VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #2352/01 3521254
ZNR UUUUU ZZH
R 181254Z DEC 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 9921
INFO RUEHC/DEPT OF LABOR WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 6730
RUEHCV/AMEMBASSY CARACAS 1629
RUEHMN/AMEMBASSY MONTEVIDEO 6934
RUEHSG/AMEMBASSY SANTIAGO 0945
RUEHBR/AMEMBASSY BRASILIA 6614
RUEHLP/AMEMBASSY LA PAZ DEC SAO PAULO 3605
RUEHRI/AMCONSUL RIO DE JANEIRO 2407

UNCLAS BUENOS AIRES 002352 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: AR ECON EFIN BEXP OVIP VE
SUBJECT: Argentina: Debt and Investment Issues Discussed with Labor 
Secretary Chao 
 
 
SIPDIS 
 
Ref:  (A) Buenos Aires 2338 
      (B) Buenos Aires 2271 
      (C) Buenos Aires 2112 
 
This cable contains sensitive information - not for internet 
distribution. 
 
------- 
Summary 
------- 
 
¶1. (SBU) Secretary of Labor Chao, in a December 12 meeting with 
incoming Finance Secretary Hugo Secondini and Argentina's proposed 
new Ambassador to the U.S. Hector Timerman, emphasized the 
importance of addressing Paris Club arrears as a first step in 
regularizing Argentina's access to international capital markets. 
Secondini acknowledged the importance of resolving this issue which 
he said needs to be done quietly and "not in the press."  The GoA 
also plans to address the bond holdout issue, but on the GoA's own 
schedule, not one defined by U.S. and European holdout lobbying 
groups.  On Venezuela's support in placing Argentine bonds, 
Secondini said "we know who and what we are dealing with." 
Secretary Chao said she appreciated the recent visit of senior GoA 
 
SIPDIS 
statistical agency officials to her Department's Bureau of Labor 
Statistics to review U.S. consumer price index calculation 
methodologies.  In response to the Secretary's questions on the 
investment climate, Timerman called Argentina's success in 
attracting new service sector foreign investment a function of 
Argentina's capable and well-educated human capital.  Ambassador 
noted the need for an investment climate that welcomes needed new 
infrastructure investment as well, particularly in the energy 
sector. 
End Summary. 
 
--------------------------------------------- ------ 
Department of Labor Hosts GoA Statistical Officials 
--------------------------------------------- ------ 
 
¶2. (SBU) On December 12, Secretary of Labor Chao met with incoming 
Ministry of Economy Finance Secretary Hugo Secondini and incoming 
Ambassador to the U.S. (and current Consul General in New York City) 
Hector Timerman at the Ambassador's residence.  Secretary Chao noted 
the recent visit of senior INDEC (GoA official statistical agency) 
officials to the Department of Labor's Bureau of Labor Statistics 
(Ref C) to review U.S. consumer price index calculation 
methodologies.  Secondini thanked the Secretary for DoL's courtesy 
and said the "updating" of Argentina's inflation calculation is a 
priority of incoming Economy Minister Lousteau (Ref B). 
 
--------------------------------------------- 
Bond Holdouts, Paris Club and IMF-Pre-payment 
--------------------------------------------- 
 
¶3. (SBU) Secretary Chao noted the American Task Force Argentina, a 
bond holdout advocacy group, had requested that she raise their 
longstanding repayment claims with senior GoA officials.  Secondini 
said that the GoA will certainly address holdout issues, but on the 
GoA's own schedule, not one defined by U.S. and European holdout 
lobbying groups.  The GoA position remains clear and consistent, he 
said: "In 2005 we gave all bondholders the option of accepting a 
deal, and the GoA is now legally prohibited from re-opening this 
offer."  The Argentine economy, he concluded, remains "under stress" 
and requires a flexible approach to dealing with holdout creditors. 
Ambassador noted that he had followed the GoA's 2005 bond exchange 
offer from his previous Washington-based position as the State 
Department's Assistant Secretary for Economic Affairs and suggested 
that Argentina could have increased participation in the exchange by 
10-15% had the GoA shown more flexibility in structuring its offer 
(bondholders of 76% of the total value of GOA defaulted bonds 
swapped their bonds in this exchange at roughly $0.34 on face value 
dollar). Nevertheless, it is clear that U.S. bondholders will remain 
active seeking a re-opening of talks. 
 
¶4. (SBU) Secretary Chao and Ambassador emphasized the importance of 
addressing Paris Club arrears as a first step in regularizing 
Argentina's access to international capital markets, so that 
Argentina can once again access needed official export credit agency 
financing.  Secondini agreed, noting the Economy Minister Lousteau 
 
has publicly acknowledged the importance of resolving this 
outstanding issue.  "We need to take this step-by-step," he said, 
"and we certainly don't want to negotiate this sensitive matter in 
the press."  Secondini offered to meet with the Embassy's economic 
team to review GoA discussions with Paris Club creditors to date. 
 
 
¶5. (SBU) Secretary Chao noted that the GoA had significantly 
increased its cost of funding by pre-paying relatively inexpensive 
IMF debt in January 2006 and funding with sovereign and 
Venezuela-supported issues at significantly higher rates -- 
especially since international capital markets began re-pricing risk 
in August 2007.  The GoA's decision to pre-pay IMF debt, Secondini 
responded, was a largely political one, with a broader political 
cost/benefit calculus.  On Venezuela's support in placing Argentine 
bonds, he said "We know who and what we are dealing with." 
 
¶6. (SBU) Current Argentine Consul General in New York City and 
Ambassador-designate to the U.S. Hector Timerman joined the 
conversation late. He noted that he is pending "agrement" (USG 
approval) and is eager to take up his duties in Washington.  In 
response to Secretary Chao's question on who in the GoA is 
responsible for attracting needed foreign investment to Argentina, 
Timerman distinguished between investment in basic infrastructure, 
under the purview of Planning Minister Julio De Vido, and service 
sector (information technology, creative arts) investment, under the 
responsibility of Argentina's investment promotion agency head 
Beatriz Nofal.  Timerman called Argentina's success in attracting 
new service sector FDI a function of Argentina's capable human 
capital.  Ambassador noted strong growth in Argentina's automotive, 
IT, tourism and creative sectors and praised the caliber of 
Argentina's labor pool.  He agreed that the rapid expansion of U.S. 
investment in Argentina's service sector was a function of the 
nation's well-educated, highly capable and relatively inexpensive 
workforce.  Ambassador noted the need for an investment climate that 
welcomes new infrastructure investment as well, particularly in the 
energy sector. Timerman noted the boom in U.S. tourism to Argentina, 
with Buenos Aires elected in one recent U.S. survey as the second 
most popular tourist destination. 
 
¶7. (SBU) Secretary Chao noted that she had arrived in the U.S. as an 
immigrant and asked about Argentines living abroad.  Timerman 
estimated there are roughly one million Argentines overseas, with 
70,000 in Israel, 500,000 in Europe (where Spain and Italy offer 
automatic citizenship to third generation returnees) and 200-300,000 
in the U.S., concentrated in Los Angeles, Miami, and New York City. 
New York's Major Blumberg, Timerman said, had commented to him on 
the caliber of the Argentine immigrant population in New York. 
Finally, Timerman noted the concentration of educated Argentine's 
working in New York City's financial sector, including his own 
brother, who trades foreign currencies at Bear Sterns.  He 
recommended the recently published book "Golden Boys," which 
documents the exploits of Argentine investment bankers on Wall 
Street. 
 
WAYNE