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10BUENOSAIRES11 8 January 2010 Confidencial Embassy Buenos Aires

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DE RUEHBU #0011/01 0082146
O R 082146Z JAN 10



E.O. 12958: DECL: 2035/01/08


CLASSIFIED BY: Alexander Featherstone, ADCM, State, Front Office;
REASON: 1.4(B), (D)

1. (C) Summary: WHA A/S Arturo Valenzuela met with Argentine
Cabinet Chief Anibal Fernandez and Acting Foreign Minister Victorio
Taccetti during his December 15-17 visit to Buenos Aires.
Valenzuela explained the U.S. position on Honduras, exchanged views
on other regional developments, and praised Argentine efforts to
combat terrorism, narco-trafficking, proliferation, and other
problems. The GOA officials assured him of their desire to
strengthen cooperation with the USG. Valenzuela also met with
AmCham leaders who voiced optimism about 2010 but repeatedly
expressed concern about the need for clear rules and rule of law.
During his visit, Valenzuela met former Cabinet Chief Alberto
Fernandez, who offered his assessment of the Kirchners, and he met
separately with leading presidential contenders, including the
estranged vice president, Julio Cobos; the mayor of Buenos Aires,
Mauricio Macri; Peronist dissident Francisco de Narvaez, who bested
former president Nestor Kirchner in the June 28 mid-term
congressional elections; and former president Eduardo Duhalde. The
opposition leaders criticized the Kirchners for their combative
style, insular decision-making, counter-productive economic
policies, and the erosion of Argentina’s rule of law. Press
coverage and GOA reaction to A/S Valenzuela’s visit was reported
reftel. End summary.

Cabinet Chief Stress Law Enforcement Cooperation


2. (C) Valenzuela, accompanied by Ambassador and DCM, called on
influential Cabinet Chief Anibal Fernandez for a positive, 45
minute discussion, during which Fernandez focused heavily on the
areas of bilateral cooperation falling into his previous portfolio
as Minister of Justice, Security and Human Rights, emphasizing
robust GOA actions against drug and human trafficking and
terrorism. Valenzuela emphasized that the United States viewed
Argentina as a partner in many areas of bilateral cooperation. He
specifically asked that the Minister give thought to the challenges
the region faced in Bolivia and how it might engage, underscoring
that the United States was working for dialogue and seeking
positive accomplishments from a government that had clear
democratic legitimacy following President Morales’ reelection.
Fernandez agreed on the importance of working with Bolivia and
described his own conversations with Bolivian Government (GOB)
officials to encourage cooperation on counter-narcotics and other
security issues. He noted that the GOB had pushed Argentina to
address the flow of coca processing precursor chemicals from
Argentina to Bolivia, and that Argentina accepted its
responsibility in this area and was taking steps. Fernandez
suggested the government was open to further outreach with Bolivia.

3. (C) Fernandez further described GOA actions to disrupt ephedrine
trafficking, shutting down a hole in the law that had allowed 20
metric tons to be imported into Argentina from 2006 to 2008 for
purposes of diversion to Mexico and the United States. The change
of law, he asserted, had brought the trade to a virtual halt.
Fernandez made a case for the GOA’s initiatives to treat most drug
users as victims and provide help to them rather than
incarceration, but he emphasized that strong bilateral cooperation
against drug trafficking would continue. Valenzuela offered to
share experiences from the United States on programs to reduce drug
demand. He pointed to the length of Argentina’s borders as a
particular challenge, comparing them to the length of the
U.S.-Mexican border.

4. (C) Turning to the issue of international terrorism, Fernandez
underscored President Cristina Fernandez de Kirchner’s (CFK) firm
commitment to bring to justice those responsible for the 1992 and
1994 terrorist bombings in Buenos Aires. He noted that she
continued her strong diplomacy aimed at the Iranian masterminds of
the attack, and suggested that Argentina continued to fear
terrorist reprisals for its forceful diplomacy. Fernandez added
that he personally was known as a particularly strong voice against

5. (C) Valenzuela ended the meeting by laying out U.S. views on
events in Honduras, with an emphasis on the efforts the USG had

made to build consensus within the OAS on ways forward. He shared
a hope that Argentina would give the U.S. position greater
consideration. Fernandez emphasized that the position taken by
Argentina was explicitly not "pro-Zelaya" but was meant to express
the government’s concern with any arbitrary interruption of
democratic government. The complaints about Zelaya’s own
violations of law or democratic practice, he emphasized, should
have been resolved via the Honduran justice system.

MFA: Keep Relations Warm and Productive


6. (C) Acting Foreign Minister Victorio Taccetti welcomed A/S
Valenzuela and stressed the GOA’s desire to continue the productive
and fruitful relations it had enjoyed with A/S Shannon. Valenzuela
outlined President Obama’s vision of a stable, prosperous Americas
with social inclusion, and said it would require focusing on shared
interests. Taccetti agreed that the United States shared many
values, like non-proliferation, and concerns, such as Iran’s
sponsorship of terrorism and its nuclear development efforts.
Valenzuela conveyed the USG’s appreciation of the GOA’s ongoing
responsible stance in thwarting proliferation efforts. Taccetti
said the GOA had also sought a moderating position within UNASUR to
tamper pressure from some UNASUR members to criticize the U.S.
Defense Cooperation Agreement (DCA) with Colombia. Valenzuela
recalled Washington’s efforts to explain the DCA, including a
letter co-signed by Secretary of State Clinton and Secretary of
Defense Gates to their regional counterparts. Taccetti noted that
the impression was often that "the Empire often acts first and
explains later," as happened with the USG’s announcement of the
return of the Fourth Fleet to the region.


7. (C) Taccetti said the MFA wanted to draw Valenzuela’s attention
to the situation in neighboring Bolivia, which was undergoing
profound change after years of social division and exclusion.
Valenzuela said there was dialogue with the Evo Morales
administration despite the GOB’s expulsion of DEA from Bolivia, and
he stressed that U.S. counter-narcotics cooperation with Bolivia
depends on the effectiveness of U.S. counter-narcotics cooperation
with Bolivia’s neighbors. Valenzuela said that in Washington’s new
paradigm for regional relations, there was a greater focus on
demand reduction efforts. He noted that cocaine consumption was
growing not in the U.S., but elsewhere.


8. (C) Taccetti said the crisis in Honduras was worrisome and did
not offer any easy ways out. He claimed that Paraguayan President
Lugo was particularly worried that the coup in Honduras, if left
unpunished, might embolden the military in Paraguay. Valenzuela
agreed that the coup must not be legitimized. He recalled that the
USG and GOA had worked together to get the de facto regime
suspended from the OAS and to reinstate President Zelaya. The U.S.
position had been clear throughout: the coup had been a grave,
unacceptable mistake, and Zelaya was the legitimate president of
Honduras. Still, Valenzuela noted, the de facto regime did not
feel completely isolated by the international community. The
Liberal International, for example, had offered Micheletti a vice
presidency; German Christian Democrats and Spanish conservatives
(PP) had also engaged with the de facto regime leaders. Valenzuela
noted that Catholic prelate Maradiaga, with Vatican support, had
been perhaps the most hardline of all in offering succor to the de
facto regime. Valenzuela then emphasized that the November 29
elections were necessary but not sufficient to resolve the crisis.
Taccetti said the GOA’s bottom line was that the Honduras coup
could not be viewed as gratis — its leaders must be punished.
Valenzuela said it was encouraging that President-elect Lobos had
called for the de facto regime to depart and a unity government to

cover the gap until his January 27 inauguration.


9. (C) On Haiti, Taccetti said he thought there had been "too many
elections" leading to voter fatigue. He expressed concern that
MINUSTAH was "digging in," and the UNSYG Special Representative
HC)di Annabi was growing too attached to his palatial residence
there. Taccetti said the international community had to redouble
its efforts at institution-building in Haiti (particularly with the
HNP police force) so that it could turn the country back over to
its people and exit. Valenzuela said that NGOs there also had to
move beyond assistance to capacity-building. He said Haiti’s
"winner-takes-all" political culture was holding it back, but there
was some optimism that the labor-intensive tourism sector could be
the engine for Haiti’s economic development.

Scorecard Diplomacy

10. (C) Taccetti raised the GOA’s unhappiness with the USG’s
proliferating report cards on how other countries addressed issues.
He took issue with the State Department’s annual report on
Trafficking in Persons (TIP) and Argentina’s place on the Tier Two
Watch List. He said other countries such as Italy had a much worse
TIP problem than Argentina but were not on the Watch List.
Valenzuela explained that these reports were often mandated by the
U.S. Congress and were Capitol Hill’s way of ensuring that the
executive branch would track and monitor these issues of great
concern to legislators.

American Business Community Voices its Concerns


11. (SBU) A/S Valenzuela met with several members of the American
Chamber of Commerce in Argentina’s (AmCham) Executive Board
including Merck, Sharpe & Dohme, Nextel, DuPont, Duke Energy,
General Motors, American Express, Prudential, Coca Cola and IBM.
An overwhelming majority agreed that 2009 was not as bad as they
had anticipated and most are optimistic about a solid recovery
2010, mostly due to the world economic recovery rather than the
GOA’s own economic policies. Many explained that they faced several
challenges in the market such as labor and union demands for
continued salary increases, rule of law, transparency, corruption,
inflation, overregulation, and price controls. Company
representatives believed that such challenges have created an
anti-business climate that has precipitated a lack of confidence
among foreign investors. The most extreme case being the energy
sector in which Duke detailed the GOA’s subsidy program which
provides power to consumers at one-third the average market value.
Most concerning, commented Duke, was the GOAs inability to pay
energy companies the subsidies thus forcing Duke to hold large
amounts of debt. General Motors explained that they continued to
have success in the Argentine market and believed that much of this
was due to the fact that 75% of their autos are exported to Brazil
making the current trade dispute between the two markets worrisome.
Nextel explained that the IT sector was generally in a better
position than others, but that the communication sector is
suffering from a lack of clear regulation. However, they too
expressed concerns, specifically in regards to increase taxes,
which have directly resulted in a 30% decrease in profits. In
general, those companies with minimal dependency on unions, more
external clients and in sectors that are less regulated are in a
better position to endure the current challenges of - and benefit
from - the Argentine market. Company representatives, excluding
Duke and Prudential, agreed that 2010 would offer more
opportunities and better profits than 2009, due to the recovering
world economy rather than the GOAs poor economic policies.

Former Cabinet Chief Offers Insider Views

12. (C) Ambassador hosted former Cabinet Chief Alberto Fernandez to
a breakfast with A/S Valenzuela at the Residence. The cordial
meeting focused on Fernandez’s expectations for the next two years
in Argentina as well as past and present aspects of the bilateral
relationship. He described the Obama Administration as holding out
great opportunities for improved Argentine-U.S. and Latin
American-U.S. relations. On the political front, he anticipated
difficulties, as the Presidential couple was not practiced at
ruling with a strong opposition such as now occupied the Congress.
Between the irascible nature of the first couple and the "madness"
of the opposition, Argentina was in for a rough season.

Bilateral Relations: Nestor Kirchner Meant "Hegemonic" in a Good


13. (C) Fernandez described himself as having little contact with
the ruling circle, including none whatsoever with his former boss
Nestor Kirchner (NK) since the June mid-terms, but he shared an
interest in seeing relations between the CFK government and
Washington improve. He insisted that most Argentines viewed
President Obama very favorably. Fernandez lamented that CFK’s
initial call from then President-elect Obama had reputedly gone
poorly, based on his own perception from Washington that she had
been seen as "all talk and no listening," and that she was now
suffering from the popular perception that U.S. relations with
Argentina’s neighbors (including, in particular, Chile and Brazil)
were much more positive. This was particularly painful for CFK
because, he confided, she had been an early advocate of then
Senator Obama’s candidacy within their inner counsels, though she
had very positive views on Senator Clinton as a candidate as well.

14. (C) Valenzuela recognized that there was still strong positive
potential in the relationship, but said that CFK’s decision not to
receive him, though understandable from a protocol perspective,
meant that he could not carry back a personal case from her to
Washington for enhancing high-level ties. Valenzuela also said
that Argentina’s strong statements against any recognition of
positive elements in the recent Honduran presidential vote had been
perceived as a direct criticism of the exhaustive U.S. efforts to
build consensus toward a viable way forward.

15. (C) Fernandez speculated that many even in the Obama
Administration held a critical view of Argentina due to the wide
publicity given events targeting former President Bush at the
ill-fated 2005 Summit of the Americas en Mar del Plata, Argentina.
As an insider in those preparations, he wanted to set the record
straight. First, he emphasized, the GOA had encouraged that the
Hugo Chavez-led anti-Bush rally be held at a soccer stadium to
avoid violence and disorder in the streets. They had helped
organize it to prevent something worse but had come across simply
as organizing an anti-Bush rally. Second, NK had begun his
bilateral meeting with President Bush with a factual reference to
the importance of the United States, describing it as "hegemonic."
This was not really pejorative in the Spanish, Fernandez argued,
but had come across that way in the English. President Bush’s
reaction to the turn-of-phrase had effectively ended the meeting.
Finally, he said, Argentina had deferred a decision on the Summit’s
draft communiquC) endorsing the Free Trade Area of the Americas
because it knew the proposal would not achieve consensus, not
because it sought to torpedo the U.S. priority.

Politics: The Unexpected Turn of Events


16. (C) Fernandez described the current political and economic
climate in Argentina as difficult and not at all what he and the
Kirchners anticipated when they planned for the future at the end
of former President Nestor Kirchner’s term. Fernandez said he had
advocated President Cristina Fernandez de Kirchner’s candidacy to
succeed her husband in 2007 in the anticipation that the government
would be challenged more in the second term and that having NK
available to run again 2011 would force a caution on opposition
within and outside the Peronist coalition. Had NK succeeded
himself, Fernandez said, they believed that the political
positioning for 2011 would have begun immediately, increasing
governance challenges. He had likened having NK stepping aside to
holding a great soccer player like Lionel Messi on the bench,
available to turn the tide of a game. Unfortunately, he joked,
Kirchner had never really stayed on the bench and had instead
remained in the game and undermined his standing.

17. (C) The CFK term had been marked by unexpected negative turns,
including the Antonini-Wilson suitcase scandal immediately after
her inauguration, continuing with the farm crisis of 2008, the
international economic crisis, and finally the major reversals in
the June 2009 mid-term elections. Of these negative events, he
claimed they had foreseen only the international economic crisis,
but that CFK had expected Argentina to be more immune to it than
was the case.

18. (C) Fernandez offered positive comments on NK and CFK but said
that, beginning with the farm crisis, they had manifested a
devastating inability to see those opposing their policies in
anything but political terms. They had seen the farm groups as
mobilizing against their power rather than as mobilizing to defend
their economic interests. The persistent use of a political
calculus had lead to a steady decline in CFK’s popularity. Asked
by Valenzuela who within the Administration could present or
advocate alternative points of view to the President and her
husband, Fernandez said that unfortunately there were few if any;
most acted as government employees unwilling to risk their jobs by
challenging the first couple’s views.

19. (C) Asked by the Ambassador whom he would back in 2011 national
elections, Fernandez said he was leaning toward supporting a third
force in politics outside of Peronism and the current opposition.
He said that the leading politicians in the country would likely
"pulverize" each other before 2011, including the Kirchners, Buenos
Aires Mayor Macri, and former President Eduardo Duhalde. He had
doubts that Peronist Senator Carlos Reutemann would insert himself.
Of Vice President Julio Cobos, he expressed the view that
Argentines were more favorably inclined to him as an opposition
voice with limited power than as a potential President. Fernandez
said he would look among governors for new leaders and mentioned
only Salta Governor Uturbey specifically.

Vice President Cobos: Looking to Rebuild

20. (C) Valenzuela met with Vice President Julio Cobos, who is
estranged from the Kirchners and currently the leading contender to
succeed them in Casa Rosada. Cobos brought with him former
congressional leader Raul Baglini, widely believed to be Cobos’s
chief advisor; Senator Ernesto Sanz, newly elected leader of the
Radical Party (UCR); well known Radical stalwart Rodolfo Terragno;
and Roberto Villambrosa, widely believed to be a potential foreign
minister in a Cobos administration.

21. (C) With Cobos, Valenzuela explained the U.S. position on
Honduras. Cobos advisor Terragno pointed out that the
international community needed to stop recognizing the legitimacy
of Honduran President Zelaya’s claim to office beyond the January
27 end of his mandate. Turning to Argentina, Cobos said the
country needed to recover credibility, institutionality, separation
of powers, checks and balances. He said the opposition was
divided, but so were the Peronists — which meant there was an
opportunity to forge with some Peronists a common agenda
prioritizing education and social investment, crime and security,

energy, rule of law, and other issues. Terragno said they needed a
non-aggression pact between the government and opposition, but
together they could work to guarantee contractual sanctity, which
in Argentina would be a novelty. Sanz said there was a growing
political space for a positive agenda geared at improving
Argentina’s investment climate. Cobos said he was concerned about
U.S. sanitary and phytosanitary measures that keeping Argentine
beef and lemons out of the U.S. market, and he emphasized the
importance of continuing to provide GSP benefits to Argentine
exports. The DCM urged the GOA to address the grievances of U.S.
companies who had not been paid the damages awarded to them by the
International Court for the Settlement of Investment Disputes
(ICSID), since these companies could get Argentina’s GSP benefits
suspended. A/S Valenzuela said the GOA needed to take action to
restore confidence in Argentina, and he relayed the concerns about
rule of law expressed to him by leaders of U.S. business operating
in Argentina.

Macri: Expecting a Difficult 2010

22. (C) A/S Valenzuela, the Ambassador and the DCM engaged with
Buenos Aires City Mauricio Macri, the center-right leader who is
widely expected to run for president in 2011, regarding the current
political panorama and the 2011 presidential race. Former
Ambassador to the U.S. Diego Guelar accompanied Macri.

23. (C) Macri said Argentina faces a difficult year ahead and
expressed concern that the Kirchners were pushing Argentina towards
becoming a Venezuela-like state. Nonetheless, he noted that since
the June midterm elections, the Argentine public has demonstrated
that it is tired of the government’s confrontational approach. He
said recent polls show a decline in approval ratings for both
ruling party and opposition officials, noting that the public is
tired of the Kirchners’ approach while blaming the opposition for
not pushing them to change course.

24. (C) Macri noted that the key question that is being debated in
political circles today is the role of the state. Valenzuela said
he was struck by several trends, which appear to be operating in
Argentina as well as in many Latin American countries. First, he
noted that those who win power, tend to achieve all control.
Secondly, there seems to be a preference to see those who are
governing, fail. Finally, weak institutions contribute to these
trends. Macri replied that the Kirchners have been "brutal" in
their push to do whatever it takes to win and maintain power. He
added that Argentina is on the extreme end of the pendulum
regarding the weak state of its institutions. He said that during
the Kirchner era judges have been terrorized, the business sector
is worse off, journalists have been discredited, and police have
become increasingly corrupt. He added that the "the level of
impunity is so high" that a sense of what is right and wrong has
been lost. What is needed, Macri noted, is for an established
system of rules and regulations within an independent judicial
branch. Under the Kirchners, all institutions and sectors have
worsened except for the Supreme Court, which has achieved
independence. Macri cited the true challenge to be tapping into
Argentina’s potential despite the isolation the Kirchners have

Macri on Other Presidential Contenders

25. (C) Macri handicapped the presidential race for Valenzuela.
The Mayor cited the most likely top three candidates to be Cobos,
NK, and an independent backed by Macri’s Republican Proposal party
(implicitly referring to his candidacy) and Peronist dissidents. He
speculated that a push for NK’s candidacy would create a fracture
within the Peronist party. He said that while NK might achieve 20%
or 25% in the first round, he did not see him winning a second
round, given his low approval ratings. As to Cobos’s candidacy,
Macri noted that the UCR remained deeply divided over whether to
reincorporate Cobos, let alone make him the UCR candidate.

26. (C) As to other possible candidates, Macri said Civic Coalition
leader and former 2007 presidential candidate Elisa Carrio’s
chances are particularly unlikely given she would be following an
unpopular female president. As to Peronist dissident Colombian-born
Francisco De Narvaez, Macri thought it would be difficult for him
to overcome the constitutional ban on foreign-born candidates.
Macri predicted that Santa Fe Governor Hermes Binner of the
Socialist Party might be hard-pressed to bridge the gap from
provincial to national-level recognition. However, the Mayor
believed that if Peronist Senator Carlos Reutemann from Santa Fe
decided to run, Peronist leaders would switch their support en
masse from NK to Reutemann. Macri speculated that former President
Eduardo Duhalde could be a candidate, but has lost much of the
power he once had. National deputy and former Governor of Buenos
Aires Province Felipe Sola and the former Governor of Misiones
Ramon Puerta also have lost much influence.

On the Radical Party

27. (C) As to Radical party leadership changes, Macri referred to
the Radical’s party new President Ernesto Sanz as "very modern,
pro-capitalist, and a better candidate than Cobos." He noted that
the Radical party has traditionally been highly institutional and

De Narvaez

28. (C) A/S Valenzuela met with Peronist dissident, congressional
deputy and multi-millionaire businessman Francisco De Narvaez, who
told Valenzuela he intended to run for the Peronist Party’s
presidential nomination in 2011 to reverse Argentina’s "profound
decadence." Amid generalizations about the need to restore
normalcy and optimism to Argentina, he repeatedly let drop that he
enjoyed "excellent relations" with VP Cobos and remarked on their
compatibility. De Narvaez said he wanted Argentina to return to
international financial markets, but his top priority was fighting
crime and enhancing security. He spoke at length of
narco-trafficking and the violence it brought with it, and claimed
the GOA was in a "state of denial" about crime and poverty in the
country. He claimed he could reduce poverty by one third within
ten years. He said he saw himself, Santa Fe Senator Carlos
Reutemann and maybe Buenos Aires Mayor Macri as the leading options
for the Peronists. Valenzuela noted that Argentina had yet to meet
the enormous productive potential of its educated workforce and
resource wealth, and his astonishment that Chilean per capita GDP
had surpassed Argentina’s. De Narvaez stressed the need for rule
of law in Argentina, and said the Argentine business class needed
to take responsibility for putting Argentina on the right course.
De Narvaez’s advisor, congressional deputy Gustavo Ferrari, said
the Kirchner administration’s refusal to comply with court orders
was deeply disturbing and undermined Argentina’s rule of law.

Eduardo Duhalde

29. (C) In a separate meeting, Eduardo Duhalde, the Peronist
strongman who preceded Nestor Kirchner as transitional president
(2002-03) who has since announced his candidacy for the Peronist
presidential nomination, spoke at length of the need to rebuild
Argentine institutions. He said he was particularly hoping to put
in place a two-party system that would be able to strike bipartisan
agreements on five or six basic themes, such as personal security
and the business climate. He said the country was in dire need of
clear rules and lamented Argentina’s long decline. "Poverty did
not exist in Argentina before 1974," he claimed, as he identified
several areas (such as forestry and mining) where Argentina was
currently exploiting only a small fraction of its potential.

Duhalde claimed he was working to cultivate a new generation of
leaders and said it was an unfortunate myth that the Radicals (UCR)
were unable to govern. He claimed he had contrived to get UCR
leaders to re-engage with Vice President, whom the UCR had expelled
when he had joined the Kirchner ticket in 2007. Valenzuela noted
that he was struck by Argentina’s lack of national cohesion, and by
the discouragement of the American company representatives with
whom he had met the previous day. Duhalde said he encountered on a
daily basis the pessimism and anxieties of the business community.
Switching to the issue of narco-trafficking, Duhalde praised what
he viewed as the Obama Administration’s "paradigm shift" toward
prevention and demand reduction, and he specifically lauded
Secretary of State Clinton’s acknowledgement in Mexico that
narco-trafficking was a demand-driven issue. Valenzuela noted that
drug consumption was generally not increasing in the United States,
and he explained that eradication and interdiction were necessary
elements along with demand reduction in the new strategy of

30. (SBU) Press coverage and GOA reaction to A/S Valenzuela’s visit
was reported reftel.

31. (U) WHA A/S Valenzuela has cleared this cable.