Cablegate: Argentina: American Chamber Describes


DE RUEHBU #1760/01 3651257
R 301257Z DEC 08




E.O. 12958: N/A



1. (SBU) CODEL Meeks received a first-hand understanding of the
commercial opportunities and challenges faced by U.S. companies
operating in Argentina during a roundtable discussion with American
Chamber of Commerce in Argentina (AmCham) member companies on
December 17, 2008. Discussion focused on the pressures on
profitability of U.S. firms in Argentina, and how GoA actions are
exerting pressure on trade and investment. Financial services and
energy companies complained the loudest. Technology and consumer
goods companies reported on how they have found opportunities to
work around or avoid obstacles created by the Argentine government.
Congressmen Meeks, Hinojosa, and Ryan encouraged AmCham members to
help the new U.S. administration to find opportunities to improve
the bilateral relationship with Argentina.

Congressman Hinojosa made a strong pitch for U.S. businesses to
support financially the Embassy's Youth Ambassadors and Teacher
Ambassadors Programs. End Summary.

AmCham hosts roundtable

2. (SBU) After introductions by the CODEL and participating
companies, the AmCham CEO summarized the current trends in the
business climate in Argentina. For the last few years, he said,
U.S. firms were profitable and growing rapidly thanks to a rapidly
expanding economy and their understanding of how to deal with the
boom-and-bust cycles of the Argentine economy. However, as economic
growth slows, institutional values such as protection for private
property and ensuring a stable regulatory environment and free
markets have become more important considerations for the foreign
companies operating in Argentina. Participating companies were
MetLife, Duke Energy, Prudential, CH2M Hill, Mary Kay Cosmetics,
Apache Energy, and Microsoft. The Ambassador, Economic Counselor,
Commercial Counselor (notetaker), and CODEL Control officer also

Expropriation through legislation

3. (SBU) MetLife's corporate headquarters is located in Congressman
Meek's district. The GoA's recent move to nationalize all Argentine
private pension plans greatly affects MetLife's operations in
Argentina (reftel). MetLife said that they would comply with the
recently enacted law that nationalized private pension plans, but
are concerned about its effect on the company, their clients, and
their employees, and emphasized their interest in receiving a fair
price for the value of their expropriated investment.
Representative Meeks, familiar with this case, reported to MetLife's
representative that he mentioned to the President's Chief of Cabinet
Sergio Massa his interest in seeing MetLife treated fairly, and his
hope that the resolution of the exit of MetLife from their pension
business in Argentina would not sour current or future U.S.
investment in Argentina (septel). Prudential echoed frustrations
that the business climate is worsening, and that action taken

against private pension funds has damaged any residual trust that
the financial sector had in the public sector.

Energy sector suffers

4. (SBU) Both Duke Energy and Apache Energy voiced frustration over
government intervention and over-regulation that discourages private
investment in the energy sector from exploration to distribution.
Seventy percent of planned investments in the energy sector are
currently supported by the State, which results in high inefficiency
and which reflects the fact that given low state imposed tariffs
which discourage investment. Both companies stressed that Argentina
lacks the long-term stability that private investors need. Strong
labor unions and a weak judiciary add to the highly unpredictable
operating environment.

High Tech Remains Strong


5. (SBU) Microsoft reported 25 percent growth in the market, and a
positive relationship with the GoA due to employment generation and
corporate social responsibility activities. The growth of the local
software industry will depend on successful efforts to reduce the
rate of piracy, currently estimated at 79 percent. More IT
professionals are also needed to continue growth in the local
software industry.

Crisis Creates Opportunity

6. (SBU) For Mary Kay Cosmetics, the economic crisis of 2002 created
a large growth opportunity for direct sales. Mary Kay Argentina
quadrupled its sales force over the past seven years, and has
avoided the government's price control regime that targets mostly
lower-end consumer goods and commodities. CH2M Hill has also taken
advantage of local low-wage, highly-skilled employees by hiring more
than 400 engineers that provide private-sector clients in Argentina,
Latin America, and the world with engineering services for major
projects. CH2M Hill currently avoids government interference by not
bidding on public

tenders. However, they note that more complicated times lie ahead
for CH2M Hill as private sector clients scale back expansion, and
the government begins to initiate the vast majority of new
investments in infrastructure.

--------------------------------------------- ---------
Business as Ambassadors urged to Support Embassy Exchange Programs
--------------------------------------------- ---------

7. (SBU) The Congressmen concluded by urging the U.S. business
community in Argentina to work with the U.S. Government and take
advantage of the opportunity to improve bilateral relations that
will come with the change of administrations in Washington.
Congressman Meeks stressed that US businesses serve as informal
Ambassadors for the U.S. and that their role is even more important
these days. That opportunity to improve relations promises to go
far beyond solely commercial relationships, the Congressmen stated,
with the potential for Argentina to be a stronger partner of the USG
in dealing with the serious issues which confront the region.

8. (U) Representative Hinojosa made a lengthy presentation about the
importance of education and exchanges and urged the Chamber and its
members to support them. He shared how impressed he was to learn
about the Embassy's Youth Ambassador and Teacher Ambassador
Programs. He urged the Chamber to consider a donation of $1,000 by
each of its member companies to the Youth Ambassador Program -- an
investment in bilateral relations which will pay off handsomely.

9. (U) The CODEL did not have the opportunity to clear this report.


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