC/USDOC WASHINGTON DC
INFO RUEHBR/AMEMBASSY BRASILIA 5616
RUEHAC/AMEMBASSY ASUNCION 5765
RUEHMN/AMEMBASSY MONTEVIDEO 5979
RUEHSG/AMEMBASSY SANTIAGO 5377

UNCLAS BUENOS AIRES 002667

SIPDIS

SECSTATE FOR THOMAS PIERCE, WHA FOR WHA/BSC AND WHA/EPSC
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER
USDOC FOR 3134/USFCS/OIO/WH/MKESHISHIAN
USDOC FOR 4320/ITA/MAC/WH/DAS/WMBASTIAN

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECONETRDBESPAR
SUBJECT: AMBASSADOR WAYNE VISITS ARGENTINA'S AGROINDUSTRIAL CAPITAL
OF ROSARIO, SANTA FE


SENSITIVE BUT UNCLASSIFIED (NOT FOR INTERNET DISTRIBUTION)

1. (U) SUMMARY: AMBASSADOR WAYNE TRAVELED TO ARGENTINA'S
AGROINDUSTRIAL CAPITAL OF ROSARIO FOR HIS FIRST TRIP OUTSIDE OF THE
CAPITAL. ACCOMPANIED BY THE COMMERCIAL ECONOMIC AND AGRICULTURAL
COUNSELORS, THE INFORMATION OFFICER AND THE SENIOR FSN COMMERCIAL
SPECIALIST, THE AMBASSADOR MET WITH THE MAYOR, VISITED GENERAL
MOTORS AND CARGILL, MET WITH BUSINESS AND CIVIC LEADERS, TOURED THE
BINATIONAL CENTER AND DONATED BOOKS AND SCHOOL SUPPLIES TO A PUBLIC
SCHOOL. MOST ROSARINOS EXPRESSED SURPRISE AND SATISFACTION THAT THE
AMBASSADOR HAD TRAVELED TO THEIR CITY SO SOON AFTER ARRIVING AND
ENCOURAGED HIM TO DO SO REGULARLY AND OFTEN DURING HIS TENURE.
PRESS COVERAGE WAS EXTENSIVE AND POSITIVE. END SUMMARY.

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GENERAL MOTORS

2. (U) THE PROGRAM BEGAN WITH A VISIT TO THE GENERAL MOTORS
(GM) COMPLEX ON THE OUTSKIRTS OF ROSARIO. THE CEO, MR. FELIPE
ROVERA, BRIEFED THE AMBASSADOR ON GM'S OPERATIONS IN BRAZIL AND THE
SOUTHERN CONE. THE AMBASSADOR THEN TOURED THE PRODUCTION
FACILITIES. GM HAS A STATE-OF-THE-ART INTEGRATED PRODUCTION COMPLEX
WITH A CAPACITY OF 100,000 UNITS PER YEAR THAT CURRENTLY EMPLOYS
2,000 WORKERS. IN SEPTEMBER 2006, GM ADDED A SECOND SHIFT AND HIRED
400 NEW EMPLOYEES IN ORDER TO RAMP UP PRODUCTION BY 40 PERCENT. GM
ARGENTINA IS THE SECOND LARGEST AUTO MANUFACTURER AND SELLER IN
ARGENTINA WITH A MARKET SHARE OF 16.5 PERCENT. EXPORTS REPRESENT
60 PERCENT OF GM'S TOTAL PRODUCTION AND ARE DESTINED TO THE
BRAZILIAN, MEXICAN, CHILEAN, PARAGUAYAN AND URUGUAYAN MARKETS.

3. (U) GM'S COMMITMENT TO CORPORATE SOCIAL RESPONSIBITY WAS EVIDENT
FROM THE NEWLY ESTABLISHED VOCATIONAL TRAINING AND ENTREPRENEURSHIP
INSTITUTE IT HAD ESTABLISHED AT THE COMPLEX IN COLLABORATION WITH
JUNIOR ACHIEVEMENT, AS WELL AS ITS PROGRESS IN INCREASING
OPPORTUNITIES FOR WOMEN TO RISE INTO THE SUPERVISORY AND MANAGEMENT
RANKS OF THE COMPANY. THE AMBASSADOR EXPRESSED APPRECIATION FOR THE
IMPORTANT ROLE GM PLAYS IN THE ECONOMIC AND SOCIAL DEVELOPMENT OF
ROSARIO AND ARGENTINA.

4. (SBU) GENERAL MOTORS EXPRESSED SATISFACTION WITH ARGENTINA'S
ECONOMIC GROWTH, THE DRAMATIC EXPANSION OF ITS DOMESTIC CAR MARKET
AND THE QUALITY OF ITS WORKERS. MR. ROVERA SAID THAT THE GOA
CLEARLY PLACED A HIGH PRIORITY ON THE FUTURE GROWTH AND DEVELOPMENT
OF THE SECTOR AND DESCRIBED GM'S STRATEGY TO TAKE ADVANTAGE OF
RECENTLY EXTENDED ARGENTINA-BRAZIL AUTO SECTOR ACCORDS. AS A
RESULT, GM IS CONSIDERING A VERY SUBSTANTIAL NEW INVESTMENT ON THE
ORDER OF USD 350 MILLION IN ARGENTINA IN 2007 AND WILL INITIATE
TALKS WITH THE GOA TOWARD THAT END BY THE MIDDLE OF JANUARY 2007.
THIS NEW PROJECT WILL INCLUDE THE DEVELOPMENT OF SUPPLIERS IN
ARGENTINA THROUGH JOINT VENTURES MODELED AFTER THE COMPANY'S COMPLEX
IN GRAVATAI, RIO GRANDE DO SUL IN SOUTHERN BAZIL.

5. (SBU) GENERAL MOTORS COMMENTED ON A NUMBER OF CONCERNS, INCLUDING
ACCESS TO ADEQUATE ENERGY SOURCES FOR THEIR OPERATIONS, INFORMAL
PRICE CONTROLS, RIGID LABOR LAWS AND THE APPARENT INFLUENCE THAT
VOLKSWAGEN AND PEUGEOT HAVE IN THE GOA. THE ENERGY SITUATION IS THE
FIRM'S BIGGEST CONCERN. GM DOES NOT EXPECT ANY PROBLEMS WITH ENERGY
SUPPLIES IN 2007 AND HAS INSTITUTED MEASURES TO CONSERVE ENERGY.
REGARDING "INFORMAL" AUTO SECTOR PRICE CONTROLS THAT HAVE BEEN
ESTABLISHED BY THE SECRETARY OF INTERNAL COMMERCE, GM SAID THAT THE
GOVERNMENT HAS SHOWN SENSITIVITY AND FLEXIBILITY IN ITS DISCUSSIONS
WITH THE AUTOMOTIVE MANUFACTURERS RECOGNIZING THE LEGITIMACY OF
PROPOSED PRICE INCREASES IN THE FIVE-SEVEN PERCENT RANGE IN 2007 TO
COMPENSATE FOR SUPPLIER AND OTHER COST INCREASES. THE FIRM IS MORE
CONCERNED ABOUT ARGENTINE SUPPLIERS AND A GROWING SENTIMENT WITHIN
THE ARGENTINE PARTS MANUFACTURERS ASSOCIATION (AFAC) THAT ITS
MEMBERS SHOULD PUSH FOR PRICE INCREASES AND WORK WITH THE GOA TO
EMPHASIZE THE IMPORTANCE OF SOURCING LOCALLY.

FUNDACION LIBERTAD

6. (U) THE LIBERAL FREE MARKET THINK TANK FUNDACISN LIBERTAD (FL)
HOSTED A LUNCHEON FOR THE AMBASSADOR DURING WHICH HE HAD AN
EXCELLENT OPPORTUNITY TO GET TO KNOW THE LEADING CIVIC ORGANIZATIONS
AND NGOS IN ROSARIO, INCLUDING CARITAS (CATHOLIC CHURCH) AND JUNIOR
ACHIEVEMENT, AS WELL AS NUMEROUS SOCIAL SERVICE, CULTURAL,
EDUCATIONAL AND PHILANTHROPIC ORGANIZATIONS. ATTENDEES DESCRIBED
ROSARIO AS A VITAL AND RAPIDLY GROWING CITY, WITH ITS ECONOMY LIFTED
BY FOUR YEARS OF STRONG AGRICULTURAL SECTOR GROWTH. THEY EXPLAINED
HOW ROSARIO'S CIVIC AND PHILANTHROPIC ORGANIZATIONS HAVE CONTRIBUTED
TO THE DYNAMIC DEVELOPMENT AND SOCIAL COHESION OF THEIR COMMUNITY,
EVEN THOUGH, ABSENT GOA TAX INCENTIVES TO ENCOURAGE CHARITABLE
CONTRIBUTIONS, THEIR FUNDRAISING WORK REMAINS CHALLENGING. MOST

PARTICIPANTS EXPRESSED SATISFACTION THAT THE AMBASSADOR HAD COME TO
ROSARIO SO SOON AFTER ARRIVING AND ENCOURAGED HIM TO RETURN
REGULARLY AND OFTEN.

MAYOR LIFSCHITZ

7.(U) AMBASSADOR WAYNE ALSO MET WITH ROSARIO MAYOR MIGUEL
LIFSCHITZ, A MEMBER OF THE SOCIALIST PARTY WHO HAS AN EXCELLENT
REPUTATION AND WORKING RELATIONSHIP WITH BUSINESS AND CIVIC LEADERS.
THE MAYOR MENTIONED HE WILL BE LEADING A DELEGATION OF ROSARIO
BUSINESS, CIVIC AND EDUCATIONAL LEADERS TO CALIFORNIA IN FEBRUARY TO
MEET STATE OFFICIALS, COMPANIES AND UNIVERSITIES TO ENCOURAGE CLOSER
TIES AT ALL LEVELS. HIS AGENDA WILL INCLUDE MEETINGS WITH STATE
SENATORS IN SACRAMENTO, THE MAYORS OF SAN FRANCISCO AND LOS ANGELES,
AND A PRESENTATION ON ROSARIO AT THE GREATER LOS ANGELES CHAMBER OF
COMMERCE THAT IS BEING ORGANIZED BY A RECENT PAS-SPONSORED U.S.
SPEAKER, CARLOS VALDERRAMA. THE MAYOR ALSO MENTIONED THAT HE HAD
BEEN INVITED TO SPEAK AT A CONFERENCE IN CALIFORNIA ABOUT THE
SUCCESS HIS GOVERNMNT HAS HAD IN REDUCING THE LEVELS OF SMOKING IN
PUBLIC.

BOLSA DE COMERCIO

8.(SBU) ONE OF THE MOST SUBSTANTIVE MEETINGS WAS WITH THE BOARD OF
DIRECTORS OF THE BOLSA DE COMERCIO DE ROSARIO (BCR - STOCK EXCHANGE
AND BOARD OF TRADE). IT IS A 122 YEAR OLD INSTITUTION THAT HAS
1,000 MEMBERS REPRESENTING ALL SECTORS OF THE ECONOMY. THE BOARD
MEMBERS INDICATED THAT THEY WERE PROFITABLE AND CONTINUING TO INVEST
IN MODERNIZATION AND EXPANSION PROJECTS DESPITE HIGH TAXES LEVIED ON
AGRICULTURAL EXPORTS. THE GRAIN MARKET OPERATED BY THE BCR IS THE
MOST IMPORTANT IN ARGENTINA AND OVER 60 PERCENT OF CROPS (SOY BEANS,
WHEAT, ETC.), OR 40 MILLION TONS, ARE TRADED THERE ANNUALLY. THE
BOARD MEMBERS RAISED A WIDE RANGE OF SUBSTANTIVE BILATERAL TRADE
ISSUES, INCLUDING IPR, GMOS, AGRICULTURAL SUBSIDIES, ARGENTINA'S
FOREIGN AND TRADE POLICIES, AND PLANS FOR THE ARGENTINE AND U.S.
SOYBEAN PRODUCERS TO WORK TOGETHER TO INCREASE DEMAND FOR SOYBEANS
IN INDIA. SUBSEQUENTLY, THE BCR OFFERED A COCKTAIL RECEPTION FOR THE
AMBASSADOR DURING WHICH HE WAS ABLE TO MEET WITH TOP BUSINESS,
POLITICAL AND MEDIA REPRESENTATIVES FROM THE REGION.

CARGILL

9. (SBU) AMBASSADOR WAYNE CONCLUDED HIS VISIT TO ROSARIO WITH A
PRESENTATION AND TOUR OF CARGILL'S RAPIDLY EXPANDING AND WORLD CLASS
USD 300 MILLION AGRICULTURAL EXPORT PROCESSING FACILITIES AND PORTS
IN VILLA GOBERNADOR GALVEZ. THE COMPLEX IS OPERATING BUT STILL
UNDER CONSTRUCTION INCLUDES CRUSHING PLANTS FOR GRAINS AND OILSEEDS,
A MALT PROCESSING PLANT, AND AN ADDITIONAL OILSEEDS PROCESSING
FACILITY WHICH WHEN COMPLETED IN APRIL 2007, WILL HAVE THE CRUSHING
CAPACITY OF 13,200 TONS PER DAY (CLOSE TO 4.4 MILLION TONS OF
SOYBEANS PER YEAR) AND BE THE WORLD'S LARGEST AND MOST MODERN.
CARGILL HAS OPERATED IN ARGENTINA SINCE 1947 AND HAS 3,800
EMPLOYEES, MOST OF WHOM WORK IN ARGENTINA'S PRIME AGRICULTURAL
REGION, WHICH LIES WITHIN A 300 KILOMETER RADIUS OF ROSARIO. ITS
ANNUAL SALES TOTALED USD 3.4 BILLION IN 2005, DERIVED MOSTLY FROM
EXPORTS.

10. (SBU)CARGILL SAID THAT ARGENTINA IS ONE OF ITS TOP THREE TO FIVE
SOURCE MARKETS IN THE WORLD AND REITERATED ITS STRONG COMMITMENT TO
THE MARKET. NEVERTHELESS, THE CORPORATION DID HIGHLIGHT SOME ISSUES
WHICH PRESENT CHALLENGES FOR CARGILL'S SUCCESS AND GROWTH IN
ARGENTINA. ONE OF THE PRIMARY CHALLENGES POSTED WAS THE ABSENCE OF
CLEAR RULES OF DOING BUSINESS IN ARGENTINA, EXACERBATED BY THE
UNPREDICTABILITY OF ARGENTINE GOVERNMENT POLICIES. EXAMPLES OF THE
FOREGOING WHICH HAVE HAD AN IMPACT ON CARGILL'S OPERATIONS INCLUDE A
TEMPORARY BAN ON BEEF EXPORTS EARLIER THIS YEAR; THE COLLECTION OF
EXPORT TAXES ON AGRICULTURAL COMMODITIES; THE IMPOSITION OF PRICE
CONTROLS ON WHEAT DESTINED FOR DOMESTIC PROCESSING; AND THE FREEZING
OF CORN EXPORT CONTRACTS. CARGILL OPINED THAT GOA INTERVENTION IN
THE MARKETS WOULD PROBABLY CONTINUE AT LEAST UNTIL AFTER THE
PRESIDENTIAL ELECTIONS IN OCTOBER 2007.

11. (SBU) DESPITE THE CHALLENGES CARGILL HAS FACED, IT IS VERY
PROUD OF HAVING ADHERED TO A STRICT CODE OF ETHICAL CONDUCT AND ITS
DEEP FAITH IN THE ABILITY OF ARGENTINA'S AGRICULTURAL SECTOR TO MEET
THE WORLD'S INCREASING DEMAND FOR FOOD AND FIBER. THE FIRM PLANS TO
CONTINUE INVESTING AND EXPANDING ITS OPERATIONS IN ARGENTINA.

12. (U) THE AMBASSADOR EXPRESSED HIS WILLINGNESS TO DO ALL THAT HE
COULD DO TO ENGAGE THE GOA IN A DIALOGUE AIMED AT STRENGTHENING THE
INVESTMENT CLIMATE, AS WELL AS TO HIGHLIGHT TO THE GOVERNMENT AND
THE GENERAL PUBLIC THE IMPORTANT CONTRIBUTIONS U.S. COMPANIES HAVE

MADE TO ARGENTINA'S ECONOMIC DEVELOPMENT AND RECOVERY. THE
AMBASSADOR ALSO CONGRATULATED THE FIRM FOR ITS COMMITMENT TO SOCIAL
SERVICE.

PUBLIC DIPLOMACY

13. (U) THE AMBASSADOR TOOK ADVANATAGE OF HIS VISIT TO ROSARIO TO
ENGAGE IN PUBLIC DIPLOMACY OUTREACH THAT DEMONSTRATED THE IMPORTANCE
THE EMBASSY PLACES ON ACADEMIC AND CULTURAL EXCHANGES, AS WELL AS
OUR INVESTMENT IN THE COUNTRY'S YOUTH. THE AMBASSADOR ANNOUNCED TWO
INITIATIVES FOCUSED ON CHILDREN FROM THE PROVINCES, THE YOUTH
AMBASSADORS PROGRAM TO SEND YOUNG LEADERS TO THE STATES AND THE
SARMIENTO-MANN ENGLISH SCHOLARSHIPS FOR TALENTED YOUTH TO STUDY
ENGLISH. THE AMBASSADOR VISITED A LOCAL SCHOOL TO MAKE A BOOK
DONATION AND SPEAK TO A GROUP OF OVER 200 CHILDREN. THE AMBASSADOR
ENGAGED IN A LIGHTHEARTED AND ENJOYABLE EXCHANGE WITH THE STUDENTS
AND DISTRIBUTED PENS AND NOTEBOOKS INDIVIDUALLY - ALL IN FRONT OF
THE LOCAL PRESS. IN ADDITION, THE AMBASSADOR HELD A ROUNDTABLE WITH
FULBRIGHT ALUMNI TO EXAMINE THE POSSIBILITIES OF FUTURE ACTIVITIES
TO CONTINUE EXPANDING ON THE BENEFITS THEY RECEIVED FROM THEIR U.S.
ACADEMIC EXPERIENCES. HIS TOUR OF THE LOCAL BINATIONAL CENTER - ONE
OF THE LARGEST IN ARGENTINA - CONFIRMED THE COMMUNITY'S ACUTE
INTEREST IN STUDYING ENGLISH.

14.(U) PRESS COVERAGE OF THE OUTREACH TRIP WAS EXTENSIVE IN ROSARIO,
INCLUDING THE MAIN PAPER'S FRONT PAGE AND MAJOR TELEVISION CHANNELS.
SURPRISINGLY, BUENOS AIRES PRESS ALSO OFFERED POSITIVE COVERAGE.

WAYNE

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