VZCZCXYZ0011
RR RUEHWEB

DE RUEHBU #1442/01 1781737
ZNR UUUUU ZZH
R 271737Z JUN 06 ZDK
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 5044
INFO RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RHMFISS/HQ USSOUTHCOM MIAMI FL
RUENAAA/SECNAV WASHDC
RUEAHQA/OSAF WASHDC
RUEKJCS/SECDEF WASHDC

UNCLAS BUENOS AIRES 001442 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
EX-IM BANK FOR MICHELE WILKINS 
OPIC FOR GEORGE SCHULTZ AND RUTH ANN NICASTRI 
SOUTHCOM FOR POLAD 
ARMY FOR RESEARCH AND DEVELOPMENT COMMAND 
SECNAV FOR OFFICE OF NAVAL RESEARCH 
OSAF FOR AFOSR SCIENTIFIC RESEARCH 
SECDEF FOR DIRECTOR DEFENSE RESEARCH AND ENGINEERING 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EAID TSPA AR
SUBJECT: EMBASSY SUPPORTS PROPOSED IDB LOAN TO ARGENTINA FOR REMOTE 
SENSING SATELLITE PROJECT 
 
Ref: Buenos Aires 666 
 
¶1.  (U) Sensitive but unclassified.  Not for internet distribution. 
 
 
¶2. (SBU) Summary:  Embassy Buenos Aires supports the proposed USD 50 
million IDB loan to Argentina for a remote sensing satellite as 
being in the US national interest and as being an appropriate loan 
for the IDB.  Far from being a "classic trophy project," the loan 
would develop an industry where Argentina is globally competitive 
and one in which the USG and US companies have extensive military, 
scientific and commercial interests.  At all costs, we should avoid 
giving the impression that we are opposed to the development of 
Argentina's technology industry, one of the bases for the GOA's 
opposition to the G-7 proposal to limit trade in radioactive 
materials with Iran.  Post has some sympathy for concerns about 
waiving procurement rules, but they may not matter in the Argentine 
context, where only one company can do the work.  End summary. 
 
¶3. (SBU) The IDB is preparing a USD 50 million performance driven 
loan (PDL) that will support the construction and launch of a remote 
sensing, L-band radar satellite, which would be Argentina's fourth 
publicly-owned satellite.  The document has not been submitted for 
formal Board or IDB approval yet.  However, the USED's office has 
already begun a conversation on the loan and has indicated it has 
three objections to this loan: 
 
 -- That this is a "classic trophy project," a public sector space 
program that the multi-lateral development banks should not support. 
 
 
-- That this should not be done under the PDL Program because 
Argentina has asked for a waiver of IDB procurement rules; and 
 
-- That this is not a policy priority in Argentina, where IDB should 
focus on poverty alleviation and policy regime change. 
 
¶3.  (SBU) Embassy Buenos Aires supports the loan as being in the 
U.S. national interest. This loan would help develop one of the few 
technological areas where Argentina is globally competitive, and 
also one in which the USG and U.S. private companies are working in 
cooperation with Argentina and stand to gain substantially from this 
project.  The U.S. military has direct interests in the technology 
that would result from this project going forward.  Post has some 
reservations about the procurement rule exception, although it may 
have less relevance in the Argentine context, where there is only 
one company that can do this sort of work, one which sources 90 
percent of its procurement from the United States. 
 
----------------------------- 
A Classic Development Project 
----------------------------- 
 
¶4. (U) Far from being a "classic trophy project," this is a classic 
development project, one aimed at developing a country's comparative 
advantage.  Argentina already has a highly-competitive remote 
sensing satellite components production industry.  While the loan 
would be to CONAE, the Argentine space agency, CONAE will only 
contract the work out to private or public-private companies (see 
below).  What is new in this loan is that instead of supplying 
components to L-band sensing satellites assembled in other 
countries, Argentina would produce this satellite domestically, and 
thus give it the ability to compete for remote sensing satellite 
business elsewhere.  That fits within the IDB's Country Strategy for 
Argentina, to "increase national competitiveness" and "reconstruct 
human capital." 
 
¶5. (U) The almost certain winner of the contract will be INVAP, a 
corporation owned by the province of Rio Negro which operates on a 
private sector basis, and receives no provincial funding.  INVAP has 
360 employees in Argentina, and two subsidiaries, one in the US 
(Black Rock Technology) and one in Brazil.  90 percent of its 
materials and components are purchased from the USA.  INVAP has 
developed nuclear reactors (sold to Australia, Egypt and Algeria); 
the SAC series satellites; wind energy machinery; and robotic 
components for operations in hazardous areas.  It has several 
partnerships with NASA and is certified to provide parts to NASA. 
 
 
The US military is interested in its technology. 
 
¶6. (SBU) INVAP's supply line is heavily reliant on US technology, 
which not only means that US companies will receive a large portion 
of the loan proceeds but also that US technology restrictions (e.g., 
Kyl-Bingaman, related to remote sensing imagery of Israel) will 
apply. 
 
¶7.  (SBU) Post notes that Argentina's satellite technology 
capabilities do not extend to building a telecommunications 
satellite, where US private sector contacts tell us that INVAP does 
not yet have the technical capability necessary to compete at a 
world level.  In remote sensing, however, Argentina can compete on 
both price and quality. 
 
--------------------------------------------- 
USG Interests in Argentine Satellite industry 
--------------------------------------------- 
 
¶7. (U) NASA has an already established relationship with CONAE to 
coordinate collection of Earth Observation data. The Argentine SAC-C 
satellite was flying in formation with three NASA satellites 
(Terra--MODIS data, Landsat-7, and EO-1).  The collection of data 
from different sensors at about the same time is quite an innovative 
and useful approach.  We can reasonably expect a new Argentine 
satellite system to have the same level of coordination with NASA. 
INVAP is certified as a component supplier to NASA, and NASA 
receives satellite data thru the Cordoba Ground Station project. 
 
¶8. (U) L-band radar, because of its wider wavelength will be very 
useful for soil moisture determination and crop residue (tillage) 
applications.  This would help delineate the extent of a drought or 
the extent of flooding for agricultural areas.  For areas that are 
more densely vegetated (forests, tropical rain forests, forest 
plantations in Corrientes and Misiones), the L-band would be useful 
for biomass measurement, and would greatly help in quantifying the 
deforestation taking place in northern Argentina (see reftel). 
These are remote areas, not easily accessible.  Using space-based 
observations to complement and augment the few point-based ground 
observations would save time, and increase the efficiency and 
reliability of the information.  The Engineer Research and 
Development Center of the US Army Corps of Engineers is interested 
in Argentina's use of L-band radar to remotely measure soil moisture 
and biomass. 
¶9. (U) The Argentines, should they go forward with this project, 
would have a unique asset to bring to the table for Earth 
Observation.  There is currently a Group on Earth Observation (GEO) 
which is a world-wide effort to build a global earth observation 
system to improve weather information, reduce vulnerability to 
natural disasters, adapt to a changing climate, and combat 
desertification. There are 64 GEO member countries. The 
satellite-based L-band would be able to contribute to this effort. 
¶10. (SBU) There is extensive interest by all branches of the US 
military in INVAP technology.  The US Army International Technology 
Center South America (USAITC-SA) is located in Argentina to identify 
Argentine technology that could be useful for US defense 
applications, including INVAP.  The US Army is directly interested 
in INVAP sensing technology, particularly integrated and deep 
drilling sensors.  Two US military entities are interested in INVAP 
satellite technology for Future Combat Systems (FCS).  The Space and 
Missile Defense Command is interested in INVAP satellite buses and, 
potentially, in its L-Band radar technology. 
¶11. (SBU) Comment:  In Post's views, the US interest in Argentina's 
satellite industry -- commercial, scientific and military -- should 
be sufficient to support this loan.  At all costs, the USG should 
avoid the appearance that the USG is opposed to Argentina's effort 
to develop its technology industry, an issue that Argentina already 
is sensitive about as a result of the G-7 proposal to limit trade in 
radioactive materials with Iran. 
 
GUTIERREZ