VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0188/01 0461543
ZNR UUUUU ZZH
R 151543Z FEB 08 ZDK
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0261
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000188 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
TREASURY FOR LTRAN AND MMALLOY 
E FOR THOMAS PIERCE 
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE 
PASS USTR FOR DUCKWORTH 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
US SOUTHCOM FOR POLAD 
 
E.O. 12958: N/A 
TAGS: AR ECON EFIN ETRD
SUBJECT: Argentine Economy Minister Prioritizes Paris Club 
Resolution, Investment Climate 
 
Ref:  (A) 07 Buenos Aires 2292 
 
      (B) 07 Buenos Aires 2271 
  (C) Buenos Aires 154 
 
This cable contains sensitive information - not for internet 
distribution. 
 
------- 
Summary 
------- 
 
¶1. (SBU) GOA Economy Minister Martin Lousteau, in his second meeting 
with the Ambassador, called a Paris Club settlement an important -- 
but not urgent -- priority of the Cristina Fernandez de Kirchner 
administration.  He called any formal role for the IMF in a 
rescheduling politically unpalatable and looked forward to 
senior-level engagement with the USG to explore "alternatives" to 
resolve this outstanding friction, including by sending his 
Secretary of Finance to Washington soon.  Lousteau expressed 
 
SIPDIS 
interest in upgrading bilateral economic engagement, including by 
considering invitations 
to attend a regional finance ministers' meeting on the margins of 
the April IDB conference in Miami and to keynote a Council of the 
Americas' conference in May.  He also agreed to receive Codel Engel 
on February 21.  Noting GoA sensitivity to a number of public USG 
reports that describe the Argentine economy, Ambassador explained 
that these are not policy documents and are not intended to transmit 
USG views on these issues.  Ambassador noted the USG is closely 
following efforts by U.S. bond holdouts to resolve their outstanding 
claims, as well as a number of arbitration suits filed by U.S. 
multinationals in the aftermath of the 2001/2 economic crisis. 
Ambassador encouraged the GoA to resolve these bilateral frictions 
both to normalize Argentina's relations with international capital 
markets and to improve the nation's investment climate.  Ambassador 
also briefed Lousteau on ongoing discussions of outstanding claims 
on the GoA, including those by U.S. insurance company TIG, U.S. 
printer Bowne, and the human rights case of Eduardo Saiegh. 
Finally, Lousteau noted expanding U.S. investment in Argentina's 
high tech and "creative" services sector and his Ministry's 
cooperation with the American Chamber of Commerce to encourage new 
investor interest.  He and Ambassador agreed to explore ways to help 
meet Argentina's growing demand for well-trained tech sector 
employees, including by encouraging U.S./Argentine university to 
university links. 
End Summary. 
 
--------------------------------------------- ------- 
2nd Meeting with Econ Minister: Invitation to Engage 
--------------------------------------------- ------- 
 
¶2. (SBU) Ambassador, DCM, and EconCouns met February 13 with Economy 
Minister Martin Lousteau, Finance Secretary Hugo Secondini and 
Counselor Ignacio Perez Cortes.  At their first meeting on December 
3 (Ref A), then-President of the state-owned Buenos Aires Province 
Bank Lousteau had already been named, but not yet sworn in, as 
Minister. 
 
¶3. (SBU) Ambassador passed Treasury Secretary Paulson's invitation 
to Lousteau to join an April 7 regional finance ministers' meeting 
on the margins of the upcoming IDB annual meeting in Miami and noted 
former Minister Peirano's attendance at the last October 2007 
meeting.  Lousteau agreed to have Secondini join a March 4 Deputies 
call on this.  AmbaQ,Em1QM5Q>\>,Q , and Codel Engel's request for a 
meeting with Lousteau February 22.  More broadly, Ambassador 
emphasized our desire to have senior USG officials engage their GoA 
economic counterparts in Argentina, in the U.S., and in multilateral 
fora to broaden our working relationship and to move our common 
economic agenda forward.  Lousteau expressed enthusiasm for an 
expanded bilateral agenda and agreed to meet with Representative 
Engel's congressional delegation. 
 
------------------------------------------- 
Paris Club: Alternatives to IMF Monitoring? 
------------------------------------------- 
 
¶4. (SBU) Lousteau confirmed the GoA position that dealing with the 
 
 
longstanding Paris Club (PC) impasse was "important but not urgent," 
a phrase he had used previously with the domestic media.  He noted 
that Finance Secretary Secondini had met February 11 in Paris with 
PC Secretary Musca and French Treasury authorities, and later in 
Berlin with German Treasury authorities to outline GoA PC views. 
Lousteau confirmed that any "traditional" IMF role in a PC 
rescheduling remains politically unacceptable to Argentina.  "We 
want a deal, but our country has suffered in its relations with the 
Fund," Lousteau explained.  Ambassador noted a general perception 
among PC creditors that Argentina has the capacity to pay and 
recalled discussions of some possible alternatives, including 
substantial voluntary payments, by Lousteau's predecessors with 
major PC creditors, but that the GoA has yet to present any formal 
proposal to the PC.  Resolving PC arrears, the Ambassador said, 
would clearly be a positive step forward for both countries, and the 
Embassy has worked extensively on this issue with Lousteau's two 
most recent predecessors -- Ministers Miceli and Peirano -- and 
their staffs.  Ambassador suggested that Lousteau consider 
submitting a voluntary proposal to the Paris Club Secretariat and 
emphasized that any such plan should include provisions to begin 
making up-front payments on arrears as a sign of good faith. 
Lousteau offered to have his Finance Secretary Secondini travel to 
the U.S. in the next few weeks for more substantive discussions of 
GoA concerns and "creative" alternatives. 
 
¶5. (SBU) Note: In an earlier conversation with EconCouns, Secondini 
had informed EconCouns that the GoA is preparing an analysis for the 
PC Secretariat that he said would debunk PC creditor perceptions 
that Argentina has the capacity to clear its arrears immediately and 
justifying Argentina's need for creditor "relief."  The paper should 
be completed within the month.  Secondini probed for "space for a 
Paris Club resolution that uses alternative monitoring mechanisms 
and reflects Argentina's political and economic reality," including 
allowing the French Treasury, perhaps in combination w5[QZ)QnQinked debt 
payment capacity. 
 
----------------------- 
Bond Holdouts and ICSID 
----------------------- 
 
¶6. (SBU) Ambassador noted his frequent conversations with former 
Economy Ministers Miceli and Peirano and their staffs about the 
issue of bondholders who did not participate in the 2005 debt 
exchange.  He emphasized this is an issue of great interest in 
Washington, with U.S. citizen holdout bondholders, in addition to 
their legal actions against the GoA, continuing to forcefully lobby 
the USG and Congress. Congressman Engel, in his upcoming visit to 
Argentina, will certainly raise this issue, the Ambassador 
concluded. 
 
¶7. (SBU) Lousteau replied that Argentina has a law that defends 
Argentina's sovereign interests vis-a-vis bond holdouts. (The law 
prevents the re-opening of the original 2005 exchange under better 
terms than the original proposal, changing the debt exchange offer 
and/or making in-court or out-of-court settlements with creditors 
not participating in the 2005 debt exchange.)  He called the bond 
holdout issue important, but a second-tier issue pending resolution 
of Paris Club arrears.  Finally, he noted President Cristina 
Fernandez de Kirchner's disinterest in engaging on the holdouts, 
saying "the less time CODEL Engel spends on this issue with the 
President, the better their meeting will be."  Without showing any 
willingness to alter the GOA's dug-in position, he encouraged the 
Ambassador to convey to the CODEL's members that they would be 
well-advised to discuss the issue with him instead. 
 
¶8. (SBU) Ambassador noted a number of high-profile international 
arbitration cases that derive from the 2001/2 economic crisis are 
coming to their final conclusion within the ICSID tribunal process. 
(The first ICSID case that has fully concluded was that of CMS 
Energy's investment in Argentine natural gas pipeline company TGN). 
Ambassador outlined USG views on this case, originally presented in 
November 2007 to former Argentine Ambassador to the U.S. Bordon by 
A/S Sullivan: the GoA had earlier given formal assurances to the 
ICSID Annulment Committee that the GoA would pay, in accordance with 
the ICSID Convention, if Argentina lost the annulment appeal; 
Argentina did lose the annulment appeal; our expectation is that the 
 
GoA will pay the CMS award in accordance with its ICSID commitments; 
and we are concerned that a failure to make a timely payment will 
send the wrong signal to potential foreign investors. 
 
¶9. (SBU) Finance Secretary Secondini noted the Economy Ministry's 
familiarity with the issue and said that his Secretariat has 
discussed the potential contingent liability these ICSID and 
UNICITRAL cases imply.  Counselor Perez Cortes noted provisions of 
Argentine law and of the ICSID Convention (Article 54) that he said 
require any final ICSID claims being "executed" through domestic 
institutions.  (Note: In an earlier conversation with EconCouns, 
local CMS counsel argued that any such requirement for local 
execution was against the spirit, if not the letter, of ICSID 
arbitration and was a transparent GoA ploy to tie up outstanding 
ICSID claims for another decade in Argentine courts.) 
 
--------------------------------------------- - 
Sensitivities on USG Public Economic Reporting 
--------------------------------------------- - 
 
¶10. (SBU) Ambassador noted recent media attention to the publication 
of USG annual reports that touch on the Argentine economy, including 
our Background Notes, the Investment Climate Statement/Country 
Commercial Guide, the National Trade Estimate, and the Special 301 
Report.  These reports, the Ambassador explained, including a recent 
Background Notes update that touched on Argentine inflation 
calculation methodologies, are not policy documents and not intended 
to transmit U.S. government views on issues. Ambassador noted the 
assistance provided to INDEC staff by the U.S. Bureau of Labor 
Statistics (BLS) and underlined the importance of GoA statistics 
agency INDEC taking steps -- including rolling out a new CPI 
calculation methodology -- to restore public and international 
confidence in the organization's economic data reporting.  Lousteau 
understood the nature of USG public reporting and said he 
appreciated the assistance of the U.S. BLS and the Bureau of the 
Census in meeting with INDEC officials to brief them on U.S. CPI 
calculation methodologies. 
 
------------------------ 
Outstanding Claims Cases 
------------------------ 
 
¶11. (U) Ambassador noted Embassy's close collaboration with the 
Economy Ministry on several disputes involving U.S. companies, 
including two disputes related to the claims of TIG Insurance 
company and Bowne. He hoped these cases could be finally resolved 
soon.  Despite the lack of a response from the Department for our 
request for front-channel guidance on the matter (ref c), Ambassador 
also noted Embassy's work with the Economy Ministry on the status of 
Argentine citizen Eduardo Saiegh's effort to attain compensation 
from the government for his kidnapping in 1980 and the loss of his 
stake in Banco Latinoamericano.  (Mr. Saiegh claims that he was not 
only a victim of kidnapping and torture, but also a victim of 
anti-Semitism.)  Lousteau expressed ignorance about the case, but 
asked Finance Secretary Secondini to coordinate with the Embassy on 
these issues. 
 
--------------------------------------------- ------- 
Cooperation to Expand Services, High Tech Investment 
--------------------------------------------- ------- 
 
¶12. (U) Lousteau highlighted Ministry of Economy efforts to support 
the growth of Argentina's burgeoning service sector, particularly in 
the high tech and "creative" fields where Argentina's well-educated 
and capable labor pool offer the nation a strong competitive 
advantage.  He noted a recent meeting with an American Chamber of 
Commerce delegation where Lousteau expressed the GoA's desire to 
have more U.S. companies centralize their regional back-office 
operations in Argentina.  He cited IBM as an exemplar, with over 
5,000 engineers based in Buenos Aires providing back officer 
services for IBM affiliates throughout the hemisphere.  Ambassador 
suggested that Lousteau participate in the upcoming Montevideo 
Innovation Forum April to spotlight Argentina's competitive 
strengths. Ambassador noted that Secretary of Commerce Gutierrez 
would be pleased to meet with Lousteau either in Uruguay or on the 
margins of the upcoming Washington Council of the Americas annual 
meeting in May.  To help meet Argentina's growing demand for well 
trained tech sector employees, Ambassador and Lousteau discussed the 
 
benefits of expanding links between U.S. and Argentine 
universities. 
 
------- 
Comment 
------- 
 
¶13. (SBU) With recent bilateral frictions linked to the "suitcase" 
scandal receding, the Economy Ministry appears eager to engage on 
our common economic agenda items and expand senior-level bilateral 
contacts.  This is certainly welcome.  But other than preparing a 
justification for its request for Paris Club "relief" on outstanding 
arrears, Lousteau's Economy Ministry has yet to go beyond restating 
its allergy to a formal IMF role in a Paris Club rescheduling. 
Hopefully, meetings later this month by Finance Secretary Secondini 
with senior State and Treasury officials can move the Paris Club and 
the related bond holdout processes forward.  Post will continue to 
encourage GoA focus on ICSID and other outstanding company claims as 
a tangible sign of the GoA's intent to improve its investment 
climate. 
 
KELLY