VZCZCXYZ0008
RR RUEHWEB

DE RUEHBU #0648/01 1361829
ZNY EEEEE ZZH (CCY AD926F93 MSI3049-695)
R 151829Z MAY 08 ZDS
FM AMEMBASSY BUENOS AIRES
TO RHMCSUU/FBI WASHINGTON DC
RUEHC/SECSTATE WASHDC 1042

UNCLAS E F T O BUENOS AIRES 000648 
 
NOFORN 
SENSITIVE 
SIPDIS 
 
C O R R E C T E D COPY -- CORRECTING PARA 8 MARKING 
 
 
FOR FBI DEPUTY DIRECTOR JOHN PISTOLE FROM AMBASSADOR TONY 
WAYNE 
 
E.O. 12958: N/A 
TAGS: PREL PGOV PHUM PTER SNAR ECON EFIN BEXP AR
SUBJECT: ARGENTINA: SCENESETTER FOR FBI DEPUTY DIRECTOR 
JOHN PISTOLE 
 
¶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 21-22 visit to Argentina.  We are looking to build 
on an already positive bilateral relationship with the 
five-month-old administration of President Cristina Fernandez 
de Kirchner (CFK).  However, the CFK administration is going 
through a serious domestic crisis with the agricultural 
sector and its popularity has fallen. This follows its seven 
week crisis which is over the Miami court case which we 
successfully overcame. 
 
¶3. (SBU) Current significant areas of mutual interest and 
cooperation include counter-terrorism, counter-narcotics, 
international crime and regional stability, but also science 
and technology, education and cultural exchanges and, of 
course, promoting economic and commercial interests.  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.  We have also 
put priority on helping to strenghthen Argentina's judicial 
and law enforcement system.  It is based in part on our model 
but is not as independent as it was designed to be and 
suffers many ineffeciencies and a tremendous backlog.  During 
this visit, you will meet with the the President, Minister of 
Justice and Security, the Deputy Director of Argentina's 
Intelligence Service and the Chief of the Argentine Federal 
Police.  You will also visit the Argentine-Israeli Mutual 
Association, site of the 1994 terrorist bombing, and its 
directors.  We are looking forward to meeting with you during 
your time in Argentina and US and to discussing US 
international law enforcement 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 Staes 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 cutoff from the USG. (However the case clearly remains 
very sensitive and its revelation could easily reopen old 
wounds.  They still have 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 the April 10-11 visit by WHA Assistant Secretary 
Shannon, the May 6-7 visit by Southcom Commander's Adm. 
Stavridis, and the March 5-6 visit by the FBI's Tom Fuentes. 
 
------------------------------ 
A Government Against the Ropes 
------------------------------ 
 
¶6. (SBU) Without consultation, a GoA decree issued March 11 
that increased export taxes on Argentina's main agricultural 
export crops.  This 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 with little progress on 
the main issue of export taxes.  On May 7, the farm groups 
decided to continue their protests, this time without major 
roadblocks and promises not to provoke shortages of 
foodstuff.  The GoA's public perspective is that the truce 
and ongoing negotiations are a victory for the government, 
and validates CFK's hard line.  Most analysts, however, 
consider the 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 and is now 
somewhere in the 30-40% range according to various polls. 
This drop is fueled not just by the agricultural problems but 
also by soaring inflation/prices. 
 
¶7. (SBU/NF) We provide the preceding information to you in order 
that you may have some context for the state the GoA finds 
itself as you embark on your bilateral discussions. 
 
-------------------------------------- 
What We're Doing on Issues of Interest 
-------------------------------------- 
 
¶8. (SBU) Anti-Americanism:  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.  Yet, overall, Argentina 
maintains positive political relations with the United 
States, but 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.  This financial dependence has increased given 
recent events on the economic scene. 
 
¶9. (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 last 
week, Argentina  hosted with US a gathering of all OAS States 
to better implement UN resolution 1540 and 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. 
 
¶10. (SBU) Terrorism:  Former President Nestor Kirchner's 
administration strongly supported counter-terrorism policies 
during his time in office, and his wife and successor 
Christina Fernandez de Kirchner 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). 
 
¶11. (SBU) Argentina cooperates with the United Nations, the 
OAS, its neighbors, and the United States o a number of 
counterterrorism initiatives.  The Embassy and USG agencies 
worked with the GoA to pass comprehensive antiterrorism, 
money laundering, and terrorism finance legislation to 
strengthen local enforcement efforts.  We assist the GoA in 
capacity-building in the Financial Intelligence Unit, within 
the restraints created by Brooke Amendment sanctions, to 
build capacity of Argentine law enforcement forces, and 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 been a member of the Egmont Group 
since July 2003, and has ratified all of the 12 international 
counter-terrorism conventions and has been an active 
participant in the 3 plus 1 TBA counterterrorism mechanism, 
which just met 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. 
 
¶12. (SBU) International Crime and Drugs:  Argentina is a 
transshipment and destination point for narcotics emanating 
largely from Colombia, Peru, Bolivia, and Paraguay. 
Argentina, with its large chemical and pharmaceutical 
industries, 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.  In the area or anti-money 
laundering and counter-terrorism finance, the Mission is 
working through diplomatic channels and via bilateral 
technical assistance and training programs to encourage 
Argentine law enforcement and regulatory bodies to enforce 
existing laws and regulations more aggressively.  Justice 
Minister Fernandez has just announced 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.  He will be in Washington meeting with colleagues 
during your visit. 
 
¶13. (SBU) Human Trafficking (TIP):  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 ofwhom 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 law and prosecution.  Minister 
Fernandez is in charge of implementation for the executive 
branch.  A number of NGOs have criticized this new law as 
weak on the issue of adult "consent." 
 
¶14. (SBU) Democracy and Rule of Law:  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 it does not side with us 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. 
 
¶15. (SBU) Human Rights:  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 remains in Florida.  The Argentines also remain 
concerned of these citizens (Soldano) on death row in Texas. 
President CFK has also been preoccupied with the fate of 
Columbian hostage, Ingrid Bettancourt, 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. 
 
------------------------------- 
Background: Political Landscape 
------------------------------- 
 
¶16. (SBU) Cristina Fernandez de Kirchner (CFK) took office on 
December 10, 2007, receiving th 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 
--------------------------------------------- 
 
¶17. (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 keysocio-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. 
 
¶18. (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 "true" 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 we reported as much lower by 
the government. There is ongoing public debate about 
inflation measures.  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. 
 
¶19. (U) Over 450 U.S. companies are currently operating in 
Argentina and employ over 150,000 Argentine workers.  U.S. 
investment in Argentina is concentrated in the manufacturing, 
information, and financial sectors. Other major sources of 
investment include Spain, Chile, Italy, France, Canada, 
Japan, and Brazil.  U.S. investment in Argentina is 
concentrated in the manufacturing, information, and financial 
sectors.  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. 
 
¶20. (SBU) Promoting U.S. economic/commercial interests:  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 
long-standing 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. 
WAYNE