VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #0934/01 2261415
ZNR UUUUU ZZH
R 141415Z AUG 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 4222
RUEHBO/AMEMBASSY BOGOTA 1920
RUCNMER/MERCOSUR COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS BUENOS AIRES 000934 
 
USDOC FOR 4321/ITA/MAC/OLAC/PEACHER 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD ECON PREL AR VE
SUBJECT: ARGENTINA: CRISTINA GOES TO CARACAS TO GRAB COLOMBIAN 
MARKET SHARE 
 
REFs: A. CARACAS 1062 
       ¶B. CARACAS 690 
 
¶1. (SBU) SUMMARY:  Argentine President Cristina Fernandez de 
Kirchner (CFK) and Venezuelan President Hugo Chavez met August 11 in 
Caracas to discuss bilateral trade issues and sign 22 commercial 
accords valued at an announced US$1.1 billion.  These trade 
agreements followed Chavez's recently announced intent to seek 
replacements for Colombian imports as punishment for Colombia's 
negotiations with the USG for expanded access to that country's 
military bases.  Kirchner and Chavez were slated to discuss the 
status of BRV plans to nationalize additional holdings of 
Argentina's Techint Group.  According to news reports, Kirchner 
strongly endorsed Chavez and highlighted the importance of 
Argentine-Venezuelan ties, despite the criticism Chavez has received 
in Argentina over the recent expropriation of Techint Group's 
subsidiary investments in Venezuela.  END SUMMARY. 
 
KIRCHNER AND CHAVEZ SIGN TRADE AGREEMENTS 
----------------------------------------- 
 
¶2. (U) CFK followed her August 9-10 trip to Ecuador for the 
re-inauguration of President Correa with an overnight trip to 
Caracas, where she led a 100-member trade mission.  She and Chavez 
signed 22 trade agreements purportedly worth US$1.1 billion.  The 
wide range of accords includes plans for Venezuela to import 
agricultural machinery, leather, and several foodstuffs, including 
beef, rice, poultry, and milk.  CFK sought to take advantage of 
diplomatic tensions between Chavez and Colombian President Alvaro 
Uribe over Colombia's negotiations to allow the U.S. greater access 
to Colombian military bases.  In the immediate wake of Chavez's 
threat to freeze trade relations with Colombia, he and CFK announced 
August 11 that Venezuela will import 10,000 cars (including 
Argentine-manufactured Fords) from Argentina before the end of the 
year.  Reportedly, the Argentine auto industry exported to Venezuela 
about 12,000 units in 2007 and 7,000 units in 2008, but has yet to 
export a single vehicle to Venezuela in 2009.  News reports estimate 
the agreement to import 10,000 Argentine cars could be worth some 
$150 million. 
 
CHAVEZ PLANS TO NATIONALIZE TECHINT GROUP'S INVESTMENTS 
--------------------------------------------- ---------- 
 
¶3. (U) On August 10, the BRV made a payment of $260 million to 
Ternium, Techint's flat steel division, the second payment as part 
of a settlement for the 2008 renationalization of Venezuelan steel 
maker Sidor (Siderurgica del Orinoco), of which Ternium had held a 
majority share.  This installment came just a day prior to the 
meeting between CFK and Chavez where the status of three other 
Techint subsidiaries was expected to be discussed.  While the price 
dispute regarding the BRV's 2008 takeover of Ternium-held equity in 
Sidor had been settled according to announcements on May 7, Chavez 
announced on May 22 his intent to nationalize Tenaris's holdings 
(Tenaris is Techint's steel pipe division) in three other steel 
product firms in Venezuela; Techint has a majority share in two of 
the three.  Following the August 11 meeting, news sources reported 
that Chavez has yet to begin analyzing compensation for these other 
Techint Group holdings.  CFK reportedly praised Chavez and urged 
Argentine business leaders not to "demonize" him for his plans to 
nationalize "strategic" industries. 
 
¶4. (U) In May 2007, Ternium Sidor was targeted by Chavez for 
nationalization.  Ternium, Techint's flat steel manufacturing 
division, owned nearly 60% of Sidor equity, while Chavez moved to 
increase the 20% stake of the Venezuelan state to 79.7%.  Discussion 
of terms went on until an agreement was signed on May 7, 2009, when 
Techint accepted a settlement of $1.97 billion, ending the long 
price dispute (Ternium originally purchased Sidor for $1.79 billion 
in 1997).  The BRV made an initial deposit of $400 million at the 
time of the agreement (Ref B).  $945 million is scheduled to be paid 
over six equal quarterly installments, and the remaining balance, to 
be paid in October 2010, will be adjusted according to benchmark 
light, sweet crude price. 
 
¶5. (SBU) COMMENT:  This was CFK's third trip to Caracas in her 20 
months as president.  Like previous agreements between these two 
governments, the newly announced deals are unlikely to lead to a 
significant increase in bilateral trade.  The Argentine President 
was even quoted by newspapers as describing the agreement to export 
rice as "the most important in Argentine history."  Post does not 
expect actual trade from these commercial accords to match the hype. 
 While they may result in some trade diversion from Colombia to 
Argentina's benefit, the actual volume of Argentine exports from the 
announced deals is likely to be modest.  END COMMENT. 
 
ADDITIONAL BACKGROUND ON TECHINT 
-------------------------------- 
 
 
¶6.  (U) Since its inception in 1945, Compagnia Tecnica 
Internazionale (later renamed Techint) has evolved under the 
leadership of Argentina's Rocca family into one of Argentina's most 
prominent "Multilatinas" (a Latin-American based multinational 
corporation), currently holding stock in over 100 companies in over 
35 countries, while employing over 53,100 permanent employees.  The 
Techint Group, including both public and private companies, has an 
annual turnover of nearly $26 billion.  Led by its two primary 
divisions, Tenaris and Ternium, Techint Group is comprised of 
several subsidiaries, collectively making it Latin America's largest 
steel making company and the largest manufacturer of seamless steel 
tubes in the world.  Tenaris focuses on the manufacturing of steel 
piping and is an important supplier to the global oil industry, 
while Ternium concentrates on flat steel production.  The Techint 
Group also consists of additional companies that specialize in other 
industries. 
 
TENARIS: 
 
Through its subsidiaries, Tenaris engages in the manufacturing of 
steel pipe products for industrial applications, particularly for 
the energy industry.  The company operates in three divisions: 
Tubes, Projects, and Others.  The Tubes division produces and sells 
seamless and welded steel tubular products, while also providing 
related services for energy and industrial applications.  The 
Projects division engages in the production and sale of welded steel 
pipe products, typically used in the construction of major pipeline 
projects.  The Others division manufacturers sucker rods and welded 
steel pipes for electric conduits, industrial equipment, and raw 
materials.  In addition to serving oil, gas, and engineering 
companies, Tenaris also engages in the constructing oil and gas 
gathering, transportation, and processing facilities.  The company, 
which is based in Luxembourg, currently operates in North America, 
South America, Europe, the Middle East, Africa, the Far East, and 
Oceania. 
 
TERNIUM: 
 
Ternium is engaged in the manufacturing and processing of flat and 
long steel products for several industries, including automotive, 
construction, container, food, energy, home appliances, and capital 
goods.  Ternium operates in three divisions: Flat Steel Products, 
Long Steel Products, and Others.  The Flat Steel Products division 
produces various flat steel products, including: hot rolled coils 
and sheets; cold rolled coils and sheets; tin plates; welded pipes; 
hot dipped galvanized and electrogalvanized sheets; pre-painted 
sheets; and other customized products.  The Long Steel Products 
division manufactures long steel products, such as billets, wire 
rods, and bars.  The Other Products division is engaged in the 
production of pig iron, pellets, and pre-engineered metal buildings. 
 Based out of Luxembourg, Ternium operates primarily in South and 
Central America, North America, and Europe. 
 
OTHER OPERATIONS: 
 
Other companies within the Techint Group include: Techint 
Engineering & Construction, Tenova, Tecpetrol, and Humanitas. 
Techint Engineering & Construction is internationally involved with 
the building of pipelines, oil and gas facilities, and metals and 
mining plants.  Tenova offers a number of technologies and capital 
goods for the metals, mining, power, raw material, and rock wool 
industries worldwide.  Tecpetrol is involved in oil and gas 
exploration and development, as well as in gas transmission and 
distribution projects in the South American region.  Humanitas has 
established a relevant presence in the supply of health services in 
Italy. 
 
KELLY