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Cablegate: Spanish Investment Disputes in Argentina

VZCZCXYZ0005
RR RUEHWEB

DE RUEHMD #0963 2490855
ZNR UUUUU ZZH
R 050855Z SEP 08
FM AMEMBASSY MADRID
TO RUEHC/SECSTATE WASHDC 5300
INFO RUEHRL/AMEMBASSY BERLIN 0642
RUEHFR/AMEMBASSY PARIS 1507
RUEHRO/AMEMBASSY ROME 2406
RUEHBU/AMEMBASSY BUENOS AIRES 0391
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS MADRID 000963

SENSITIVE
SIPDIS

STATE FOR EEB/OIA and L/EB
STATE PASS USTR

E.O. 12958: N/A
TAGS: ECON KIDE EINV SP AR
SUBJECT: SPANISH INVESTMENT DISPUTES IN ARGENTINA

REF: STATE 88697

1. (U) On September 3, Econoff raised the issue of investment in
Argentina with Alejandro Alvargonzalez San Martin, MFA Deputy
Director General for Bilateral Economic Relations with Developing
Countries. Alvargonzalez noted that the stock of Spanish investment
in Argentina amounts to approximately 35 billion euros, making Spain
the country's largest foreign investor, and that Spanish companies
are experiencing problems similar to those described in reftel. In
particular, firms involved in Argentina's electricity and oil and
gas sectors, e.g., Endesa and Repsol, as well as some in highway
administration, were adversely affected by the freezing of tariffs
during the 2001 economic crisis and suffered considerable losses.

2. (SBU) Some of these companies, Alvargonzalez stated, had brought
cases before ICSID, but later withdrew them as the GOS, seeking to
avoid tensions, pursued a policy of negotiating with the GOA on a
case-by-case basis, an approach which has yielded positive results
in some cases, but which he acknowledged is a very slow and often
frustrating process. Alvargonzalez had no views on the
interpretation of Articles 53 and 54 of the ICSID Convention but
found it unsurprising that the GOA was failing to comply with its
obligations, as many Spanish investors are still encountering
problems and are, in his view, likely to continue to do so. He
cited a recent Bank of Spain report that listed Argentina as a
high-risk country for foreign investors, and President Fernandez de
Kirchner's rejoinder that the Bank should focus on its own problems,
as illustrative of the strained bilateral investment relations. He
also mentioned the Aerolineas Argentinas situation, in which the
Spanish controlling shareholder, Marsans, was pressured to sell its
stake back to the GOA. Alvargonzalez added that some Spanish
investors were able to reduce their risks, or improve their chances
of favorable treatment from the government, by taking on local
partners, as in the case of Repsol YPF.

AGUIRRE

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