VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #1427/01 2911233
ZNR UUUUU ZZH
R 171233Z OCT 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 2261
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 001427 
 
USDOC for 4321/ITA/MAC/OLAC/PEACHER 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD ECON WTRO AR
SUBJECT: Argentina: American Chamber Describes Investment 
Challenges, Opportunities to WHA DAS McMullen 
 
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Summary 
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¶1. (SBU) As the American Chamber of Commerce in Argentina celebrates 
its ninetieth anniversary, member company reps noted to visiting WHA 
DAS McMullen their long and successful tenures in Argentina's 
historically volatile economic environment.  U.S. companies remain 
broadly profitable, and a number are actively expanding their 
operations here, including Staples and Monsanto.  However, company 
reps noted serious risks to their existing investments, including 
high inflation, energy restrictions, controversial taxation 
measures, the short-term focus of government policies, and lack of 
IPR law enforcement.  Company reps commented they could be doing 
even better, investing more, and creating more value in the market 
if the attitude of the GOA toward the private sector was more 
positive and proactive.  End Summary 
 
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AmCham's 90th anniversary 
-------------------------- 
 
¶2. (SBU) WHA DAS Christopher McMullen met on October 3 with 
representatives of the American Chamber of Commerce (AmCham) 
business community in Argentina.  The meeting was hosted by AmCham 
CEO Alejandro Diaz, and included senior representatives of U.S. 
companies Dow, Esso, PriceWaterhouse Coopers, Eli Lily, Johnson and 
Johnson, Merck Sharp & Dohme, Monsanto, Pfizer, Prudential, Staples 
and Teletech. 
 
¶3. (SBU) With AmCham's 90 anniversary celebration already well 
underway, a number of companies at the table, including Dow and Esso 
and Monsanto, noted their long tenure in Argentina's historically 
volatile economic environment.  Company reps commented to McMullen 
that they remain broadly profitable, but with serious risks to 
existing investments that include high inflation, energy 
restrictions, controversial taxation measures, dominant short-term 
focus of government policies, and lack of IPR law enforcement. 
Companies doing well noted that they could be doing even better, 
investing more, and creating more value in the market of the 
attitude of the GOA toward the private sector was more positive and 
proactive. 
 
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IPR protection a major theme 
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¶4. (SBU) Pharmaceutical majors Johnson and Johnson, Merck, Monsanto, 
and Pfizer highlighted ongoing IPR concerns, including patent 
processing backlogs, the GoA's poor record on protecting data 
exclusivity, poor enforcement of existing IPR protection laws, and 
no support for the Patent Cooperation Treaty.  While saying they 
appreciated the GoA's creation of a stand-alone Science and 
Technology Ministry, they underscored the new Science Minister's 
lack of political influence, the fact that the Health Minister does 
not care to discuss issues of interest to pharmaceutical companies, 
and the strong influence of  Argentina's domestic pharmaceutical 
lobby.  Pharmaceutical company reps were unanimous in expressed 
their thanks to th Embassy for its ongoing support on IPR issues. 
 
--------------------------------------------- -------- 
Labor, tax and energy issues slimming company profits 
--------------------------------------------- -------- 
 
¶5. (SBU) Company reps believed that official GoA inflation 
statistics are significantly under-reported and noted that strong 
unions demanding regular cost of living wage increases were 
narrowing their margins.  Teletech, Staples and Prudential all cited 
labor issues as a constraint on continued high-growth.  Staples, 
while still growing fast (40% this year), lamented that paying taxes 
according to the law put them at a disadvantage vis domestic 
competitors who do not fully comply with the tax code.  Dow, which 
uses natural gas a primary feedstock for its chemical manufacturing, 
said is had become increasingly hard to maintain existing production 
levels, let alone expand, due to energy restrictions.  During the 
austral winter months, Dow said its plastic production lines 
operated at only 40% of capacity. 
 
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Will investors stay or look elsewhere for growth? 
--------------------------------------------- ---- 
 
¶6. (SBU) Monsanto called Argentina its third largest market in world 
for seeds.  Their government affairs rep stated that the company is 
working with the GoA on a new approach to increase royalties derived 
from seed production (currently only 10% of seeds used in Argentina 
are certified).  Monsanto reported new investment of $225 million 
($100 million this year; $125 million over the next 3-4 years) to 
expand corn seed production in Argentina.  However, when this US 
 
agriculture giant looks strategically at the region, Brazil and 
Paraguay are winning the race for new headquarters investment 
approvals. 
 
¶7. (SBU) Exxon-Mobil's Esso Argentina noted that, only six months 
ago, the company was considering leaving Argentina due to its 
frustration with an over-regulated energy market.  However, thanks 
in part to US Embassy assistance, Esso is better able to deal with 
Argentina's challenging investment environment and will soon be 
talking to the GOA about the possibility of expanding its upstream 
investments in Neuquen province. 
 
¶8. (U) This cable has been cleared by DAS McMullen 
 
WAYNE