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Cablegate: Media Reaction: Latin America Military Expenditures;

VZCZCXYZ0005
OO RUEHWEB

DE RUEHBU #1120/01 2821438
ZNR UUUUU ZZH
O 091438Z OCT 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4465
INFO RHMFISS/CDR USSOCOM MACDILL AFB FL//SCJ2//
RULGPUA/USCOMSOLANT

UNCLAS BUENOS AIRES 001120

STATE FOR INR/R/MR, I/GWHA, WHA, WHA/PDA, WHA/BSC,
WHA/EPSC
CDR USSOCOM FOR J-2 IAD/LAMA

SIPDIS

E.O. 12958: N/A
TAGS: KPAO OPRC KMDR PREL
SUBJECT: MEDIA REACTION: LATIN AMERICA MILITARY EXPENDITURES;
ARGENTINA AND THE IMF; STATE DEPARTMENT BACKGROUND NOTES ON
ARGENTINA; 10/09/09; BUENOS AIRES

1. SUMMARY STATEMENT

Today's key international stories are related to the deep reductions
in Argentina's defense budget; Argentina's "essential" need to reach
a deal with the IMF; and the State Department background notes on
Argentina.

2. OPINION PIECES AND EDITORIALS

- "Argentina, far from its neighbors in the arms race"

Business-financial "El Cronista's" contributor Jorgelina do Rosario
writes (10/09), "According to Centro de Estudios para la Nueva
Mayoria (think tank), last year, Argentina only used 0.87% of its
GDP to its defense budget, which is a 0.92% reduction vis-`-vis
2007. Along with Surinam, Argentina has one of the lowest military
budgets in the region.

"The air space control is another military issue in which the
country is behind schedule...

"Since the early '90s, Argentina started to suffer a strong
disinvestment on military expenditures. This is why Fabian Calle,
senior researcher at the Argentine Council for International
Relations (CARI), describes the country as 'an anomalous case,'
based on the fact that its military expenditures are below the world
average military expenditures (which account for about 2.5% on world
GDP).

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"Argentina's military weakness is a reason for 'concern' for the
experts consulted by 'El Cronista.' The Malvinas islands, the
dispute with Chile over the continental ice cap, the maritime
control, Argentina's Antarctic territory and foreign interest in our
natural resources are the potential threats posed to the Armed
Forces. Jorge Battaglino, professor of the Torcuato Di Tella
University believes, that the country 'should not buy (weapons)
because it feels threatened but in order to prevent its military
weakness.'

"The political analyst pointed out, 'The interesting thing about all
this is that both the left and the right wing in Argentina think
that nothing should be done about this issue. A general feeling
prevails among the people that there are no threats.' 'In the event
of a foreign attack, expectations are that Brazil or Chile will
defend us because we are losing our own military capabilities.'

"... While an arms race in Latin America has been dismissed, there
is an increasing concern among regional and international leaders
over an increase in the purchase of weapons in the region... Except
for Argentina, Latin American countries continue spending money in
weapons."

- "Argentina's inevitable return to the IMF"

Daily-of-record "La Nacion" editorializes (10/09), "The political
difficulties self-imposed by the Argentine government through its
own discourse are reflected in its back and forth moves about its
deal with the IMF in order to allow for its Article IV economic
review.

"In order to understand those obstacles, we should recall former
President Nestor Kirchner's disqualifying discourse on December 15,
2005, when he announced the pre-cancellation of the country's debt
to the IMF...

"As a consequence of the steady increase in public expenditures, the
country's fiscal surplus was gradually lost and it turned out to be
a financial deficit as of the second quarter of 2009... It is now
inevitable to recover the international credit.

"For this purpose, there is only one road and clear rules. First and
foremost, the Argentine Government should get out of its default
situation with holdout bondholders and Paris Club creditors. The
latter call for an IMF audit... We should say that the country's
return to markets is a requisite for the recovery of private
investment, which is a crucial element for growth.

"This explains Economy Minister Amado Boudou's dealings with the IMF
head in order to make the mentioned audit happen. It is an essential
step towards the normalization of financial ties to the world. It is
a first stage, although not sufficient, to access other sources of
loans at reduced interest rates... One can only expect that the
political restraint of a populist discourse, which demonized the
multinational lending agency to which now it resorts, will be
overcome."


- "The US insists that Argentina should pay debts and honor judicial
rulings"

Ana Baron, leading "Clarin's" Washington-based correspondent, writes
(10/09), "In its latest report on Argentina (Background Notes), the
Department of State insisted again on the need for Argentina to
solve the problem of its holdout creditors and to honor its Paris
Club debt as well as the ICSID (International Center for the
Settlement of Disputes) rulings on claims filed by US corporations
and those of other countries due to the country's breach of
contract.

"According to the report, the debt Argentina still has with
international creditors and a big number of claims for arbitration
filed by foreign companies are the legacy of the 2001-02 economic
meltdown that should be resolved.

"The Department of State recalls that the Government announced in
2008 that it intended to pay debts to Paris Club creditors using
Central Bank reserves. It also describes the framework set by the
Economy Minister in August 2009 for the restructuring of an amount
of defaulted T-bills (or Letes), which were not included in the 2005
restructuring, and the swap of inflation-related bonds.

"However, the report does not include Economy Minister Amado
Boudou's negotiations in New York and Istanbul to pay off the
country's debts to private creditors and the Paris Club as well as
to put the country's relationship Qth the IMF on a safe track
again. Obviously enough, they had no time to include this point.

"The Argentine Government suffered a big retreat when French Economy
Minister Christine Lagarde made it quite clear during a press
conference in Istanbul that Argentina will not be able to
restructure its Paris Club debt without an IMF audit.

"A mixture of expectation, uncertainty and skepticism prevails in
Wall Street. Many agree that in the event the Government does not
reach a soon agreement with holdout creditors, the rise in Argentine
bonds will lose its impetus."

To see more Buenos Aires reporting, visit our
classified website at:
http://www.state.sqov.gov/p/wha/buenosaires

MARTINEZ

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