Cablegate: Argentina's Investment Pitch Marred by Poor Grades On

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TAGS: EINV ECON PGOV PREL AR

SUBJECT: ARGENTINA'S INVESTMENT PITCH MARRED BY POOR GRADES ON

CORRUPTION, DOING BUSINESS

REF: Buenos Aires 1938

1. (U) Summary: During President and Mrs. Kirchner's New York

business-focused visit (reftel), two highly respected and widely

read international business reports released their annual surveys -

and Argentina came up wanting. Transparency International's

""Corruption Perceptions Index 2007"" (CPI) and the World Bank's

""Doing Business 2008"" both released their findings on September 25,

were widely publicized in local media, and gave Argentina poor

grades in the areas of corruption and ease of doing business. The

reports largely tracked with previous years' ratings. End Summary.

2. (U) Transparency International's CPI, the preeminent comparative

international measure of corruption, ranked Argentina 105 out of

180, ranking it alongside Mongolia, Albania, Bolivia and Burkina

Faso. The 2007 CPI survey ranked 180 countries and territories by

their perceived levels of corruption, as determined by expert

assessments, opinion surveys and business people, and ranges between

10 (highly clean) and 0 (highly corrupt). Denmark, Finland and New

Zealand, all at 9.4, led the list. The United States ranked 20th,

at 7.2. Among Latin American nations, Chile (#22, 7.0) and Uruguay

(#25, 6.7) again led the region in 2007. Argentina's index was 2.9.

Venezuela (#162, 2.0) and Haiti (177, 1.6) bottomed out the list

for the Western Hemisphere.

3. (U) In the World Bank's Doing Business 2008 survey, Argentina

ranked 109 of 178, alongside Bangladesh, Nigeria, Belarus, and

Nepal. The survey is a composite, ""ease of doing business"" index

comprised of the following factors: starting a business, dealing

with licenses, employing workers, registering property, getting

credit, protecting investors, paying taxes, trading across borders,

enforcing contracts, and closing a business. Singapore, New

Zealand, and the United States occupied top three spots. Among

Latin America and the Caribbean, Puerto Rico (28), Chile (33), and

St. Lucia (34) were the highest ranking; Haiti, Venezuela and

Ecuador were the worst.

4. (SBU) One of the most noteworthy and wide disseminated factors

that comprised this overall ""doing business"" survey picked up by the

local press was the number of salary weeks payment required to

terminate an employee. Employers must pay a fired worker 139 weeks

of salary in Argentina (compared to zero in the United States,

Denmark, and New Zealand). Note that this 139-week figure does not

take into account GOA's recent termination of its onerous ""double

indemnification"" labor termination policy; if it had, this number

would have been less. Nevertheless, even if this policy change had

been incorporated into the survey, according to the survey's

methodology, Argentina's overall Doing Business score would not have

changed much.

5. (U) The Doing Business 2008 survey highlighted other serious

policy challenges facing Argentina. While it takes only one legal

procedure to start a new business in Australia (four in the United

States), it takes 14 in Argentina. While it takes two days to start

a new business in Australia (six in the United States), it takes 31

in Argentina. These and other findings serve as reminders of why

employers are reluctant to hire new workers (an estimated 41% of the

Argentine labor force is informal) or make new investments.

6. (SBU) Comment: Unfortunately for the GOA, these reports were

released at precisely the time that its first couple was pitching

Argentina to investors in New York. On the one hand, they were a

rude reminder to prospective investors about the challenges of doing

business here. However, on the other hand, the reports tracked

almost exactly with previous years' ratings, and thus there was a

sense of resignation and ""nothing new"" to the reports. And, in an

almost perverse sense, as GOA officials are constantly saying that

there is ""money to be made in Argentina,"" perhaps the real message

to these damaging reports is that, yes, there is money to be made,

as long as you know how - and with whom - ""doing business"" is really

done in Argentina. Local banking and business sources noted that

presidential candidate Cristina Fernandez de Kirchner missed and

opportunity to address these and other issues during her September

24-28 visit to New York. End comment.

WAYNE

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