US embassy cable - 04BUENOSAIRES3427

C O N F I D E N T I A L SECTION 01 OF 04 BUENOS AIRES 003427 
 
SIPDIS 
 
STATE FOR WHA/BSC AND INR/RA, 
NSC FOR TOM SHANNON 
SOUTHCOM FOR POLAD 
 
E.O. 12958: DECL: 10/07/2014 
TAGS: PGOV, PREL, AR 
SUBJECT: TRAVEL NOTES: ARGENTINA'S MENDOZA PROVINCE LEADING 
THE PACK IN POLITICAL AND ECONOMIC DEVELOPMENT 
 
REF: BUENOS AIRES 00023 
 
Classified By: Ambassador Lino Gutierrez for Reasons 1.4 (B) and (D) 
 
1.  (C) Summary: POLOFFS recently traveled to Mendoza to 
attend a political development conference, meet with leading 
political leaders, and participate in a cosmic ray 
observatory dedication ceremony.  Mendoza enjoys greater 
political diversity than the nation as a whole, with three 
well-developed political parties and a host of minor parties 
competing for power in the province.  Mendoza's economy is 
also growing faster than the nation on average, boosted by 
strong exports in wine, tourism, petroleum, and agricultural 
products.  The province has been making good on promises to 
the scientific community with its support for The Pierre 
Auger Cosmic Ray Observatory that is putting Mendoza on the 
map for scientific research.  POFOFFS found that people in 
Mendoza, as in many other provinces, have a noticeably more 
upbeat outlook on Argentina and the Argentine economy than 
people in Buenos Aires.  End Summary. 
 
------------------------------- 
A Diverse Political Environment 
------------------------------- 
 
2.  (C) On November 20-21, POLOFF attended a political 
development conference sponsored by the International 
Republican Institute (IRI) that brought representatives of 
Ricardo Lopez Murphy's Recrear party from throughout 
Argentina with the goal of developing a national party 
structure.  Delegates to the conference were optimistic about 
Recrear's chances of building a nationwide movement, but they 
acknowledged the daunting obstacles facing them in 
challenging the political dominance of the Peronist Party 
(PJ).  Many delegates expressed privately to POLOFF the hope 
that alliances with Mauricio Macri's Commitment for Change 
movement or the Radical Civil Union (UCR) would materialize 
to help Recrear have a greater impact nationally.  A 
Representative of the UCR, which currently holds the 
governorship of Mendoza, attended the conference.  In one of 
the panel discussions, the UCR representative exhorted the 
Recrear delegates to not attempt to go it alone, arguing that 
Recrear could only build a true opposition to the PJ working 
in concert with the UCR and Elisa Carrio's Affirmation for an 
Egalitarian Republic (ARI). 
 
3.  (C) In addition to attending the political development 
conference, POLOFF also met with leaders from all three major 
political parties in Mendoza: the UCR, the PJ, and the 
Democratic Party, as well as a key ARI leader.  UCR National 
Deputy and former governor Roberto Iglesias gave an upbeat 
assessment of the province politically and economically.  He 
felt one of the biggest challenges for the UCR-led provincial 
government was the difficulty in reaching agreements with the 
other two political parties due to the fact that both parties 
are divided and lack strong leaders.  He felt the UCR was 
starting to recover and reorganize from their disastrous 
showing in the 2003 presidential elections, with the election 
of Adolfo Stubrin to head the UCR convention and the recent 
UCR Congress as the first steps.  Iglesias felt the 2003 
presidential vote was more of a vote for a change of any 
kind, rather than an endorsement of the PJ.  He thought that 
over the long-term there would be more political space for 
other political parties, like the UCR, as is already the case 
in Mendoza.  Roberto Iglesias did not discount the utility of 
political alliances, but argued that the party could not 
attempt to align with every possible political force and 
expect to be taken seriously.  For example, Iglesias was 
strongly against the Grupo Olavarria's, a break-away faction 
of the UCR in BA province, attempts to align with Kirchner. 
Iglesias acknowledged that the greatest obstacle to the 
recovery of the UCR nationally was its lack of strength in BA 
province and BA city, arguing that the downfall of the De la 
Rua Administration took much of the BA party structure with 
it. 
 
4.  (C) Rodolfo Arland, chief advisor the President of the PJ 
bloc of provincial deputies, and PJ Provincial Deputy 
Frederico Uriguen largely confirmed National Deputy Iglesias' 
description of the Mendoza PJ party as divided and lacking 
strong leaders, but were still optimistic that the party 
would win the governorship in 2007.  Federico Uriguen 
described Peronism as a combination of nationalism and 
populism that is completely American in its origin (meaning 
Western Hemisphere), as opposed to the UCR that draws its 
roots from Spain and France.  This background gives the PJ a 
much greater ability to garner support from the lower classes 
than the UCR, which has been especially important over the 
last several years of economic difficulties.  Uriguen 
characterized himself as a political reformer within the 
provincial PJ.  He felt most PJ politicians in Mendoza were 
willing to work with Kirchner, but were not beholden to him 
nor his methods.  Rodolfo Arland described himself as a 
traditional Peronist, stemming from his days as a student 
during the military dictatorship.  Arland argued that many 
things were going well in the province, but that the economic 
improvements were in spite of the mismanagement of the UCR 
government. 
 
5.  (C) Rodolfo Arland told POLOFF that corruption was a real 
problem in the province, which was demonstrated first hand 
when two motorcycle police officers pulled Rodolfo Arland 
over, with POLOFF in the passenger seat, allegedly for 
speeding.  Arland had been taking POLOFF on a short tour of 
the city, driving slowly to show him the sights.  The police 
officers claimed their radar gun showed that Arland was 
driving 80 kph in a 40 kph zone, something that was extremely 
unlikely given the pace of Arland's tour.  Neither POLOFF nor 
Arland saw a radar gun, nor would the police officers show 
Arland the gun when he asked to see it.  The police officers 
asked Arland to step out of the vehicle, which Arland later 
told POLOFF was done to avoid any witnesses and provide 
Arland an opportunity to offer the bribe that the police 
officers wanted.  Arland stepped out of the vehicle and 
pulled out his cell phone and told the officers he was 
calling his good friend the Minister of Security to let him 
know that his officers were operating with faulty radar 
equipment because he could not possibly have been driving at 
more than 40 kph.  (Rodolfo Arland, before moving to the 
provincial legislature, was the chief advisor to the Mendoza 
Minister of Security.)  The officers replied that this was 
not necessary and that they must have made a mistake and 
handed him back his license and wished him a nice day. 
Arland told POLOFF as they drove away that this type of 
corruption was unfortunately fairly frequent, as police 
officers are poorly paid and the procedures for paying fines 
are so cumbersome that people find it much easier to offer 
bribes to avoid the hassle.  Arland felt the officers spotted 
a foreign-made car with two well-dressed men inside and 
figured they would likely pay a sizable bribe. 
 
6.  (C) Horacio Migliozzi, the Provincial Director of 
Investigations, briefed POLOFF on his efforts to improve the 
image of the police, but stated that his efforts have been 
limited by police corruption.  He stated that corruption is a 
major problem in the province; he himself has been 
responsible for sending five officers to prison, and 
continues to receive death threats as a result.  As an 
example of police corruption, Migliozzi explained that if 
there is a bank robbery his first step in the investigation 
is to get a list of police working in the area at the time 
and then figure out which ones were involved.  He believes 
with a combination of proper supervision, hiring new officers 
and an increase in police salaries the situation can be 
improved, but admits it will be uphill battle. 
 
7.  (C) Dr. Omar Demarchi, President of the Democratic Party 
and Mayor of Lujan de Cuyo, the heart of the wine-growing 
region, described his party as being in the rebuilding stage. 
 The Democratic Party is the oldest party in Mendoza, tracing 
its roots back to the mid-19th century.  The Democratic Party 
has been unable to retain its past dominance of Mendoza 
politics, as it is seen by many Mendocinos as having worked 
too closely with the military dictatorship.  The Democratic 
Party still holds a number of seats in the provincial 
legislature, but fared poorly in the last two races for 
governor.  Demarchi displayed an almost egotistical sense of 
confidence about the party's ability to regain the 
governorship in 2007, although all the other political 
leaders and analysts POLOFF spoke with in Mendoza felt the 
party's chances for a major resurgence are slim. 
 
8.  (C) Gustavo Gutierrez, who was Carrio's running mate in 
2003 and was formally a congressman for the Democratic Party, 
attributed Mendoza's strong economic growth in discussions 
with POLOFF to the wine industry and Mendoza's proximity to 
Chile.  Gutierrez felt that Mendoza and Argentina as a whole 
had been severely damaged by the populism of both the PJ and 
the UCR.  He felt Argentina needed a new direction and a 
focus on institution-building that he thought Carrio could 
best provide for the country.  Carrio's emphasis on 
institution-building and good governance were the reasons 
Gutierrez gave to explain how a right-of-center individual 
like himself could work with a left-wing politician like 
Carrio.  Gutierrez said he did not plan to seek elected 
office before 2007, choosing to focus on his trucking 
business, but he would accept the spot as vice presidential 
candidate again if Carrio asked him in 2007.  Gutierrez 
readily acknowledges the ideological difference between 
himself and Carrio.  He stated to POLOFF that he worked with 
Lopez Murphy in the past and was much more ideologically 
aligned to him and Recrear, but felt Lopez Murphy was "too 
intellectual" to effectively govern Argentina.  Gutierrez, 
decision to run with Carrio was yet another example that 
ideology is often not the deciding factor in Argentine 
politics.  Gutierrez felt that political alliances might be 
possible between ARI and the other opposition parties, 
acknowledging that an agreement existed between Carrio and 
Lopez Murphy to not compete against each other in the 2005 
elections, with Lopez Murphy agreeing to run in BA province 
and Carrio running in BA city. 
 
--------------------------------------------- --------- 
Mendoza's Economy Booming, but Only in Certain Sectors 
--------------------------------------------- --------- 
 
9.  (C) Leading economist Silvia Jardel of the Consejo 
Empresario Mendocino (CEM) told POLOFF that Mendoza's economy 
has been growing more rapidly than the rest of the nation 
since recovering from the recession the province experienced 
between 1999 and 2002.  She argued the main drivers of the 
strong growth rates were the petroleum industry and wine 
exports.  Mendoza also has a strong agricultural sector, with 
the main exports being garlic, pears, olives, peaches, and 
apples.  Of the 15 billion pesos worth of goods and services 
produced in Mendoza in 2003, 19 percent of it was exported, 
representing the fastest growing sector of the economy. 
Mendoza has increasingly benefited from Argentina's tourism 
boom, with tens of thousands of tourists every year coming to 
enjoy Mendoza's mountains, good weather, and wine.  At the 
same time, Silvia Jardel pointed out that traditional 
industries in Mendoza, such as manufacturing and 
construction, have been undergoing a severe contraction over 
the last few years.  The manufacturing sector fell 26.2 
percent and the construction sector declined 32.1 percent in 
the period between 1993 and 2003.  Jardel pointed out that 
this was creating greater income distribution disparities, as 
those workers tied to fast growing industries like the wine 
and tourism sectors dramatically increased their household 
incomes, while those tied to declining industries faced 
increasing economic hardship. 
 
10.  (C) One major obstacle facing even the hottest parts of 
the export sector is the difficulty in obtaining credit and 
investment.  According to Jardel, despite the recently 
successful restructuring of the province's USD 250 million 
Aconcagua bond, even Mendoza's wine industry has a difficult 
time obtaining badly needed foreign credit and investment due 
to the reluctance of international investors to invest in 
Argentina while the national debt restructuring is still 
pending.  The petroleum industry has an even more difficult 
time obtaining credit and investment, Jardel argued, due to 
the GOA's continued intervention in the energy sector making 
it difficult for private energy producers to make a profit. 
 
--------------------------------------------- ----- 
Cosmic Ray Optical Detector Observatory Dedication 
--------------------------------------------- ----- 
 
11.  (U) On November 13, POLOFF attended the dedication 
ceremony for the third of four optical detector observatories 
planned for the Pierre Auger Cosmic Ray Observatory located 
in Malargue, Mendoza.  For a complete description of the 
Observatory and the science behind the study of cosmic rays 
see reftel, or visit the Observatories website at 
. 
 
12.  (C) The Observatory is an international undertaking 
budgeted at USD 54 million, receiving major funding from a 
large number of donor nations including the United States, 
Argentina, Italy and Germany.  Argentina is the second 
largest donor after the United States, with the federal 
government originally pledging USD 10 million and the 
Province of Mendoza pledging USD 5 million.  Due to the 
Argentine economic collapse the project managers have been 
forced to look elsewhere for the USD10 million pledged by the 
GOA, while the Province has slowly worked to fulfill its 
commitment.  Mendoza Governor Julio Cobos presided over the 
recent ceremony with members of the Italian Science 
Institute, and promised that the Province would make good on 
its USD 5 million dollar pledge in the next three years. 
While project managers continue to negotiate with GOA 
officials regarding funding, they remain skeptical that any 
significant amount will be forthcoming and federal 
representation was noticeably lacking at the event. 
 
13.  (C) The new Observatory is a prime example of the type 
of funding provided by the Province.  While the Government of 
Italy funded the newly dedicated optical detector, the 
provincial government provided vital infrastructure support 
needed to bring the detector on-line.  For example, Cobos 
recently approved the installation of a high-tension power 
line running more than 50 miles directly to the detector at 
an estimated cost of USD 400,000.  POLOFF was informed by a 
provincial official that the Governor rationalized the 
expense by arguing that the power line brought power to the 
citizens living near the detector, but admitted that the less 
than 20 goat herders living in the area without running water 
probably would not be signing up for electrical service 
anytime soon.  In these difficult financial times POLOFF 
expected to find ample criticism among opposition parties for 
Cobos's decision to meet the Province's commitments to the 
project, but support for the Observatory appears to cross all 
political and cultural lines in the Province.  Celso Jacque, 
National Senator for Mendoza and member of the opposition 
Peronist Party, told POLOFF that the Observatory project was 
an example of "positive international investment."  Jacque is 
a former mayor of Malargue and compared the impact of the 
Observatory to that of the oil industry in the early 90s. 
He stated that while the oil companies did bring jobs and 
money to the region, when they left the city suffered over 45 
percent unemployment.  He stressed that his people were worse 
off after the oil boom because they had abandoned their 
traditional jobs.  By comparison, he praised the Observatory 
and the scientific community for the positive and 
long-lasting changes they have made to the quality of life in 
the region.  The Observatory is overwhelmingly seen locally, 
and within the scientific community involved, as a positive 
example of international cooperation in Argentina. 
 
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Comment 
------- 
 
14.  (C) Mendoza's political and economic diversity provides 
a model for the rest of Argentina.  It was refreshing to see 
Recrear's attempt to build a national party structure, 
although they have a difficult road in front of them in order 
to achieve a level of organization that will allow them to 
compete with the more established parties.  Corruption, 
especially in the police force, is a crucial issue that the 
provincial government needs to address.  Mendoza's economy is 
booming, although it is evident that like the rest of 
Argentina, Mendoza is counting on a successful restructuring 
of the national debt to bring in the investment necessary to 
sustain the economic recovery. 
 
 
GUTIERREZ