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FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2995
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS IMMEDIATE
RUEHSO/AMCONSUL SAO PAULO IMMEDIATE 3869
RUEAIIA/CIA WASHINGTON DC IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE

C O N F I D E N T I A L SECTION 01 OF 03 BUENOS AIRES 000133 
 
SIPDIS 
 
E.O. 12958: DECL: 02/05/2019 
TAGS: ECON EFIN ETRD EXIM AR
SUBJECT: GOA ECONOMY MINISTER ON "BUY AMERICA," DEBT SWAPS, 
PENSIONS NATIONALIZATION, AND EXIMBANK TOLLING AGREEMENT 
 
Classified By: Ambassador E. Anthony Wayne for Reasons 1.4 (b,d) 
 
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Summary 
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¶1. (C) Argentine Economy Minister Carlos Fernandez noted GoA 
concerns with the "buy America" provisions in pending U.S. 
economic stimulus legislation during a February 4 meeting 
with Ambassador that mostly focused on G-20 issues (septel). 
The Minister highlighted the GoA's recent successful debt 
swap, which will open to foreign bondholders soon, but 
downplayed chances of a deal soon with "holdouts."  The 
Ambassador called for fair treatment of U.S. companies that 
had investments expropriated when the GoA nationalized the 
private pension funds in December, particularly with regards 
to compensation.  Ambassador also urged Fernandez to engage 
directly in completing a tolling agreement with ExImBank. 
Fernandez said he would soon respond to a Financial Action 
Task Force (FATF) letter raising concerns about the GoA's new 
capital repatriation law.  He noted that the GoA published 
implementing regulations of that law February 2, which he 
claimed eliminated the potential for abuse of the law for 
purposes of laundering money.  End Summary. 
 
¶2. (C) The Minister and Ambassador focused on the GoA's 
participation in ongoing and upcoming G-20 meetings (reported 
septel).  This cable describes their discussion of bilateral 
issues. 
 
--------------------------------------------- - 
Argentine Concerns Re "Buy America" Provisions 
--------------------------------------------- - 
 
¶3. (C) Reflecting concerns raised in local media, Minister 
Fernandez asked the Ambassador for details about the "buy 
America" provision included in the stimulus package pending 
in the U.S. Congress.  The Ambassador noted that the 
legislation was still being debated in the Congress, and the 
end result would be a matter of negotiation in Congress and 
with the administration.  He highlighted President Obama's 
February 3 statements on the need to avoid creating problems 
with our trading partners, and also pointed out that many 
U.S. companies, in addition to our trading partners, had 
expressed concern about the provision as originally drafted. 
(Comment: While the meeting received prominent and positive 
press play, articles highlighted the Ambassador and 
Minister's discussion of this issue, portraying the exchange 
as a GoA reclama on the issue, even though Fernandez was very 
restrained in his comments.  There are serious local concerns 
that the provision could disadvantage Argentine steel exports 
to the United States.) 
 
--------------------------------------------- ------ 
Debt Issues: Local Debt Swap and Plans for Holdouts 
--------------------------------------------- ------ 
 
¶4. (C) The Ambassador congratulated the Minister on achieving 
a 97% acceptance rate in the GoA's recent debt exchange of 
locally-held Guaranteed Loans ("Prestamos Garantizados"), 
which according to press reports will result in lowering the 
GoA's financing needs in 2009 by over US$1.5 billion. 
Fernandez said the successful swap sent an important signal 
to the market that the GoA "still has sufficient resources to 
pay its debts, despite everything going on in the world."  He 
said the GoA would keep the exchange open for a few more days 
to allow the last few domestic holders of these bonds to 
participate, and planned soon to open the exchange to foreign 
holders.  He noted that the GoA would provide the same offer 
during the foreign tranche of the swap, or maybe even 
slightly worse, but expected heavy participation because 
"everybody wants to exchange the illiquid Guaranteed Loans 
for more liquid bonds."  (This issue reported in more detail 
septel.) 
 
¶5. (C) Fernandez took the opportunity to bash rating 
agencies, which currently have "worse ratings for Argentina 
than in 2001," before Argentina's default and devaluation. 
He accused these entities of failing to anticipate both 
Argentina's 2001 crisis and the ongoing international crisis, 
and argued it made no sense for Argentina to be considered so 
much riskier than other countries in the region after six 
years of strong fiscal and trade surpluses.  He suspected the 
ratings were based more on politics than technical reasons. 
 
¶6. (C) The Ambassador commented that the perception that 
Argentina is a riskier market in large part derives from the 
GoA's outstanding debt situation with both Paris Club 
 
BUENOS AIR 00000133  002 OF 003 
 
 
creditors and holdouts.  Fernandez responed that the 
political will is still there, and the GoA sees these as 
priority issues that must be resolved as soon as feasible. 
However, he contradicted press and private sector speculation 
that the GoA will soon attempt to restructure untendered 
defaulted bonds (the so-called "holdouts"), arguing that 
"international conditions must first return to normal." 
 
------------------------------------------ 
Argentine Nationalization of Pension Funds 
------------------------------------------ 
 
¶7. (C) The Ambassador highlighted Washington interest in the 
GoA's nationalization of the private pension funds in 
December, as well as USG concern about GoA treatment of the 
two U.S. companies (MetLife and NYLife) that had their assets 
expropriated.  The Ambassador called for the GoA to ensure 
that their interests and those of their employees and 
shareholders were appropriately protected.  Fernandez 
reassured Ambassador that the GoA was also concerned about 
the thousands of employees that worked for the 10 private 
pension funds, and was looking to employ as many as possible 
at the Argentine Social Security Agency (ANSES, which took 
possession of the private funds' assets in mid-December). 
Fernandez also assured that the GoA would be reasonable and 
prudent with regards to the question of compensation, and its 
actions would accord with Argentine laws.  (Comment: 
Fernandez likely has little say over this issue in the 
cabinet, but Post is delivering a similar message during all 
contacts with appropriate GoA officials.) 
 
-------------------------- 
ExImBank Tolling Agreement 
-------------------------- 
 
¶8. (SBU) The Ambassador explained that ExIm has renewed its 
effort to sign a tolling agreement with the GoA, and asked 
for the Minister to engage directly in completing the 
documents and then sending the agreement and decree to the 
President for signature.  Although Fernandez seemed 
unfamiliar with the issue, after hearing explanations by 
EconOff of how this agreement would benefit both Argentina 
and ExIm, and would protect both of their legal rights, 
Fernandez agreed to follow-up personally with his staff in 
the Secretariat of Finance, who are handling the issue. 
 
¶9. (SBU) Background: the purpose of this agreement is to 
extend the statute of limitations on ExIm's non-performing 
loans to the GoA.  Economy Ministry staff, ExIm officials, 
and the GoA's legal counsel, Cleary Gottlieb, completed a 
draft agreement in August 2008, and EconMin staff were on the 
verge of sending it to the Minister for approval.  However, 
both sides agreed informally to delay the process after 
President Cristina Fernandez de Kirchner (CFK) announced 
September 2, 2008, that the GoA would pay all Paris Club 
debts -- including the roughly $425 million owed to EXIM and 
other USG agencies -- in one lump sum.  However, given that 
the GoA never followed through on the promise, and the 
deterioration in international and domestic financial markets 
makes any Paris Club payment soon unlikely, ExIm and Finance 
Secretariat staff agreed to resume the effort. 
 
---------------------------------- 
Argentine Capital Repatriation Law 
---------------------------------- 
 
¶10. (C) In response to the Ambassador's question, Fernandez 
noted that the GoA issued implementing regulations on 
February 2 covering its recent and controversial law on 
capital repatriation passed by the Argentine Congress last 
December.  He argued that these regulations preclude any 
possible abuse of the law for the purpose of laundering money 
-- especially funds deriving from illicit means.  Now that 
the GoA has completed all legislative and regulatory 
documentation, Fernandez said he would finally respond to 
FATF's December 8 letter to him, which expressed concern 
about the potential risks of passing such a law and asked for 
details. 
 
¶11. (C) Comment: the implementing regulations require that 
financial transfers originate in countries that meet 
international money laundering/terrorism finance standards, 
and also require the local financial institutions receiving 
the funds to comply with all relevant Central Bank and 
Financial Investigative Unit rules and regulations.  GoA and 
Central Bank officials say that these restrictions are 
sufficient to eliminate the potential for money laundering, 
but Post's private sector contacts warn that there is still 
 
BUENOS AIR 00000133  003 OF 003 
 
 
significant room for abuse, particularly with regards to 
movements of cash.  (Reported in more detail septel.) 
 
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Publication of Investment Climate Statement 
------------------------------------------- 
 
¶12. (C) As a pull aside, the Ambassador informed Fernandez 
that the USG would soon publish the latest versions of the 
Investment Climate Statement and Country Commercial Guide. 
The Ambassador emphasized that these are balanced technical 
evaluations of Argentina's investment and business climate, 
but warned that the press has used these reports in the past 
to stir up conflict between our two countries.  Fernandez 
reassured the Ambassador that GoA officials are fully 
familiar with the Argentine press' penchant for hyperbole. 
 
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Comment 
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¶13. (C) This was the Ambassador's first formal meeting with 
Minister Fernandez since July 2008, when they met during the 
visit of WHA A/S Shannon and Treasury DAS O'Neill on the 
margins of the bilateral consultations, though they have 
talked by telephone and at events in between.  This compares 
to the almost monthly meetings the Ambassador enjoyed with 
Fernandez's three predecessors, and is an indication of this 
Minister's low profile and diminished role in the CFK 
administration.  Never a power player in the cabinet, his 
role was even further reduced when CFK split his Ministry 
into two (Economy and Production) in late November.  Whereas 
before he had -- at least in theory -- a say in issues 
related to industry, trade, and agriculture, Fernandez is now 
the Minister in charge of only finance and the budget.  While 
Fernandez comes across as forthright and honest, and has a 
good reputation as a competent technocrat, especially on 
budget-related issues, his influence is limited.  There is 
little doubt that the real decisions on the economy are being 
made in the Casa Rosada and presidential residence Los 
Olivos, the lair of presidential spouse Nestor Kirchner.  End 
Comment. 
 
WAYNE