VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0568/01 1211722
ZNR UUUUU ZZH
R 301722Z APR 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0910
INFO RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000568 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
TREASURY FOR LTRAN AND MMALLOY 
PASS USTR FOR DUCKWORTH 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
 
E.O. 12958: N/A 
TAGS: ENRG EEPET ECON PREL PGOV AR VZ BR EC
SUBJECT: ARGENTINA: PLANNING MINISTER DE VIDO ON ARGENTNE TIES WITH 
U.S., VENEZUELA, AND DOMESTIC STRATEGY TO LAUNCH NEW INFRASTRUCTURE 
AND "SOCIAL PACT" INITIATIVES 
 
REF:  Buenos Aires 496, 407, 356, 288, 230, 07 BsAs 1892 
 
This cable contains business-sensitive information - not for 
internet distribution. 
 
------- 
Summary 
------- 
 
¶1. (SBU) Planning Minister De Vido called A/S Shannon's visit to 
Buenos Aires a positive step in rebuilding bilateral relations 
damaged by the earlier Antonini Wilson "suitcase" scandal.  He hopes 
the postponed visits to the United States by former President Nestor 
Kirchner and Chief of Cabinet Alberto Fernandez can be rescheduled 
soon and hoped he too might visit the United States.  De Vido will 
travel to Venezuela shortly to sign agreements on a national oil 
company joint venture to construct an LNG receiving plant in Buenos 
Aires province's Bahia Blanca.  He expressed serious concern over 
what he saw as a union-driven process of radicalization in Venezuela 
that is pushing President Chavez further to the left and led to 
Chavez' decision to nationalize the Argentine-owned Sidor steel 
plant.  De Vido said he was skeptical that Bolivia will meet its 
contractual obligations to provide Argentina natural gas, even when 
a second natural gas pipeline linking the two nations is completed 
in 2010.  He noted his recent trip with President Kirchner to 
Ecuador to sign an accord between GoA state-owned energy company 
ENARSA and its Ecuadorian counterpart to construct a $1.5 billion 
hydro-electric project. 
 
¶2. (SBU)  On agricultural sector strife, De Vido called the GoA's 
strategy of sector-specific dialogues on beef, wheat, and milk 
"successful" despite ongoing limits on beef and wheat exports that 
have prompted accusations of bad faith by agrarian associations.  He 
admitted, however, that there had not been good GoA dialogue with 
farmers earlier.  On inflation, he revealed that an upcoming May 7 
consumer price index conference here at which U.S., French, and 
Spanish experts will participate will help the GoA launch a new, 
more credible CPI index.  De Vido also signaled plans on Argentina's 
May 25 Independence Day for what local pro-government press has 
called an effort to "re-launch" and give the government some new 
momentum.  The GoA will also release a Bicentennial strategic 
infrastructure plan detailing development priorities in the 
transport, telecom, energy and mining, water and sanitation, and 
school sectors for each of Argentina's 24 provinces and the Buenos 
Aires metropolitan area.  Also on May 25, the GoA will formally 
launch a "Social Pact" initiative to help reconcile and coordinate 
interests of the GoA with organizations representing Argentina's 
industrial, unions and financial service sectors.  This is 
apparently designed to be an ongoing round table which would stand 
in contrast to the lack of dialogue which led to the rural sector 
strike. (SEPTELs will examine further). De Vido also defended the 
GoA's recent increase in mining sector export tariffs, noted new 
generation investment plans by U.S. company AES, and supported 
Exxon's decision not to sell its Argentine refining and gas station 
assets. 
End Summary. 
 
--------------------------------------------- 
Praising Shannon's Understanding and Patience 
--------------------------------------------- 
 
¶3. (SBU) In an April 25 meeting with Ambassador, Planning Minister 
De Vido offered a tour d'horzon of current domestic political and 
regional challenges facing the GoA, as well as background on the 
GoA's broad infrastructure development strategic plans and comments 
on individual U.S. energy company investments in Argentina.  His 
comments on the planned May 25 launch of a new "Social Pact" 
initiative by the government will be reported Septel. 
 
¶4. (SBU) De Vido called A/S Shannon's March visit to Buenos Aires a 
positive step in rebuilding bilateral relations damaged by the 
earlier Antonini Wilson "suitcase" scandal.  Shannon, he said, 
understands the Latin mindset and appreciates the specific 
characteristics and idiosyncrasies of individual nations.  Above 
all, he praised Shannon's patience, noting that the saying "he who 
loses patience loses all" has particular relevance for those 
countries who seek to maintain good working relationships with 
Argentina. 
 
¶5. (SBU) On the earlier planned but postponed March visits of former 
president Nestor Kirchner and Chief of Cabinet Alberto Fernandez to 
New York and Washington, De Vido blamed the extraordinary demands on 
 
 
Fernandez as a result of the three-week agriculture strike in March. 
 He agreed that these visits are important steps to build mutual 
confidence that should be rescheduled soon.  Ambassador suggested 
that De Vido himself consider visiting the United States, and DeVido 
said he would like to do so later in this year. 
 
--------------------------------------------- ---- 
Ag Sector Strike, Inflation and Curbing the Press 
--------------------------------------------- ---- 
 
¶6. (SBU) On ongoing GoA negotiations with the agriculture sector on 
polemical export tariff increases, De Vido was confident that some 
equitable resolution would be achieved, though he declined to say 
whether that could happen before the agrarian associations' May 2 
strike deadline.  He called the GoA's strategy of sector-specific 
dialogues on beef, wheat, and milk "successful" despite coincident 
limits on beef and wheat exports managed by Internal Commerce 
Secretary Moreno that have prompted accusations of bad faith by 
 
SIPDIS 
agrarian associations.  De Vido noted that Brazil has recently 
followed Argentina's policy lead in announcing restrictions on rice 
exports to ensure domestic supplies. But when discussing this idea 
of a new "Social Pact"/round table among business, unions and 
government, De Vido said it would be designed to avoid the lack of 
dialogue between government and the farm organizations which led to 
the rural sector strike. 
 
¶7. (SBU) Speaking of domestic inflation, De Vido offered his 
"personal opinion" that there is an urgent need to reach some 
domestic consensus on how to develop a viable cost of living index 
that bridges the gap between the GoA's (widely discredited) CPI 
index and the interest of everyone in moderating inflationary 
expectations.  He noted the upcoming May 7 INDEC CPI conference at 
which U.S., French and Spanish CPI experts will participate as a 
step in that direction.  On the GoA's high-profile campaign against 
Clarin, De Vido insisted there were high levels of "disinformation" 
that justified the GoA's efforts to modify Argentina's radio 
broadcast law. "If you don't put limits (on the media), they'll say 
anything," De Vido commented. 
 
---------------------------- 
Regional Ties - Energy Focus 
---------------------------- 
 
¶8. (SBU) De Vido said that he would return to Venezuela shortly to 
sign agreements on a PDVSA/ENARSA joint-venture project (Ref BsAs 
288) to construct an LNG receiving plant in Buenos Aires Province's 
Bahia Blanca.  He expressed concern at a union-driven process of 
radicalization in Venezuela that is pushing President Chavez further 
and further to the left.  De Vido called the GoBRV's decision to 
nationalize Techint steelmaker Sidor (Ref BsAs 496) a case in point, 
where demands by seven separate steel factory unions provided the 
impetus for Chavez' nationalization announcement. 
 
¶9. (SBU) De Vido said he was skeptical that Bolivia would meet its 
contractual obligations to provide Argentina natural gas, even when 
a second natural gas pipeline linking the two nations is completed 
in 2010.  He called the President's unsuccessful request at the 
February 2008 trilateral Argentina/Brazil/Bolivia summit in Buenos 
Aires that Brazil cede a portion of its Bolivian gas to Argentina an 
embarrassing "bad call" (Ref BsAs 230).  The request should have 
been posed to President Lula quietly in a bilateral meeting. 
 
¶10. (SBU) De Vido noted his recent trip with CFK to Ecuador to sign 
an accord between GoA state-owned energy company ENARSA and its 
Ecuadorian counterpart to construct a $1.5 billion hydro-electric 
project.  He clarified that the GoA would not/not be contributing 
capital in support of its 30% share of the project, but rather would 
work with a number of Argentine private sector players to "channel" 
their participation in the project.  He noted that Eduardo 
Eurnekian's Americas Group would be in charge of financing, and 
Enrique Pescarmona's IMPSA group would build turbines for the 
project. 
 
--------------------------------------------- - 
Bicentennial Infrastructure Plan & Social Pact 
--------------------------------------------- - 
 
¶11. (SBU) On May 25 (one of Argentina's two independence days, the 
day the first national government was established in 1810, as well 
as the date former president Nestor Kirchner assumed office in 
2003), the GoA will release its Bicentennial strategic 
infrastructure development plan.  De Vido gave Ambassador a bound 
 
 
300-page text that outlines GoA plans for transport, 
telecommunications, energy, mining, water, sanitation, and school 
development for each of Argentina's 24 provinces and the Buenos 
Aires metropolitan area.  "We have a plan, we have a vision," he 
said.  De Vido confirmed that the GoA will also announce on May 25 a 
"Social Pact" initiative to help reconcile and coordinate interests 
of the GoA with organizations representing Argentina's industrial, 
unions, and financial service sectors. Local pro-government press is 
presenting this Independence Day effort as a means to "relaunch" the 
government and regain momentum. (Septel will examine this in more 
detail). 
 
------------------------- 
Energy and Mining Sectors 
------------------------- 
 
¶12. (SBU) De Vido noted that AES Energy would see him shortly after 
his meeting with the Ambassador to discuss a new potential 
generation investment in southern Patagonia.  (AES had earlier 
informed Embassy the company planned to convey to De Vido AES' 
strong interest in investing roughly $200 million to build a 
greenfield 180 MW combined cycle gas generation plant in southern 
Patagonia.  AES currently generates a total of 2,830 MW in nine 
generation plants here, roughly 12% of total Argentine generation 
capacity.  AES called their new generation investment strategy a 
"defensive" measure given their large installed generation base here 
and the GoA's insistence on new investment as a "social obligation" 
of current sector players.) 
 
¶13. (SBU) On Exxon's recent decision not to sell its Argentine 
refinery and service station assets, De Vido admitted that the GoA 
had rejected a possible Esso sale to Brazil's Petrobras to avoid 
"excessive" Brazilian participation in the downstream refining and 
retailing sector.  But, he said, the GoA had never really wanted 
Exxon to leave Argentina.  De Vido quoted an old Argentine saying: 
"He that goes without being thrown out, returns without being 
called."  (Exxon's September 2007 decision to shop its Argentine 
assets reflected a headquarters-mandated strategic retrenchment in 
South America -- Exxon subsequently announced it would be selling 
off its Venezuelan and Brazilian holdings -- as well as growing 
frustration by Exxon's Argentine execs at a complex and distortive 
range of GoA market interventions that have made Exxon's Argentine 
operation only nominally profitable -- Ref 07 BsAs 1892.) 
 
¶14. (SBU) De Vido referred to Apache Energy's longstanding complaint 
that the GoA's decision to cut gas exports to Chile from Tierra del 
Fuego has "stranded" large volumes of natural gas in this island 
province pending a planned expansion of the gas pipeline network 
connecting Tierra del Fuego with the Argentine mainland.  This has 
had a significant impact on Apache's profitability since 
over-injection into the existing Tierra del Fuego gas pipeline by 
Petrobras and Total has forced Apache to re-inject a substantial 
volume of gas back into the ground.  De Vido noted that the cut-off 
of Tierra del Fuego gas exports to the Canadian-owned Methenex plant 
in Chile would be "regularized" in the coming months and provide 
Apache a source of export revenue.  The GOA, he added, would soon 
bid out the construction of the new gas pipeline from Tierra del 
Fuego to the Argentine mainland.  Once this pipeline is completed in 
2 years' time, he said, oil and gas producers in Tierra del Fuego 
should be able to expand production for domestic consumption 
significantly. 
 
¶15. (SBU) On GoA efforts to build-up domestic energy infrastructure, 
De Vido noted the President's recent inauguration of the first of 
two gas turbines at a Campagna, Buenos Aires province generation 
facility.  The turbines were funded by existing electricity 
generators in Argentina via agreed withholdings of capacity and 
variable cost payments due them by GA electricity wholesaler 
CAMMESA.  The second turbine, he said, would be up and running in 
May, for a total addition to domestic generation capacity of 1,100 
MW.  Looking to the future, De Vido said that the 700 MW Atucha II 
atomic energy facility is scheduled for completion in October 2010 
with 5,000 workers currently employed in its construction. 
 
¶16. (SBU) Ambassador noted Energy Secretary Daniel Cameron's 
participation in the February 2008 WIREC renewable energy (RE) 
conference in Washington.  He encouraged Argentina to move forward 
on Cameron's earlier idea (Ref BsAs 407) of joining the more than 
100 nations who have made voluntary WIREC pledges, taking credit for 
Argentina's current RE efforts, including legislation on the books 
requiring that 5% of diesel fuel be sourced from bio-diesel by 
¶2010. 
 
 
 
¶17. (SBU) On the polemical November 2007 increase in mining sector 
export tariffs, De Vido acknowledged that this could be interpreted 
as contradicting 1990s-era mining legislation that ensured 30 years 
of contractual stability.  But the increase in global commodity 
prices, he said, had boosted mining sector profit margins from the 
15-18% range to the 28% range, and the GoA was committed to 
recycling a portion of additional revenues collected via increased 
export tariffs to mining province-specific infrastructure 
development to maintain a "virtuous investment cycle."  He noted the 
example of UK/Swiss mining company Xstrata which controls the 
world-class Bajo de Alumbrera gold mine in Catamarca province. 
Additional taxes collected from this company will be used to fund a 
$200 million/year fiduciary fund to develop provincial 
infrastructure, including roads and electricity public works that 
will benefit the mining operation itself. 
 
------- 
Comment 
------- 
 
¶18. (SBU) In his role as Planning Minister, De Vido is directly 
responsible for Argentina's public infrastructure, energy, telecom, 
transportation, and mining sectors.  He also oversees a large -- and 
rapidly growing -- volume of government transfers and subsidies to 
these sectors that mark the GoA's interventionist economic policy 
model.  As a senior advisor, presidential confidant and "penguin," 
one of a loyal inner circle who served with Nestor Kirchner while he 
was governor of Santa Cruz province, De Vido has taken on a broader 
"super minister" profile, and is considered by many to be 
Argentina's de facto Foreign Minister to Venezuela, Bolivia, and 
Ecuador. 
De Vido is also widely reported to be the leading figure of the 
government faction battling with cabinet chief Alberto Fernandez and 
his allies. De Vido's group is portrayed in the press as more 
"interventionist" than Alberto Fernandez's group. 
 
¶19.  (SBU) De Vido has proven himself an important GoA interlocutor 
to address U.S. investor concerns.  Post will continue to advocate 
aggressively on behalf of U.S. companies in Argentina many of whom, 
while profitable, remain concerned by infrastructure bottlenecks and 
unpredictable shifts in the GoA's regulatory and tax regimes. 
 
WAYNE