VZCZCXYZ0002
RR RUEHWEB

DE RUEHBU #1489/01 3031928
ZNY CCCCC ZZH
R 291928Z OCT 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 2357
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 1805
RUEHPE/AMEMBASSY LIMA 2344
RUEHMD/AMEMBASSY MADRID 2162
RUEHRI/AMCONSUL RIO DE JANEIRO 2474
RUEHSO/AMCONSUL SAO PAULO 3811
RHMFISS/HQ USSOUTHCOM MIAMI FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

C O N F I D E N T I A L BUENOS AIRES 001489 
 
SIPDIS 
 
E.O. 12958: DECL: 10/29/2018 
TAGS: ECON EFIN ETRD MARR MOPS PGOV PREL AR BR
SUBJECT: BRAZIL-ARGENTINA COORDINATE ON G-20, DIFFER ON 
TRADE POLICY 
 
Classified By: Ambassador E. Anthony Wayne for reasons (B) and (D). 
 
Summary: 
-------- 
 
¶1. (C)  On October 27, Brazilian Ambassador to Argentina 
Mauro Vieira (protect strictly) told the Ambassador that 
while Brazil and Argentina differed on the proper trade 
policy response to the current economic crisis, Brazil would 
be patient with its neighbor and would work to encourage a 
constructive Argentine role at the November 15 G-20 summit. 
Separately, a U.S. citizen told the Ambassador that President 
Cristina Fernandez de Kirchner said October 28 that she and 
Brazilian President Lula had agreed to meet before the G-20 
summit to coordinate positions. 
 
¶2.  (SBU) The conversation with the Brazilian Ambassador also 
 
covered Argentina's protectionist response to the economic 
crisis, Argentina's proposal to nationalize private pension 
funds, bilateral military relations, Nestor Kirchner's UNASUR 
candidacy, and other topics. 
 
Protectionism and Argentine-Brazil 
Bilateral Relations: 
---------------------------------- 
 
¶3.  (SBU) Argentina's response to the economic crisis is 
knee-jerk protectionist, straight out of the Peronist 
tradition, the Brazilian diplomat said.  Vieira (protect) had 
held a long conversation with Brazilian Foreign Minister 
Amorim October 26 telling his boss to expect strong Argentine 
pleading in the October 27 Mercosur economic ministers 
meeting.  Brazil would listen but would not adopt a 
protectionist response, he said.  Argentina swings back and 
forth between seeing Brazil as its savior and fearing 
Brazilian dominance.  Right now, the pendulum is swinging to 
fear. 
 
¶4.  (SBU) Argentine businessmen are afraid of cheaper 
Brazilian goods flooding the domestic market and of Brazilian 
purchases of more Argentine businesses.  Many Argentines, 
including trained economists and senior officials, have 
approached the Brazilian Ambassador in recent days asking why 
the GoB devalued the real at Argentina's expense.  When he 
tries to explain that it was the international economic 
situation that brought about the devaluation, not a GoB 
decision, they find that hard to believe.  This is an 
indication that many Argentines just don't understand 
international finance or economic realities. 
 
¶5. (SBU)  Similarly, the Ambassador said, the Brazilians are 
being patient about the GoA targeting Brazilian and Chinese 
goods in its recent expansion of non-tariff barriers, but 
they are telling the Argentines quietly that, if Brazilian 
goods start being impeded at the borders, then Brazilian 
manufacturers will ask the government to respond. Brazil 
remains by far Argentina's largest market for its 
manufactured goods exports.  "Does Argentina really want to 
endanger that?," he asked rhetorically.  Vieira acknowledged 
a large and increasing Brazilian bilateral trade surplus with 
Argentina, which he said could grow by a billion or more 
dollars under some scenarios of the next year.  But he said 
part of the surplus is a result of Argentina's own policies 
and decisions.  For example, Brazil had to look elsewhere to 
buy wheat this year because of Argentine restrictions on 
exports put in place to maintain low domestic prices.  While 
Brazil wants to be patient with its neighbor, there are 
currently no plans for bilateral ministerial meetings in the 
near future to address Argentina's trade concerns. 
 
Response to Economic Crisis and Upcoming G-20 
Summit: 
--------------------------------------------- 
 
¶6.  (C) Brazil will try to consult with the Argentines before 
the G-20 Summit on November 15.  Its Ambassador characterized 
Argentine statements at the UNGA opening and since, as well 
as during the Doha Round, as  "provincial" and "not 
constructive."  Hopefully, the Argentines can play a more 
constructive role at the Washington meeting, the Ambassador 
said.  A private U.S. citizen in recent contact with the top 
of the GOA subsequently told the Ambassador that Argentine 
President Cristina Fernandez de Kirchner (CFK) had said in a 
private meeting on October 28 that she and Brazilian 
President Lula had agreed to meet before the G-20 summit, 
including a possible meeting on November 14 in Washington, in 
order to coordinate positions for the summit.  The U.S. 
citizen said that CFK seemed to understand the importance of 
the meeting, was clearly looking forward to it, and was quite 
clear about the need to be fully coordinated with Lula.  The 
U.S. citizen noted that CFK is often much more reasonable in 
her statements in closed-door meetings than when speaking in 
a forum with the press present.  (Comment:  Ambassador has 
been quietly urging, through the Central Bank governor and 
others, that CFK deliver a responsible set of positions at 
the G-20 gathering and play a constructive role.) 
 
UNASUR Presidency: 
------------------ 
 
¶7.  (C) Uruguay's decision not to back Nestor Kirchner for 
Secretary General of UNASUR had been conveyed independently 
to Brazil and to Chile, at least, before it became public in 
the last few days, Vieira said.  Peru and Colombia had 
privately indicated that they were not comfortable with 
Kirchner's candidacy, but they did not want to be out front 
about their opposition.  Now, the Bolivian candidate may well 
emerge as the front-runner, the Brazilian speculated.  The 
decision must be by consensus. 
 
Paraguay and Military Exercises: 
-------------------------------- 
 
¶8.  (SBU) The Ambassador said that the Brazilians informed 
the Paraguayans, Argentines, and Uruguayans months ago of the 
military exercises underway in Brazil near Paraguay. 
Brazilian Ambassadors received a second set of instructions 
to tell host governments about the exercises five or six days 
before they began.  In Paraguay, however, one newspaper in 
particular has tried to fan flames about this and this has 
played off against local concern about Brazilian farmers and 
workers in Paraguay. The Brazilian military conducts these 
types of exercises fairly regularly, Vieira said.  It was not 
aimed at pressuring the government of Paraguay. 
 
Argentine Military Exercise Participation: 
------------------------------------------ 
 
¶9.  (SBU) Ambassador asked Vieira his views about the 
Argentine decision not to participate in the UNITAS combined 
exercise this year, allegedly because of budget constraints. 
The Brazilian said that budget could in reality be part of 
the reason.  The Argentines canceled annual bilateral 
military exercises  with Brazil this year, citing budget 
costs.  The Argentine Navy decided not to send their 
submarines to Rio for repairs but asked the Brazilians to 
send naval engineers here to help maintain the submarines. 
The Argentines have cut back on naval aviation training on 
the Brazilian aircraft carrier too. (Comment: Southern 
Command offered over US$900k in DCCEP Exercise funding to 
offset costs associated with the UNITAS exercise.  MOD 
Garre's animosity toward various aspects of U.S. policies 
could be a factor.) 
 
Embraer and the Lockheed Martin operation 
in Cordoba: 
----------------------------------------- 
 
¶10.  (SBU) The Brazilian Ambassador said that while the 
Argentines are clearly interested in having Embraer replace 
Lockheed Martin as manager of the aircraft production 
facility in Cordoba, Embraer will have to make its own 
decision based on its commercial interests.  Right now, 
Embraer is not evincing great interest and has signaled only 
some minor interest in having a regional maintenance facility 
in Cordoba as part of a greater regional network.  The 
company doesn't seem to have any interest in producing planes 
at the facility, he noted. 
 
Pension Nationalization: 
------------------------ 
 
¶11.  (C) The GoA apparently took the decision to confiscate 
privately held retirement accounts in an unsophisticated way 
without consulting widely, the Brazilian said.  Increasingly 
it appears that the political aspects were foremost in the 
thinking of the two main decision-makers, CFK and Nestor 
Kirchner, he noted.  The GoA nationalization initiative will 
provide more funds for public works programs in the run-up to 
the 2009 and 2011 elections, and it will give the federal 
government additional and important leverage over the 
provinces as the private pension system has been an important 
purchaser of provincial bonds.  If Congress approves the 
private pension system nationalization, the federal 
government can purchase bonds of favored governors, not buy 
bonds of others and be strict or not with repayment of bonds, 
etc., he noted. 
WAYNE