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UNCLAS BUENOS AIRES 000489 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ENRG EAGR ETRD AR VZ
SUBJECT: CHAVEZ' ECONOMIC DELIVERABLES TO ARGENTINA -- 
PAYMENT FOR RALLY STOP 
 
REF: A. BUENOS AIRES 465 
     ¶B. BUENOS AIRES 427 
     ¶C. BUENOS AIRES 284 
     ¶D. BUENOS AIRES 360 
 
Summary 
------- 
¶1. (SBU) Presidents Kirchner and Chavez oversaw the signing 
of a number of bilateral economic accords and commercial 
agreements during Chavez' March 9 visit to Argentina 
(reftels).  This was the "substantive" side of Chavez' visit 
to Buenos Aries and the focus for the GoA.  The two 
Presidents agreed to include Bolivia in the "Banco del Sur" 
and to create an organization of natural gas exporters. 
Other agreements covered enhanced energy and agricultural 
cooperation and increased commercial opportunities for 
Argentine companies.  The agreements expand on accords the 
two Presidents signed during Kirchner's visit in February to 
Venezuela (Ref B), and are largely symbolic.  Nevertheless, 
GoA officials claim the closer relationship with Venezuela 
has brought real economic benefits, including a doubling of 
exports to Venezuela since 2005, and expected to reach over 
$800 million in 2007.  End Summary. 
 
Eleven, no, Ten, Accords 
------------------------ 
¶2. (SBU) According to local press, Presidents Kirchner and 
Chavez presided over the signing of eleven economic and 
commercial accords on March 9, during Chavez' pass through 
Buenos Aires as part of his shadow "anti-Bush" tour (see 
reftels).  The two governments later issued a list of ten 
agreements.  The two Presidents signed agreements to invite 
Bolivia to join their concept for a regional development 
bank, "Banco del Sur," and also to create the "Organization 
of Gas Producers and Exporters in South America (OPEGASUR). 
 
¶3. (SBU) Venezuela's national oil company PDVSA signed three 
agreements with Argentine companies to produce vehicles, 
buses, motors and other equipment that operate on natural 
gas.  PDVSA also agreed with Argentina's "Grobo Group" on a 
$400 million program to expand agricultural production in 
Venezuela.  The two sides also signed scientific and 
technological cooperation agreements on agricultural and 
cattle production, and agreed to create an Agricultural 
technology institute, and to construct two reproductive 
biotechnology facilities in Venezuela. 
 
¶4. (SBU) GoA officials justify their tighter relationship 
with Venezuela as economically pragmatic.  The Argentine 
private sector is benefiting, with exports to Venezuela 
increasing from $513 million in 2005 to $793 million in 2006; 
exports are expected to exceed $800 million in 2007.  (Note: 
Argentina's imports from Venezuela decreased from $32 million 
in 2005 to $25 million in 2006.) 
 
Bolivia Joins "Banco del Sur" 
----------------------------- 
¶5. (SBU) Kirchner and Chavez welcomed Bolivia into the "Banco 
del Sur," their new concept of a regional development bank to 
rival the IFIs.  However, GoA and GoV negotiators have yet to 
agree on the details of how to organize or finance the bank. 
As reported Ref B, the press reports that the two governments 
are considering committing reserves to capitalize the bank. 
However, at least for Argentina this would require 
Congressional approval to change the Central Bank's charter. 
(Comment:  this would also create a public perception problem 
for Argentina with Paris Club countries, since the GoA has 
 
argued that the Central Bank's charter keeps the GoA from 
using official reserves to pay arrears to Paris Club 
creditors.  End Comment). 
 
Energy Agreements -- Repeats and Pie in the Sky 
--------------------------------------------- -- 
¶6. (SBU) The three agreements that involve compressed natural 
gas (CNG) technology transfer (for automobiles and buses) to 
Venezuela were minimalist expansions on earlier MOUs signed 
in Caracas (Ref B).  According to ex-GoA Energy Secretary 
(and current private energy consultant) Daniel Montamat, the 
fourth agreement -- to create a South American natural gas 
exporter/producer association -- is largely symbolic, and 
Chavez' response to the U.S./Brazil biofuel agreement. 
 
Argentina Sells Agricultural Know-How to Venezuela 
--------------------------------------------- ----- 
¶7. (SBU) PDVSA agreed to invest $400 million to expand 
Venezuela's crop production with Argentine technical 
assistance.  Grobo Group, one of Argentina's largest 
agricultural companies, will manage the project.  Grobo will 
begin by planting soybeans on 10,000 hectares of PDVSA land, 
increasing production to 100,000 hectares by year four, and 
eventually reaching one million hectares.  (Comment:  the 
project may have trouble getting off the ground, given 
Chavez' stated opposition to GMO soybeans, which comprise 
about 95% of Argentine soybean production.  Grobo is 
aggressively pro-biotech.  End Comment). 
 
¶8. (SBU) The two sides signed several other accords to 
promote agricultural production and research in Venezuela, 
using Argentine technical expertise.  They agreed to enlarge 
four potato research centers and build two biotechnology labs 
focused on cattle reproduction.  They also agreed to create 
an agricultural technological institute in the Bolivar area, 
with the Argentine Institute of Agricultural Technology (INTA 
-- equivalent to USDA's Agricultural Research Service) 
providing technical assistance.  (Comment:  Post's contacts 
comment that these projects support Chavez' stated interest 
to double Venezuela's cattle stock in five years, with the 
longer term goal of becoming self sufficient in dairy and 
beef production.  End Comment). 
 
Comment 
------- 
¶9. (SBU) These accords, along with prior agreements signed in 
Venezuela and during the Rio Mercosur Summit, form the 
blueprint for the future of the Kirchner/Chavez relationship, 
with Kirchner selling the political support of one of Latin 
America's premier countries to Chavez in return for economic 
benefits -- financed by Venezuelan oil.  Many of the 
agreements are not fully developed, such as the Banco del 
Sur, or are even unrealistic, such as the South American 
natural gas organization.  However, others -- particularly 
Venezuela's purchase of Argentine bonds and Argentine 
agricultural companies' exports to Venezuela -- have tangible 
value for both Argentina and Venezuela.  Kirchner's continued 
support for Chavez will remain rooted in this economic and 
commercial pragmatism, while also parlaying his support of 
Chavez' brand of populism to appeal to the Argentine left 
during the election cycle.  End Comment. 
WAYNE