VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0086/01 0262036
ZNR UUUUU ZZH
R 262036Z JAN 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 2922
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCNMER/MERCOSUR COLLECTIVE

UNCLAS BUENOS AIRES 000086 
 
SIPDIS 
SENSITIVE 
 
FOR REPRESENTATIVE COSTELLO FROM AMBASSADOR E. ANTHONY WAYNE. 
DEPARTMENT FOR H AND WHA/BSC 
 
E.O. 12958: N/A 
TAGS: OVIP CODEL ECON PREL BEXP AR
SUBJECT: Argentina - Scenesetter for Codel Costello 
 
This cable contains sensitive information - not for internet 
distribution. 
 
¶1. (SBU) On behalf of Embassy Buenos Aires, I warmly welcome your 
visit to Argentina January 30 - February 1.  We have arranged 
meetings for your Transportation Committee delegation with U.S. 
private sector civil aviation representatives and have requested 
meetings with senior Government of Argentina (GoA) transportation 
officials.  We have also arranged a tour of our very successful 
Container Security Initiative at the Port of Buenos Aires.  Your 
delegation's visit supports our efforts to build on the important 
bilateral relationship we have developed with the administration of 
President Cristina Fernandez de Kirchner. 
 
--------------------------------------------- ---- 
Civil Aviation: Bilateral Ties Strong and Growing 
--------------------------------------------- ---- 
 
¶2. (U) Expanding civil aviation ties between the U.S. and Argentina 
reflect a significant growth in bilateral tourism over the past six 
years: in 2007 alone, over 266,000 Argentines traveled to the United 
States (up 26% from 2006) while over 300,000 U.S. citizens traveled 
to Argentina (up 23%).  In response to this growth and prompted by 
requests from our U.S. carriers, in 2007 the USG and the GoA 
negotiated a modernization and liberalization of our 1985 bilateral 
aviation agreement to allow for a gradual doubling of frequencies, 
from 56 to 112 flights per week.  This agreement also includes 
updated chapters on security, traffic rights, charters, and 
pro-competitive doing-business provisions. 
 
¶3. (SBU) U.S. carriers dominate flights to the United States, with 
American, United, Delta, and Continental sharing 73 weekly 
frequencies.  Federal Express and UPS also have significant 
operations here.  U.S. carriers remain profitable, and both American 
and Delta have taken advantage of our updated bilateral agreement in 
2008 to expand frequencies and add new flights.  Nevertheless, U.S. 
air carrier margins have been squeezed by inflation in Argentina. 
They are concerned about infrastructure deficiencies and high costs 
at Ezeiza airport, Buenos Aires' international gateway, imposed by 
the monopoly private airport concessionaire Aeropuertos 2000, 
discriminatory lower international airport fees approved by the GoA 
for national flag carrier Aerolineas Argentinas, and poor quality 
service provided to air carriers by the state-owned ground handling 
company Intercargo. 
 
¶4. (SBU) Other civil aviation issues that will be of interest to 
your delegation include the planned transition from military to 
civilian control of general aviation.  USG civil aviation oversight 
agencies, including TSA and the FAA, also have a number of concerns 
about Ezeiza airport safety and security issues, a topic about which 
our Country Team will brief you. 
 
--------------------------------------------- ---- 
Argentina a Container Security Initiative Partner 
--------------------------------------------- ---- 
 
¶5. (SBU) The Department of Homeland Security's Customs and Border 
Protection Container Security Initiative (CSI) program was 
established at the Exolgan Port in Buenos Aires in November 2005. 
Since that time, the GoA has proven to be one of our strongest and 
most forward-looking CSI partners in the region, working with our 
Embassy's Immigration and Customs Enforcement officers to ensure 
that the provisions of the 2007 Maritime Security SAFE Port Act are 
met.  The GoA has asked for DHS support in expanding the CSI program 
to additional Argentine ports. 
 
------------------------- 
Broader Political Context 
------------------------- 
 
¶6. (SBU) You arrive in Argentina shortly after Cristina Fernandez de 
Kirchner (CFK) completed her first year as president, having taken 
office on December 10, 2007.  She succeeded her husband, Nestor 
Kirchner, who retains a high profile in government policy and 
decision-making.  CFK has a decades-long history in politics, having 
served in the Chamber of Deputies and most recently in the Senate. 
She won the 2007 presidential election with 45% of the vote over a 
sharply divided opposition.  Having campaigned on the themes of 
change and continuity, she retained most of her husband's cabinet 
and much of his confrontational style.  During her first year in 
office, she suffered a severe drop in popularity and approval 
ratings, which now hover around 30%, due in large part to her 
handling of the protracted March - August conflict with the very 
popular farming sector over a government proposal to increase export 
duties on soy and other agricultural products.  In coping with the 
sudden downturn in global commodity prices that had fueled 
Argentina's 2002-2008 economic recovery, CFK's major policy 
challenges will be to maintain employment levels,attract and boost 
investment, and restore a sense of law and order to an electorate 
increasingly concerned about crime and security.  Argentina's 
political class is increasingly focused on upcoming October 2009 
congressional elections. 
 
¶7. (SBU) Bilateral relations are strong, having recovered from a 
rough patch in December 2007.  Two days after CFK was inaugurated, 
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 States as agents of the Venezuelan government without 
notifying the Attorney General as required by law.  One of the 
accused was recently convicted.  Others pled guilty and they are 
just now being sentenced.  During the proceedings in Miami, 
allegations surfaced that undeclared cash brought into Buenos Aires 
in August 2007 from Venezuela had been destined for the presidential 
campaign of CFK.  The allegations were not made by the USG, but 
rather by one of those arrested. 
 
¶8. (SBU) Initially, President Fernandez de Kirchner reacted angrily 
to the allegation that she had been the intended recipient of the 
cash that was intercepted by GOA airport 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, and the relationship normalized due to 
a great deal of behind-the-scenes work.  We agreed at the end of 
January 2008 to put the case behind us and to work to strengthen 
bilateral cooperation, which we have done in part by reviving a 
special consultative process that has already resulted in agreements 
in new areas such as alternative energy, nanotechnology, and 
national park administration.  We also agreed to promote greater 
parliamentary exchanges; your visit will help in 
that regard.  However, during the trial of the only defendant not to 
plead guilty in Miami this last fall, the government remained 
standoffish to close public cooperation with us, as the allegations 
that the money was for CFK's campaign were repeated and amplified. 
The local Argentine investigation into this remains stalled, and 
judicial authorities here seek the extradition from the United 
States of the prime prosecution witness in the Miami trial. 
 
---------------- 
Economic Context 
---------------- 
 
¶9. (SBU) Argentina, once one of the richest countries of the world, 
has experienced much economic decline and political instability over 
the last 70 years, culminating in a profound political and economic 
crisis in 2001-2002 that was comparable to our Great Depression and 
included Argentina's default on $88 billion in debt, the largest 
sovereign debt default in history.  Many Argentines are at a loss to 
explain how their country, blessed with rich natural resources, 
fertile land, and low population density, fell so far short of its 
potential.  Some blame the military dictatorships, which 
predominated between 1930 and 1983.  Others blame corruption and a 
series of populist measures taken since 1944.  Many Argentines blame 
external factors, particularly the IMF and alleged U.S. 
insensitivity to their plight for the last crisis. 
 
¶10. (U) Argentina's economy sustained a robust recovery following 
the 2001/2002 economic crisis, with five consecutive years of over 
8% real growth in gross domestic product (GDP).  Argentine GDP 
reached US$ 261 billion in 2007, approximately US$ 6,630 per capita. 
The economic expansion created jobs, with unemployment declining 
from over 21% in 2002 to under 8% as of the fourth quarter of 2008. 
Poverty levels also dropped.  According to government statistics, 
20.6% of the population in the 28 largest urban areas remained below 
the poverty line in the first quarter of 2008, down from over 50% in 
the immediate aftermath of the economic crisis. 
 
¶11. (U) Argentina benefits from rich natural resources, a highly 
educated population, a globally competitive agricultural sector, and 
a diversified industrial base.  Argentina's post-crisis move to a 
more flexible exchange rate regimen, along with sustained global and 
regional growth, a boost in domestic aggregate demand via monetary, 
fiscal, and income distribution policies, and favorable 
international commodity prices and interest rate trends were 
catalytic factors in supporting renewed growth between 2003 and 
¶2008.  A higher tax burden, improved tax collection efforts, and the 
recovery's strong impact on tax revenues supported the government's 
successful efforts to maintain primary fiscal surpluses since 2003. 
 
¶12. (SBU) Although Argentina continued its strong expansion in 2008, 
with GDP growth estimated in the 6-7% range, there are growing 
indications of a broad deceleration of economic activity in 2009, in 
part due to the impact of ongoing global financial turmoil and the 
resulting slowdown in world economic output.  In addition to the 
challenges posed by global economic trends, economic experts have 
identified a range of other potential challenges to sustaining high 
levels of growth in the future, including: capacity constraints; the 
need for new investment in infrastructure; potential energy 
shortages; and inflation (7.2% in 2008 according to official 
statistics, but estimated by independent analysts to be 
significantly higher) and the heterodox policies employed to contain 
inflation.  These include pressure on the private sector to limit 
price increases on some consumer goods, delays in the renegotiation 
of public service tariffs, export trade taxes, and export bans.  The 
government has recently introduced measures to stimulate the economy 
and maintain jobs, and is also considering measures to take in the 
face of a crippling agricultural drought. 
 
¶13. (U) Argentina's exchange rate policy is based on a managed 
float.  Market analysts have considered the peso's real exchange 
rate undervalued in previous years, though it is now under 
substantial pressure and has depreciated significantly in recent 
months, currently trading around 3.5 pesos to the dollar.  The 
previous undervaluation, along with historically high global 
commodity prices, helped lift export volumes and values to record 
level, resulting in an estimated $13.3 billion trade surplus in 
¶2008.  Foreign trade was approximately 40% of GDP in 2007 (up from 
only 11% in 1990) and plays an increasingly important role in 
Argentina's economic development.  Exports totaled approximately 22% 
of GDP in 2008 (up from 14% in 2002), and key export markets 
included MERCOSUR (22% of exports), the EU (19%), and NAFTA 
countries (11%). 
 
¶14. (SBU) Two-way trade in goods with the U.S. in 2007 totaled about 
$9.7 billion (according to both U.S. and Argentine government 
statistics).  Total two-way trade in services in 2007 was $4.0 
billion ($2.8 billion exported from US to Argentina, $1.2 billion 
imported in the US from Argentina, according to the Bureau of 
Economic Analysis, U.S. Department of Commerce).  The production of 
grains, cattle, and other agricultural goods continues to be the 
backbone of Argentina's export economy.  High technology goods and 
services are emerging as significant export sectors.  A decline in 
global commodity prices and slower global (and Argentine) growth 
levels in 2009 is expected to reduce Argentina's trade surplus 
levels in the medium term. 
 
¶15. (U) Around 500 U.S. companies are currently operating in 
Argentina, employing over 155,000 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.  Continuing 
Argentine arrears to international creditors and a large number of 
international arbitration claims filed by foreign companies are 
legacies of the 2001/2002 economic crisis that remain to be resolved 
and adversely impact Argentina's investment climate.  Outstanding 
debts include over $20 billion in default claims by international 
bondholders and between $7 and 8 billion owed to official ("Paris 
Club") creditors.  President Cristina Fernandez de Kirchner 
announced in September 2008 that the government intends to pay debts 
to Paris Club creditors and seek a settlement with international 
bondholders of untendered Argentine government debt.  However, 
neither of these initiatives has moved to fruition as of this 
writing.  The government recently nationalized Argentina's private 
pensions system, which affected two U.S. companies that had been 
running pension funds. 
 
-------------------------------------------- 
Promoting U.S. Economic/Commercial Interests 
-------------------------------------------- 
 
¶16. (SBU) In support of U.S. companies operating in Argentina, we 
are encouraging the GoA to maintain 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 longstanding arrears to the USG, 
and are encouraging the GoA to resolve claims of U.S. holders of 
defaulted Argentine bonds.  Regarding currently stalled WTO trade 
negotiations, Argentina has staked out a 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 flexible approach.  We have 
also encouraged the GOA to uphold its G-20 pledge to refrain from 
implementing protectionist measures in response to the international 
financial crisis. 
 
--------------------------------------------- --------- 
Anti-Americanism, Bilateral Relations, Strategic Goals 
--------------------------------------------- --------- 
 
¶17. (SBU) 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.  We believe we have 
found a formula for success through substantially increased media 
outreach, focused attention on youth, and augmented involvement with 
NGOs and community activities.  We seek to use all available 
resources, from visiting American rock groups and sports heroes to 
Nobel Prize winners and U.S. companies, to carry the positive agenda 
forward. 
 
¶18. (SBU) Argentina maintains positive political relations with the 
United States, but there is room for further improvement.  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.  Argentine 
officials react very negatively to perceived affronts their 
sovereignty, often winning public support for their strong 
reactions. 
 
¶19. (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 
International Atomic Energy Agency, the GoA has voted to refer 
Iran's noncompliance to the UN Security Council.  The GoA has also 
endorsed the Proliferation Security Initiative (PSI) and the Global 
Threat Reduction Initiative (GTRI).  Recently, Argentina and the 
U.S. co-hosted in Buenos Aires a gathering of all OAS States to look 
for ways to better implement UN resolution 1540, which is aimed 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. 
 
--------------------------- 
Trafficking in Persons (TIP) 
--------------------------- 
 
¶20. (SBU) 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 last year 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% of trafficking victims 
in Argentina are Argentine, most of whom 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 new federal law and promote the prosecution of 
human traffickers.  Some NGOs have criticized this new law as weak 
on the issue of adult "consent," but the Justice Ministry has been 
vigorous in arresting traffickers and freeing victims in recent 
months. 
 
------------------------- 
Democracy and Rule of Law 
------------------------- 
 
¶21. (SBU) 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 increasing governmental transparency, limiting public 
corruption, and strengthening the political independence of the 
judicial branch.  While we do not succeed 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. 
 
------------ 
Human Rights 
------------ 
 
¶22. (SBU) The Argentine government 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 
wanted by the GoA remains in Florida.  Argentines are also concerned 
about an Argentine citizen on death row in Texas.  The USG and GOA 
generally cooperate on human rights issues in international and 
regional fora. 
 
----------------------------- 
International Crime and Drugs 
----------------------------- 
 
¶23. (SBU) Argentina is a transshipment and destination point for 
narcotics emanating largely from Colombia, Peru, Bolivia, and 
Paraguay.  With its large chemical and pharmaceutical industries, 
Argentina 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.  Justice Minister Fernandez has repeatedly 
stated 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. 
 
--------- 
Terrorism 
--------- 
 
¶24. (SBU) Former President Nestor Kirchner's administration strongly 
supported counter-terrorism policies during his time in office, and 
his wife and successor CFK 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, 2008) wanted in connection with the 
1994 terrorist bombing of the Buenos Aires Jewish Community Center 
(AMIA). 
 
¶25. (SBU) Argentina cooperates with the United Nations, the OAS, its 
neighbors, and the United States on a number of counterterrorism 
initiatives.  We assist the GoA in capacity-building, within the 
restraints created by Brooke Amendment sanctions, to strengthen 
Argentine law enforcement forces.  We also 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 ratified all 
of the 12 international counter-terrorism conventions and has been 
an active participant in the "3-plus-1" tri-border area 
counterterrorism mechanism, which met most recently in Asuncion, 
Paraguay in January 2008.  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. 
 
WAYNE