VZCZCXYZ0008
PP RUEHWEB

DE RUEHBU #0708/01 1442006
ZNR UUUUU ZZH
P 232006Z MAY 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 1136
INFO RUEHLP/AMEMBASSY LA PAZ MAY QUITO 1088

UNCLAS BUENOS AIRES 000708 
 
SENSITIVE 
SIPDIS 
 
FOR SENATOR CHRISTOPHER DODD FROM AMBASSADOR E. ANTHONY 
WAYNE 
DEPARTMENT FOR H AND RM/F/DFS/FO/AA/CAA 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PHUM PTER SNAR ECON EFIN BEXP AR
SUBJECT: ARGENTINA: SCENESETTER FOR CODEL DODD (BUENOS 
AIRES, MAY 28-30) 
 
¶1. (U) This telegram is sensitive but unclassified, and not 
for Internet distribution. 
 
------------ 
Introduction 
------------ 
 
¶2. (SBU) On behalf of Embassy Buenos Aires, I warmly welcome 
your May 28-30 visit to Argentina.  We are looking to build 
on an already positive bilateral relationship with the 
six-month-old administration of President Cristina Fernandez 
de Kirchner (CFK).  However, the CFK administration is in the 
midst of a serious domestic crisis with the agricultural 
sector and its popularity has fallen sharply.  This follows 
another seven-week crisis over a Miami court case (see 
paragraph 4), which we successfully overcame. 
 
¶3. (SBU) Our overall priority objective in Argentina is to 
keep chipping away at the very high levels of 
anti-Americanism of Argentines by reaching out to Argentine 
society as well as the government, with a special focus on 
youth.  Other significant areas of mutual interest and 
cooperation include education and cultural exchanges, science 
and technology, counter-terrorism, non-proliferation, 
counter-narcotics, international crime, and regional 
stability and, of course, promoting economic and commercial 
interests.  We have also worked hard to strengthen 
Argentina's judicial and law enforcement systems.  During 
this visit, you will meet with the President, the Minister of 
Foreign Affairs, the Minister of Planning and his Secretary 
of Energy, and with the Minister of Economy.  The President 
told me May 21 that she will want to talk to you about the 
U.S. presidential campaign, and remembers positively meeting 
you during her visit to the Boston Democratic Party 
convention in 2004.  You will also be the guest of honor at a 
lunch to discuss regional issues, and possibly at a coffee 
with prominent members of Argentine civil society.  We are 
looking forward to meeting with you and to discussing 
Argentina-specific and regional issues and priorities.  End 
Introduction. 
 
---------------------------- 
A Recent Bilateral Low Point 
---------------------------- 
 
¶4. (SBU) In December, two days after Cristina Fernandez de 
Kircher's (CFK) inauguration, the GoA misinterpreted and 
over-reacted to news reports concerning a federal case in 
Miami against some Venezuelans and an Uruguayan who were 
arrested on charges of operating and conspiring to operate in 
the United States as agents of the Venezuelan government 
without notifying the Attorney General as required by law. 
During the proceedings in Miami, allegations surfaced that 
undeclared cash brought into Buenos Aires in August 2007 from 
Venezuela had been destined for a presidential campaign.  The 
statements were not made by the USG, but rather by one of 
those arrested.  They were misinterpreted here as reflecting 
the USG's views because of initial presentation and reporting 
out of Miami. 
 
¶5. (SBU) CFK reacted angrily to the implication that she had 
been the intended recipient of the cash that was intercepted 
by GoA officials.  She publicly interpreted the Miami arrests 
as directed against her government and characterized the case 
as a "garbage operation."  Her ministers and the Argentine 
Congress made similar statements.  However, the rhetoric 
gradually subsided as key members of the team slowly absorbed 
our explanation and concluded it was not in their interest to 
be cut off from the USG. (The GoA has an ongoing 
investigation and an extradition request for Antonini Wilson 
over the $800,000 in cash discovered here.)  We normalized 
the relationship with a great deal of behind-the-scenes work. 
 A new beginning occurred on January 31, when I met with CFK. 
 We agreed at that meeting to put the case aside and to work 
to strengthen bilateral cooperation.  Since that time, there 
have been several important visits by U.S. officials to 
Buenos Aires, most notably separate Congressional delegations 
led by Representative Eliot Engel (February 20-23) and 
Senator Richard Shelby (March 23-26); the April 10-11 visit 
by WHA Assistant Secretary Shannon; the May 6-7 visit by 
Southcom Commander Admiral Stavridis; and the May 21-22 visit 
by FBI Deputy Director John Pistole.  CFK met with Engel, 
Shannon, and Pistole. 
 
------------------------------ 
A Government Against the Ropes 
 
------------------------------ 
 
¶6. (SBU) The GoA unexpectedly issued March 11 a decree that 
increased export taxes on Argentina's main agricultural 
export crops.  That precipitated the worst political crisis 
of either Kirchner administration since 2003.  Argentina's 
four principal agricultural organizations showed rare unity 
in organizing production stoppages and blockades of 
Argentina's transport infrastructure for twenty days, leading 
to nationwide shortages of such staples as beef, chicken, 
dairy products, and vegetables.  There were massive protests 
in support of the strike in the countryside and in Buenos 
Aires.  The GoA-organized counter-protests in Buenos Aires, 
including one attended by an estimated 100,000 individuals. 
On April 2, agricultural producers decided to lift the strike 
for thirty days and hold discussions with the GoA.  The 
parties continued to negotiate but made little progress on 
the main issue of export taxes. 
 
¶7. (SBU) On May 7, the farm groups decided to resume their 
protests, this time without major roadblocks and with 
promises not to provoke shortages of foodstuff.  The latest 
strike focused on blocking sales and exports of grains and 
oilseeds, and was considered by analysts as successful in its 
aims.  The farm groups once again suspended the strike on May 
21 to resume negotiations with the GOA.  However, the first 
meeting following the suspension of the strike ended abruptly 
May 22, and further talks have been put off until after the 
May 25 national holiday.  On that holiday, which celebrates 
Argentina's independence, farm groups plan a huge rally in 
the city of Rosario, one of Argentina's principal urban 
centers and an agricultural stronghold.  The GoA's public 
stance is that the current truce and ongoing negotiations are 
a victory for the government, and validates CFK's hard-line 
posture toward the farm groups.  Most analysts, however, 
consider the entire dispute to be a setback for the 
government, with the vital agricultural sector more united 
than at any time in a century.  During this period, the 
popularity of the government and the President has continued 
to drop, with some polls showing her at 26-27 percent.  That 
drop has been fueled not just by the agricultural problems 
but also by soaring inflation/prices. 
 
¶8. (SBU) We provide the preceding information to you for 
context as you embark on your bilateral discussions. 
 
------------------------------- 
Background: Political Landscape 
------------------------------- 
 
¶9. (SBU) CFK took office on December 10, 2007, receiving the 
presidential sash from her husband, Nestor Kirchner.  He 
completed his four-and-a-half-year term as the most popular 
Argentine President since the return to democracy in 1983. 
CFK has a long history in politics, having served in the 
Chamber of Deputies and most recently in the Senate.  She won 
the October 28 election with 45% of the vote over a divided 
and largely ineffective opposition, and she enjoys a strong 
majority in both houses of Congress.  Having campaigned on 
the seemingly contradictory themes of change and continuity, 
she has retained most of her husband's cabinet.  Apart from 
the agricultural dispute, CFK's major policy challenges will 
be to contain inflation, attract and boost investment -- 
particularly in Argentina's energy sector -- and to restore a 
sense of law and order to an electorate increasingly 
concerned about crime and security.  In spite of her pique 
over the Antonini Wilson case, CFK has also made clear that 
she would like to improve relations with the United States 
and sees the benefit for Argentina of good ties, especially 
in the economy and higher education. 
 
--------------------------------------------- 
Background: Economic and Commercial Landscape 
--------------------------------------------- 
 
¶10. (U) Following the 2001-2002 economic crisis, 2003-2006 
real GDP growth averaged over 8%, and Argentina's GDP in 2007 
grew at an estimated rate of 8.5% to $255 billion, roughly 
$6,500 per capita.  This impressive economic recovery has 
also led to improvements in key socio-economic indicators, 
with unemployment down from a peak of over 20% in 2002 to 
8.8% during the third quarter of 2007 and poverty levels down 
from a post-crisis high of over 50% to a (still-worrisome) 
25% range.  The five-year-long economic recovery can be 
attributed to a number of factors, including a post-crisis 
move to a flexible exchange rate regime, sustained global and 
 
regional growth during this period, the government's efforts 
to boost domestic aggregate demand via monetary, fiscal, and 
income distribution policies, and favorable international 
commodity price trends. 
 
¶11. (SBU) While the accumulation of a substantial foreign 
exchange reserve cushion (over $50 billion as of May 2008) 
and expanded tax collections have helped insulate Argentina's 
economy from external shocks, the Central Bank's policy of 
maintaining an undervalued exchange rate and negative real 
interest rates has contributed to substantial inflationary 
pressures.  Private sector analysts estimate that 2007 
inflation was in the 17-20% range, while the government's 
official 2007 inflation number was 8.5%.  Inflation levels in 
the first four months of 2008 are estimated by independent 
economists in the 25% range but are reported as much lower by 
the government. There is ongoing public debate about 
inflation measures. 
 
¶12. (SBU) To help control inflation, the government largely 
froze key public utility tariff rates since 2002 and, since 
2005, has negotiated price stabilization agreements on a 
sizable basket of essential consumer goods.  The combination 
of Argentina's undervalued currency and high global commodity 
prices have lifted Argentine exports to a record $55.4 
billion in 2007.  Major 2007 Argentine export markets were 
Mercosur (22%), the EU (18%) and NAFTA (11%).  Argentine 2007 
imports totaled $44.8 billion, with the major suppliers 
Mercosur (36%), the EU (17%) and NAFTA (16%).  Total 
U.S.-Argentina two-way trade in 2007 totaled $9.5 billion. 
Imports from the U.S. largely comprise intermediate capital 
goods which have contributed to improvements in domestic 
productive capacity. 
 
¶13. (U) Over 500 U.S. companies are currently operating in 
Argentina and employ over 150,000 Argentine workers.  U.S. 
investment in Argentina is widely diversified, but heavy 
investment is found in the manufacturing, information, and 
financial sectors.  Other major sources of investment include 
Spain, Chile, Italy, France, Canada, Japan, and Brazil.  A 
range of economic experts have identified challenges to 
sustaining high levels of economic growth in the future, 
including: capacity constraints; the need for substantial new 
investment in primary infrastructure; potential energy 
shortages in the face of high growth and domestic energy 
prices kept below international market levels; increasing 
scarcity of highly skilled labor; inflation and the 
government's heterodox policies to contain it, including 
price controls.  Continuing Argentine arrears to 
international creditors (including over $20 billion in 
default claims by international bondholders, including U.S. 
citizens, and over $7 billion owed to official creditors, 
approximately $360 million of which is owed to the U.S. 
government) and a large number of arbitration claims filed by 
foreign companies, including U.S. companies, are legacies of 
the 2001/2002 economic crisis that remain to be resolved and 
adversely affect Argentina's investment climate. 
 
-------------------------------------- 
What We're Doing on Issues of Interest 
-------------------------------------- 
 
¶9. (SBU) The greatest overall challenge we face in Argentina 
is the high level of anti-Americanism in the Argentine 
public.  Argentina consistently registers the highest levels 
of anti-Americanism in the hemisphere in public opinion 
polls.  Working to change these perceptions is the Embassy's 
highest priority.  Argentina maintains positive political 
relations with the United States, but there is room for 
further improvement.  One of the major tasks facing the 
Embassy is forging relationships of trust with a government 
that has been largely inward-focused and intent on 
maintaining an image as independent from our country.  In 
lobbying the GOA, it can be counter-productive to push an 
issue too aggressively and especially in public.  Argentine 
officials react very negatively to perceived affronts to 
their sovereignty, often winning public support for their 
strong reactions.  Shut off from other sources of 
international financing, the GOA has turned to Hugo Chavez to 
place large bond issues. 
 
¶10. (SBU) Argentina, nevertheless, holds Major Non-NATO Ally 
status and cooperates in regional security, 
counter-terrorism, drug interdiction, nonproliferation and in 
contributing troops to U.N. peacekeeping missions.  The GoA 
has been a strong international voice on arms control and 
 
nonproliferation issues.  In the IAEA, the GoA has voted to 
refer Iran's noncompliance to the UNSC.  The GoA has also 
endorsed the Proliferation Security Initiative (PSI) and the 
Global Threat Reduction Initiative (GTRI).  Just this month, 
Argentina and the U.S. co-hosted in Buenos Aires a gathering 
of all OAS States to look for ways to better implement UN 
resolution 1540, which is aimed at keeping WMD from 
terrorists.  It is under the banner of science that the USG 
and Argentina have realized some of the best examples of 
bilateral cooperation, and we have a long history of 
aerospace cooperation with Argentina. 
 
Promoting U.S. Economic/Commercial Interests 
-------------------------------------------- 
 
¶11. (SBU) In support of U.S. companies operating in 
Argentina, we are encouraging the GoA to support a more 
welcoming investment climate, with greater regulatory, legal, 
and tax regime consistency.  We expend a good deal of effort 
supporting and working with U.S. companies.  We are working 
closely with the GoA and the Paris Club of sovereign 
creditors to resolve longstanding arrears to the USG and are 
encouraging the GoA to resolve claims of U.S. holders of 
defaulted Argentine bonds.  Regarding ongoing WTO trade 
negotiations, Argentina has staked out a hard-line position 
that links acceptance of developed economy agricultural 
sector proposals with more developing nation flexibility on 
industrial tariff cuts.  We have been urging them to adopt a 
more constructive approach. 
 
Trafficking in Persons (TIP) 
--------------------------- 
 
¶12. (SBU) Argentina is on the USG's Tier-2 Watchlist for lack 
of progress in providing greater assistance to victims and 
curbing official complicity in trafficking at the provincial 
level.  However, the legislature recently passed fairly 
comprehensive anti-TIP legislation that makes TIP-related 
violations a federal crime.  Argentina is a source, transit, 
and destination country for men, women, and children 
trafficked for the purposes of commercial sexual exploitation 
and forced labor.  According to the International 
Organization for Migration, 80 percent of trafficking victims 
in Argentina are Argentine, most of whom are trafficked for 
the purpose of sexual exploitation.  Bolivians and Peruvians 
are trafficked into the country for forced labor in 
sweatshops and agriculture.  Argentine efforts to combat 
trafficking have focused on prevention and training of 
security and government officials.  One of our key goals this 
year is to support a vigorous GoA implementation of the new 
federal law and promote the prosecution of human traffickers. 
 However, a number of NGOs have criticized this new law as 
weak on the issue of adult "consent." 
 
Democracy and Rule of Law 
------------------------- 
 
¶13. (SBU) We work with the GoA, media, and civil society to 
strengthen democratic institutions, fight corruption, and 
reinforce civilian control of the military.  We promote key 
reform efforts such as ending the election of representatives 
by party slate lists, increasing governmental transparency, 
and limiting public corruption and strengthening the 
political independence of the judicial branch.  While we do 
not succeed on every issue, we continue to cultivate the GoA 
as a cooperative partner in multilateral fora, and seek 
Argentina's cooperation in the defense of democracy and the 
observance of human rights in countries like Cuba, Venezuela, 
and Bolivia, as well as UN peacekeeping in Haiti. 
 
Human Rights 
------------ 
 
¶14. (SBU) The Government of Argentina generally respects the 
human rights and fundamental freedoms of its citizens.  The 
Kirchner government's human rights policy focuses on seeking 
justice for the human rights violations committed during the 
1976-83 military dictatorship, which resulted in the 
disappearance of between 11,000-30,000 leftist guerrillas and 
political dissidents.  It does not, however, focus on 
bringing to justice armed guerrilla groups who also committed 
human rights abuses during the same period  (known as "the 
Dirty War"), albeit on a much smaller scale.  To date, the 
courts have convicted three former officials of the military 
regime, including a military chaplain.  We recently returned 
one person sought here for human rights violations and 
 
another individual wanted by the GoA remains in Florida. 
Argentines are also concerned about one particular citizen on 
death row in Texas.  CFK has been preoccupied with the fate 
of Colombian hostage Ingrid Betancourt, lobbying Uribe and 
others to work for her release. Argentina is a strong 
international advocate for human rights and the USG and GOA 
generally cooperate on human rights issues in international 
and regional fora. 
 
International Crime and Drugs 
----------------------------- 
 
¶15. (SBU) Argentina is a transshipment and destination point 
for narcotics emanating largely from Colombia, Peru, Bolivia, 
and Paraguay.  With its large chemical and pharmaceutical 
industries, Argentina is also a major source and destination 
for precursor chemicals.  Argentine law enforcement agencies 
cooperate closely with their USG counterparts on drug 
interdiction efforts, fugitive arrests, and information 
sharing, which has resulted in increased enforcement.  This 
Mission is focused on institutional capacity-building and 
expanding training opportunities for law enforcement 
officials, prosecutors and judges in order to improve 
internal security and decrease international drug and 
criminal activity in Argentina.  Justice Minister Fernandez 
has repeatedly stated that he wants to put top priority on 
attacking drug traffickers and less priority on arresting 
individual users.  The Supreme Court President is working 
hard to increase judicial independence and efficiency. 
 
Terrorism 
--------- 
 
¶16. (SBU) Former President Nestor Kirchner's administration 
strongly supported counter-terrorism policies during his time 
in office, and his wife and successor CFK has continued the 
cooperation.  Argentina was itself a victim of international 
terrorist attacks in the 1990s and has been a cooperative 
partner in countering terrorism, especially in the Tri-border 
Area.  On November 7, 2007, Argentina succeeded in getting 
Interpol's General Assembly vote to issue international 
capture notices for five current and former Iranian officials 
and one Lebanese Hizballah member (who was reportedly killed 
in Syria February 13) wanted in connection with the 1994 
terrorist bombing of the Buenos Aires Jewish Community Center 
(AMIA).  On May 22, a local prosecutor announced charges 
against former President Menem and other former officials for 
mishandling the AMIA investigation in the 1990s. 
 
¶17. (SBU) Argentina cooperates with the United Nations, the 
OAS, its neighbors, and the United States on a number of 
counterterrorism initiatives.  We assist the GoA in 
capacity-building, within the restraints created by Brooke 
Amendment sanctions, to strengthen Argentine law enforcement 
forces.  We also work closely with the Argentine military on 
modernization, increasing interoperability, and training and 
education focused on civilian control, respect for human 
rights, defense resource management, strategic planning, and 
science and technology.  Argentina has a leading role in the 
OAS Inter-American Committee Against Terrorism (CICTE), 
established on Argentina's initiative in the 1990s. 
Argentina has ratified all of the 12 international 
counter-terrorism conventions and has been an active 
participant in the 3 plus 1 tri-border area counterterrorism 
mechanism, which met most recently in Asuncion, Paraguay in 
January.  The GOA and the USG have a Mutual Legal Assistance 
Treaty that entered into force in 1993, and an extradition 
treaty that entered into force in 2000. 
 
Money Laundering, Terrorism Finance, Legal Reform 
--------------------------------------------- ---- 
 
¶18. (SBU) The Embassy and USG agencies worked with the GoA to 
pass comprehensive antiterrorism, money laundering, and 
terrorism finance legislation to strengthen local enforcement 
efforts.  Since 2005, and largely in response to pressure 
from the Financial Action Task Force (FATF), the GoA and 
Argentine Central Bank have acted to fortify the anti-money 
laundering and counter-terrorism finance legal and regulatory 
regime, passing new legislation, amending existing laws, and 
establishing stricter financial sector regulations.  The 
result is that Argentina currently has an adequate 
legal/regulatory structure that provides the legal foundation 
for the Central Bank and other law enforcement and regulatory 
bodies to investigate and prosecute money laundering and 
terrorism finance.  The challenge now is for Argentine law 
 
enforcement and regulatory agencies and institutions to 
enforce aggressively the newly strengthened and expanded 
legal, regulatory, and administrative measures available to 
them to combat financial crimes. 
 
¶19. (U) Argentina is not an important regional financial 
center or offshore financial center.  Money laundering 
related to narcotics trafficking, corruption, contraband, and 
tax evasion is believed to occur throughout the financial 
system, in spite of the GoA's efforts to stop it.  Tax 
evasion is the predicate crime in most Argentine money 
laundering investigations.  Argentina has a long history of 
capital flight and tax evasion, and Argentines hold billions 
of dollars offshore, much of it legitimately earned money 
that was never taxed.  The large informal sector in Argentina 
(as well as in most other Latin American countries) exposes 
it to financial crimes. 
 
¶20. (U) In 2007, the Argentine Congress passed legislation to 
criminalize acts of terrorism and terrorist financing, and 
establish terrorist financing as a predicate offense for 
money laundering.  The law, which amends the Penal Code and 
Argentina's 2000 anti-money laundering law, entered into 
force in mid-July 2007.  It effectively removed Argentina 
from FATF's follow-up process, which began in 2004 to address 
deficiencies in the GOA's anti-money laundering and 
counter-terrorist financing (AML/CTF) regime.  With the 
passage of this law, Argentina joined Chile, Colombia, and 
Uruguay as the only countries in South America to have 
criminalized terrorist financing. 
 
¶21. (U) On September 11, 2007, President Nestor Kirchner 
signed into force the National Anti-Money Laundering and 
Counter-Terrorism Finance Agenda.  The overall goal of the 
National Agenda is to provide a roadmap for fine-tuning and 
implementing existing money laundering and terrorist 
financing laws and regulations.  The Agenda's 20 individual 
objectives focus on closing legal and regulatory loopholes 
and improving interagency cooperation. 
 
¶22. (U) The U.S. Department of Homeland Security's Office of 
Immigration and Customs Enforcement (ICE) and the GoA have 
established a Trade Transparency Unit (TTU) in Argentina. 
The TTU examines anomalies in trade data that could be 
indicative of customs fraud and international trade-based 
money laundering, and maintains a key focus on financial 
crimes occurring in the tri-border Area.  The creation of the 
TTU was a positive step towards complying with FATF Special 
Recommendation VI on terrorist financing via alternative 
remittance systems. 
 
¶23. (SBU) Even with the improved AML/CTF legal/regulatory 
regime, the GoA is more limited than the U.S. in its ability 
to combat financial crimes.  The root of the problem is the 
relatively overburdened and inefficient judicial system, 
which is an inquisitorial as opposed to an accusatorial 
system (such as the United States has).  Judges have the lead 
on all investigations.  The system is backed up, slow, and 
prone to subornment.  The result is that the GoA has 
successfully concluded only two money laundering convictions 
since money laundering was first criminalized in 1989, and 
none since the passage of the GoA's 2000 anti-money 
laundering law.  Former Justice Minister Alberto Iribarne, 
who left office with the change of government in December 
2007, proposed sweeping reforms to create a more effective 
and fair criminal justice system (one closer in design to the 
U.S. system of justice).  However, implementing such reforms 
would be a difficult and lengthy process.  Justice Minister 
Anibal Fernandez told us May 21 he supports moving ahead with 
judicial reform. 
WAYNE