VZCZCXYZ0000
OO RUEHWEB

DE RUEHBU #1520/01 3091811
ZNR UUUUU ZZH
O 041811Z NOV 08
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2407
RUCNMER/MERCOSUR COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS BUENOS AIRES 001520 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EINV PREL PGOV AR
SUBJECT: Argentina: Finance and Industries Secretaries on G-20 
Positions 
 
Ref: (A) Buenos Aires 1495 
     (B) Buenos Aires 1493 
     (C) Buenos Aires 1415 
 
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Summary 
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¶1. (SBU) GoA Finance Secretary Hernan Lorenzino confirmed he has 
taken on the substantive role of formulating Argentina's positions 
for the upcoming G-20 Summit in Washington and that these positions 
will be coordinated with those of Brazil at the upcoming November 
8-9 Mercosur Summit in Sao Paulo.  GoA statements in Washington will 
track closely with points raised by Economy Minister Carlos 
Fernandez in his October 11 statement to the IMF International 
Monetary and Financial Committee and will emphasize: (1) the need 
for better macro-economic coordination between emerging market and 
developed country government and central bank officials; (2) the 
need to improve and better coordinate broad financial sector 
regulatory and supervisory standards; and (3) the need to revisit 
the role of IFIs and particularly that of the IMF in terms of crisis 
support and general responsiveness to emerging economy needs. 
Separately on the trade front, Economy Ministry Industries Secretary 
Fernando Fraguio confirmed Argentina will not use the G-20 venue to 
promote its recent protectionist response to the financial crisis as 
a developing country policy model.  Instead, the GoA will emphasize 
the need for emerging market economies to develop individually 
appropriate policy options to sustain domestic employment.  Fraguio 
recognized that a G-20 communique will be carefully parsed by 
international financial markets and that G-20 members need to craft 
a "consensual, progressive, and practical" message.  End Summary 
 
--------------------------------------------- --- 
Econ Ministry, Not Central Bank, Takes G-20 Lead 
--------------------------------------------- --- 
 
¶2. (SBU) Finance Secretary Hernan Lorenzino called EconCouns the 
evening of November 3 to advise that he will personally take on the 
substantive sous-sherpa role of formulating Argentina's position 
papers for the upcoming G-20 Summit in Washington. (Note: Ref B 
reported on Central Bank President Martin Redrado' October 24 
conversation with Ambassador during which Redrado indicated that his 
Central Bank was developing substantive GoA position papers.) 
Lorenzino noted that he would work on this project primarily with 
his Economy Ministry colleague Political-Economy Secretary Martin 
Abeles and Abeles' subordinate Pablo Baronoa, National Director for 
Projects related to International Credit Organizations. 
 
¶3. (SBU) Lorenzino noted that the GoA's position at the G-20 would 
be coordinated closely with Brazil at the upcoming November 8-9 
Mercosur Summit hosted by President Lula in Sao Paulo.  He also 
noted that the internal GoA positions currently being refined would 
track with substantive points raised by Economy Minister Carlos 
Fernandez in his October 11 statement to the IMF International 
Monetary and Financial Committee (IMFC) and later amplified in his 
comments at the October 27 Extraordinary Mercosur Council meeting on 
the global financial crisis in Brasilia. 
 
¶4. (SBU) According to Lorenzino, Argentina currently plans to 
emphasize three key points: (1) the need for better macro-economic 
coordination between emerging market and developed country 
government and central bank officials; (2) the need to improve and 
better coordinate broad financial sector regulatory and supervisory 
standards; and (3) the need to revisit the role of IFIs and 
particularly that of the IMF in terms of crisis support and general 
responsiveness to emerging economy needs. 
 
--------------------------- 
Argentina's IMFC Submission 
--------------------------- 
 
¶5. (U) Minister Fernandez' submission to the IMFC on behalf of 
Argentina, Bolivia, Chile, Paraguay, Peru, and Uruguay amplifies on 
all of these points.  (Text at www.imf.org 
/External/AM/2008/imfc/statement/eng/arg.pdf. )  The paper calls for 
"concrete" developed county actions to tackle insufficient capital 
and falling asset valuations in the global financial system as well 
as for coordinated developed country and IFI policy support to 
create a multi-currency reserve system and more effective mechanisms 
to provide liquidity to developing countries.  On global financial 
system regulation, it calls for better systemic prudential 
regulations, clearer and more transparency accounting rules, higher 
capital requirement and more effective surveillance of banks, 
intermediaries, and credit rating agencies. 
 
¶6. (U) On the IMF, Fernandez' submission calls for the institution 
to revisit its "excessive" focus on inflationary risks and its 
standard recipe for more flexible exchange rates and full capital 
 
account liberalization in emerging market economies.  Instead, the 
paper argues that the Fund should focus more on promoting growth in 
developing countries and promote income distribution policies aimed 
at boosting consumption capacity.  On specific IMF reforms, the 
paper calls for the IMF to strengthen its policy guidance oversight 
of developed country economies and to develop an "early warning" 
system aimed at preventing the recurrence of periodic financial 
crises.  It calls for more emerging market country input into IMF 
decision making and the development of a multilateral insurance 
scheme to better shield developing country members from exogenous 
shocks.  Further, the statement calls for a streamlining of IMF 
conditionality and a review of access limits and financing terms to 
bring them into line with developing members' actual potential needs 
to borrow.  The paper concludes that the voice and representation of 
developing countries within the IMF needs to be expanded beyond the 
"modest" steps taken in the recently approved quota increase.  This 
includes revisiting the size and composition of the IMF Executive 
Board, which it characterizes as under-representing developing 
countries. 
 
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GoA Won't Push Protectionism as Policy Model 
-------------------------------------------- 
 
¶7. (SBU) Separately in a November 3 conversation with EconCouns, 
Ministry of Economy Secretary of Industries Fernando Javier Fraguio 
and Undersecretary Ariel Schale made clear that Argentina would 
not/not seek to use the G-20 summit as a venue to promote the GoA's 
recent imposition of non-tariff trade barriers NTBs) as any sort of 
a financial crisis policy model for developing nations.  (Ref A and 
C detail President Kirchner's crisis-linked announcement of a policy 
of "administered trade" and the GoA's imposition of a variety of 
safeguard measures and NTBs.) "Our policy is not protectionist," 
Fraguio declared, "but our policy is unashamedly to protect and 
sustain domestic employment.  Each developing nation needs to craft 
its own appropriate policy response to the crisis to sustain 
employment."  Fraguio said he recognized that a G-20 communique will 
be carefully parsed by international financial markets and that G-20 
members need to craft a "consensual, progressive and practical" 
message. (Septel will report on the GoA's efforts to coordinate a 
trade policy response to the financial crisis bilaterally with 
Brazil and more broadly within the Mercosur trade bloc.) 
 
KELLY