VZCZCXYZ0000
OO RUEHWEB

DE RUEHBU #0627/01 1482125
ZNR UUUUU ZZH
O 282125Z MAY 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3789
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

UNCLAS BUENOS AIRES 000627 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958:  N/A 
TAGS: ECON EINV EIND ELTN ETRD AR
SUBJECT: Argentina: GoA Pension Fund Gives Credits to General Motors 
to Sustain Domestic Production 
 
Ref: A) 08 Buenos Aires 1443 
 B) Buenos Aires 1682 
 
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Summary 
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¶1. (SBU) The GOA's national pension fund (ANSES) will provide GM 
Argentina up to US$ 70 million in credits to support the company's 
production of its new "Viva" compact car.  The Viva will incorporate 
Brazilian parts and be targeted for export to other Latin American 
markets.  President Cristina Fernandez de Kirchner is slated to 
attend a June 4 signing ceremony at GM's Santa Fe province plant.  A 
GoA official admitted that, beyond the Kirchner administration's 
focus on sustaining employment in Argentina's ailing auto sector, 
consideration had been given in extending this credit to the 
bilateral political benefits to be gained from supporting a U.S. 
company's operations here.  This latest ANSES domestic funding 
initiative comes a month before mid-term elections and on the heels 
of a number of other GoA announcements of programs to support 
Argentina's auto industry.  In the context of speculation on GM's 
imminent bankruptcy and heated bidding for GM's European operations, 
a local Fiat executive confirmed that Fiat has also made an offer 
for GM's Latin American operations.  According to GM Argentina, the 
company remains a separately incorporated and profitable venture 
whose intertwined Argentine and Brazilian production has been the 
single most profitable part of the GM worldwide for the past four 
years.  End Summary. 
 
¶2. (SBU) General Motors Argentina President Edgar Lourencon 
confirmed to EconCouns that GoA-controlled pension fund ANSES will 
lend the company up to US$ 70 million (Pesos 260 million) for four 
years to provide the company a base to ramp up production of its new 
"Viva" compact car.  Interest on the loan will be calculated at a 
variable rate based on the local "Badlar" wholesale deposit rate 
(currently about 13%) plus 6%.  Funds will be channeled through a 
"fideicomiso" trust fund managed by GoA-owned Banco Nacion, with 
GM's re-payment to the trust fund guaranteed by its export revenues. 
 GM Argentina will provide equivalent internal funding in the US$ 70 
million range to match the GoA loan. 
 
¶3. (SBU) Lourencon explained that the Viva car concept was 
originally announced with much fanfare in a 2007 meeting between 
then-GM CEO Wagner and then-President Nestor Kirchner as part of 
GM's commitment to continue investing in Argentina.  He attributed 
the long delay to GoA bureaucratic mis-steps, Argentina's 
precipitous economic downturn, and the significant drop in domestic 
automobile consumption over the past eight months.  Lourencon 
clarified that the Viva will not be the wholly domestically produced 
"Argentine peoples car" envisioned by Internal Commerce Secretary 
Guillermo Moreno:  as with most of GM Argentina's production, it 
will incorporate components from GM's international production 
network, primarily from GM's Brazilian operations. 
 
¶4. (SBU) Although the final ANSES/Banco Nacion/GM loan agreement is 
yet to be signed, the Casa Rosada (office of the President) has 
asked General Motors to host a signing ceremony at its Buenos Aires 
province plant June 4. President Cristina Fernandez de Kirchner, 
Production Minister Debora Giorgi, Internal Commerce Secretary 
Guillermo Moreno (who Lourencon called a driving force behind this 
ANSES funding initiative), Labor Minister Carlos Tomada, and ANSES 
Director Amadou Boudou are to attend.  Lourencon asked that the U.S. 
Embassy send an appropriate level representative as well. 
 
¶5. (SBU) Lourencon noted that GM produces roughly 20% of Argentina's 
automobiles and just dropped to the number two rank in 2008 
following a significant capacity expansion investment by French 
rival Peugeot.  GM Argentina produced 112,000 units in 2008, 
exported roughly 70,000 units (primarily to Brazil), and sold 
domestically 95,000 units (a 16% market share that including models 
imported from Brazil).  Like most GM cars produced in Argentina, the 
Viva model will incorporate Brazilian parts and up to 80% of its 
production will target export markets.  Local daily La Nacion 
recently quoted GM company sources as projecting that Viva 
production would ramp up by the third quarter of 2009, with 
10-12,000 units produced this year, and a significantly larger 
production volume in 2010. 
 
--------------------------------------------- 
GM's Mercosur Focus and GM Argentina's Future 
--------------------------------------------- 
 
¶6. (SBU) Lourencon explained that GM approaches the broader 
Brazil/Argentina Mercosur market as a single strategic business unit 
and that GM has optimized its production to take full advantage of 
the Brazil-Argentina auto pact (Ref A).  In the context of GM's 
current bankruptcy discussions with the USG and parallel bidding for 
 
GM's European manufacturing facilities by Fiat and others, Lourencon 
noted that GM Argentina is a separately incorporated profitable 
stand-alone enterprise and that GM's Latin America-wide production 
has been the single most profitable contributor to the U.S. parent 
company's bottom line for the past four years running.  He confirmed 
there has been some media speculation that Fiat may be interested in 
bidding for some of GM's Latin American assets as well. 
 
¶7. (SBU) Separately, in a May 29 conversation with Econ Couns, Fiat 
Argentina CEO (and outspoken Vice President of the Argentine 
industrial Union) Cristiano Ratazzi confirmed that Fiat has two 
offers on the table to GM: one for GM Europe (Opel) alone and one 
for GM Europe plus GM Latin America.  He dismissed Lourencon's 
contention that GM's stand-alone status ensures its survivability as 
meaningful only in the very short term: GM Argentina depends on the 
U.S. mother company for all of its R&D, the key to developing and 
introducing new models, Ratazzi said. 
 
-------------------------------------------- 
ANSES: Investing in Domestic Auto Production 
-------------------------------------------- 
 
¶8. (SBU) Sergio Chodos, former Economy Ministry Finance Secretary 
under Ministers Felisa Miceli and Miguel Peirano in 2006-7, became 
the GoA-appointed head of the private pension fund (AFJP) umbrella 
organization in the run-up to the GoA's nationalization of AFJP 
assets in December 2008 (Ref B). He is currently serving as the 
Deputy Director of ANSES' Stability Fund, which manages now 
nationalized AFJP monies.  In a May 26 conversation with EconCouns, 
he called himself the originator of the GM loan concept and 
emphasized that it meets the ANSES Stability Fund's two primary 
missions: to sustain domestic employment and to encourage the 
expansion of local content and domestic value-added in domestic 
production. 
 
¶9. (SBU) Chodos hinted that additional ANSES loans to Argentina's 
auto sector, including auto parts manufacturers, will follow in the 
near term. (Local media is reporting that ANSES is negotiating with 
Peugeot to support the domestic production of its new 308 and other 
models).  He asked whether the U.S. Embassy had any information on a 
possible sale of GM Argentina to the Fiat Group, admitting that, 
beyond the GoA's primary employment sustaining rationale for making 
this credit available to GM, consideration had been given to the 
bilateral political benefits to be gained from supporting a U.S. 
company's operations here. 
 
----------------------------- 
Comment: ANSES to the Rescue? 
----------------------------- 
 
¶10. (SBU) This latest ANSES funding initiative comes a month before 
mid-term elections and on the heels of a number of complementary GoA 
announcements of programs to support Argentina's ailing auto 
industry.  Two successive Kirchner administrations have repeatedly 
pointed to GoA support for the auto sector as part of their efforts 
to further diversify Argentina's economy away from its traditional 
agricultural commodity exporting base and towards the kind of 
higher-end industrial manufacture that expands domestic value-added 
and high wage employment.  Other recent GoA auto sector support 
programs included a December 2008 announcement of ANSES-subsidized 
car loans for first-time buyers (a program later expanded to a 
broader buyer base), a February 2009 "junker" trade-in subsidy 
program, and a March 2009 announcement of Labor Ministry-managed 
employment subsidies for car and car part companies. 
 
¶11. (SBU) The broader question raised by this loan - and one that 
opposition politicians have repeatedly raised in mid-term election 
campaign talks - is whether such investments of nationalized pension 
fund resources are the most productive use of scarce GoA capital and 
whether they are in the best long-term interest of current and 
future pensioners. 
 
WAYNE