VZCZCXRO0716
RR RUEHAO RUEHCD RUEHHO RUEHNG RUEHRD RUEHRS
DE RUEHBU #0055/01 0282026
ZNY CCCCC ZZH
R 282026Z JAN 10
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 0397
INFO WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 0014
RUEHBS/USEU BRUSSELS 0011
RUEHBY/AMEMBASSY CANBERRA 0011
RUEHEG/AMEMBASSY CAIRO
RUEHFR/AMEMBASSY PARIS 0011
RUEHJA/AMEMBASSY JAKARTA 0011
RUEHKO/AMEMBASSY TOKYO 0011
RUEHLO/AMEMBASSY LONDON 0014
RUEHME/AMEMBASSY MEXICO
RUEHMO/AMEMBASSY MOSCOW 0011
RUEHNE/AMEMBASSY NEW DELHI 0029
RUEHRH/AMEMBASSY RIYADH 0011
RUEHRL/AMEMBASSY BERLIN 0011
RUEHRO/AMEMBASSY ROME 0041
RUEHSA/AMEMBASSY PRETORIA 0018
RUEHUL/AMEMBASSY SEOUL 0011

C O N F I D E N T I A L SECTION 01 OF 03 BUENOS AIRES 000055 
 
SENSITIVE 
SIPDIS 
SIPDIS 
AMEMBASSY BRIDGETOWN PASS TO AMEMBASSY GRENADA 
AMEMBASSY OTTAWA PASS TO AMCONSUL QUEBEC 
AMEMBASSY BRASILIA PASS TO AMCONSUL RECIFE 
 
E.O. 12958: DECL: 2020/01/28 

TAGS: ECON EFIN EINV ETRD PGOV AR

SUBJECT: Argentina: Economy Minister Says Debt Swap On Track 

 

REF: BUENOS AIRES 25 

 

CLASSIFIED BY: Martinez, Vilma, Ambassador; REASON: 1.4(B), (D) 

 

Summary 

 

------------ 

 

 

 

¶1.  (C) In a January 26 meeting with the Ambassador and DCM, 

Economy Minister Amado Boudou emphasized the positive despite the 

many challenges he faces.  Confident and composed despite the late 

hour of the meeting and the severe political pressure he has faced 

in the past month, Boudou insisted that the GOA's plans to reengage 

international markets are moving ahead, and that the plan to use 

Central Bank reserves to guarantee 2010 debt service payments (the 

controversial Fondo Bicentenario) would be implemented. 

Frustrated with the imbroglio surrounding the leadership of the 

Central Bank, Boudou said that the situation ""would be resolved 

this week.""  While claiming that the proposed debt restructuring 

would move ahead, Boudou asked that the Embassy convey to the U.S. 

Securities and Exchange Commission (SEC) the importance of speed 

and flexibility in its review of the GOA's submissions for 

regulatory approval of the debt swap.  Boudou agreed to work with 

the Embassy to manage the GOA reaction to the upcoming publication 

of the Investment Climate Statement, which might contain language 

critical of aspects of Argentina's investment climate.  Finally, on 

ICSID, Boudou was non-committal, listening approvingly to the DCM's 

discussion of the importance of the GOA's efforts to reach an 

agreement with Azurix, but without pledging to move ahead on other 

ICSID cases.  End Summary. 

 

 

 

Boudou to Redrado: ""You're Fired"" 

 

--------------------------------------------- 

 

 

 

¶2.  (C) On the issue of the leadership of the Central Bank (BCRA), 

Boudou expressed frustration that the situation has dragged on for 

so long, lamenting that ""we've wasted the whole month on this.""  He 

vowed that the saga would end soon and that the status of (former) 

BCRA President Martin Redrado will ""be resolved this week.""  Saying 

that Redrado no longer has the luxury of resigning, Boudou stated 

emphatically that ""we're firing him.""  He emphasized that the GOA 

now considers former BCRA Vice President Pesce to be the head of 

the Bank.  Boudou backed away from his comments earlier this month 

that Mario Blejer would succeed Redrado as BCRA head.  He said that 

he met with him two weeks ago, but Blejer, an experienced and 

respected economic figure (and former BCRA head), is wary of being 

involved in this controversial and unpredictable situation. 

 

 

 

Holdout Proposal 

 

----------------------- 

 

 

 

¶3.  (C) Boudou argued that the controversy regarding the BCRA is 

unrelated to progress on the proposed debt restructuring proposal, 

 

BUENOS AIR 00000055  002 OF 003 

 

 

which the GOA is now working hard to get through the international 

regulatory approval process.  Quick SEC approval is vital, he said, 

since regulatory agencies in Italy and Germany will only act after 

the SEC issues its findings with regard to the debt swap.  The SEC 

is working along three separate tracks, reviewing current economic 

developments in Argentina, examining the technical aspects of the 

proposed agreement, and developing a set of ""warnings"" to potential 

investors regarding the risks (as is usual practice in developing 

the prospectus for a securities issuance).  Boudou explained that 

the SEC has asked for clarifications from the GOA in several areas 

and that the GOA has done its best to respond as fully as possible. 

However, he noted that the SEC needs to understand that the GOA is 

not in a position to deal with controversial aspects of its 

economic policies, such as the problems associated with the 

government's statistics agency, INDEC.  Doing so would exact a huge 

political price from the GOA, given the local media's aggressive 

campaigns against the government.  Boudou acknowledged the 

problematic nature of some GOA policies, but he opined that the SEC 

should respond expeditiously and show some understanding of the 

government's difficult political position so that the debt swap 

could advance. He also noted that bondholders who are the GOA's 

intended partners in this deal know Argentina's economic situation 

well and don't need the SEC to spell it out for them.  In response, 

the Ambassador and DCM pointed out that the SEC is an autonomous 

regulatory agency which works independently of the executive 

branch.  Boudou indicated that he understood that they could not do 

anything beyond passing along the substance of his remarks. 

 

 

 

Paris Club, ICSID 

 

---------------------- 

 

 

 

¶4.  (C) Despite the controversy surrounding the creation of the 

Bicentennial Fund to use BCRA reserves to guarantee the payment of 

debt service due in 2010, Boudou said that the GOA would proceed 

with establishing the fund.  In addition, he also noted that the 

government intends to normalize relations with the Paris Club, but 

would not move seriously on that until after a debt swap deal with 

the bondholder holdouts is completed.  On the issue of ICSID 

judgments and the Azurix case in particular, the DCM explained that 

the U.S. is encouraged by Argentina's engaging in negotiations to 

reach an agreement with Azurix, and stressed the importance of 

finalizing the deal so that Azurix would drop its petition to 

remove GSP preferences from Argentine exports.  He added that the 

GOA should build on this to address other ICSID cases as well. 

Boudou listened attentively, but did not give a substantive 

response on the issue. 

 

 

 

Spending is Good for the Economy 

 

--------------------------------------------- 

 

 

 

¶5.  (C) The Ambassador asked Boudou about the concerns of private 

economic analysts regarding the increasing rate of government 

expenditure growth, and noted the potential negative impact this 

 

BUENOS AIR 00000055  003 OF 003 

 

 

could have on inflation.  Boudou responded by noting the long-term 

success of the GOA's economic policies and defended the 

counter-cyclical spending policies as necessary to promote economic 

growth, adding half-jokingly that ""we're just following your 

example.""  He said that the government would continue to spend on 

public investment and employment, and added that it would 

intelligently use the reserves in the Bicentennial Fund for the 

benefit of the Argentine people. 

 

 

 

Investment Climate Statement Release 

 

--------------------------------------------- ------ 

 

 

 

¶6.  (C) The Ambassador noted that the Investment Climate Statement 

(ICS) would be issued in the coming weeks, and hoped that the 

Embassy and the GOA would work together to minimize any negative 

reactions from the government that could complicate the bilateral 

relationship.  Boudou noted that the Argentine press has a tendency 

to exaggerate and sometimes forces the government to respond more 

harshly to perceived slights than warranted.  However, he agreed 

that the GOA and the Embassy should work together to prepare for 

the release of the document and contain any negative fallout. 

 

 

 

Comment 

 

------------- 

 

 

 

¶7.  (C) Boudou has been under tremendous political pressure this 

past month, since the imbroglio over the Bicentennial Fund and the 

leadership of the BCRA began.  Press rumors are rampant that his 

position as Economy Minister is imperiled by the Kirchners' 

dissatisfaction over his handling of the Redrado affair.  But 

Boudou did not behave like a man whose career is hanging by a 

thread.  The meeting occurred in the evening after being delayed 

several times due to Boudou's appearance before the Congressional 

committee investigating the Redrado situation.  He was then 

convoked to the President's office.  Despite the lateness of the 

hour and his marathon grilling before the committee (and perhaps in 

the Casa Rosada as well), Boudou was fresh, enthusiastic, calm, and 

totally composed during the meeting.  He appears committed to 

completing the debt swap and then moving forward on dealing with 

the Paris Club debt.  Whether he gets the chance to see these 

things through depends ultimately on his future standing with CFK 

and her husband.  As the sacking January 27 of Osvaldo Guglielmino, 

the Attorney General in the Treasury suggests, the standing of 

senior government officials in the eyes of the Kirchners, always 

tenuous even in the best of times, can change very quickly in the 

current environment. 

MARTINEZ 


=======================CABLE ENDS============================