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Cablegate: Argentine Minister of Economy Says Goa Is Ready To

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DE RUEHBU #0976/01 2381604
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O 261604Z AUG 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4275
INFO RUCNMER/MERCOSUR COLLECTIVE IMMEDIATE
RHMFISS/HQ USSOUTHCOM MIAMI FL IMMEDIATE
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE

C O N F I D E N T I A L BUENOS AIRES 000976

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TREASURY FOR NLEE/LTRAN/WLINDQUIST, DEPT PASS TO USTR FOR
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E.O. 12958: DECL: 08/26/2029
TAGS: EAGR ECON EFIN ENIV ETRD KSUM PREL AR

SUBJECT: ARGENTINE MINISTER OF ECONOMY SAYS GOA IS READY TO

ENGAGE IMF, ACCESS INTERNATIONAL CREDIT MARKETS


Classified By: Classified By: CDA Tom Kelly for reasons 1.4 (b) and (d)


1. (C) Summary: CDA met August 24 with Minister of Economy

and Public Finances Amado Boudou and discussed the upcoming

G-20 Summit in Pittsburgh, Argentina's re-engagement with the

IMF, an agreement with Paris Club debtors and bond holdouts,

as well as Argentina's fiscal and economic outlook. Not

surprisingly, Boudou was generally upbeat about Argentina's

current economic situation and prospects in the coming year.

While Argentina wants to regain access to the international

credit markets and hopes to have an agreement with the IMF

and its Paris Club creditors by year's end, Boudou stressed

that Argentina is under no fiscal pressure to do so but

rather is doing so in order to help lower borrowing costs for

Argentine producers and stimulate employment. End Summary.


2. (C) CDA, accompanied by EconCouns, opened the meeting by

asking Boudou (who was alone) Argentina's perspective on the

upcoming G-20 Summit. Boudou noted that he will be attending

the meeting next week of G-20 finance ministers in London in

preparation for the September 24-25 G-20 Summit in

Pittsburgh. He said that Argentina is going into the meeting

with a fairly strong financial and fiscal position. The

level of public debt is low; the Government has easily met

its relatively low debt servicing obligations, and will

continue to do so through 2010; and the GoA's fiscal and bank

liquidity situation is ""very good."" Boudou said that the

government's strategy now is to lower the opportunity and

borrowing costs for private sector producers through lower

interest rates which can be achieved if Argentina has access

to international credit markets.


3. (C) CDA asked if reaching an accommodation with the IMF is

part of the GOA strategy. Boudou said that the GOA wants to

normalize relations with the IMF, including a possible

Article IV review by year-end, so long as the review does not

include IMF prescriptions/conditionality. Boudou said that

the GOA also wants to re-engage with EXIM and other foreign

export credit agencies, recognizing this will require working

with the U.S. and other official creditors to clear

Argentina's Paris Club arrears through either

(IMF-sanctioned) rescheduling or other means which Argentina

hopes to achieve by the end of the year. Boudou confirmed

recent press reports that the GOA is also discussing ways to

reach a settlement with the private bond holdouts.


4. (C) Boudou stressed that, while Argentina very much

welcomes new foreign investment and access to foreign capital

that will boost Argentine employment, the GOA is under little

fiscal or economic pressure to do so. While 2009 will be a

bad year, with zero economic growth, Boudou said the GoA

forecasts growth between 3-4 percent in 2010, giving

Argentina positive growth in seven out of the last eight

years. CDA asked if reports of fiscal problems in the

provincial budgets were true. Boudou said the situation in

some of the provinces has deteriorated, blaming them for

building up their payrolls unsustainably. He contrasted this

with the GoA's ""more responsible"" countercyclical approach,

which he claimed had boosted aggregate demand during this

recessive period through increased public investment rather

than via current expenditures. He said the GOA would not

authorize provincial governments to issue bonds as a way out

of the mess, noting that he intended to turn down such a

request by Cordoba, the country's second-most-populous

province. (Officially, that request is pending.)


5. (C) On the issue of inflation, Boudou said that there has

been an overemphasis on data in Buenos Aires that indicates

continued upward pressure on prices for higher value goods.

Boudou said that GoA data shows that, as is historically

true, prices remain stable in most of the provinces outside

Buenos Aires, as well as for lower value goods generally,

meaning that rising inflation has not adversely impacted

Argentines at the lower end of the wage scale. Boudou also

noted that the Argentine Central Bank (BCRA) has a monetary

plan in place to ensure price stability.


6. (C) Comment: Now a month in office, Boudou seemed much

more loquacious and confident than his predecessor, Carlos

Fernandez, and more comfortable in his skin than Martin

Lousteau, Cristina Fernandez de Kirchner's first Economic

Minister. He came across as a poised, confident interlocutor

who is eager to engage on resolving the legacy issues that

stand in the way of Argentina returning to the international

credit and capital markets. He'll need those skills and more



as he attempts to sell economic policies that are broadly

seen as negligent and irresponsible. Boudou's optimism

contrasts sharply with new reports that the GoA's fiscal

situation continues to decline along with an economy now

firmly in recession, and highlighted by Lousteau in an August

24 television interview in which he described the GoA as in

denial over the deteriorating fiscal/financial situation.


7. (C) Boudou must perform a delicate balancing act to

achieve the rapprochement with capital markets that he

professes to want. He needs to constructively engage key

foreign interlocutors, including the Fund, the Paris Club,

and the hold-outs, without losing the confidence of his de

facto boss, Nestor Kirchner. Given that dilemma, his rosy

presentation of Argentina's fiscal and economic situation was

not surprising, nor was his assertion, in classic Kirchner

style, that Argentina is ready to deal, but only on its terms

and without pre-conditions. But Boudou's charm offensive

with international capital markets is clearly on. The GoA

press line was that the meeting with the CDA was part of the

GoA's newly launched campaign to rejoin international capital

markets, and this campaign will likely be its theme at

upcoming G-20 meetings. Boudou is also meeting this week

with IMF Director Western Hemisphere Director (and former

Chilean Finance Minister) Nicolas Eyzaguirre on the margins

of a Council of Americas meeting in Buenos Aires which the

GoA is publicly promoting. End Comment

KELLY


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