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TO RUEHC/DEPT OF LABOR WASHINGTON DC PRIORITY
INFO RUEHC/SECSTATE WASHDC 4422
UNCLAS BUENOS AIRES 001095
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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