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DE RUEHBU #1095/01 2751402
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FM AMEMBASSY BUENOS AIRES
TO RUEHC/DEPT OF LABOR WASHINGTON DC PRIORITY
INFO RUEHC/SECSTATE WASHDC 4422

UNCLAS BUENOS AIRES 001095 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ELAB PGOV ECON ETRD AR
SUBJECT: Scenesetter for Secretary Solis' Visit to Argentina, 
October 6-8 
 
¶1. (SBU) On behalf of Embassy Buenos Aires, I warmly welcome your 
October 6-8 visit to Argentina.  I will have been in the country a 
little less than three weeks when you arrive, and I am honored to 
have you among my first visitors.  The Government of Argentina will 
also be extremely interested in the first visit by an Obama 
Administration cabinet member to Argentina.  The GOA is interested 
in deepening relations with the United States and values high level 
contacts with the administration. 
 
¶2. (SBU) Even in the company of ministers from throughout the 
hemisphere, your visit is certain to generate attention and press. 
Most of that press we expect to be positive, but we will also draw 
your attention to our separate message on an ongoing labor dispute 
involving U.S. company Kraft Foods, a dispute that has generated 
critical comments in Argentina about the U.S. role. 
 
¶3. (SBU) I look forward to hosting you and some of your party to 
dinner at my residence on October 7.  We plan to include leaders 
from organized labor as well as some private sector and civil 
society representatives.  I would also plan to participate in your 
bilateral meeting with the Argentine Minister of Labor Carlos 
Tomada.  I hope that you will have the chance to meet President 
Cristina Fernandez de Kirchner, who I understand is planning to open 
the Labor Ministerial.  While I understand that meeting may focus on 
regional labor issues, it will be a good opportunity to encourage 
Tomada to play a role in addressing issues like 
trafficking-in-persons and child labor in Argentina while 
underscoring our support for the full application of labor rights, 
something worth underscoring following the dispute at Kraft foods. 
 
 
¶4. (U) Please let me know personally if there is anything else we 
can do to meet your needs while in the country.  In the meantime, I 
have asked my Embassy staff to make every effort in support of you 
and your team while in Argentina.  I hope that your meetings will be 
a significant success.   I am providing the following background 
material on Argentina to help you prepare for your visit. 
 
----------------- 
Political Context 
----------------- 
 
¶5. (SBU) You arrive in Argentina three months after the ruling 
Victory Front (FpV) suffered an electoral defeat in the June 28 
congressional mid-term elections.  In the wake of the global 
economic crisis, President Cristina Fernandez de Kirchner (CFK) 
asked the Congress to move up the congressional mid-term elections 
from October to June, purportedly so that Argentine politicians 
could get past electoral politics and focus on the crisis.  The 
elections were portrayed by many as a referendum on the President 
Fernandez de Kirchner and her politically active husband and 
predecessor as President, Nestor Kirchner.  The FpV and allies won 
only about 30% of the vote nationwide and lost their working 
majority in both houses of Congress.  In the key race in the 
country's largest population center, Buenos Aires Province, Nestor 
Kirchner led his party's candidate list but lost by 2.4 percentage 
points to the ticket headed by multimillionaire Peronist dissident 
Francisco de Narvaez.  Kirchner won a seat in Congress, but the 
second-place finish was a clear setback.  Ruling party candidate 
lists also placed second or worse in major provinces like Santa Fe, 
Cordoba, and Mendoza, but the opposition victories were shared among 
different national coalitions and provincial movements. 
 
¶6. (SBU)  A week after the FpV's defeat, CFK made a number of 
cabinet changes.  In an effort to regain political momentum, the 
government initiated a round of talks in mid-July with opposition 
political parties, the farm sector, as well as the country's 23 
governors and the mayor of Buenos Aires City.  The dialogue provoked 
little in the way of consensus policies but did exacerbate splits in 
the opposition. 
 
¶7. (SBU) In August, the CFK administration launched a major push to 
reform the country's antiquated media laws.  The initiative, which 
would limit ownership of multiple television and radio broadcast 
channels by single groups, was seen as a challenge in particular to 
the large Clarin Media Group, which has been consistently critical 
of the Kirchners.  The government is pressing to pass the bill prior 
to the seating of the new, opposition-controlled Congress in 
December, but dissents by some ruling-party Senators may require the 
government to compromise on the legislation, including on issues of 
media ownership and on government influence over broadcast content. 
Also in August, the Government secured congressional approval to 
extend for one year special executive powers over the economy, 
including the ability to set agricultural export taxes. 
 
¶8. (SBU) CFK took office on December 10, 2007, succeeding her 
husband.  CFK is an experienced politician, having served in the 
Chamber of Deputies and later in the Senate during her husband's 
first term.  She won the 2007 presidential election with 45% of the 
vote over a divided opposition.  Having campaigned on themes of 
change and continuity, she retained most of her husband's cabinet 
 
and agenda.  During CFK's first year in office, however, she 
suffered a sharp drop in popularity due to a four-month conflict 
with the farming sector over agricultural export taxes, a conflict 
that is still simmering.  Since then other factors, including a 
gradual economic decline, perceptions of rising crime, and political 
disillusionment among certain segments of the population, have 
contributed to continuing political difficulties for the President. 
Her approval ratings now range between 26% to 30%. 
 
¶9. (SBU)  Looking ahead, CFK's major policy challenges are to 
maintain government programs, prevent job losses, prevent a major 
slip in the GOA's finances, and address public concerns over poverty 
and crime and the resulting deterioration in personal security. 
Meanwhile, the opposition's challenge is to unify and present a 
clear policy alternative.  Presidential elections will occur in 
¶2011. 
 
Bilateral Relations 
------------------- 
 
¶10. (SBU) Bilateral relations are good but sometimes delicate.  For 
example, in December 2007, two days after President Fernandez de 
Kirchner was inaugurated, the GOA reacted negatively to news reports 
concerning a federal case in Miami against three Venezuelans and an 
Uruguayan who were arrested on charges of operating in the United 
States as Venezuelan agents.  Charges and testimony in the case 
alleged events that were embarrassing for the GOA.  We agreed at the 
end of January 2008 to put the case behind us and to work to 
strengthen bilateral cooperation, which we have done in part by 
reviving a special consultative process that quickly led to 
agreements in areas such as alternative energy, nanotechnology, and 
national park administration.  We also agreed to promote greater 
parliamentary exchanges.  The election of President Barrack Obama 
also changed significantly the approach of CFK and her advisors 
toward the U.S. Government, though areas of friction remain. 
 
¶11. (SBU) Argentina cooperates with us and multilateral partners in 
regional security, counter-terrorism, drug interdiction, 
nonproliferation and in contributing troops to U.N. peacekeeping 
missions.  The GOA has been a strong international voice on arms 
control and nonproliferation issues.  In the International Atomic 
Energy Agency, the GOA has voted to refer Iran's noncompliance to 
the UN Security Council.  The GOA has also endorsed the 
Proliferation Security Initiative (PSI) and the Global Threat 
Reduction Initiative (GTRI).  Recently, Argentina and the U.S. 
co-hosted in Buenos Aires a gathering of all OAS States to look for 
ways to better implement UN resolution 1540, which is aimed at 
keeping WMD from terrorists.  It is under the banner of science that 
the USG and Argentina have realized some of the best examples of 
bilateral cooperation, and we have a long history of aerospace 
cooperation with Argentina. 
 
Economic Context 
---------------- 
 
¶12. (SBU) Argentina, once one of the richest countries of the world, 
has experienced much economic and political instability over the 
last 70 years, culminating in a profound political and economic 
crisis in 2001-2002 that was comparable to our Great Depression and 
included Argentina's default on $82 billion in debt, the largest 
sovereign debt default in history.  Many Argentines are at a loss to 
explain how their country, blessed with rich natural resources, 
fertile land, and low population density, fell so far short of its 
potential.  Some blame the military dictatorships, which 
predominated between 1930 and 1983.  Others blame corruption and a 
series of populist measures taken since 1944.  Many Argentines blame 
external factors, particularly the IMF and alleged U.S. 
insensitivity to their plight for the last crisis. 
 
¶13. (U) Argentina's economy sustained a robust recovery following 
the 2001/2002 economic crisis, with five consecutive years of over 
8.5% real growth in gross domestic product (GDP).  Argentine GDP 
reached US$ 320 billion in 2008, approximately US$ 8,150 per capita. 
The economic expansion created jobs, with unemployment declining 
from over 21% in 2002 to 7.3% as of the fourth quarter of 2008. 
Poverty levels also dropped.  According to government statistics, 
15.3% of the population in the 31 largest urban areas remained below 
the poverty line in the second quarter of 2008, down from over 50% 
in the immediate aftermath of the economic crisis. 
 
¶14. (U) Argentina benefits from rich natural resources, a highly 
educated population, a globally competitive agricultural sector, and 
a diversified industrial base. Argentina's post-crisis move to a 
more flexible exchange rate regime, along with sustained global and 
regional growth, a boost in domestic aggregate demand via monetary, 
fiscal, and income distribution policies, and favorable 
international commodity prices and interest rate trends were 
catalytic factors in supporting renewed growth between 2003 and 
¶2008. A higher tax burden, improved tax collection efforts, and the 
recovery's strong impact on tax revenues supported the government's 
successful efforts to maintain primary fiscal surpluses since 2003. 
 
 
¶15. (SBU) Although Argentina continued its strong expansion in 2008, 
with GDP growth estimated at 7%, many economists expect a sharp 
deceleration of economic activity in 2009, largely due to the impact 
of ongoing global financial turmoil and the resulting slowdown in 
world economic output.  In addition to the challenges posed by 
global economic trends, economic experts have identified a range of 
other potential challenges to sustaining high levels of growth in 
the future.  The government has introduced measures to stimulate the 
economy and maintain jobs. 
 
¶16. (U) Argentina's exchange rate policy is based on a managed 
float.  Market analysts have considered the peso's real exchange 
rate undervalued in previous years.  The previous undervaluation, 
along with historically high global commodity prices, helped lift 
export volumes and values to record level, resulting in an estimated 
$12.6 billion trade surplus in 2008.  Foreign trade was 
approximately 39% of GDP in 2008 (up from only 11% in 1990)and plays 
an increasingly important role in Argentina's economic development. 
Exports totaled approximately 21% of GDP in 2008 (up from 14% in 
2002), and key export markets included MERCOSUR (23% of exports), 
the EU (19%), and NAFTA countries (10%). 
 
¶17. (SBU) Two-way trade in goods with the U.S. in 2008 totaled about 
$13.3 billion (according to the U.S. International Trade 
Commission).  Total two-way trade in services in 2008 was $3.4 
billion, according to the Bureau of Economic Analysis, U.S. 
Department of Commerce.  Total two-way trade in services in 2007 
(the latest data available) was $4.0 billion, $5.0 billion, $3.5 
billion in U.S. exports to Argentina, and $1.5 billion in U.S. 
imports from Argentina, according to the Bureau of Economic 
Analysis, U.S. Department of Commerce.  The production of grains, 
cattle, and other agricultural goods continues to be the backbone of 
Argentina's export economy. High technology goods and services are 
emerging as significant export sectors.  A decline in global 
commodity prices and slower global (and 
Argentine) growth levels in 2009 is expected to reduce Argentina's 
trade surplus levels in the medium term. 
 
¶18. (U) Around 500 U.S. companies are currently operating in 
Argentina, employing over 155,000 Argentine workers. U.S. investment 
in Argentina is concentrated in the manufacturing, information, and 
financial sectors.  Other major sources of investment include Spain, 
Chile, Italy, France, Canada, Japan, and Brazil.  Continuing 
Argentine arrears to international creditors and a large number of 
international arbitration claims filed by foreign companies are 
legacies of the 2001/2002 economic crisis that remain to be resolved 
and adversely affect Argentina's investment climate.  Outstanding 
debts include over $28 billion in default claims by international 
bondholders and approximately $8 billion owed to official ("Paris 
Club") creditors.  President Fernandez de Kirchner announced in 
September 2008 that the government intends to pay Paris Club 
creditors and seek a settlement with international holders of 
untendered Argentine government debt.  However, neither of these 
initiatives has moved to fruition as of this writing.  The 
government in late 2008 nationalized Argentina's private pensions 
system, which affected two U.S. companies that had been running 
pension funds. 
 
The Labor Scene 
--------------- 
 
¶19. (SBU) Argentina has a strong and politically well-connected 
labor movement.  At the national level, the General Confederation of 
Workers (CGT), headed by Hugo Moyano since 2004, is recognized as 
the exclusive legitimate representative of trade federations and 
trade unions.  The International Labor Organization has rejected 
Argentina's internal regulations granting exclusive authority to one 
confederation as violating Convention 87 on Freedom of Association. 
A smaller and more radical national organization, the Argentina 
Worker Central (CTA), continues to petition for government 
recognition.  At stake are both influence and access to state 
resources, for example government provided health benefits that are 
channeled through the labor confederation structure.  The CTA has a 
broad definition for membership, including in its ranks the 
unemployed and informal workers, which the CGT does not.  The CGT is 
divided into several factions.  Moyano is viewed as a strong 
political supporter of the Kirchners and their policies, a position 
not shared uniformly among CGT affiliate federations in different 
sectors. 
 
¶20. (SBU) At the factory level or occupational sector level, 
Argentine law recognizes one union as the legitimate representative 
for collective bargaining purposes, as well as for the mandatory 
retention of dues by the employer.  The Government will give a basic 
legal registration to all other unions, but only the one showing a 
plurality of membership will be given full recognition.  Often there 
is a contest at the shop level between CGT and CTA affiliates, and 
this was one significant dynamic at the labor action at Kraft foods. 
 The initial demand for benefits and then the subsequent protests at 
the plant were led by a smaller, unrecognized affiliate of the CTA. 
 
 
DOL Report on Child and Forced Labor 
------------------------------------ 
 
¶21. (SBU) The Government of Argentina conveyed its strong objection 
to us over the publication in August of the Congressional Department 
of Labor Report on Goods Produced with Child and Forced Labor.  That 
report listed 11 product areas as produced with child labor, one of 
which, garments, was on the forced labor and the forced child labor 
listing.  Most products were agricultural, including grapes, 
blueberries, and yerba mate, the herbal base of the Argentines 
national variation on tea.  The report did not generate significant 
press coverage, but may well be raised in private during your visit. 
 
 
¶22. (SBU) Although we noted that the report carried no threatened 
sanctions, the GOA objected on several grounds.  First, that the 
report unfairly identified entire sectors rather than specific 
companies suspected of violations.  They fear that this could 
subject exporters with good labor practices to consumer boycotts 
that might target products included on the list.  Second, the 
government strongly objected to being identified in the first 
tranche of a partial global list, which meant that other countries' 
products might be favored even though they might also have problems 
that were simply not reported on to this point.  Third, Argentina 
believes the entire report to be illegitimate because unilateral, 
arguing that its policy is to respond only to reports by appropriate 
multilateral organizations such as the ILO. 
 
¶23. (SBU) The Government took umbrage because it takes pride in its 
relatively welcoming policies toward legal and illegal immigrants 
from countries in the region, many of whom nonetheless end up 
working in informal labor situations vulnerable to exploitative 
labor practices.  Finally, Argentina believes it is paying a cost 
for being welcoming to the work of NGOs on labor issues, since these 
organizations provided much of the material for the report.  They 
warned that this type of reporting by the U.S. Government was 
ultimately counter-productive to getting positive results against 
child labor and forced labor. 
 
Trafficking in Persons (TIP) 
--------------------------- 
 
¶24. (SBU) Argentina is on the USG's Tier-2 Watchlist for lack of 
progress in providing greater assistance to victims and curbing 
official complicity in trafficking at the provincial level. 
However, the legislature last year passed fairly comprehensive 
anti-TIP legislation that makes TIP-related violations a federal 
crime.  Argentina is a source, transit, and destination country for 
men, women, and children trafficked for the purposes of commercial 
sexual exploitation and forced labor.  According to the 
International Organization for Migration, 80% of trafficking victims 
in Argentina are Argentine, most of whom are trafficked for the 
purpose of sexual exploitation.  Bolivians and Peruvians are 
trafficked into the country for forced labor in sweatshops and 
agriculture.  Argentine efforts to combat trafficking have focused 
on prevention and training of security and government officials. 
 
¶25. (SBU) One of our key goals in the Embassy this year is to 
support a vigorous GOA implementation of the new federal law and 
promote the prosecution of human traffickers.  We supported this 
with a week-long conference for judges and prosecutors September 
21-25, and have dedicated resources for continuing technical 
assistance.  We will also encourage the GOA to provide more uniform 
services to trafficking victims, an area of weakness listed in the 
TIP report.  Some NGOs have criticized this new law as weak on the 
issue of adult "consent," but the Justice Ministry has been vigorous 
in arresting traffickers and freeing minor and adult victims. 
 
Promoting U.S. Economic/Commercial Interests 
-------------------------------------------- 
 
¶26. (SBU) In support of U.S. companies operating in 
Argentina, we are encouraging the GoA to maintain a more welcoming 
investment climate, with greater regulatory, legal, and tax regime 
consistency.   We expend a good deal of effort supporting and 
working with U.S. companies.  We are working closely with the GoA 
and the Paris Club of sovereign creditors to resolve longstanding 
arrears to the USG, and are encouraging the GOA to resolve claims of 
U.S. holders of defaulted Argentine bonds.  Regarding currently 
stalled WTO trade negotiations, Argentina has staked out a position 
that links acceptance of developed economy agricultural sector 
proposals with more developing nation flexibility on industrial 
tariff cuts.  We have been urging them to adopt a more flexible 
approach.  We have also encouraged the GOA to uphold its G-20 pledge 
to refrain from implementing protectionist measures in response to 
the international financial crisis. 
 
Anti-Americanism and Public Diplomacy 
------------------------------------- 
 
¶27. (SBU) The greatest overall challenge we face in Argentina is the 
high level of anti-Americanism in the Argentine public. Argentina 
consistently registers the highest levels of anti-Americanism in the 
hemisphere in public opinion polls.  Working to change these 
perceptions is the Embassy's highest priority.  We believe we have 
found a formula for success through substantially increased media 
outreach, focused attention on youth, greatly expanded English 
language teaching program, and augmented involvement with NGOs and 
community activities.  We seek to use all available resources, from 
visiting American rock groups and sports heroes to Nobel Prize 
winners and U.S. companies, to carry the positive agenda forward. 
 
¶28. (SBU) The election of President Obama has given our public 
diplomacy efforts a big boost.  He rates very highly in opinion 
polls and the President of Argentina has made clear her hope to 
build a good relationship with him.  Argentina maintains positive 
political relations with the United States, but there is room for 
further improvement.  One of the major tasks facing the Embassy is 
forging relationships of trust with a government that has been 
largely inward-focused and intent on maintaining an image as 
independent from our country. 
 
Democracy and Rule of Law 
------------------------- 
 
¶29. (SBU) We work with the GOA, media, and civil society to 
strengthen democratic institutions, fight corruption, and reinforce 
civilian control of the military in a manner that respects Argentine 
leadership on these domestic issues.  We promote key reform efforts 
such as increasing governmental transparency, limiting public 
corruption, and strengthening the political independence of the 
judicial branch.  While we do not succeed on every issue, we 
continue to cultivate the GoA as a cooperative partner in 
multilateral fora, and seek Argentina's cooperation in the defense 
of democracy and the observance of human rights in countries like 
Cuba, Honduras, Venezuela, and Bolivia, as well as UN peacekeeping 
in Haiti. 
 
Human Rights 
------------ 
 
¶30. (SBU) The Argentine government generally respects the human 
rights and fundamental freedoms of its citizens.  The Kirchner 
government's human rights policy focuses on seeking justice for the 
human rights violations committed during the 1976-83 military 
dictatorship, which resulted in the disappearance of between 
11,000-30,000 leftist guerrillas, political dissidents and related 
family members.  It does not, however, focus on bringing to justice 
armed guerrilla groups who also committed significant but smaller 
scale human rights abuses during the same period (known as "the 
Dirty War").  To date, the courts have indicted an estimated 508 
persons for crimes against humanity, and sentenced 32 former 
officials of the military regime, including a military chaplain.  We 
recently returned one person sought here for human rights violations 
and another individual wanted by the GoA remains in Florida. 
 
¶31. (SBU) The USG and GOA generally cooperate on human rights issues 
in international and regional fora.  The GOA has not been a strong 
advocate for reform in Cuba and has publicly pressed for the United 
States to end its trade embargo and other restrictions. 
 
International Crime and Drugs 
----------------------------- 
 
¶32. (SBU) Argentina is a transshipment and destination point for 
narcotics emanating largely from Colombia, Peru, Bolivia, and 
Paraguay.  With its large chemical and pharmaceutical industries, 
Argentina is also a major source and destination for precursor 
chemicals.  Argentine law enforcement agencies cooperate closely 
with their USG counterparts on drug interdiction efforts, fugitive 
arrests, and information sharing, which has resulted in increased 
drug seizures and successes against trafficking organizations.  This 
Mission is focused on institutional capacity-building and expanding 
training opportunities for law enforcement officials, prosecutors 
and judges in order to improve internal security and decrease 
international drug and criminal activity in Argentina.  Cabinet 
Chief Fernandez has repeatedly stated that he wants to put top 
priority on attacking drug traffickers and less priority on 
arresting individual users, and the Argentine Supreme Court in 
August issued a ruling decriminalizing the personal possession of 
small amounts of marijuana.  One challenge to a more effective 
policy against international crime is Argentina's judicial system, 
which remains inefficient despite halting efforts at reform. 
 
Terrorism 
--------- 
 
¶33. (SBU) Under both Kirchners, Argentina has supported 
counter-terrorism policies.  Argentina was itself a victim of 
international terrorist attacks in the 1990s and has been a 
cooperative partner in countering terrorism, especially in the 
 
Tri-border Area (where Argentina, Brazil, and Paraguay meet).  In 
November 2007, Argentina succeeded in getting Interpol's General 
Assembly vote to issue international capture notices for five 
current and former Iranian officials wanted in connection with the 
1994 terrorist bombing of the Buenos Aires Jewish Community Center 
(AMIA).  The GOA issued sharp protests when one of those indictees, 
Ahmad Vahidi, was named in August to be Iran's Minister of Defense. 
President Fernandez de Kirchner repeated strong statements about the 
Vahidi nomination and about Iran's obligation to surrender the 
suspects for fair trial in Argentina during her remarks at this 
year's United Nations General Assembly. 
 
MARTINEZ