VZCZCXYZ0014
RR RUEHWEB

DE RUEHBU #1089/01 2191327
ZNR UUUUU ZZH
R 061327Z AUG 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 1717
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUCNMER/MERCOSUR COLLECTIVE
RHMFIUU/HQ USSOUTHCOM MIAMI FL

UNCLAS BUENOS AIRES 001089 
 
PASS NSC FOR MICHAEL SMART 
PASS USTR FOR KATHERINE DUCKWORTH 
USDOC FOR 4322/ITA/MAC/OLAC/PEACHER 
US SOUTHCOM FOR POLAD 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PREL ECON ETRD WTRO AR BR VE
SUBJECT: ARGENTINA: CFK BOOSTED BY LULA, CHAVEZ VISITS, MIXED 
MESSAGES ON INVESTMENT AND INTEGRATION 
 
Ref: BUENOS AIRES 1079 
 
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Summary 
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¶1. (SBU) President Cristina Fernandez de Kirchner (CFK) used 
overlapping August 3-5 visits by Brazil's President Lula and 
Venezuelan President Chavez to try to regain political momentum. 
Lula's visit focused on renewed Argentine-Brazilian commercial 
collaboration following a damaging public divergence in end-game WTO 
Doha Round negotiations, while Chavez waded directly into Argentine 
affairs, offering a strong defense of CFK's domestic agenda and 
promising continuing Venezuelan financial support.  Lula and CFK 
focused on areas of agreement on global trade and opportunities for 
expanding bilateral trade and investment, though GoA officials gave 
assurances of protecting sensitive domestic sectors.  The 
last-minute addition of a trilateral heads of state meeting offered 
mixed messages: flirtation with Chavez's hemispheric agenda, jabs at 
domestic opponents, and a recognition of Brazil's importance.  A 
planned Chavez-CFK trip to Bolivia to meet President Morales had to 
be called off, reportedly because of security problems in Bolivia. 
End Summary. 
 
-------------------------------- 
Post-Doha Failure Reconciliation 
-------------------------------- 
 
¶2. (SBU) Brazilian President Lula arrived in Argentina the evening 
of August 3, accompanied by 300-plus business leaders, for a 
bilateral trade and investment conference that our Foreign Ministry 
contacts tell us was pulled together in less than a week.  GoA 
contacts admit that the conference was a vehicle designed in the 
last week to allow Mercosur-bloc leaders Argentina and Brazil to 
publicly reconcile following sharp differences in positions that 
emerged at failed Doha Round global trade talks in Geneva (Reftel). 
There, Brazil had softened its stance against developed nations' 
agricultural subsidies, but negotiations collapsed when China, 
India, and others (including Argentina) opposed the deal. 
 
¶3. (SBU) In his opening remarks to the August 4 conference, Lula 
said: "The frustration of the Doha round demands that we redouble 
our efforts in other arenas to eliminate distortions and barriers in 
international trade...Argentina and Brazil can lead the response to 
those challenges from Mercosur and South America.  Together, we can 
challenge the richest countries on trade."  (Earlier that day in a 
radio address, Lula said world trade talks would continue despite 
the impasse.)  President Cristina Fernandez de Kirchner (CFK), in 
her conference remarks, argued that, post-Doha, Argentina and Brazil 
can still work together to promote the interests of developing 
countries.  "There are moments when we feel that for the first time 
we are more needed than the developed countries.  That should put 
Argentina and Brazil in synergy, deepening this alliance and this 
productive model." 
 
--------------------------------------------- ---------- 
Push for Expanded Trade, Bilateral Economic Integration 
--------------------------------------------- ---------- 
 
¶4. (SBU) At the conference, Lula called the strategic alliance 
between Argentina and Brazil "the backbone" of South America, an 
alliance that should form the nucleus of a "South American Union of 
Nations."  Lula said that 2008 trade with Argentina may rise to $30 
billion, up from $24.8 billion in 2007, and that he can imagine a 
future in which South America's two biggest economies share the same 
currency.  He called the global food crisis a historic opportunity 
for Argentina and Brazil to be increasingly competitive players in 
supplying the world's expanding food requirements.  Lula argued for 
deeper economic integration with Argentina, saying stronger ties 
between the two countries would help boost all South American 
economies and promising the creation of a sovereign fund to finance 
Brazilian private sector or Brazilian/Argentine joint venture 
investment in Argentina.  In her remarks, CFK noted that any such 
process of economic integration must take into account the interests 
of Argentina's national industries, particularly the sensitive and 
labor-intensive textile and shoe manufacturing sectors. 
 
¶5. (SBU)  In later discussions between GoA and GoB officials, 
Secretary of Industries Alberto Fraguio praised the bilateral 
automotive trade regime, but insisted that Argentina's 62-month long 
- and growing - bilateral trade deficit with Brazil (septel) must be 
addressed.  Fraguio agreed that expanded Brazilian investment in 
Argentina is desirable and called for increased Argentine 
 
value-added in the bilateral auto trade. 
 
--------------------------------------------- -------- 
Chavez Joins, Supports CFK, Talks Tripartite Alliance 
--------------------------------------------- -------- 
 
¶6. (SBU) Venezuelan President Hugo Chavez's participation in the 
discussions with CFK and Lula was only confirmed at the last minute. 
 Argentina's state news agency Telam announced Mr. Chavez's presence 
only on August 4, halfway through Lula's official visit to Buenos 
Aires.  Local press described sustained Argentine efforts to 
convince the Brazilian delegation to agree to the trilateral 
meeting.  Chavez arrived in Buenos Aires the afternoon of August 4 
and met with CFK and Lula before Lula returned to Brazil that 
evening.  (Chavez and Fernandez were to travel together August 5 to 
the southern Bolivian city of Tarija to meet with President Evo 
Morales on regional energy issues, but the visit was cancelled 
August 5, reportedly because of security concerns.) 
 
¶7. (SBU) At a ceremony inaugurating a low-income housing project in 
the Buenos Aires suburb of Almirante Brown, Chavez congratulated CFK 
for having confronted "the attacks of the oligarchy" in her ongoing 
battle with the rural agrarian sector over export tariffs.  In line 
with her earlier August 2 press conference comments justifying the 
GoA's conflict with the rural sector in the name of needed income 
redistribution, CFK followed Chavez to the podium arguing that 
"those in sectors that are growing and have more wealth have no 
right not to see that, by giving a little, they help those who, 
alone, cannot escape poverty." 
 
¶8. (SBU) Chavez, in airport discussions with local media, celebrated 
the increasingly close relationship between Venezuela, Brazil, and 
Argentina: "We have revived the process of forming a tripartite 
alliance that is based on what we have for several years been 
calling the main axis of South America: Caracas-Brasilia-Buenos 
Aires," he said.   Such an axis, he said, is capable of countering 
Europe and the United States, and able to help meet the world's 
rising demand for food.  Chavez added that his country "already felt 
part of Mercosur," though ratification of Venezuela's full 
membership remains pending from the Brazilian and Paraguayan 
parliaments. 
 
¶9. (SBU) On Argentina-specific issues, Chavez told local media he 
considered himself a "true Peronist," that Venezuela was "disposed" 
to purchase additional Argentine sovereign debt (beyond the $6.6 
billion the GoV has purchased since 2005), and that GoV discussions 
with Argentina's Techint Group on appropriate compensation for the 
GoV's forced nationalization of Techint's SIDOR steel plant were 
going so well that the issue was not even raised in his discussions 
with CFK.  (This was not the description Techint's CEO gave the 
Ambassador earlier August 4.)  Chavez also told local media that his 
earlier proposal to build a 5,000-mile Caracas-to- Buenos Aires 
natural gas pipeline (Gasoducto del Sur) at an estimated cost of $23 
billion should be reconsidered.  "I think it is the moment to bring 
that back," he said.  Chavez added that the three heads of state 
would meet again in Brazil's Pernambuco city on September 6 and that 
they had agreed that joint state companies should be created in the 
oil and energy sectors.  GoA Ambassador to Caracas, Alicia Castro, 
told local media that the three countries were considering creation 
of a regional air carrier (only two weeks after the GoA announced 
the state takeover of flagship carrier Aerolineas Argentinas) as 
well as a railway linking Caracas and Buenos Aires, "a dream that 
today appears utopian." 
 
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Comment 
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¶10. (SBU) It appears that CFK tried to use Lula and Chavez's visits 
to bolster her beleaguered public image.  The Lula/CFK trade and 
investment conference was also broadly viewed as a hastily arranged 
kiss-and-make-up affair to ease intra-Mercosur tensions generated 
during heated Doha end-game negotiations.  Lula himself summed up 
the overriding rationale in his conference address: "We often lose 
time in internal fights without realizing that this suffocates 
growth."  The new initiatives announced, including sovereign funds 
to promote Brazilian investment in Argentina and cooperation between 
the two nations' state-owned development banks, appear vague and ad 
hoc.  Neither Lula nor CFK used their remarks to criticize the U.S. 
Lula talked about calling President Bush on trade issues and CFK 
publicly recognized the presence of the Ambassador during her 
speech. 
 
¶11. (SBU) Chavez's last-minute participation and discussion of a 
"tripartite alliance" added political color but little economic 
substance to discussions.  Media focused on his political support of 
CFK in the aftermath of her Senate defeat on the export tariff issue 
and his hints that Venezuela is willing to purchase additional GoA 
sovereign debt.  This was followed by a statement by GoA Finance 
Secretary that Argentina would have no trouble meeting its 2008 
financing needs but that the GoA "had not discarded" the possibility 
of additional borrowing from Venezuela this year.  Chavez's 
participation may have muddied the Casa Rosada's message of 
returning to more constructive politics in which fundamental issues 
like Argentine-Brazil trade and investment would supersede 
ideological agendas.  The planned August 5 Chavez-CFK trip to 
Bolivia to meet President Morales had to be called off because of 
security problems, but CFK got her photo with Chavez and Lula on the 
front pages of many Buenos Aires dailies. 
 
WAYNE