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C O N F I D E N T I A L SECTION 01 OF 03 BUENOS AIRES 000134 
 
SIPDIS 
 
E.O. 12958: DECL: 02/05/2019 
TAGS: ECON EFIN ETRD PREL PGOV AR BR MX
SUBJECT: ARGENTINE GOVERNMENT'S G-20 PRIORITY:  IFI REFORM 
 
REF: A. 2008 BUENOS AIRES 1520 
     ¶B. 2008 BUENOS AIRES 1537 
     ¶C. BUENOS AIRES 66 
 
Classified By: Ambassador E. Anthony Wayne for Reasons 1.4 (b,d) 
 
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Summary 
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¶1. (C) The GoA is focused intensely on G-20 meetings and 
preparations, and will continue its push for reform of the 
international financial institutions (IFIs), Economy Minister 
Carlos Fernandez told Ambassador February 4.  Fernandez said 
the GoA will promote "reasonable, serious, and prudent 
reforms," arguing that the IDB needs a capital increase, the 
World Bank needs to be more agile and rapid in its lending, 
with more focus on growth, and IMF reforms must include 
increased emerging market participation, greater monitoring 
of developed economies, and "faster use of its lending 
instruments."  Fernandez denied that the GoA is interested in 
IMF financing, but press reports allege this is the GoA's 
primary motivation for seeking IFI reforms via the G-20.  In 
a separate meeting February 2 (septel), ex-Economy Minister 
Domingo Cavallo suggested the USG encourage Mexico and Brazil 
to coordinate G-20 positions with Argentina.  However, 
Minister Fernandez noted that the GoA is not at present in 
formal communication with either country on G-20 issues. 
 
¶2. (C) Comment:  Fernandez took a reasonable line, but it is 
clear the GoA wants more access to financing with few 
conditions, and seems to believe it is speaking for many 
other emerging countries on the topic.  Fernandez, Finance 
Secretary Lorenzino, and Central Bank Governor Redrado are 
serious officials with whom we can negotiate, but the key to 
getting the Argentines to play constructively in the G-20 
process will be the attitude of President Cristina Fernandez 
de Kirchner (CFK) and, to some degree, her Sherpa, Ambassador 
to the U.S. Hector Timerman.  The danger is that the 
President and Timerman, who is not deeply versed in 
economics, will take the G-20 Summit as an opportunity to 
tout the Argentine model, lambaste the IMF, and focus on 
getting more condition-free funding, rather than supporting a 
constructive give and take while seeking their priorities. 
In this context, some investment by Washington in bringing 
Timerman and ultimately CFK along before the April Summit 
could bear good fruit.  Similarly, encouraging Brazil to work 
with Argentina would also be a good way to encourage a more 
constructive Argentine approach in our view.  End Summary. 
 
¶3. (C) The Minister's discussion of the state of the economy 
and GoA concerns about the "Buy America" provisions in 
pending U.S. legislation, as well as the Ambassador's 
advocacy on behalf of U.S. companies and investors, are 
reported septel. 
 
----------------------------- 
G-20 a priority for Argentina 
----------------------------- 
 
¶4. (C) Minister Fernandez emphasized to the Ambassador the 
importance of the G-20 to the GoA.  The Argentine leadership 
highly values it, he said, and added that it is good for the 
world to have a group that is broader than just the G-7.  The 
Ambassador encouraged the GoA to take a serious approach, 
emphasizing Argentina's opportunity to play a key and 
constructive role in finding solutions to the current crisis. 
 Fernandez said that he and other GoA officials are extremely 
concerned about the fragile state of the world economy, and 
particularly the fallout in Brazil, Argentina's major trading 
partner.  "We haven't seen the floor of the crisis," he 
worried, "and global uncertainty is high and worsening." 
 
BUENOS AIR 00000134  002 OF 003 
 
 
While arguing that Argentina is in better shape to weather 
the storm than during past international financial crises, 
Fernandez nevertheless said he sees the G-20 process as 
essential to mitigating the global and regional impact of the 
crisis. 
 
¶5. (C) Fernandez said he sent his top subordinates -- Finance 
Secretary Hernan Lorenzino and Economic Programming Secretary 
Martin Abeles -- to the recent Deputies meeting, and 
commented that the GoA is also participating intensively in 
the working groups, particularly the two focused on IFI 
reforms.  He noted that the Argentine Central Bank (BCRA) is 
leading the Argentine participation in the working groups on 
regulation and financial markets, which he termed "mostly 
developed country issues."  Fernandez said he would lead the 
GoA delegation to the Finance Ministers meeting in March in 
London.  (Local press reports state that President Kirchner 
will attend the April meeting.) 
 
--------------------------------------------- ------- 
GoA Pushes IFI/MDB Reform, Denies Need for IMF Loans 
--------------------------------------------- ------- 
 
¶6. (C) Fernandez reassured Ambassador that the GoA is 
promoting "reasonable, serious, and prudent" IFI reforms, but 
noted that these were crucial given the IFIs' collective 
"failure to predict the crisis" and subsequent "failure to 
respond (adequately) to it."  While reserving his strongest 
criticism for the IMF, Fernandez commented that the World 
Bank moves too slowly to respond to crises.  He argued that 
it needs to become more agile and rapid, and complained that 
there was not enough talk in the G-20 working group on World 
Bank and multilateral bank reform about supporting emerging 
market growth and increasing financial support to emerging 
economies.  With regards to the IDB, Fernandez praised its 
efforts, but called for a capital increase.  (The Ambassador 
noted that Argentina is currently the largest recipient of 
IDB funding, but Fernandez did not comment on the unspoken 
implication that the GoA would presumably be a main 
beneficiary of increased IDB lending.) 
 
¶7. (C) Fernandez argued that IMF monitoring efforts had 
failed to predict the current crisis, and he panned the 
Fund's efforts to assist countries in trouble.  For example, 
he pointed out, the IMF provided financial support to 
Iceland, but only after its economy had imploded.  While 
highlighting the need for "fortifying its financing 
mechanisms," Fernandez mostly underlined the need for greater 
emerging market participation (and "greater voice") in the 
governing of the IMF.  He also accused the IMF of focusing 
monitoring efforts almost exclusively on developing 
countries, and noted that the current crisis highlighted the 
need for the IMF to improve its monitoring of developed 
economies.  (Comment: GoA officials have voiced these same 
criticisms on numerous prior occasions; see Ref A.) 
 
¶8. (C) Fernandez acknowledged local sensitivities related to 
the IMF (given the GoA's demonization of the IMF for its role 
in the 2001/2002 crisis).  Therefore, he noted, the GoA is 
supporting IMF reform in order to help other emerging 
economies and, for its own part, has no intention or need to 
return to the IMF for financing.  Nevertheless, press reports 
on the meeting speculated that that the GoA expects to use 
the G-20 as a means to achieve IFI reforms that would allow 
it to access low-conditionality IMF credits, given that it is 
desperate for funds and has no access to either international 
or domestic financing. 
 
¶9. (C) Responding to Fernandez's question on whether the U.S. 
will support broad reforms of the IFIs, EconOff noted USG 
support to date for increased emerging economy voting rights 
and "voice" in the IMF, as well as USG support to date for 
 
BUENOS AIR 00000134  003 OF 003 
 
 
IFI reform in the G-20 process.  Fernandez acknowledged that 
the GoA had been one of the few IMF members to vote against 
the last IMF reform effort (in May 2008), which increased 
developing country representation and "voice" on the 
Executive Board, and even admitted that the GoA had cast its 
vote mainly because its voting share declined as a result of 
the reform.  Nevertheless, he called the reform "marginal," 
and stated that current efforts need to go farther. 
 
------------------------------------------ 
Coordination with Other LatAm G-20 Members 
------------------------------------------ 
 
¶10. (C) In a separate meeting with the Ambassador on February 
2 (reported septel), ex-Economy Minister Domingo Cavallo 
suggested that one way to moderate Argentina's approach to 
the G-20 and broader approach to economic policy would be to 
encourage greater coordination of positions among Mexico, 
Brazil, and Argentina.  He said he had already recommended 
this to his Mexican and Brazilian colleagues in the G-30: 
ex-President of Mexico Ernesto Zedillo, current Mexican 
Central Bank President Guillermo Ortiz Martinez, and 
ex-President of Brazil's Central Bank, Armenio Fraga Neto. 
(The G-30, a private group focused on deepening understanding 
of international economic and financial issues, issued a 
report on January 15 on financial reform, which Cavallo said 
is aimed at influencing G-20 discussions.)  Cavallo also 
urged the Ambassador to push for a USG initiative to promote 
such coordination among the three countries, particularly on 
G-20 positions.  (Comment: Minister Fernandez did not offer 
hope that the GoA would pursue this option on its own, and 
stated that at this point the GoA is not in formal 
communication with either country on G-20 issues, although 
the G-20 comes up in Argentina's regular informal discussions 
with Brazil.) 
 
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Comment 
------- 
 
¶11. (C) Cavallo's idea is a good one and worth pursuing. 
Brazil and Mexico could have a very positive effect on 
Argentina's position, which was not very constructive at the 
last G-20 Summit.  Unfortunately, President CFK tends to 
launch into grand rhetoric about the Argentine model, the 
failure of the IFIs, and the financing needs of emerging 
economies.  Her Sherpa, Ambassador Timerman, often echoes 
these sentiments and has little grounding in economics.  In 
addition to the positive influence that Brazil (especially) 
and Mexico could have on Argentine behavior, CFK is very 
anxious to get off to a good start with President Obama.  We 
believe some time invested by senior officials with Timerman 
and a well-timed call or message from the President to CFK 
could have a big impact on Argentine performance at the G-20 
(and elsewhere, such as in the Summit of the Americas).  End 
Comment. 
WAYNE