Identifier
Created
Classification
Origin
06MONTEVIDEO746
2006-08-14 19:07:00
CONFIDENTIAL
Embassy Montevideo
Cable title:  

USTR VISIT PROMPTS PRESIDENT VAZQUEZ TO OPENLY

Tags:  ETRD PREL ECON PGOV AORC UY 
pdf how-to read a cable
VZCZCXYZ0000
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DE RUEHMN #0746/01 2261907
ZNY CCCCC ZZH
P 141907Z AUG 06
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC PRIORITY 6147
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 2528
RUEHCV/AMEMBASSY CARACAS 0433
RUEHLP/AMEMBASSY LA PAZ AUG SANTIAGO 2886
RUMIAAA/CDR USSOUTHCOM MIAMI FL//J-5//
RUEHC/DEPT OF AGRICULTURE WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
C O N F I D E N T I A L MONTEVIDEO 000746 

SIPDIS

SIPDIS

DEPT ALSO FOR A/S SHANNON, WHA/BSC AND EB
DEPT PASS USTR FOR EEISSENSTAT AND SCRONIN
TREASURY FOR OASIA FOR DDOUGLAS
COMMERCE FOR ITAITA/MAC/WBASTIAN
NSC FOR DFISK AND DTOMLINSON
SOUTHCOM FOR POLAD

E.O. 12958: DECL: 08/14/2016
TAGS: ETRD PREL ECON PGOV AORC UY
SUBJECT: USTR VISIT PROMPTS PRESIDENT VAZQUEZ TO OPENLY
ENDORSE FREE TRADE

REF: A. MONTEVIDEO 00707


B. MONTEVIDEO 00616

C. MONTEVIDEO 00616 AND PREVIOUS

Classified By: Charge D'Affaires James D. Nealon
for reasons 1.4 (B) and (D)

C O N F I D E N T I A L MONTEVIDEO 000746

SIPDIS

SIPDIS

DEPT ALSO FOR A/S SHANNON, WHA/BSC AND EB
DEPT PASS USTR FOR EEISSENSTAT AND SCRONIN
TREASURY FOR OASIA FOR DDOUGLAS
COMMERCE FOR ITAITA/MAC/WBASTIAN
NSC FOR DFISK AND DTOMLINSON
SOUTHCOM FOR POLAD

E.O. 12958: DECL: 08/14/2016
TAGS: ETRD PREL ECON PGOV AORC UY
SUBJECT: USTR VISIT PROMPTS PRESIDENT VAZQUEZ TO OPENLY
ENDORSE FREE TRADE

REF: A. MONTEVIDEO 00707


B. MONTEVIDEO 00616

C. MONTEVIDEO 00616 AND PREVIOUS

Classified By: Charge D'Affaires James D. Nealon
for reasons 1.4 (B) and (D)


1. (C) Summary: The recent visit by Assistant United States
Trade Representative for the Americas Everett Eissenstat and
USTR's Senior Director for Brazil and the Southern Cone, Sue
Cronin, sparked an intense internal debate over the future
direction of Uruguay's trade relationships and pitted
outward-looking free trade advocates against the old-time
statists wedded to the Mercosur trading bloc. President
Tabare Vazquez came out squarely in favor of more trade with
the outside world and for deeper ties with the US,
persuasively arguing that such moves might result in a
"bigger and better" Mercosur, although he could not say how
an FTA with Uruguay would be reconciled with Mercosur. The
stubbornly ideological Foreign Minister Reinaldo Gargano
publicly defied the President's message, but said he would
not resign. The USTR officials were invited here to
participate in a Council of the Americas event, but their
presence precipitated an informal referendum on a Free Trade
Agreement (FTA) with the United States. During their broad
public and private discussions, USTR officials made it
abundantly clear that the US was not negotiating or
pressuring the GOU on an FTA. However, they identified the
difficult commitments, constraints and concessions necessary
should a trade agreement be formally pursued. The week was
particularly significant in terms of the Frente Government's
search for a balance between pragmatic needs and its
increasingly awkward socialist rhetoric. There seemed to be
a palpable sensation that the country was at some kind of

tipping point. The national debate on Uruguay's place in the
world, and its place in Mercosur was significant and will be
closely monitored going forward. Below are some highlights
and selected excerpts from the USTR officials'
visit. End Summary.


2. (U) A/USTR Everett Eissenstat and USTR Director for Brazil
and the Southern Cone Sue Cronin arrived in
Montevideo on August 7 to attend a Council of the Americas
event entitled "Uruguay in the Global Economy." This was a
significant event here that received widespread media
attention. The USTR officials also had ample opportunity to
consult with a wide variety of key decision makers during
their 3-4 days of meetings, including with President Vazquez.

August 8 Meeting With President Vazquez
--------------


3. (C) USTR officials and the Charge met with President
Vazquez at their request on August 8 at the Suarez Residence.
The President insisted that the meeting be kept from the
public. Initially Vazquez appeared nervous, perhaps
anticipating that A/USTR Eissenstat was going to press him to
define his thoughts on an FTA. Vazquez soon relaxed after
realizing that the A/USTR was not there to apply any
pressure. Eissenstat began by conveying greetings from
President Bush, to which Vazquez inquired if he was well.
Eissenstat said that he was, and that POTUS appreciated his
support for a shared vision of spreading democracy, opening
markets, and enhancing the rule of law. Vazquez responded
(paraphrased). "Please send my regards to President Bush. We
had an excellent meeting in Washington. Tell him I haven't
yet had a chance to use the fishing rod. I feel good about
tomorrow's (Council of the Americas) conference, as it's
important for the country. Let's cooperate so that it is a
success. We're going to have a deep discussion about the
right path to deepen our trade relationship. It's a turning
point. We have had good relations historically - artistic,
cultural, in the defense of liberty, peace, fighting for
social justice, defense of liberty. Now perhaps we can
enhance our relationship in the trade field. Our technical

people are exploring which road would be the best to achieve
that. I wouldn't be honest if I didn't say that there are
distinct different voices within my government. But I am
optimistic that we can advance. All in my government share
the basic goal of enhancing the trade relationship. If there
is political will, we can do it. You have lots of experience
in this arena, but we have very limited experience outside of
Mercosur. We only have a free trade deal Mexico, signed two
years ago. We don't want to damage Mercosur. We want to
protect our investment in regional integration. We don't
want any new agreement to harm Mercosur. That is our
challenge now that you are here."


4. (C) A/USTR Eissenstat responded that the US is committed
to the multilateral trade system and was disappointed at the
suspension of the latest Doha WTO talks. He thanked Uruguay
for its constructive help in Geneva and for playing a
positive role. Eissenstat remarked that market access is the
key that can help a small country like Uruguay. Vazquez
responded (paraphrased) "Yes, in my speech I'll say we can't
just discuss possible bilateral agreements, we need a broader
context. I think we can begin a new relationship between the
United States and Latin America. This may seem like a
paradox now that there are so many "progressive" governments
in Latin America, but it isn't. This political ferment
creates the conditions in which a new relationship could
thrive. It's in this context that we need to think about a
possible trade agreement. Let's find a point where our
interests meet. According to the report I've received from
my (trade) team, a lot of technical progress has been made.
Now the work ahead, for us, is mostly political. I believe
your President will see things the same way. Let's take
advantage of the political momentum that we currently enjoy.
I don't believe in populism. I believe in delivering better
living standards for our people by creating jobs. I will be
flexible. If we have the political will we can move ahead.
You know, this is what your President told me."


5. (C) Eissenstat indicated that USTR has been very pleased
with the progress made under JCTI auspices. He noted that
President Bush stated that he wanted to deepen our trade
relationship -- and as a result USTR is talking to Vazquez,
team to find the most appropriate way to do just that. He
said that our measured approach is the correct approach
because, "We want to continue to be successful and we want
you to understand that we don't want to undermine Mercosur
either. We leave it to you to work out your path with
Mercosur as we move forward. For us, the goal is to enhance
the trade relationship. We want to choose the best path to
do that, a path that works for both of us." Vazquez responded
that Uruguay wanted to continue the dialogue and to enhance
the trade relationship. He assured the A/USTR that Uruguay
has
consensus on that commitment and that he could rest assured
that the GOU will move ahead in a serious manner.


6. (C) Eissenstat commented that "It sounds like we have a
shared vision," and asked Vazquez to give his opinion on
Mercosur. Vazquez laughed and said, "It's not easy. I'll
base my answer on statements made by Lula and Kirchner back
in May, in Brazil. When I made my statements then that
Mercosur isn't currently serving the interests of the smaller
members and that bold words and good intentions need to be
put into practice, both Lula and Kirchner said to me that
they would not stand in the way of trade negotiations with
third countries outside of Mercosur. I have those statements
in my files. Later, Celso Amorim came here and delivered a
very different message, but I choose to remember what Lula
had said instead. In Cordoba, Minister Astori made a
proposal to allow the smaller countries to negotiate outside
the Mercosur bloc. There was no resolution, but Astori said
the atmosphere was positive. But look, if we signed an FTA
with Mexico two years ago and they didn't kick us out then,
why would they kick us out now? We're working on all this
through Mercosur channels. I believe that maybe our improved

trade relations with you can also help improve our regional
relations. We need to start somewhere, and this is a good
place to begin."


7. (SBU) Highlights of 8/9 Council of the Americas Event
-------------- --------------

-- President Vazquez observed that individuals respond to the
global economy by either trying to avoid it or by "planting
their feet squarely in reality" and participating in it. He
opined that his Governments "principles and pragmatism were
not incompatible" and strongly urged the latter approach. In
reference to a Uruguay/U.S. trade deal, he said, "History
doesn't rewind, it doesn't stop, it doesn't repeat. The
train, sometimes, comes only once," and concluded that
Uruguay should actively pursue deepened trade relations with
the United States.

-- Foreign Minister Gargano followed Vazquez in a somewhat
incoherent speech that lambasted agricultural subsidies and
complained that Bilateral Investment Treaties gave too many
advantages to foreign investors. Outside the conference room
he later openly contradicted the President when he told the
press that he was opposed to an FTA because he had to "remain
faithful to the voters who had elected the Frente
Government."

-- Former Chilean Ambassador to the U.S. Andres Bianchi
proved to be one of the most useful interlocutors on
discussing a Free Trade Agreement since he had been closely
involved in Chile's FTA negotiations with the US. He outlined
the difficult steps that were needed and surprised his
audience when he told them that Chile had unilaterally
lowered its trade tariffs as part of its poverty alleviation
program, with a positive benefit to government coffers.

-- AUSTR Eissenstat's remarks revolved around three themes,
1) Uruguay's success in following good policy, both
politically and economically, in particular its adherence to
the rule of law and democratic institutions, 2) the
importance of re-engaging to bring the Doha Development
Agenda to a successful conclusion and 3) our joint commitment
to deepening the trade relationship. Eissenstat left the
means of achieving that goal open, saying that he would
return in October for a meeting of the Joint Committee on
Trade and Investment to discuss the best means of moving
forward.

-- Economy Minister Danilo Astori stated that Uruguay should
look beyond the borders of Mercosur to expand its trade and
thereby develop its economy. He also argued that while the
larger countries benefit from the protection of a closed
Mercosur system, the smaller countries, such as Uruguay, are
hurt by restrictions against trade outside the bloc. Astori
highlighted accomplishments in the US/Uruguayan trade
relationship thus far including JCTI, the BIT, Uruguay's
removal from the 301 list and the meeting with POTUS last
May. He opined that market access to the world's biggest
economy was essential for Uruguay and said that Uruguay's
commitment to the rule of law and its fight on poverty would
pay off in terms of foreign investment.

-- A peaceful protest mainly by Communists, radicals and
trade unionists against an FTA took place in downtown
Montevideo without incident in the early evening. Estimates
of the size of the crowd varied from 400 to 1,000.


8. (C) Other Key Contacts
--------------

-- On August 7 Eissenstat, Cronin and the Charge met with the
GOU members of the Joint Commission on Trade and Investment
(JCTI),including Ambassador to the U.S. Carlos Gianelli, the
MFA's Carlos Amorin and the Economic Ministry's Dario
Sarachaga. Most important issues covered: If an FTA was to be

pursued what are the potential obstacles. Among them: Antel,
ANCAP, Beef BSC, Pharmaceuticals, and Intellectual Property
Rights. That evening, at dinner at the Charge's Residence
Eissenstat and Cronin met with Minister of Economy Danilo
Astori, Minister of Industry Jorge Lepra and Ambassador to
the US Carlos Gianelli.

-- On August 8 the USTR officials met separately with
opposition National Party Leader Jorge Larranaga and former
Colorado President Jorge Batlle. Batlle shared President
Vazquez' vision on building a new relationship between the US
and Latin America. He said that. "If Uruguay signs an FTA
with the US it will be like dominoes in the region. Paraguay
and yes, Argentina will follow." The USTR officials also held
an off-the-record meeting with the American Chamber of
Commerce where one businessman remarked "if you want an FTA
with us all you have to do is change the name and yield in
one discussion. That will do the trick."

USTR Senior Southern Cone Director's Meetings with Key Sectors
-------------- --------------


9. (SBU) Sue Cronin separately met August 9-10 with
representatives in key sectors of the economy to discuss
potential problem areas and to exchange views. These
included: Daniel Belerati (Executive Director of the Chamber
of Beef Exporters),Gustavo Zerbino (President of the Chamber
of Foreign Pharmaceuticals),Pedro Otegui (China Camber of
Commerce),Dr. Luis Fratti and Dr. Fernando Perez Abella
(President and vice-president of INAC Organic Beef
Association) and members of the Uruguayan Information
Technology (IT) Chamber. Among general themes, Cronin
explained that the US was a common law country and was bound
to propose the same texts on regulations to all countries
concerned with little room for maneuver, making it virtually
impossible to accommodate sensitivities that may be unique to
Uruguay. To this end, she encouraged her interlocutors to
review the openly-available relevant texts of the Peru TPA as
well as the FTA texts for Colombia and Costa Rica in order to
understand US requirements on touchy issues such as
Government Procurement, Intellectual Property rights, US beef
exports, Pharmaceuticals etc. she also encouraged her
interlocutors to study niche markets and the benefits
intra-hemispheric trade apart from the US. It is worth noting
that during Cronin's discussions private sector players
generally did not see Mercosur as a key to economic growth or
a benefit to their own enterprises. They were concerned
about Venezuela's entry into the bloc, and noted that it
could change the nature of Mercosur, making it less a trade
agreement, and far more political.

COMMENT
--------------

10. (C) The USTR senior officials' visit was exceptionally
useful in promoting the deepening of the Uruguay-US trade
relationship while providing a dose of reality about the
challenges entailed in launching an FTA. It also had the
unintended effect of sparking an internal debate on where
Uruguay should be headed in the increasingly globalized world
economy. Both in private and in public President Vazquez
demonstrated his unwavering commitment to constructive
engagement and a deepened trade relationship with the US and
confidence in his ability to counter domestic and regional
opposition to this vision. This is not the first time that
he has told us that he wants to be part of a new relationship
between the U.S. and the region. It was a bold political
move that Vazquez, in front of his Vice President, his
obstreperous Foreign Minister, and all but two members of the
Cabinet, told Uruguayans that he would continue to pursue
regional integration that serves Uruguay's interests, but
that he would also pursue deeper ties with the United States.
Concern regarding Venezuela's entry into Mercosur was a
recurrent theme in meetings with government officials and
opposition representatives. Like the private sector,
government/opposition leaders thought Chavez would make

Mercosur far more political. They also noted that
Venezuela's ascendance posed a threat to Brazil's leadership
in the region. When the time comes, they thought this
concern might be manifested through an active debate in
Uruguay and Brazil over legislative approval of Venezuela's
Mercosur membership, though approval of Venezuela's
membership is a foregone conclusion. This telegram was
cleared by USTR. End Comment.
Nealon