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RR RUEHWEB

DE RUEHBU #0151/01 0432054
ZNR UUUUU ZZH
R 122054Z FEB 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 3027
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHMD/AMEMBASSY MADRID 2199
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS BUENOS AIRES 000151 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ECON PGOV EFIN SP AR
SUBJECT: ARGENTINA, SPAIN CONTAIN AEROLINEAS DISPUTE, CARRY 
OFF A MOSTLY POSITIVE STATE VISIT BY CFK 
 
REF: A. BUENOS AIRES 118 
     ¶B. 08 BUENOS AIRES 1476 
     ¶C. MADRID 59 
 
¶1. (U) This cable was coordinated with Embassy Madrid. 
 
¶2. (SBU) Summary: President Cristina Fernandez de Kirchner 
(CFK) survived a potentially conflictive state visit to Spain 
and received good press locally on her two days of events. 
Both she and her Spanish counterpart, President Jose Luis 
Rodriguez Zapatero, acknowledged but also contained the 
lingering dispute over Argentina's renationalization of 
Aerolineas Argentinas from Spanish conglomerate Marsans.  GOA 
sources prior to the trip had said the President's first 
objective was to gain Spain's reaffirmation that Argentina 
was a worthy destination for Spanish investment, and 
President Zapatero provided just that, stating that his 
government would support Spanish investment in Argentina.  In 
a joint press conference in which both Presidents addressed 
the upcoming G-20 meeting, CFK returned to one of her 
standard themes, calling for a new international system that 
would hold the rich and powerful to the same standards as 
less influential countries.  She argued that the United 
States had gotten away with budget deficits that would not 
have been allowed of smaller countries, that the United 
States was largely responsible for the global financial 
crisis, and that countries needed to consider an alternative 
to the U.S. dollar as a reserve currency.  End Summary. 
 
¶3. (U) Argentine President Cristina Fernandez de Kirchner 
(CFK) was received by Spanish President Rodriguez Zapatero 
and by Spanish King Juan Carlos during a two-day State Visit 
February 9-10.  Argentine press before the visit speculated 
that the renationalization of Aerolineas Argentinas from 
Spanish conglomerate Marsans as well as the nationalization 
of private pension funds, some of which were owned by Spanish 
banks, would cause friction during the visit, a concern that 
was shared also in the Governments of Argentina and Spain 
(Reftels A, C).  Press also focused on the fact that Santa Fe 
Province Senator Carlos Reutemann had declined an invitation 
to join the large party of business, labor, and government 
officials traveling with the President, with speculation that 
he sought to maintain distance from the Kirchners despite 
talk that he might ultimately be their candidate in 2011 
presidential elections. 
 
¶4. (SBU) Influential Argentine Planning Minister Julio de 
Vido, accompanying the President and involved in several of 
the commercial talks, described the State Visit as CFK's most 
important to date given Spain's importance to Argentina in 
commercial and cultural terms.  And, by the standard of 
disasters avoided, the visit appeared to go off relatively 
well and generate from both governments the commitment to a 
positive bilateral relationship despite commercial frictions. 
 In fact, the Argentine press carried fairly positive reports 
on her two days of events. 
 
Aerolineas Looms, Recedes 
------------------------- 
 
¶5. (U) Despite reported concerted efforts to finalize a deal 
prior to CFK's travel, neither the run-up nor the visit 
yielded an agreement on compensation to previous owner 
Spanish tourism group for the GOA's nationalization of 
Argentina flag carrier Aerolineas Argentinas, previously 
owned by Spanish tourism group Marsans (Reftel B).  Marsans 
has filed suit against the GOA in the World Bank's 
International Center for the Settlement of International 
Disputes (ICSID) but will reportedly drop the suit if an 
acceptable compensation agreement is reached. 
 
¶6. (U) The proposed deal hinges on the GOA taking over 
contractual obligations from Marsans to purchase up to thirty 
Airbus planes valued at US$2-3 billion out of as many as 73 
that Marsans had earlier contracted to buy.  Marsans 
"compensation" would reportedly be the return to it by Airbus 
of an earlier downpayment in the US$100 million range.  Daily 
"La Nacion" reported on 11 February that Spanish President 
Zapatero had discussed with CFK the possibility that Spain 
would provide some of the financing for this purchase to 
facilitate a deal.  Daily "Clarin" reported February 12 that 
a sticking point in negotiations appears to be an Airbus 
 
requirement that the GOA/Aerolineas pay it US$400 million up 
front. 
 
¶7. (SBU) Even if the GOA can come up with the sizable 
downpayment, the GOA's ability to finance the balance of this 
large purchase will be challenging (Airbus reported wants 
"sufficient guarantees" of payment).  (Note: Aerolineas 
recently signed a letter of agreement with Boeing for the 
purchase of twelve 737s; financing for that deal has also yet 
to be secured.) 
 
¶8. (SBU) Despite the tension over the Aerolineas 
nationalization, President Zapatero offered on February 9 the 
diplomatic formulation that this dispute and other points of 
friction constituted only "one percent" of cases in the 
overall commercial relationship, and that "99 percent" of the 
business relationships were positive.  He described his 
government's continued support for Marsans and hope that a 
mutually satisfactory settlement would be reached.  Argentine 
press reported that some in the Spanish Government had felt 
Marsans was pushing to trongly to make the overall 
Spain-Argentina bilateral relationship contingent on their 
commercial dispute.  CFK said that the government had not 
sought nationalization but had found it necessary to 
guarantee "continuity of an essential service" for the 
Argentine people and that the GOA also sought a reasonable 
settlement. 
 
Other Business News 
------------------- 
 
¶9. (SBU) Local media reported that Spanish/Argentine 
hydrocarbon major Repsol/YPF confirmed to CFK that the 
company would continue with the US$2 billion investment plan 
it had announced in 2008 and strive to sustain employment. 
Spain's Telefonica pledged to continue investing in Argentina 
and reaffirmed its plans to invest $1.7 billion to develop 
broad band and "nextgen" cellular services. 
 
Atmospherics 
------------ 
 
¶10. (SBU) CFK was reportedly received three times by the 
Spanish King, including at the formal dinner to which the 
Argentine President was a half-hour late, and had a 
substantive exchange with President Zapatero.  Press reported 
a positive tone, reflecting the overarching desire of these 
two large, culturally close and commercially intertwined 
partners to keep things positive despite Spanish 
disappointments with various aspects of Argentine commercial 
policy.  References by the King and Spanish President to 
judicial security were described by leading Argentine 
columnist Joaquin Morales Sola ("La Nacion") as an oblique 
and diplomatic way of marking deep Spanish concerns about 
Argentine decisions on Aerolineas, pension funds, and other 
commercial decisions.  Argentine press later picked up 
Spanish press critiques of CFK's tardiness and other gaffes 
in Madrid (para 12). 
 
The Unfairness of It All 
------------------------ 
 
¶11. (SBU) Columnist Morales Sola also noted the ideological 
angle CFK took in discussing the upcoming G-20 meetings in a 
joint press appearance with President Zapatero (whereas 
Zapatero had focused on pragmatic proposals).  Among CFK's 
recommendations were that countries would need to launch 
counter-cyclical policies, something she said the IMF did not 
allow of countries except the United States, which was 
allowed to run an enormous deficit financed by the rest of 
the world.  "One thing we will have to discuss then," she 
said, "is whether the dollar will remain as the world's 
reserve currency, because if it does and if the United States 
continues to be the source of toxic financial instruments and 
the world's most phenomenal budget deficit, financed by the 
financial reserves of all the rest of the world's countries, 
then I believe we will not get out of this crisis."  She also 
noted the unfairness of a system that had been sustained in 
recent years by developing country growth rates but that 
would now punish these countries the most as capital was 
quickly transferred to financial safe havens or to the United 
States. 
 
 
¶12. (SBU) Embassy Madrid Comment: Spanish commentators 
focused on CFK's perceived undiplomatic behavior while in 
Spain.  Not only was her three-day trip shortened to only two 
days before it even began, but she was described by one 
journalist as "tip-toeing" through the Spanish capital, past 
business leaders with whom she refused to meet publicly.  The 
Argentine President was further criticized for remaining 
seated to address a special February 10 joint session of both 
houses of the Spanish Congress, during which she also 
defended dialogue with terrorists one day after the Basque 
terrorist group ETA detonated a car bomb (injuring none) near 
Madrid's international fairgrounds.  Spanish MFA sources were 
pleased with the visit, which went as well as could be 
expected despite the very public commercial dispute, but they 
noted that Grupo Marsans did not share that view. 
WAYNE