VZCZCXYZ0005
OO RUEHWEB

DE RUEHBU #1120/01 2821438
ZNR UUUUU ZZH
O 091438Z OCT 09
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4465
INFO RHMFISS/CDR USSOCOM MACDILL AFB FL//SCJ2//
RULGPUA/USCOMSOLANT

UNCLAS BUENOS AIRES 001120 
 
STATE FOR INR/R/MR, I/GWHA, WHA, WHA/PDA, WHA/BSC, 
WHA/EPSC 
CDR USSOCOM FOR J-2 IAD/LAMA 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KPAO OPRC KMDR PREL
SUBJECT: MEDIA REACTION: LATIN AMERICA MILITARY EXPENDITURES; 
ARGENTINA AND THE IMF; STATE DEPARTMENT BACKGROUND NOTES ON 
ARGENTINA; 10/09/09; BUENOS AIRES 
 
¶1. SUMMARY STATEMENT 
 
Today's key international stories are related to the deep reductions 
in Argentina's defense budget; Argentina's "essential" need to reach 
a deal with the IMF; and the State Department background notes on 
Argentina. 
 
¶2. OPINION PIECES AND EDITORIALS 
 
- "Argentina, far from its neighbors in the arms race" 
 
Business-financial "El Cronista's" contributor Jorgelina do Rosario 
writes (10/09), "According to Centro de Estudios para la Nueva 
Mayoria (think tank), last year, Argentina only used 0.87% of its 
GDP to its defense budget, which is a 0.92% reduction vis-`-vis 
¶2007. Along with Surinam, Argentina has one of the lowest military 
budgets in the region. 
 
"The air space control is another military issue in which the 
country is behind schedule... 
 
"Since the early '90s, Argentina started to suffer a strong 
disinvestment on military expenditures. This is why Fabian Calle, 
senior researcher at the Argentine Council for International 
Relations (CARI), describes the country as 'an anomalous case,' 
based on the fact that its military expenditures are below the world 
average military expenditures (which account for about 2.5% on world 
GDP). 
 
"Argentina's military weakness is a reason for 'concern' for the 
experts consulted by 'El Cronista.' The Malvinas islands, the 
dispute with Chile over the continental ice cap, the maritime 
control, Argentina's Antarctic territory and foreign interest in our 
natural resources are the potential threats posed to the Armed 
Forces. Jorge Battaglino, professor of the Torcuato Di Tella 
University believes, that the country 'should not buy (weapons) 
because it feels threatened but in order to prevent its military 
weakness.' 
 
"The political analyst pointed out, 'The interesting thing about all 
this is that both the left and the right wing in Argentina think 
that nothing should be done about this issue. A general feeling 
prevails among the people that there are no threats.' 'In the event 
of a foreign attack, expectations are that Brazil or Chile will 
defend us because we are losing our own military capabilities.' 
 
"... While an arms race in Latin America has been dismissed, there 
is an increasing concern among regional and international leaders 
over an increase in the purchase of weapons in the region... Except 
for Argentina, Latin American countries continue spending money in 
weapons." 
 
- "Argentina's inevitable return to the IMF" 
 
Daily-of-record "La Nacion" editorializes (10/09), "The political 
difficulties self-imposed by the Argentine government through its 
own discourse are reflected in its back and forth moves about its 
deal with the IMF in order to allow for its Article IV economic 
review. 
 
"In order to understand those obstacles, we should recall former 
President Nestor Kirchner's disqualifying discourse on December 15, 
2005, when he announced the pre-cancellation of the country's debt 
to the IMF... 
 
"As a consequence of the steady increase in public expenditures, the 
country's fiscal surplus was gradually lost and it turned out to be 
a financial deficit as of the second quarter of 2009... It is now 
inevitable to recover the international credit. 
 
"For this purpose, there is only one road and clear rules. First and 
foremost, the Argentine Government should get out of its default 
situation with holdout bondholders and Paris Club creditors. The 
latter call for an IMF audit... We should say that the country's 
return to markets is a requisite for the recovery of private 
investment, which is a crucial element for growth. 
 
"This explains Economy Minister Amado Boudou's dealings with the IMF 
head in order to make the mentioned audit happen. It is an essential 
step towards the normalization of financial ties to the world. It is 
a first stage, although not sufficient, to access other sources of 
loans at reduced interest rates... One can only expect that the 
political restraint of a populist discourse, which demonized the 
multinational lending agency to which now it resorts, will be 
overcome." 
 
 
- "The US insists that Argentina should pay debts and honor judicial 
rulings" 
 
Ana Baron, leading "Clarin's" Washington-based correspondent, writes 
(10/09), "In its latest report on Argentina (Background Notes), the 
Department of State insisted again on the need for Argentina to 
solve the problem of its holdout creditors and to honor its Paris 
Club debt as well as the ICSID (International Center for the 
Settlement of Disputes) rulings on claims filed by US corporations 
and those of other countries due to the country's breach of 
contract. 
 
"According to the report, the debt Argentina still has with 
international creditors and a big number of claims for arbitration 
filed by foreign companies are the legacy of the 2001-02 economic 
meltdown that should be resolved. 
 
"The Department of State recalls that the Government announced in 
2008 that it intended to pay debts to Paris Club creditors using 
Central Bank reserves. It also describes the framework set by the 
Economy Minister in August 2009 for the restructuring of an amount 
of defaulted T-bills (or Letes), which were not included in the 2005 
restructuring, and the swap of inflation-related bonds. 
 
"However, the report does not include Economy Minister Amado 
Boudou's negotiations in New York and Istanbul to pay off the 
country's debts to private creditors and the Paris Club as well as 
to put the country's relationship Qth the IMF on a safe track 
again. Obviously enough, they had no time to include this point. 
 
"The Argentine Government suffered a big retreat when French Economy 
Minister Christine Lagarde made it quite clear during a press 
conference in Istanbul that Argentina will not be able to 
restructure its Paris Club debt without an IMF audit. 
 
"A mixture of expectation, uncertainty and skepticism prevails in 
Wall Street.  Many agree that in the event the Government does not 
reach a soon agreement with holdout creditors, the rise in Argentine 
bonds will lose its impetus." 
 
To see more Buenos Aires reporting, visit our 
classified website at: 
http://www.state.sqov.gov/p/wha/buenosaires 
 
MARTINEZ