The Diplomatic Letter: One and a half years after President Nestor Kirchner took office, on 25 May 2003, Argentina appears to be on the road to economic recovery and renewed political stability. Could you outline the priority goals targeted by President Kirchner, as he works to turn around the country?

H.E. Juan Archibaldo Lanus: The popular uprising during the 2001-02 austral summer had a tremendous impact, which can still be felt even today. The Argentine people took to the streets to voice their discontent and hasten the downfall of a social model that was leading the country to ruin. This bold move by the people, coupled with the country’s cultural creativity, helped us ward off any major problems. Argentines’ attachment to democratic values has grown even stronger since that time. The government is facing a huge challenge at present. One of the hardest tasks will be reconciling our civil society and political sphere, our institutions and leaders, and unite them in one big common space. President Kirchner has vowed to rebuild a national capitalist system that will get us moving back up the social ladder. To that end, he is pushing dynamic policies that will foster economic development and growth, help create new jobs, and achieve a more equitable distribution of wealth. The government is working to restore the values of solidarity and social justice, with the belief that it is the state’s job to redress social inequalities as it carries out the mission entrusted to it by our national Constitution: defending the rights of the entire population. The government’s other key goals include improving the functioning of our institutions and ensuring complete compliance with law standards and the rules of law. Everyone must enjoy legal security, not only the richest Argentines. The president has vowed to wage a merciless battle against corruption and impunity. In doing so, he has opened the way for a cultural and moral shift that will lead to greater respect for the law. He is trying to strengthen the security net for the underprivi-leged, creating a federal network of well rounded social policies designed to ensure that this segment of the population has access to housing, health care, and education. As for Argentina’s current economic policy, reestablishing steady economic growth is the primary goal. This will make it possible to double Argentina’s wealth every fifteen years, while ensuring this wealth is distributed in a fairer manner and reducing poverty. The state is, once again, an active economic player pursuing specific objectives: finishing public works pro-jects, creating jobs, and making heavy investments in new projects. The government intends to create new jobs in the food industry, tourism, energy production and mining, new technologies, and the transportation sector. The president has vowed to maintain fiscal balance, a decision that is already bearing fruit, with Argentina posting record surpluses and tax revenues, and provincial coffers growing sharply. Consequently, Argentina is no longer forced to take out loans to cover its shortfalls. With regard to the foreign debt, we have three main goals: reducing the overall debt, cutting interest rates, and setting longer maturity dates for treasury bonds. When it comes to trade, Argentina is an open country that practices what I call “realistic” openness. In other words, it is open to competition within the framework of regional preference policies, and is fundamentally open via MERCOSUR. The United States and the European Union have insistently held on to their farming subsidies, blocking the signing of inter-bloc trade agreements. Building a politically stable, prosperous and united Latin America, one bolstered by solid pillars of democracy and social justice, is another one of the current Argentine administration’s top priorities. And MERCOSUR and regional integration are, of course, key priorities in and of themselves. Argentina has also expressed its willingness and repeated its offer to negotiate the issue of the Falkland Islands with the United Kingdom. It hopes to maintain reliable, well developed, and wide ties with the United States and the European Union, while also strengthening its friendships with other developed countries and key developing nations. What’s more, the Argentina of today is not indifferent to the need to maintain world peace and security. The Argentine government has proved its commitment and solidarity time and again, starting with its active participation in the Security Council and the presence of Argentines in many of the globe’s hot spots, both as U.N. blue helmets and as civilian peace-support agents.

T.D.L.: President Kirchner   was elected in the first round of the April 2003 presidential runoff with 22% of the vote, after his opponent dropped out. He put the ensuing “legitimacy” crisis behind in short order, by gaining widespread popularity. How would you describe his governing style, which appears to be driven by authoritarian and Keynesian tendencies?   Is this indeed a new brand of Peronism?

H.E.J.A.L.: The current administration has full legitimacy, as imbued by our nation’s constitution and electoral law. The government swiftly won over wide popular support as well, bolstering its legitimacy all the further. It is clear that the current administration has shifted directions in the economic and social arenas, compared to the policies followed in the 1990s. I will come back to this point, if you like, later on in our discussion.

As for your question about the eventual rebirth of Peronism, I can tell you right now that Peronism continues to exert a strong influence on Argentine political life. It is a political force that has successfully surmounted the crises that strike all large-scale popular movements, on a cyclical basis. Peronism is not just an electoral machine. It is a powerful democratic force that has won over a wide majority of voters, both in the past and in the present.   

T.D.L.: Driven by a strong desire to break with the Menemist past, President Kirchner is working hard to restore public faith in the Argentine State. Beyond the reorganization of the country’s judicial apparatus, what is the real significance of President Kirchner’s denunciation of the dictatorship’s crimes?

H.E.J.A.L.: As you point out, the Argentine government is working hard to make our judicial apparatus more transparent. In June 2003, the President of the Republic introduced a revolutionary method for nominating judges to the Argentine Supreme Court. Candidates to this post must only naturally meet certain requirements, as concerns their moral integrity, technical competence, commitment to democracy, and defense of human rights. In addition, this new law sets up mechanisms that will give Argentine citizens and associations, as well as concerned professional groups and non-governmental organizations, ample time to voice their opinions and eventually raise objections to a given nomination. In his eighteen months in office, President Kirchner has appointed four judges to the Supreme Court. With regard to the battle against impunity, we have made considerable strides under the current administration. In August 2003, the National Congress declared that the laws designed to bring an end to investigations into abuses committed during the military dictatorship, known as the “Full Stop” and “Due Obedience” laws,   were “irrevocably null and void.” The executive power immediately implemented this legislative decision, enabling the reopening of trials involving repression. The justice department was hence able to reopen several key trials, such as the cases against ESMA (Navy Mechanics School) and the Army’s First Corps. President Kirchner was also determined to change the laws governing extradition requests, so that requests from foreign nations could be handled by judges without executive intervention. The “Right to Full Truth Law” concerns the discovery and identification of the remains of   persons who have disappeared, as well as the search for any information that could throw light on their disappearance. This is one of the current administration’s key objectives. President Kirchner is also behind the creation, in June 2004, of an agency responsible for investigating disappearances and the illegal appropriation of children under the military dictatorship. This agency, known as the Special Investigations Unit, operates within the framework of the National Commission on the Right to Identity (CONADI). CONADI is responsible for helping identify disappeared persons and assisting the judges and prosecutors handling these cases. Everything will be done to ensure that this special unit has wide powers to gain access to information. Let me also mention that Argentina lays great importance on its recent ratification of the optional protocol of the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, adopted by the United Nations on 18 December 2003. The goal of this protocol is to prevent torture by setting up a system of periodic visits to places where people deprived of their liberty are being detained. Argentina was the first country on the American continent and one of the first countries in the world to ratify this important instrument. This is one more testimonial to the current administration’s determination to actively defend human rights. In August 2003, President Kirchner confirmed Argentina’s ratification of the Convention on the Non-Applicability of Statutes of Limitations to War Crimes and Crimes Against Humanity. The National Congress approved a law that guaranteed the constitutional compatibility of this instrument. Using DNA to identify individual human remains is a long and difficult task, but it allows us to give partial answers to the families of disappeared persons. During President Kirchner’s recent visit to France, his Foreign Relations Minister offered to help French families find their loved ones who disappeared in Argentina, using this procedure.

T.D.L.: Argentina made great strides along the road to economic recovery in 2004, posting a growth rate between 4-5%, stabilizing public funds, and curbing inflation. What is being done to foster vital reforms in the tax system and finance and banking sectors, in order to ensure sustainable growth? How do you explain the current energy crisis in Argentina, an oil-exporting nation?

H.E.J.A.L.: In the fiscal arena, the Argentine government is working to bolster the federal budget surplus so it can keep paying down the debt and take the necessary steps to boost its economy, focusing primarily on investments and social programs. The budget for the current fiscal year, as approved by the National Congress, raises the total budget surplus – for the fede-ral government and the Provinces combined – to 18.5 billion pesos, or 3.9% of gross domestic product (GDP).

This budget surplus is vital, in that it will give us the freedom to steer our economic policy in new directions, both at the national level and in the provinces. In the medium-term, the current fiscal policy lays special focus on: social justice; preferential treatment for investments, technological innovation, and exports with high added value; opening up public shareholdings to private capital; and investing in human resources.

As far as our financial system is concerned, it must be bolstered by the creation of a strong capital market, instead of simply filling the financing needs of the state and provinces.

Cautious standards and very strict regulations must be enforced during stages that involve high liquid assets. We must, however, be able to adapt to difficult situations without harming our production or employment systems, since the cohesion of our financial system will depend, in the end, upon our ability to ensure that they compliment each other well. The budget surplus policy has been designed to channel liquid assets towards financing the private sector, at both the national and provincial level.

The tax policy adopted for the current fiscal year presents an opportunity to reduce the impact of taxes on banking account debits and credits even further. The government is also looking into the possibility of reducing export duties, to help sectors saddled by these taxes.

As for expanding credit, especially long-term loans, the key goal is to shore up price stability and strengthen our financial institutions, in order to improve the performance of the loan market.

After posting growth above 8% for two consecutive years, while meeting all its obligations towards multilateral loan agencies, Argentina believes the time has come to renew its ties with the international financial community, which were temporarily suspended but never cut. This prompted the government’s felicitous initiative to renegotiate the debt with private creditors, which is currently in “default.”

Indeed, in an economy where the key businesses are, for the most part, owned by foreigners, resuming these payments will allow local subsidiaries of transnational companies to make freer investment decisions. This is true not only for private businesses, but for many industrial firms as well. By opening up new opportunities, we will be able to bring down financing costs and spur new investments, which will in turn boost the economic recovery.

With regard to the energy crisis of mid 2004, I would like to make two points. First, Argentina is not an oil-exporting country, strictly speaking. It is an exporter of fuels, in other words: of industrial pro-ducts made out of oil. Second, this crisis, which is already a thing of the past, is a clear sign of Argentina’s industrial recovery. Our energy demand was so high, it surpassed even the most optimistic predictions. What’s more, this high demand helped hasten the implementation of investment projects that were not scheduled to begin until later.

T.D.L.: The current economic crisis has brought recession, a devalued peso, and rising inflation, leading to a sharp rise in poverty and insecurity. Over one-third of the working population in now under- or unemployed. Are Argentine authorities taking steps to help create new jobs and reduce the gap between standards of living within the country?

H.E.J.A.L.: Striking a better balance in the distribution of wealth is the Argentine government’s chief concern at this time. This requires making structural reforms that will make their effects felt in both the medium and long term. In the short term, the government has already taken key decisions in the social arena, such as allocating family subsidy plans that directly benefit three million people. Authorities have also taken steps to encourage the creation of new jobs. These measures began producing results quite rapidly, bringing a strong drop in the unemployment rate and a significant decrease in temporary jobs. Meanwhile, the government has launched a tax reform designed to reduce the impact of indirect taxes on staple commodities, to help achieve a fairer distribution of wealth.

T.D.L.: Your country signed a 3-year agreement with the IMF in 2003 extending the repayment of its debt, marking a strong political victory for President Kirchner. Talks between Argentina and the IMF broke off in September 2004. Under what conditions would your country go back to the negotiating table? How does it plan to go about restructuring its external debt?

H.E.J.A.L.: Argentina’s external debt is a weak spot that the government inherited from the policies advocated in recent years, in the 1990s in particular.

To turn around this situation, the government will have to take structural decisions that could affect the interests of several constituencies, but are necessary in order to ensure the sound functioning of the economy and to create a framework that sparks new investments by both national and foreign agents.

Within this context, a program to restructure the external debt in contract with the private sector has been launched. It is the only plan compatible with the country’s repayment possibilities as well as its unmet social needs. This program has been recently approuved by 76,07% of its private creditors.

It is important to stress that Argentina has never stopped making its payments to multilateral loan agencies on time and in due form. In fact, over the past three years, when it was in the middle of the worst economic crisis in its history, Argentina made loan payments totaling some 13 billion USD. It was thus able to reduce its debt to the IMF for the first time in many, many years.

In a joint agreement with the Argentine government, the IMF decided to suspend negotiations on an eventual agreement until Argentina has completed the restructuring process I mentioned earlier (expected in mid 2005).

This shows that the dialogue with multilateral agencies, and with the IMF in particular, has not been broken off. We believe that this dialogue will, to the contrary, prove extremely fruitful over the course of the coming year.

T.D.L.: In light of the growing discord between the Argentine government and foreign investors, what exactly must be done to make your country’s legal framework more attractive to investors?

H.E.J.A.L.: The economic recovery that is gaining strength in Argentina is the biggest drawing point for national and foreign investors. The government intends to actively foster this trend. This is why it is maintaining clear and well established ground rules designed to attract “genuine” investments in the real economic sector. By “genuine” investments, I mean forward-looking long-term investments that can generate acceptable profits as well as strong reinvestment flow.

Several mutual investment protection agreements are already in effect. Argentina also has an open and unregulated exchange rate system. We expect foreign investors to follow coherent business policies, similar to those practiced by their parent companies.

T.D.L.: MERCOSUR (the Southern Common Market) got a fresh boost from the recent addition of three new associate members. The South American trade bloc celebrated its 10th anniversary on 17 December 2004, against a backdrop of continued tensions between Argentina and Brazil. What are MERCOSUR’s two economic powerhouses doing to put their trade differences behind once and for all?

H.E.J.A.L.: The “problems” inside MERCOSUR – which member countries don’t see as “problems” – can be put down to the difficulties involved in putting together any large-scale integration process. They arise in the social, political as well as economic arenas, as happens to be the case here.

The best way to overcome these differences is to pursue fruitful dialogue, increase trade, and ensure good day-to-day relations between all parties. This is the track the member countries of MERCOSUR are taking.

MERCOSUR should be seen as our domestic market. The integration process must be founded on intra-MERCOSUR industrial specialization. The only way to meet this goal is through balanced industrialization, intra-MERCOSUR industrial trade, maintaining valuable production lines, laying out quantifiable goals for each sector, and, finally, realigning our policies along these objectives, as was done in 1986 with the launching of the Integration and Economic Cooperation Program with Brazil.

What’s more, foreign investors should see MERCOSUR as an “expanded economic space,” not merely a customs union. In the same way that intra-Mercosur industrial policy must be well balanced, foreign direct investments must be guided by this same principle of proportionality and balance.

T.D.L.: On 8 December 2004, the representatives of twelve South American countries came together to create the South American Community of Nations. Could this new regional organization serve as the mainspring of the drive for greater economic and political integration in South America? Could it become an effective instrument for tackling the region’s myriad trans-national challenges, starting with battling organized crime and   water resource management?

H.E.J.A.L.: Twelve Latin American countries did, indeed, meet in Peru to sign the Cusco Declara-tion on the South American Community of Nations (SACN). It is a very promising union that covers an area over 17 million square kilometers, and has some 360 million inhabitants. It has an annual GDP of roughly one billion USD, as well as immense natural resources.

In this initial stage, the budding South American Community will not have its own institutions or budget. It will not enter into free trade agreements, outside of those already approved. The representatives of the twelve nations decided to create the South American Community out of the gradual convergence of MERCOSUR, the Andean Community (ACN), and Chile, which were later joined by the Cooperative Republic of Guyana and Surinam.  

SACN’s key goals are: a) political, social and cultural cooperation, in areas such as strengthening democracy and regional security, battling drugs and corruption, and addressing other social and cultural issues; b) economic, trade, and financial integration based on the approval and implementation of a free-trade agreement between MERCOSUR and the ACN; c) developing material and energy infrastructures, as well as communications. The IRSA Initiative outlined ten key areas for South American integration and development, along with 335 projects to be developed over the coming thirty years and 31 more projects to be carried out over the next five years.

In summary, we can rightly say that we are witnessing a very important event, one that will set the region moving forward in a brand-new and historic direction. This will not be just another diplomatic gesture.

The South American Community must begin tackling concrete issues. In order to do this, it must be founded, firstly, on both physical and geographic integration, and secondly, on making greater headway towards energy integration for resources such as gas, petroleum and water. Each country harbors a different amount of these resources, which could be key incentives in building a truly strong pro-integration dynamic.

This initiative is essential, as well as extremely important. Creating large political and economic spaces has become vitally important over the past few decades. In this sense, the South American Community of Nations should help strengthen the pro-integration thrust already in motion in South America.

T.D.L.: President Kirchner has made a major shift in Argentina’s relations with the United States, building closer ties with Cuba and focusing his foreign policy on Latin America. How would you describe current Argentine-U.S. relations? Do you think the Free Trade Area of the Americas (FTAA) will eventually come together, and if so, under what conditions?

H.E.J.A.L.: Argentina is reasserting its Latin American identity. The rapprochement with Cuba is proof of my country’s renewed interest in this region. We must not forget that Argentina has always been a strong and friendly cultural force in the Spanish-speaking Caribbean, thanks in particular to its music and films. It has not, however, forgotten its relations with other parts of the hemisphere. In fact, Vice President Scioli just returned from an official visit to Washington. Argentina and the United States have very cordial   long-standing relations. These ties are rooted in the inter-American system as well as a good number of shared values, such as the republican ideal, democracy, equality before the law, a market economy, and a great openness to immigration. Prompted by these strong ties, U.S. and Argentine leaders have dreamed of launching transnational projects since the late 19th century, and the earliest days of the Pan-American Congress. The negotiation process for the Free Trade Area of the Americas has sparked wide interest throughout the hemisphere. This great interest is, in fact, why it is so important to reach an agreement that satisfies everyone. An agreement that takes into account the needs of all the different peoples, from Alaska to Tierra del Fuego. This is, obviously, an enormous challenge. In that light, it is vital for the countries of the Southern Cone to attain an agreement that ends farming subsidies, once and for all.

T.D.L.: MERCOSUR and the European Union have been negotiating an association agreement since 1999. The talks were set to close in October 2004, before being pushed back once again.   What, in your view, would constitute a fair and balanced agreement?   Looking beyond the EU, Argentina recently signed major investment contracts with China. Has this opened the door for wider cooperation between Argentina and the nations of Asia?

H.E.J.A.L.: Argentine foreign policy has always given very high priority to multilateral policy-making. Based on this, MERCOSUR shouldn’t be seen as a closed autarchic market, but as a base with wide production specialization that can serve as an international negotiating tool with the WTO, FTAA, and the European Union. In this spirit, Argentina and MERCOSUR joined forces to begin negotiating an unprecedented expanded bi-regional agreement (MERCOSUR-EU). These talks were however suspended when the Commission changed, in October 2004, because of a difference in opinion over the agreement’s breadth and the easing of customs barriers.

Let me point out, on this matter, that MERCOSUR proposed what is known as a “100% plus customs universe.” Or to use the words of Roberto Lavagna, Argentina’s Minister of Economy, we offered a “preferential” easing, an easing even greater than the one already negotiated with the WTO. We also offered to reduce taxes on slightly over 80%   of the remaining customs tax structure. Because of differing views that emerged last year, over the space to be deregulated, it obviously became impossible to reach an agreement as desired. Argentina and MERCOSUR believe that competition is absolutely essential in farming and food processing. Agriculture is a sector like any other, and as such must fully conform to international trade regulations.

Clearly, Argentina and the members of MERCOSUR would like to strike an agreement, but they want a quality agreement that will be useful in years to come. They are hence still very keen on negotiating with the EU. In fact, at the recent “MERCOSUR-EU BUSINESS FORM” held in Luxembourg, European and South American business leaders issued a joint statement that calls for rapidly reopening trade negotiations between MERCOSUR and the EU.

With regard to our relations with China and Southeast Asia, 2004 brought the opening of negotiations on several major trade agreements. Argentina has advocated wide openness towards these regions for the past twenty years, as attested by the high business profile of the Argentine ambassadors customarily nominated to serve in the countries commonly referred to as “Asian Tigers.”

T.D.L.: Argentina has been selected to hold a non permanent seat on the U.N. Security Council for 2005-06. What kinds of issues will your country champion in this multilateral body? Where does it stand on the campaign to reform the U.N.?

H.E.J.A.L.: As we push forward to put the economic and social crisis behind us, Argentine foreign policy will gradually regain its customary vitality. In November 2004, Buenos Aires hosted a crucial meeting on climate change. In 2005, Argentina will become the pro-tempore Secretariat of the Rio Group. It will also continue its work with the Human Rights Commission. Our country will host the 4th Summit of the Americas in November of this year, in the city of Mar del Plata. As you mentioned, Argentina will hold a non permanent seat on the United Nations Security Council in 2005-06. It will be the eighth time our country has been chosen to hold this seat. The government intends to give top priority to enforcing human rights around the globe, safeguarding peace, social development, and fighting hunger and poverty. Haiti, Sudan, the Middle East, Iraq, and the grave humanitarian situation across all of Africa are my government’s biggest concerns. It will also pay special attention to the problem of international terrorism. Argentina will chair the “1267” Committee, which is responsible for maintaining and updating the list of individuals and entities with ties to terrorism. As for the future of the United Nations, we believe that collective security mechanisms should be bolstered, along with conflict-prevention efforts and the organization’s role in peacekeeping operations. We must pay more attention to the economic, social and humanitarian aspects of these situations, which are also a threat to peace and security. As it works within the Council, Argentina will try to ensure that the Council takes its decisions in continuous consultation and with the consensus of countries that are not currently members of this organization. With this in mind, Argentina will focus on measures for fighting poverty, intolerance, and exclusion. The countries of Latin American and the Caribbean have steadfastly battled the lack of transparency in the Council’s decision-making process and granting of privileges, such as veto power. Argentina believes we should encourage changes in the structure and representativeness of the Security Council. However, the ideal that prompted Argentina to become a founding member of the UN, back in 1945, prevent it from accepting, fifty years later, that these “privileges” be extended to additional states. It believes that the number of elected positions should be increased for countries from every region that would like to play a more active role in ensuring international peace and security. We find it simply unthinkable, in the 21st century, to continue copying solutions laid out in 1945 for a political situation altogether different than the present one. This much is sure: Argentina, like other key countries in the region, is against adding new permanent member seats with veto power to the Security Council.

T.D.L.: President Kirchner made a state visit to France in January 2005, continuing a long tradition of friendly bilateral relations.   Were priority areas for strengthening bilateral ties pinpointed at that time? Our countries have built up strong decentralized cooperation networks, such as the ties between Paris and Buenos Aires and   between the Midi-Pyrénées region and Buenos Aires. Could you describe some of the other key areas where France and Argentina are conducting cultural, scientific and technical exchanges?

H.E.J.A.L.: President Nestor Kirchner made a working visit to France last January, accompanied by a large delegation. He met with President Jacques Chirac, spoke at the 3rd Europe-Latin America Forum, and held meetings with officials from France’s various political parties.   He also attended a working brunch with French business leaders at MEDEF headquarters.

This visit had a very positive impact on bilateral ties, further reinforcing the friendship and cooperation long enjoyed by Argentina and France. Our political leaders found themselves in wide agreement on most of the major issues on the international agenda, such as championing multilateralism and the United Nations system, as well as justice and human rights. We share the same vision on the need to work together actively to help the people of Haiti.   France and Argentina’s Deputy Ministers of Foreign Affairs will likely meet in Buenos Aires for political consultations, before the quarter is out.

As for traditional scientific and technical cooperation, the Mixed Commission has held seven meetings on this topic since 1984. Our countries’ public institutions have established cooperation agreements targeting agriculture, working conditions, statistics, science, and technology.

In terms of co-financed cooperation, we have already set up a bilateral scientific and technological training program (ECOS-SeCyT) that spearheaded the development of more than 45 projects for the 2001-02-03 period. For the 2005-06-07 period, France and Argentina have decided to launch new projects in key sectors like the life sciences, social sciences, exact sciences and world sciences.

Another area where bilateral scientific and technological cooperation is on the rise is in growing decentralized cooperation between our two countries’ regions, counties, and cities. This can been seen between Paris and the city of Buenos Aires, and between the Midi-Pyrénées region and the province   of Buenos Aires.