PRESIDENT VAZQUEZ MOVES FORWARD ON US TRADE AGENDA

C O N F I D E N T I A L MONTEVIDEO 000774

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E.O. 12958: DECL: 08/22/2016
TAGS: PREL ETRD PGOV ECON AORC UY
SUBJECT: PRESIDENT VAZQUEZ MOVES FORWARD ON US TRADE AGENDA

REF: MONTEVIDEO 0746 AND PREVIOUS

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


1. (C) Summary: Since the August 7-10 visit of senior USTR
officials to Uruguay (reftel),President Vazquez has been
assiduously preparing his domestic constituency for deeper
trade ties with the United States. He has publicly stated
that the feasibility of a Free Trade Agreement (FTA) could be
decided at the next meeting of the Joint Commission for Trade
and Investment (JCTI) in early October. Meantime, he has
provided his interlocutors with a sound, balanced and
comprehensive paper that examines key issues on trade ties
with the US, including impact on Mercosur. The US trade
"debate" taking place here is more ideological than economic
and the main detractors predictably hail from hard-left and
anti-US sectors. However, Vazquez' recent engagement and
information sharing has also allowed a wider audience to more
thoughtfully examine the issue of an FTA and weigh the
challenges it poses. Still, the overall momentum in Uruguay
is positive towards an FTA and Vazquez seems to be expending
considerable political capital to make this happen. Below
are some salient highlights on the matter.

THE PRESIDENT AS SOLE SPOKESMAN
--------------


2. (SBU) Following a cabinet meeting on August 14, President
Vazquez issued the following press release indicating that he
will be the sole spokesperson on the issue of a trade deal
with the U.S.

(Unofficial translation) "As a result of the controversies
within the Administration, on negotiations to explore a
possible agreement to expand trade with the United States,
the President of the Republic resolves that of this date he,
or in his absence the person designated by him will be the
only spokesman on this subject. Secondly, the President of
the Republic will invite all Uruguayan political parties to
discuss the issue in depth within their own organizations.
For this purpose, the President of the Republic will call the
highest authorities of the Frente Amplio, National Party,
Colorado Party, Independent Party and the Civic Union to
provide them with the information developed by the bilateral
technical groups working on this issue. At the same time,
the President will invite the Ambassadors of the People's
Republic of China and of the Republic of India to confer
through them with their respective governments on the
possibilities of setting up bilateral committees to study the
mechanisms to improve trade between each one of these
countries." (Comment: It is widely believed that he issued
this statement to silence Formin Reinaldo Gargano, the most
outspoken critic of an FTA. End Comment.)


3. (SBU) True to his word, Vazquez invited the opposition
parties to the Suarez Residence on August 21 to share his
thoughts on the sensitive issues surrounding an FTA and trade
with the US. He presented them with an 11-page paper
entitled "Preliminary Evaluation of a Possible Agreement with
the US." Some of its highlights appear below; Embassy will
transmit a full translated copy of this document when
available.

-- Of the six working groups, the Ministry of the Economy
will head three (goods, services and government procurement.)
The Ministry of Industry (another ally) will manage
Intellectual Property Rights, perhaps the most sensitive
area. The MFA, under Reinaldo Gargano is tasked with
institutional affairs and capacity building -- areas of less
import.

-- The document clearly spells out that a potential agreement
should be framed as a comprehensive Free Trade Area.
-- It leaves the door open for negotiating either a Free
Trade Agreement (FTA) or another kind of agreement to deepen
the trade relationship with the US.

-- The largest benefits for Uruguay would stem from removing
current US barriers on beef, dairy products, food stuffs,
textiles and apparel. The GOU does not see an "invasion" of
US products that could hurt its market.

-- It reiterates the need to stay within Mercosur but
indicates that "as long as Mercosur remains stagnant" and
does not improve integration mechanisms, Uruguay's
development strategy requires boosting exports through third
country bilateral trade agreements and states, "In this
respect, it is of paramount importance to seek a higher
degree of flexibility in negotiation schemes within Mercosur
with respect to other countries," and cites the Andean
Community of Nations (CAN) as an example of this.

-- It cites the FTA Uruguay has with Mexico as a precedent
for a trade deal with the US.

MORE ON MERCOSUR
--------------


4. (U) Days earlier, the Brazilian embassy issued the
following statement in the weekly "Busqueda" (Unofficial
translation) "The Embassy of Brazil is willing to express
itself on this matter (Uruguay's bid to negotiate trade
agreements outside the Mercosur bloc) with the clear
understanding that it is not contradicting any Uruguayan
official. Uruguayan officials have the complete and
sovereign right to seek what is most beneficial to their
country. In this regard, Brazil continues to seek regional
integration and the strengthening of Mercosur and has
demonstrated this through its many businesses in Uruguay.
The Uruguayan government knows how to defend its own
interests without compromising its international commitments,
and without damaging Mercosur. (This policy) has been
reiterated by the highest authorities of Uruguay."


5. (U) At a press conference on August 21 following the
meetings with the political parties, Vazquez addressed this
issue when he responded to a reporter's question and said,
"We'll see. In the next few days I'm going to try and have a
conversation with, at least by telephone if not in person,
President Lula, who you all know is the Pro Tempore President
of Mercosur, to talk about these things. There already was an
occasion in Brasilia at a meeting with the Presidents of
Brazil and Argentina -- and you know that they expressed
themselves publicly saying that they would not put obstacles
in Uruguay's quest to improve its commercial relationship
with the United States and other countries."

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

6. (C) The "FTA debate" remains the overwhelmingly dominant
issue here, with the media portraying every nuance with
front-page banner headlines. Vazquez has taken a
considerable political risk, alienating important sectors of
his governing coalition, by clearly and publicly committing
himself to "the deepest possible" trade agreement with the
United States, which is his code for an FTA. Two weeks ago,
in the presence of senior USTR officials, he said that
"sometimes, the train only comes by once." He immediately
launched a comprehensive public diplomacy campaign to build
tri-partisan support for a trade deal. He has now stated
publicly that he will work the issue of compatibility with
Mercosur with Lula, either by phone or in person, though
Vazquez and various members of his inner circle have told us
repeatedly that Uruguay already has the right to expand its
trade with third parties. Vazquez appears confident that he
can deliver on his goal of reaching a trade agreement with
the United States, and in fact he has half of the Frente
Amplio and all of the opposition backing him. He also
appears confident that the United States will reciprocate by
grasping his outstretched hand. End Comment.
Nealon