VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0369/01 0892201
ZNR UUUUU ZZH
R 302201Z MAR 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 3428
INFO RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUCNMER/MERCOSUR COLLECTIVE
RUEHLO/AMEMBASSY LONDON 1317
RUEHFR/AMEMBASSY PARIS 1512
RUEHRL/AMEMBASSY BERLIN 1181
RUEHKO/AMEMBASSY TOKYO 0877
RUEHMD/AMEMBASSY MADRID 2242
RUEHOT/AMEMBASSY OTTAWA 0594
RUEHRO/AMEMBASSY ROME 1502
RUEHTC/AMEMBASSY THE HAGUE 0203
RUEHBS/USEU BRUSSELS

UNCLAS BUENOS AIRES 000369 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958:  N/A 
TAGS: EFIN ECON ETRD KSUM PGOV AR
SUBJECT: Argentina: On the Road to London G-20 
 
Ref:   Buenos Airs 294, 230 
 
------- 
Summary 
------- 
 
¶1. (SBU) Argentine President Cristina Fernandez de Kirchner's 
(CFK's) upbeat and cooperative participation in the March 27-28 
Progressive Governance Summit in Chile should presage constructive 
GoA positions at the upcoming G-20 summit.  GoA officials highlight 
CFK's "outstanding" bilaterals in Santiago with Vice President Biden 
and British Prime Minister Brown, and claim the GoA supports all 
U.S. G-20 positions except on IMF reform, where it seeks radically 
reduced conditionality, not just increased IMF resources.  There is 
also discussion among GoA officials that, in anticipation of some 
medium-term GoA need for IMF funding to offset its rapidly declining 
tax base, some G-20 acknowledgement of prior "poor" IMF treatment of 
Argentina as well as sufficient cosmetic G-20 mandated IMF reforms 
could provide the Kirchner administration sufficient political cover 
to return to the IMF.  In line with the GoA's political 
inclinations, CFK can be expected to push for an expanded role for 
government oversight in the global economy.  She also may criticize 
developed nations for instigating the financial crisis and demand 
progress on agricultural subsidies as a pre-condition for 
re-starting WTO Doha round talks.  Other GoA priorities include 
rating agency reform, regulatory oversight of derivatives, and the 
elimination of tax havens.  Despite some policy differences, the 
indications are that CFK wants to play a constructive role at the 
summit, and broadly supports the U.S. call for fiscal stimulus to 
revive global demand.  End Summary. 
 
--------------------------------------------- -- 
Previewing GoA Interventions at the G-20 Summit 
--------------------------------------------- -- 
 
¶2. (SBU) GoA contacts and local media are presenting President 
Cristina Fernandez de Kirchner's (CFK's) comments at the March 27-28 
Progressive Governance Summit on causes and remedies for the global 
financial crisis in Santiago, Chile as a preview of the GoA's 
position at the upcoming G-20 London heads of state summit.  GoA 
Economy Ministry Secretary for Political Economy Martin Abeles, in a 
March 30 conversation with EconCouns, called CFK's participation 
there upbeat and constructive.  He said that at this late date, 
senior Economy Ministry and Central Bank officials anticipate that 
at the London Summit, CFK will echo Brazilian President Lula's 
criticism of the developed north for having instigated the global 
financial crisis.  He anticipated that she will demand that emerging 
market economies like Argentina have ready access to 
minimal-conditionality IFI financing to deal with the crisis' 
fallout on domestic markets. 
 
¶3. (SBU) Citing mutually reinforcing market failures that have 
expanded the financial crisis' reach to the broader global economy 
-- and true to the Kirchner administration's interventionist bent -- 
Abeles predicted that CFK will also insist that expanded government 
participation in economic decision-making be an integral part of the 
new global economic architecture.  He confirmed that CFK will call 
for rating agency reform, more regulatory oversight of derivative 
securities, and a focus on eliminating global tax havens.  On 
protectionism, Abeles anticipated that CFK would hew to the GoA's 
longstanding call for developed nation movement on agricultural 
subsidies and recognition of the need for "proportional" gaps 
between developing and developed nation movement on industrial 
tariffs as pre-conditions for re-energizing the Doha trade round. 
 
--------------------------------------------- --- 
CFK at Santiago Progressive Summit: More Worldly 
--------------------------------------------- --- 
 
¶4. (SBU) Highlighting CFK's Santiago bilaterals with Vice President 
Biden and British Prime Minister Brown, local media has been 
contrasting her "agreement" with the USG and UK on the need for 
concerted G-20 government action to recover global demand with 
French and German concerns about the potential inflationary impact 
of vastly expanded government spending.  Media has also highlighted 
CFK's agreement with the USG and UK on the need to reform the IMF, 
expand lending capacity and efficiency of the MDBs (and particularly 
the Inter-American Development Bank), and impose clear and 
consistent global financial system oversight and regulation. 
 
¶5. (SBU) Foreign Minister Taiana noted to media in Santiago that 
both VP Biden and PM Brown had highlighted to CFK "Argentina's 
experience in crisis (management) and its perseverance in demanding 
changes in the IMF."  According to Taiana, CFK replied to Biden that 
"the Argentine system imploded in ways similar to what is now 
happening on a global level, and so we have a certain expertise in 
this theme.  What is happening now in the world already happened, on 
a smaller scale, in this region."  In her direct comments to media 
at the Santiago Summit, CFK criticized IFIs for not having given 
advance warning of the crisis and called for their "profound reform 
given their disorientation and lack of answers."  She said that "to 
allow the MDBs greater capacity, they must be reformed," and noted 
that Argentina would propose that "important" new money be provided 
to the World Bank and IDB for emerging economy infrastructure 
projects.  Finally, on trade policy, CFK is reported to have called 
for developed countries to lift agricultural trade barriers, 
including subsides. 
 
¶6. (SBU) In a March 29 phone call to Ambassador, Argentine 
Ambassador to the U.S. (and GoA Progressive Governance Summit and 
G-20 Sherpa) Hector Timerman called CFK's meeting with Vice 
President Biden outstanding and said that Argentina is broadly 
supportive of all U.S. G-20 positions except IMF reform, where it 
wants to go further than the U.S.  Timerman explained that the GoA 
wants to build in some acknowledgement of what it alleges to be the 
IMF's past ill-treatment of Argentina.  He added that CFK is very 
supportive of the U.S. stimulus package and any other steps to get 
the U.S. economy going as she sees this as essential for the world's 
recovery. 
 
------------------------------- 
A Return to the IMF?  Unlikely. 
------------------------------- 
 
¶7. (SBU) Notwithstanding the consistent GoA demonization of the IMF 
in the aftermath of Argentina's 2001/2 economic implosion, there 
appears to be a growing anticipation among Embassy contacts in the 
Economy Ministry and Central Bank that some acknowledgement of prior 
"poor" IMF treatment of Argentina as well as "cosmetic" G-20 
mandated IMF reforms could provide sufficient political cover for 
Argentina to return to the fold.  Beyond voting share and management 
reform to increase emerging market weight and decision-making 
participation, a key GoA goal remains a relaxation of conditionality 
-- likely in anticipation of some medium-term GoA need for IMF 
funding to offset its rapidly declining tax base and a bunching of 
sovereign debt maturities in the 2009-11 timeframe.  (Comment: This 
is consistent with GoA interventions on this point during the G-20 
working group and Finance Minister meetings over the last few 
months-- see septel.) 
 
¶8. (SBU) Nevertheless, the likelihood that Argentina could become 
eligible for the IMF's newly announced Flexible Lending Facility 
(FCL) appears remote.  In a conversation with Econcouns, IMF 
Argentine ResRep Gaston Gelos (protect) recalled that the IMF's 
spokesperson specifically highlighted in public comments that 
Argentina was not eligible for the FCL's pre-cursor, the Short-Term 
Liquidity Facility (SLF).  And by any measure, Argentina does not 
meet two of the key "pre-set qualification criteria" that the IMF 
says are at the core of the FCL and that will serve to signal the 
Fund's confidence in the qualifying member's policies and ability to 
take corrective measures when needed.  These are the Fund's 
assessment that the member have: (1) a track record of steady 
sovereign access to international capital markets at favorable 
terms; and (2) data transparency and integrity.  While the Fund has 
clarified that "compensating factors, including corrective policy 
measures under way," would be taken into account in the FCL 
qualification process, local economists agree that it is hard to 
imagine the GoA would be considered eligible absent an Article IV 
review that commits the GoA to cleaning up its statistical 
reporting. 
 
------- 
Comment 
------- 
 
¶9. (SBU) Local media and pundits have commented extensively on the 
"accident of history" that included Argentina in the G-20 club when 
it was formed a decade ago.  This inclusion recognized Argentina's 
status then as a star pupil of World Bank-designed privatization 
efforts and reflected a Peso-US$ peg that overvalued Argentina's 
share of dollar-weighted global commerce and GDP.  These observers 
have expressed concern that, at this second G-20 heads of state 
meeting, CFK could take advantage of the exposure provided by the 
summit to distinguish herself as a populist champion of the third 
world railing against the inequities of modern capitalism. 
 
¶10. (SBU) Those fears seem unlikely to be realized in the wake of 
the warm Santiago bilateral meetings between President Kirchner and 
VP Biden and PM Brown, along with constructive GoA contributions 
over the past weeks in G-20 Summit working groups on IMF, MDB and 
global financial architecture reform.  CFK will most certainly 
criticize the developed north for instigating the global financial 
crisis.  Her input on trade protectionism and IMF conditionality are 
also likely to diverge from the USG's.  However, the indications 
coming out of the Santiago summit are that she wants to play a 
constructive role overall, and broadly supports the U.S. and UK 
focus on doing whatever it takes -- particularly using fiscal 
stimulus -- to revive and expand global demand.  We hope this proves 
to be the case. 
 
WAYNE