

Currently released so far... 12900 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
2011/05/01
2011/05/02
2011/05/03
2011/05/04
2011/05/05
2011/05/06
2011/05/07
2011/05/08
2011/05/09
2011/05/10
2011/05/11
2011/05/12
2011/05/13
2011/05/14
2011/05/15
2011/05/16
2011/05/17
2011/05/18
2011/05/19
2011/05/20
2011/05/21
2011/05/22
2011/05/23
2011/05/24
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Consulate Karachi
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy Niamey
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sapporo
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
AE
ASEC
AS
AR
AMGT
AFIN
AORC
AU
AG
AF
APER
ABLD
ADCO
ABUD
AM
AID
AJ
AEMR
AMED
AL
ASUP
AN
AIT
ACOA
ANET
ASIG
AA
AGMT
AINF
AFFAIRS
ADANA
AY
AADP
ARF
ACS
AGR
AMCHAMS
AECL
AUC
APEC
APECO
AFGHANISTAN
ACAO
ASEAN
ADM
AGAO
AND
ADPM
ATRN
ALOW
AROC
APCS
AORG
AO
AODE
ACABQ
AX
AMEX
AZ
ARM
AQ
ATFN
AMBASSADOR
ACBAQ
AFSI
AFSN
AC
ASEX
AER
AVERY
AGRICULTURE
ASCH
AFU
AMG
ATPDEA
ASECKFRDCVISKIRFPHUMSMIGEG
AORL
BR
BO
BA
BM
BL
BH
BK
BEXP
BILAT
BTIO
BF
BU
BD
BY
BE
BG
BB
BBSR
BT
BRUSSELS
BP
BX
BC
BIDEN
BMGT
BWC
BN
BTIU
CA
CS
CO
CD
CR
CPAS
CDG
CI
CDC
CBW
CU
CVIS
CE
CONS
CH
CMGT
CASC
CY
CW
CG
CJAN
CIDA
CODEL
CWC
CIA
CBSA
CEUDA
CFED
CLINTON
CAC
CL
CACS
CIC
CHR
CAPC
CM
CT
CTR
COM
CROS
CN
COPUOS
CV
CF
CARSON
CONDOLEEZZA
CICTE
CYPRUS
COUNTER
COUNTRY
CBE
CKGR
CVR
COUNTERTERRORISM
CITEL
CLEARANCE
COE
CARICOM
CB
CSW
CITT
CACM
CDB
CJUS
CTM
CAN
CLMT
CBC
CNARC
CIS
EFIN
ECON
ETRD
EAID
EC
EU
EUN
EINV
EG
ETTC
EIND
ELAB
EAGR
ECIN
EINT
ENRG
EFIS
ELTN
EAIR
EPET
EZ
ET
ENERG
ECPS
EWWT
EI
ETRN
EINVECONSENVCSJA
EEPET
EUNCH
ER
ES
EN
EMIN
ESENV
ENNP
ENGR
ETRDEINVECINPGOVCS
ENVI
ECINECONCS
ELN
EFTA
ELECTIONS
ENVR
EXTERNAL
ENIV
ESA
EPA
ETRO
ETRDECONWTOCS
EUR
ECUN
EXIM
EK
EUREM
ECONOMY
EUMEM
ERNG
EFINECONCS
EAIDS
ECA
ETRC
EINVEFIN
ETC
EAP
EINN
ECONOMIC
EXBS
ENGY
ECONOMICS
EIAR
EINDETRD
ECONEFIN
EURN
EDU
ETRDEINVTINTCS
ECIP
EFIM
EREL
EINVETC
ECONCS
ETRA
EAIG
EUC
ERD
IQ
IR
IS
IN
IA
IC
IZ
ICRC
ID
IDA
IT
IO
IAEA
ICJ
ICAO
IV
IBRD
IMF
IAHRC
IWC
ILO
ISLAMISTS
IGAD
ILC
ITU
ITF
INRA
INRO
ICTY
INRB
ITALY
IBET
IL
INTELSAT
ISRAELI
IMO
IDP
ICTR
ITRA
IRC
IRAQI
IEFIN
IPR
IIP
INMARSAT
ITPGOV
ITALIAN
INTERNAL
IRS
INTERPOL
IEA
INR
ISRAEL
IZPREL
IRAJ
IF
ITPHUM
IACI
INDO
KPAO
KMDR
KCOR
KNNP
KJUS
KCRM
KDEM
KVPR
KTFN
KPRP
KTIP
KSCA
KSUM
KTEX
KIDE
KIRF
KV
KTIA
KN
KG
KFRD
KWMN
KUNR
KISL
KU
KGHG
KPKO
KOMS
KPAL
KIPR
KMCA
KOMC
KRVC
KSEP
KAWC
KOLY
KWBG
KACT
KFLO
KHIV
KZ
KGIC
KBCT
KDRG
KBTR
KCFE
KE
KHLS
KMPI
KAWK
KPWR
KIRC
KRAD
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KFLU
KPLS
KRIM
KSTH
KDDG
KPRV
KICC
KS
KSAF
KBIO
KREC
KCGC
KCIP
KTDB
KWAC
KPAI
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KFSC
KSTC
KMFO
KID
KNAR
KMIG
KVRP
KNEI
KGIT
KNSD
KHDP
KSAC
KWMM
KR
KCOM
KAID
KENV
KVIR
KHSA
KO
KCRS
KPOA
KTER
KFIN
KSPR
KTBT
KX
KCMR
KMOC
KCRCM
KBTS
KSEO
KOCI
KNUP
KPAONZ
KNUC
KNNPMNUC
KERG
KSCI
KTLA
KCSY
KTRD
KMRS
KNPP
KJUST
KRCM
KCFC
KCHG
KREL
KFTFN
KLIG
KDEMAF
KGCC
KICA
KHUM
KSEC
KPIN
KESS
KDEV
KPIR
KWWMN
KOM
KWNM
KRFD
KRGY
KIFR
KWMNCS
KPAK
MARR
MOPS
MUCN
MCAP
MNUC
MEPP
MTCRE
MASS
MO
MIL
MX
MAS
MEDIA
MAR
MI
MQADHAFI
MPOS
MTCR
MK
MG
MA
MY
MU
ML
MPS
MW
MD
MARAD
MC
MR
MT
MTRE
MASC
MRCRE
MAPP
MZ
MP
MOPPS
MTS
MLS
MILI
MEPN
MEPI
MEETINGS
MERCOSUR
MCC
MIK
MAPS
MV
MILITARY
MDC
MASSMNUC
NI
NZ
NL
NO
NPT
NATO
NS
NU
NP
NPA
NSFO
NDP
NT
NW
NASA
NSG
NE
NORAD
NAFTA
NG
NATIONAL
NSSP
NV
NSF
NK
NA
NEW
NPG
NR
NGO
NIPP
NZUS
NH
NC
NRR
NAR
NATOPREL
NSC
OIIP
OPRC
OTRA
OEXC
OREP
OSCE
OVIP
OPAD
OBSP
OECD
OFFICIALS
OAS
OPDC
ODIP
OPCW
OES
OFDP
OPIC
OCS
OIC
OHUM
OSCI
OVP
ODC
OIE
OTR
OMIG
OSAC
OFDA
ON
OCII
PREL
PINR
PGOV
PARM
PE
PTER
PHUM
PO
PINS
PREF
PK
PM
POL
PBTS
PNAT
PHSA
PAS
PA
PL
PGIV
PHUMPREL
POGOV
PAK
PEL
PROP
PP
PINL
PBT
PTBS
PG
PINF
PRL
PALESTINIAN
PSEPC
POSTS
PAHO
PHUMPGOV
PGOC
PNR
PREFA
PMIL
POLITICS
POLICY
PROV
PBIO
PREO
PAO
PDOV
PGOF
POV
PCI
PRAM
PSI
POLITICAL
PAIGH
PJUS
PARMS
PROG
PTERE
PRGOV
PORG
PS
PKFK
PSOE
PEPR
PPA
PINT
PMAR
PRELP
PNG
PFOR
PUNE
PGOVLO
PHUMBA
POLINT
PGOVE
PHALANAGE
PARTY
PDEM
PECON
PY
PLN
PHUH
PF
PHUS
PU
PARTIES
PCUL
PGGV
PSA
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
RU
RS
REGION
REACTION
REPORT
RO
RW
RCMP
RSO
RP
RM
ROOD
RFE
RICE
ROBERT
RSP
RF
RELATIONS
RIGHTS
RIGHTSPOLMIL
RUPREL
SENV
SY
SNAR
SCUL
SP
SF
SW
SOCI
SU
SMIG
SO
SA
SR
SZ
SI
SC
SEVN
SN
STEINBERG
SK
SH
SNARCS
SPCE
SARS
SNARN
SG
SL
SYRIA
SIPRS
SAARC
SNARIZ
SWE
SYR
SEN
SCRS
SAN
ST
SIPDIS
SSA
SPCVIS
SOFA
SENVKGHG
SANC
SHI
SHUM
TU
TSPA
TBIO
TS
TRGY
TINT
TPHY
TN
TW
TH
TZ
TSPL
TP
TBID
TI
TF
TD
TT
TNGD
TL
TC
THPY
TIP
TX
TV
TK
TERRORISM
TO
TRSY
TURKEY
TFIN
TAGS
TR
UK
UNSC
UNGA
UNESCO
UNHRC
UP
UN
USTR
US
UNDC
UY
UNICEF
UNDP
UNMIK
UNAUS
UNCHC
UNCSD
USOAS
UNFCYP
UG
UNIDROIT
UNO
UV
UNHCR
UNEP
USEU
UZ
UNCND
USUN
UNCHR
USNC
USPS
USAID
UE
UNVIE
UAE
UNODC
UNCHS
UNFICYP
UNDESCO
UNC
UNPUOS
Browse by classification
Community resources
courage is contagious
Viewing cable 08BUENOSAIRES1466, Pensions Nationalization Proposal Prompts Financial Panic,
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #08BUENOSAIRES1466.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
08BUENOSAIRES1466 | 2008-10-27 14:51 | 2011-04-19 06:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Buenos Aires |
VZCZCXRO0219
OO RUEHCD RUEHGA RUEHGD RUEHHA RUEHHO RUEHMC RUEHMT RUEHQU RUEHTM
RUEHVC
DE RUEHBU #1466/01 3011451
ZNR UUUUU ZZH
O 271451Z OCT 08 ZDS
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2321
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUCPDOC/USDOC WASHINGTON DC IMMEDIATE
RHMFIUU/HQ USSOUTHCOM MIAMI FL IMMEDIATE
RUCNMRC/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS IMMEDIATE
RUEAIIA/CIA WASHINGTON DC IMMEDIATE
RHEHNSC/NSC WASHINGTON DC IMMEDIATE
RUEKJCS/SECDEF WASHINGTON DC IMMEDIATE
RUEHMD/AMEMBASSY MADRID 2153
RUEHFR/AMEMBASSY PARIS 1476
RUEHLO/AMEMBASSY LONDON 1269
RUEHRO/AMEMBASSY ROME 1455
RUEHRL/AMEMBASSY BERLIN 1147
UNCLAS SECTION 01 OF 04 BUENOS AIRES 001466
C O R R E C T E D C O P Y - (PARA NOS.)
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: EFIN ECON PREL PGOV AR
SUBJECT: Pensions Nationalization Proposal Prompts Financial Panic,
Market Crash in Argentina
Ref: BUENOS AIRES 1442
BUENOS AIR 00001466 001.2 OF 004
-------
Summary
-------
¶1. (SBU) The Argentine government appears to have been completely
unprepared for the plunge in Argentine stock and bond prices
following its announcement that it would nationalize the nation's
private pension system. GoA officials clearly did not think through
the possible negative consequences of this decision, and have
struggled to respond to the crisis, with both the GoA Treasury and
Central Bank intervening heavily in markets to sustain equity and
debt prices, bolster the peso, and prevent massive capital outflows
from the banking sector. The President apparently also had to call
her Spanish counterpart to reassure him, given the negative impact
on the Spanish stock market, and to address rumors of deciding to
end negotiations with the Spanish company Marsans over the
nationalization of Aerolineas Argentinas. .
¶2. (SBU) There is a heightened sense of fear and uncertainty in the
country, with increasing talk of recession in 2009, concerns about
GoA finances and default risks, and a growing sense that no economic
sector is immune from GoA intervention. Although the GoA is
optimistic about Congressional approval of the bill, Post is hearing
of rising opposition to the measure, particularly in the Senate.
The GoA may have a larger fight on its hands than it originally
expected, and at an incredibly sensitive time for both international
and domestic economies. Septel provides additional details about
the GoA plan, market reactions, and the increasingly negative
outlook for the Argentine economy. End Summary.
--------------------------------------------- ---------
Financial Panic Sparked by GoA Pension Nationalization
--------------------------------------------- ---------
¶3. (SBU) The freefall in stock and bond prices October 21-22 in
reaction to the GoA's October 21 announcement that it intended to
nationalize the private pension funds (AFJPs) (reftel) appears to
have caught the GoA completely unprepared. With the Buenos Aires
Stock market dropping over 20% in two days and the country risk
premium spiking to over 2,000 basis points, GoA officials struggled
to find ways to halt the market panic they clearly had not
anticipated. A high-level source close to the Casa Rosada told DCM
October 23 that the markets reaction hit the government ""like
Hurricane Katrina."" Cabinet Chief Sergio Massa is apparently being
pulled in a thousand directions at once as he tries to manage both
the fallout and demands from the Kirchners, and he is apparently
being ""overwhelmed"" by the multiple challenges the administration is
facing.
¶4. (SBU) Several other sources told Ambassador that the small circle
that made the pension decision had not anticipated the negative
market reactions, but had only considered that the public did not
like the private pension system and thus would likely support the
GoA's move. As the financial storm mounted, the Kirchners
reportedly responded with anger and vigorous efforts to calm the
markets, without going back on the decision.
¶5. (SBU) According to press reports (confirmed in general terms by
central bank contacts), the GoA reacted October 22 by buying both
local bonds and stocks. This intervention seems to have succeeded
in halting some of the panic-selling in the stock market, although
short-term bond prices continued to fall on October 23. The Central
Bank has also intervened heavily in currency markets, selling
dollars to bolster the peso and limit incentives for capital
outflows from the banking sector. While the BCRA has succeeded in
maintaining the peso relatively stable, banks report deposit
withdrawals and dollar purchases at rates up to five times higher
than normal (albeit still below the worst days of the farm crisis).
Argentine media speculates that the GoA is considering further
""market-friendly"" actions to counteract the negative perceptions of
the AFJP nationalization, and Post's contacts among private banks
expect this to focus on large scale bond repurchases.
--------------------------------------------- --------
GoA Motivated by Financial Concerns, but Ignored Unintended
Consequences
--------------------------------------------- --------
BUENOS AIR 00001466 002.2 OF 004
¶6. (SBU) Although President Cristina Fernandez de Kirchner has
billed this as a ""rescue of future retirees from a failed system,""
Post's contacts (including at the central bank) uniformly agree that
the GoA's primary motivation for nationalizing the AFJPs is
financial. Facing increasing financing needs in coming years, no
access to international credit markets, plummeting commodity prices,
and growing fears of recession in 2009, the GoA was clearly
desperate for a source of funding to sustain debt payments and keep
from having to cut spending in the run-up to the mid-term 2009
elections. While there is disagreement over the actual financial
benefit to the GoA, in addition to taking possession of the AFJPs'
$30 billion in assets, it is likely to realize inflows of $8-10
billion in 2009 (including contributions, free deposits, and reduced
interest and principal amortization on GoA bonds held in AFJP
portfolios, see Reftel). This should fortify GoA finances
sufficiently to enable it to meet debt payments in 2009.
¶7. (SBU) However, according to a wide range of sources, the
President, ex-President, Cabinet Chief and Public Pensions Chief did
not appear to have taken into consideration the importance of the
private pension system to the financial sector. Not only are the
AFJPs the largest purchaser of GoA bonds (which comprise roughly 60%
of AFJP portfolios), but they also hold significant equity positions
in all the major local companies and banks, are a key source of new
financing for companies, and also are the largest source of
short-term trade financing. Therefore, by announcing the
nationalization (followed by a judicial order prohibiting AFJPs from
making any financial transactions in the near term), in one fell
swoop the GoA succeeded in cutting off a main trader in the stock
exchange and bond markets, eliminating a main source of financing
for companies and trade financing for exporter and importers, and
raising alarm among companies who now will have a highly
interventionist government as a major shareholder and potential
board member. The GoA also seems not to have considered that the
AFJPs own large stakes in foreign companies, and these positions
could be subject to attachment by holdout bondholders after the GoA
takes possession of AFJP assets.
¶8. (SBU) The immediate and negative impact on the Spanish stock
market also caught the GoA by surprise and set off a series of
consultations. These reportedly included a call from President
Cristina Fernandez de Kirchner to Spanish President Zapatero to
reassure him about Goa objectives on the pension moves and on the
nationalization of Aerolineas Argentinas, where press reported a GoA
decision to break off negotiations with the Spanish owners
(Marsans).
--------------------------
Fear and Uncertainty Reign
--------------------------
¶9. (SBU) Most local and foreign analysts were already concerned
about weakening GoA finances in the face of plummeting global
commodity prices and a rapidly decelerating economy. The consensus
among Post's banking sector contacts even prior to the October 21
announcement was that Argentina was facing recession in 2009, and
default risks were on the rise. While agreeing that the AFJP
nationalization most likely reduces the risk of default over the
next few years, Post's contacts worry about its medium term impact
on the economy. Their main concern now is whether this latest
crisis will result in large-scale capital outflows from a now
significantly less liquid financial system. However, they also note
that AFJPs are the main source of financing in Argentina, and
scarcer credit without them could exacerbate the economic downturn,
and could enhance the GoA's leverage over the private sector. In
the face of this probable credit crunch and expanding GoA presence,
Banks now worry they may be the GoA's next target, as the GoA seeks
to ensure availability of credit (possibly through old-school
Peronist techniques, such as capped interest rates and forced
lending). Broadly, there is growing fear that no sector is immune
from GoA intervention. (Septel analyzes these issues in more
detail.)
--------------------------------------------- ---
Rising expectations of a tough fight in Congress
--------------------------------------------- ---
¶10. (SBU) The Ambassador, DCM, and EconOffs have consulted widely
BUENOS AIR 00001466 003.2 OF 004
with economists, journalists, bankers, Central Bank (BCRA)
officials, and AFJP executives this week, and the initial consensus
was that the Argentine Congress would approve the measure relatively
easily, albeit possibly with some modifications. The sense was that
this issue does not resonate the same as the farmers strike with
either Argentine society or Congressional representatives, and also
that there is broad dissatisfaction in Argentine society with the
retirement system writ large, and the common perception is that the
AFJP system (with only 3-5 million mostly white collar regular
contributors), was poorly conceived, expensive to administer, and
has generally not met expectations. Certainly the GoA is publicly
optimistic that it has the votes necessary to get the bill through
both houses of Congress.
¶11. (SBU) However, the mood has shifted during the last 36 hours,
and there are increasing signs that many political leaders are
having doubts. At minimum, it appears that the Senate will push for
modifications to the GoA's bill, such as greater controls and
transparency with regards to GoA management of the funds. There are
increasing calls in Congress for guarantees that no funding from the
AFJPs will be used to finance expenditures or make debt payments.
Given the assumption that the GoA's primary motivation is to get
funds for these purposes, it appears the GoA may have more of a
fight on its hands than it bargained for.
¶12. (SBU) Opposition Congressman Esteban Bullrich told the
Ambassador October 24 that many opposition Radical party Deputies
and Senators, who initially supported the measure, are now leaning
towards opposing it. More significantly, Bullrich alleged that
during Senate Majority Leader Miguel Angel Pichetto's October 23
meeting with former President Nestor Kirchner (in which Chamber of
Deputies Majority leader Agustin Oscar Rossi also was present),
Pichetto insisted that he needed ""flexibility to make significant
modifications"" to the law, in order to get it through the Senate.
Kirchner is reported to have rejected this plea, but Pichetto's
concern is indicative of how strong opposition to the bill -- at
least as currently drafted -- may be in the Senate.
¶13. (SBU) Bullrich further notes that opponents are trying to
highlight how costly this measure will be to the Argentine society,
a tact that was highly successful during the July Senate vote over
the GoA's bill to raise export taxes. Finally, the reactions of the
Governors will be key, because Senators are much more responsive to
their Provincial constituencies than are lower house Deputies who
normally vote party lines. Many Governors are unhappy right now
with the GoA, not least because the GoA is said to be broadly
delaying both non-discretional and discretional funds transfers to
the provinces. (Septel will detail Argentina's co-participation
federal/provincial revenue sharing system.)
¶14. (SBU) Post's contacts until recently have also been relatively
sanguine regarding concerns about the possible social outcry. For
the same reasons stated in Para 6 above, most observers do not
expect social protests of the kind that could block the initiative
or destabilize the government. While there are efforts (mostly via
mass emails) to organize ""cacerolazos"" (pot-banging) protests, there
were doubts about how effective these calls for protest would be.
(There are emails calling for a cacerolazo at 8:00 p.m. local time
tonight.) That is also changing, according to Deputy Bullrich. He
pointed out that he set up a section of his website opposing the
AFJP nationalization, and within a day had received 4,000 comments
from outraged citizens (most likely AFJP contributors). This was a
much faster reaction than he saw during the spring farm strikes,
according to Bullrich, and he sees it as evidence that opposition
may be building in the public.
-------
Comment
-------
¶14. (SBU) During an October 22 lunch, several highly connected
journalists and bankers told Ambassador that some in the private
sector had initially characterized the GoA's move as a ""brilliant""
way to get more funds flowing into the GoA Treasury. However, as
the implications set in, most analysts now are portraying it as a
blow to Argentina's ability to attract investment, as it provides
further evidence of the GoA's willingness to change the rules of the
game at whim. It will thus likely reinforce the idea that Argentina
is an unpredictable place to invest, and will also undermine GoA
BUENOS AIR 00001466 004.2 OF 004
efforts to entice Argentines to repatriate capital back from
overseas. This is the overwhelming buzz in elite circles. Most
distressing to many in Argentina is the manner in which the GoA
concocted this scheme, originating and developing it within a small
group, not consulting the AFJPs or the broader financial sector, and
disregarding the probable negative consequences that were obvious to
most of Post's contacts. Once again the GoA has taken a bad
situation and made it worse through its own doing. To paraphrase
noted Argentine commentator Eduardo van der Kooy, in his October 23
column in Clarin, the impact of the global crisis on Argentina was
the equivalent of a light drizzle, a shower that Cristina and Nestor
Kirchner managed to turn into a downpour.
WAYNE
=======================CABLE ENDS============================