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UNCLAS BUENOS AIRES 001414 
 
SENSITIVE 
SIPDIS 
CONGRESSIONAL AFFAIRS BUREAU PLS PASS FROM AMBASSADOR MARTINEZ TO CONGRESSMAN ENGEL 
 
E.O. 12958: N/A 
TAGS: PREL OREP PGOV ECON ETRD ELAB PHUM PTER KTIP
SUBJECT: Scenesetter for Codel Engel Visit to Argentina, January 5-7 
 
¶1. (SBU) Mr. Chairman, on behalf of Embassy Buenos Aires, I warmly 
welcome you and your delegation to Argentina.  I will have been in 
the country for about four months when you arrive, and I am honored 
to have you among my first Congressional visitors.  The Government 
of Argentina is interested in deepening relations with the United 
States and values high level contacts with members of Congress.  I 
am especially pleased that you will have the opportunity to meet 
with President Cristina Fernandez de Kirchner. 
 
 
 
¶2.  (SBU) I look forward to hosting you and the other members of 
your delegation at a reception at my residence on January 5. 
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 to support you and your 
delegation 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 
 
----------------- 
 
 
 
¶3. (SBU) You arrive in Argentina as President Cristina Fernandez de 
Kirchner (CFK) begins the second-half of her four-year term.  New 
Members of Congress were sworn-in in early December, following June 
2009 mid-term elections that were broadly perceived as a setback 
for the President and her husband and predecessor, Nestor Kirchner 
(NK).  The Kirchners now face what is for them the novel challenge 
of governing without majorities in either Chamber of Congress, 
though their Peronist Party (PJ)-dominated Victory Front (FpV) 
coalition remains the largest bloc in both chambers, and on some 
issues they will likely be able to forge enough alliances to 
approve some legislative initiatives. 
 
 
 
¶4. (SBU) The FpV and other Kirchner allies won about 30 percent of 
the vote nationwide in the mid-terms.  In the province of Buenos 
Aires, Argentina's largest and the home to millions of lower-middle 
class and poor voters in the outer suburbs of Buenos Aires, NK led 
the FpV ticket but placed second to "dissident" Peronist and 
multi-millionaire Francisco de Narvaez. 
 
Ruling party candidate lists also placed second or worse in major 
provinces like Santa Fe, Cordoba, and Mendoza.  The opposition 
victories were shared among different national coalitions and 
provincial movements. 
 
 
 
¶5. (SBU) In a bid to regain political momentum, the CFK 
administration launched a number of controversial measures before 
the outgoing Members of Congress stepped down in December 2009. 
One expensive measure was to purchase the rights to broadcast 
national soccer league games on public television (games had 
previously been made available under a pay-per-view contract). 
Another, launched in August 2009, was to reform the country's 
antiquated media laws. 
 
 
 
¶6. (SBU) The new media law restricts the number of television and 
radio broadcast channels that single groups may own.  This was 
perceived to be a blow against the large Clarin Media Group, which 
has been consistently critical of the Kirchners.  Of note, three 
separate federal courts have ruled against the law since its 
passage, putting its application on hold.  One ruling in response 
to an appeal launched by Clarin Group deems the law's requirement 
that companies sell their excess television and radio broadcast 
licenses as a potential infringement of property rights.  The 
Government will have to appeal the rulings, and it is anticipated 
that the media law will ultimately be reviewed by the Argentine 
Supreme Court. 
 
 
 
¶7. (SBU) A final initiative, passed in December, was a political 
reform bill that would require open primaries and participation 
thresholds for all parties wishing to contest presidential and 
national Congressional elections.  The initiative was passed into 
 
law under the outgoing Congress with virtually no opposition-party 
support and with very little inter-party dialogue. 
 
 
 
¶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 
slowing of the economy in 2008 followed by a sharp recession in 
2009, 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 hover around 20%.  One casualty of the agricultural 
export tax vote was the President's relationship with her Vice 
President, Julio Cobos, who cast a tie-breaking vote against the 
government's proposal. 
 
 
 
¶9. (SBU) Argentine politicians are already focused on presidential 
elections in 2011.  Conventional wisdom is that Nestor Kirchner 
will stand for president as the FpV candidate, and his various 
institutional resources will likely make him competitive.  Much 
will depend on how the main opposition currents in the country 
coalesce.  Leading potential candidates include CFK's estranged 
Vice President Julio Cobos (former governor of Mendoza), Buenos 
Aires Mayor Mauricio Macri, and Peronists Eduardo Duhalde (the 
2002-03 caretaker president) and Santa Fe Senator Carlos Reutemann. 
As in the past, one of many charismatic provincial governors may 
also emerge as a leader. 
 
 
 
------------------- 
 
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.   Both governments have since made efforts to improve the 
bilateral relationship, in part by keeping the focus on the many 
areas of practical cooperation between our governments such as 
science and alternative energy, counter-drug cooperation, and 
nuclear non-proliferation.  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 a strong international voice on arms control 
and nonproliferation issues.  In the International Atomic Energy 
Agency, the GOA has voted consistently 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.  The USG and Argentina have 
realized some of the best examples of bilateral cooperation under 
the banner of science, and we have a long history of aerospace 
cooperation with Argentina. 
 
 
 
------------------------------------- 
 
Anti-Americanism and Public Diplomacy 
 
------------------------------------- 
 
¶12. (SBU) The greatest overall challenge we face in Argentina is 
the high level of anti-Americanism among 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. 
 
 
 
¶13. (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. 
 
 
 
---------------- 
 
Economic Context 
 
---------------- 
 
 
 
¶14. (SBU) Argentina, once one of the richest countries in 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. 
 
 
 
¶15. (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. 
 
 
 
¶16. (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, most 
importantly,  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. 
 
 
 
¶17. (SBU) Although Argentina continued its strong expansion in 
2008, with GDP growth at close to 7%, 2009 saw a sharp deceleration 
of economic activity, with most analysts projecting a contraction 
of 2-3%.  This recession was largely due to the impact of ongoing 
global financial turmoil and the resulting slowdown in world 
economic output.  Due to a healthier international economic climate 
 
and a rebound in commodity prices that is expected to continue in 
2010, many analysts project growth in the range of 3-5% of GDP in 
2010, as compared to government projections of up to 7%.  Many 
private analysts also expect inflation to accelerate somewhat in 
2010 to the 17-20% range, up from the 12- 15% consensus figure for 
¶2009.  [Post Comment: The government economic statistics agency is 
viewed by private analysts as having consistently understated 
inflation and other economic measurements for the past several 
years.  The agency's inflation measure for 2009 is expected to come 
in well under 10%.  End comment]. 
 
 
 
¶18. (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%). 
 
 
 
¶19. (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. 
 
 
 
-------------------------------------------- 
 
Promoting U.S. Economic/Commercial Interests 
 
-------------------------------------------- 
 
 
 
¶20. (SBU) 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.  We expend a good deal of effort in support of U.S. 
companies operating in Argentina, and encouraging the GoA to 
maintain a more welcoming investment climate, with greater 
regulatory, legal, and tax regime consistency.  As an example of 
the types of problems faced by companies operating in Argentina, 
the government in late 2008 nationalized Argentina's private 
pensions system, which affected two U.S. companies that had been 
running pension funds. Earlier this month, at a roundtable with 
US-based companies operating in Argentina, A/S Valenzuela heard 
that 2009 was not as bad as anticipated, and that the outlook for 
2010 was good. The company representatives mentioned that things 
could be better with improvements to the business climate, 
specifically in the area of rule of law. Valenzuela repeated this 
comment to the press which gained widespread media attention and 
the GOA's heated rebuttal. 
 
 
 
¶21. (SBU) 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.  These 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. 
The Government has initiated the process of making a new debt 
exchange offer for those bondholders who did not participate in the 
initial 2005 attempt to restructure Argentina's debt.  The offer is 
now scheduled to move forward in the second week of January.  If 
this offer succeeds, the government has indicated that it might 
 
initiate discussions with the Paris Club and the International 
Monetary Fund to resolve more of its debt issues. 
 
 
 
¶22. (SBU) 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. 
 
 
 
--------------- 
 
The Labor Scene 
 
--------------- 
 
 
 
¶23. (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, and while a December 2009 court ruling 
determined that the government cannot provide exclusive authority 
to one union, no changes have yet been implemented.  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 a strong political supporter of the Kirchners 
and their policies, a position not shared uniformly among CGT 
affiliate federations in different sectors. 
 
 
 
¶24. (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 a local food-processing plant owned by Kraft.  The 
initial demand for benefits and then the subsequent protests at the 
plant were led by a smaller, unrecognized affiliate of the CTA. 
 
 
 
--------------------------- 
 
Trafficking in Persons (TIP) 
 
--------------------------- 
 
 
 
¶25. (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. 
 
 
 
¶26. (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 public statements in support for opening shelters for victims 
of trafficking, funding 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. 
 
 
 
------------ 
 
Human Rights 
 
------------ 
 
 
 
¶27. (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 526 
persons for crimes against humanity, and sentenced 52 former 
officials of the military regime, including a military chaplain. 
 
 
 
¶28. (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 
 
----------------------------- 
 
 
 
¶29. (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 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 An????bal 
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 that suggested the decriminalization 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 
 
--------- 
 
 
 
¶30. (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 indicted, 
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 
MARTINEZ