SCENESETTER FOR SECRETARY'S VISIT TO CHILE

C O N F I D E N T I A L SANTIAGO 000446

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/01/2016
TAGS: OVIP PGOV PREL ECON ETRD CI
SUBJECT: SCENESETTER FOR SECRETARY'S VISIT TO CHILE


Classified By: Ambassador Craig Kelly. Reasons: 1.4 (b and d).


1. (C) Summary: You arrive in Santiago on the eve of the
historic inauguration of Chile's first female president,
Michelle Bachelet. Since her run-off election on January 15,
President-elect Bachelet has named a gender-equal and
technically sound cabinet. It is a cabinet not subject to
the control of the political parties that make up the
governing Concertacion coalition or the stalwarts of the
outgoing Lagos Administration. Bachelet's early domestic
priorities include public security, healthcare and pension
reform, and education. The center-right opposition and some
members of the business community are worried that Bachelet's
social policies may undermine Chile's rigorous fiscal and
monetary policies. In foreign policy, Bachelet has declared
a focus on strengthening ties with neighbors, while
maintaining important relations with the U.S., Europe and
Asia. We expect a positive bilateral relationship, but
Bachelet's degree of support for U.S. positions on
international political issues and free trade is unclear at
this point. End summary.

Michelle Bachelet
--------------


2. (SBU) Michelle Bachelet's public statements, cabinet
appointments and policy priorities appear designed to show
her intention to govern independently, while generally
continuing Concertacion coalition policies on free trade,
human rights, fiscal caution and multilateral diplomacy. Her
cabinet is comprised of experienced political figures and new
faces, and is equally divided between men and women.
Bachelet has highlighted pension and healthcare reform,
environmental protection, public security and education as
her top domestic priorities. The center-left Concertacion
coalition, which emerged from the December 2005 congressional
elections with a majority in both houses of Congress, is
expected to facilitate legislative approval for her
initiatives. On foreign policy, Bachelet has indicated she
intends to focus on strengthening Chile's ties with Latin
America (i.e., Bolivia, Argentina, Peru). She advocates
continued engagement with Venezuelan President Chavez, whom
she emphasizes, "was democratically elected."

Chilean Economy
--------------


3. (SBU) Bachelet inherits an economy that saw real GDP grow
an estimated 6.3 percent in 2005, following 6.1 percent
growth in 2004. An unemployment rate of 7 percent is now at
its lowest level since 1997. While the impressive numbers
are due partly to record-level global copper prices, Chile's
expanding web of bilateral trade agreements and responsible
fiscal policy also play key roles. In recent years, Chile
has concluded trade agreements with South Korea, New Zealand,
Singapore, Brunei and most recently with China and India. It
has just begun talks with Japan. After the U.S., fully one
third of Chile's trade is with Asia -- China, Japan, and
South Korea are its number two, three and four trading
partners, respectively. All indications are that Chile is
seeking to expand further its economic ties with Asia.


4. (SBU) During the first two years of our own Free Trade
Agreement, U.S.-Chilean bilateral trade has risen 84 percent.
The main cloud hanging over the FTA's roaring success is
Chile's weak and unwilling protection of patents, copyrights
and trademarks. American companies are directly affected by
patent violations, particularly in the pharmaceutical
industry. We have pressed hard on the issue privately and
publicly.

Bolivia
--------------


5. (C) Chile and Bolivia do not have full diplomatic
relations. Their historic border dispute stemming from the
War of the Pacific (1879-1883),in which Bolivia lost the
province of Antofagasta and thus became landlocked, continues
to cloud bilateral relations. President Lagos and former
Bolivian President Rodriguez took several steps during the
last six months of 2005 to improve relations, including
agreements to eliminate tariffs on Bolivian imports and
passports for cross-border travel.


6. (C) Evo Morales' election victory has raised Chilean
concerns about a radical shift in Bolivia's foreign policy.
At the same time, it also raised hopes that agreements could
be reached with a Bolivian president who had clear popular
support. President Lagos told WHA A/S Shannon during their
meeting in La Paz (where they were attending Morales'
inauguration) that Morales' mandate might enable him "to act
sensibly" on the controversial issue of access to the sea.
The two countries are engaged in confidence-building
measures, including a recent visit to Chile by Bolivia's
Defense Minister and cooperative demining operations along
the Chile-Bolivia border.

Venezuela/UNSC Seat
--------------


7. (C) The Lagos government has privately shared our
frustration with the Venezuelan leader's behavior, but
believed it better to remain engaged in Venezuela -- and not
isolate Chavez -- in order to bring about democratic reform.
President Lagos met with representatives of the Venezuelan
opposition during his April 2005 visit to Caracas. Foreign
Minister Walker, Senate President Romero and then
presidential candidate Bachelet received SUMATE officials
during their August 2005 visit to Santiago. However, Chile
is reluctant to confront Chavez directly, due to economic and
commercial interests in Venezuela, Venezuela's early,
pro-active support for Insulza's OAS SecGen candidacy, and
Chavez' ability to stir up trouble for Chile with its
neighbors. Argentina and Brazil's support for Venezuela's
UNSC candidacy, together with Caracas' backing of Insulza for
the OAS, may make Bachelet reluctant to go against the
regional grain by supporting Guatemala's candidacy. We have
made clear how important this issue is to us, and reminded
the incoming government of the decisive role you played in
Insulza's election.

Haiti
--------------


8. (C) Chile's peacekeeping operation has enjoyed largely
bipartisan support since the Chilean military self-deployed a
battalion within 48 hours in February 2004. Congressional
approval for the more than 500 Chilean peacekeeping troops in
Haiti expires on June 1, 2006. Any extension beyond that
date should not be taken for granted. Bachelet was Defense
Minister then, but President-elect Bachelet's views are
unclear at this point. Opposition members of Congress
recently have questioned the need for Chilean troops to
remain in Haiti now that elections have taken place.
Concerns about Chilean casualties (none to date),deployment
costs, and the perceived slow pace of economic development in
Haiti are likely to resurface when Congress debates the issue
in May.

International Criminal Court/Article 98
--------------


9. (C) Chile has signed but not yet ratified the Rome
Statute. The Lagos government agreed not to move forward on
ratification during the remainder of its term to give Chile
and the U.S. time to find "a creative solution" to avoid the
cut-off of U.S. military assistance under the American
Servicemembers' Protection Act (ASPA). However, support for
ICC ratification runs across the political spectrum in Chile,
as does opposition to signing an Article 98 agreement with
the U.S. There are indications Chile will ratify the ICC
sometime after Bachelet and the new Congress take office.
While total U.S. assistance potentially affected by ASPA
sanctions is relatively small (just over USD 5 million in
2006),GOC officials worry that sanctions could chill an
increasingly valuable relationship and create openings for
other countries to cooperate with the Chilean military.

Middle East
--------------



10. (C) The Lagos Administration has been generally
supportive of the Road Map and other U.S. initiatives to
establish peace and security in the Middle East. FM Walker
visited Israel and Ramallah in March 2005, and Palestinian
President Abbas visited Chile in May 2005. Chile has third
and fourth generations of Palestinian, Lebanese, and Syrian
immigrants (the majority Christian) who are well-integrated
into society. The Palestinian community is said to number
over 300,000 -- the largest outside of the Middle East. The
American Jewish Committee recently traveled to Santiago to
bestow its "Light of the Nations" award to President Lagos.
At the United Nations, Chile generally has adopted what it
considers to be a "balanced" approach to the Middle East.
Chile supported the Holocaust Remembrance Resolution, while
also voting in favor of resolutions to fund international
organizations that the U.S. considers anti-Israel.

Support at the United Nations
--------------


11. (C) Aside from opposing the Iraq intervention in early
2003, the GOC played a supportive role during its 2002-04
term on the UNSC. Chile supported U.S. initiatives on
Afghanistan and Iraqi reconstruction, and provided the
crucial ninth vote for UNSCR 1559, reaffirming Lebanon's
territorial integrity. During the recent United Nations
General Assembly meeting, Chile endorsed several key U.S.
foreign policy objectives. Chile voted in favor of:
Haiti-related resolutions; the Holocaust Remembrance
Resolution; key resolutions condemning human rights practices
in some countries; and, the re-election of a U.S. judge to
the International Court of Justice. Chile played a leading
role in supporting the Third Additional Protocol to the
Geneva Convention.

Military Cooperation
--------------


12. (C) President Lagos has expressed interest in
strengthening U.S.-Chile military relations as an element in
modernizing and normalizing the Chilean military's role in
society. Chile does not have a Status of Forces Agreement
(SOFA) with any country, including the U.S. However, the
U.S. and Chile exchanged diplomatic notes to provide limited
protections to DOD personnel in Chile for military exercises
in 2005. A new exchange of notes covers exercises through
June 2006, and Chile has put forth a draft proposal for
concluding a long-term SOFA.


13. (SBU) The GOC took delivery in January 2006 of the first
two of ten new F-16 fighter aircraft -- the first major
purchase of U.S. equipment since the U.S. cut-off of military
sales during the Pinochet era. The Army and Navy are also
considering significant purchases of U.S.-manufactured
systems. The U.S. has provided over USD 1 million to Chile's
topnotch joint peacekeeping training facility and has been
working to increase the GOC's global peacekeeping role.
Chile has contributed small contingents to UN missions in
Cyprus, Bosnia and Kosovo, in addition to the 500-plus troops
and engineers currently stationed in Haiti.

Cuban Migrants
--------------


14. (C) In February 2006, Chile agreed in principle to accept
for resettlement 27 protected Cuban migrants from Guantanamo.
It had been agreed Chile would begin conducting interviews
with the migrants by mid-March. However, on March 2, Chile
informed us that further movement on the resettlement process
would be postponed until the incoming Bachelet government had
the opportunity to reaffirm the overall decision to accept
the migrants.

Cooperation on Global Issues
--------------


15. (SBU) Chile supports U.S. non-proliferation,
counter-narcotics and counter-terrorism objectives. It
supported U.S.-sponsored non-proliferation initiatives during
its UNSC tenure and recently co-sponsored the OAS MANPADS
resolution. Chile enforces the United States Coast Guard's
International Ship and Port Facility Security Code, but is
not a signatory to the Container Security Initiative or the
Megaports Initiative. While not a producer of illicit
narcotics, Chile is a transit country and has its own
domestic drug use problems. Chilean law enforcement entities
are generally cooperative.


16. (SBU) Chile is a signatory to the UN International
Convention for the Suppression of the Financing of Terrorism,
as well as all 12 Anti-Terrorism Conventions and Protocols.
In 2004, Chile completed two successful years chairing the UN
Sanctions Committee. The UN considers Chile to be among the
least hospitable countries for terrorist operations in the
hemisphere. Chile has established a Financial Intelligence
Unit to combat money laundering and terrorist finance,
although relevant laws and institutional experience remain
weak.

Americans in Chile and Adoption Issues
--------------


17. (U) The American community in Chile numbers about 15,000,
and has grown rapidly in recent years thanks largely to
student exchange programs. There are about 1,500 U.S.
exchange students in Santiago, the largest number in any
South American city. Chile is an increasingly popular
destination for U.S. tourists and business visitors. The
cruise ship industry brought 68,000 Americans in 2004; a
figure which is expected to triple by 2010. There are two
less positive notes: Chile was cited as "Not Fully Compliant"
in last year's State Department report on compliance with the
Hague Convention on the Civil Aspects of International
Parental Child Abduction; the case of American citizen Boris
Weisfeiler, who disappeared under suspicious circumstances
during the Pincochet regime remains unresolved. We continue
to press for evidence of his fate as more information on
Pinochet-era human rights abuses comes to light.

Deepening People to People Ties
--------------


18. (U) Chile has set a national goal of English language
proficiency and has asked the Peace Corps to return for a
specialized program of English teaching. An assessment team
visited in August 2005 and concluded the program would
benefit Chile and further U.S. policy goals. However, the
project was put on hold for budgetary reasons. The Fulbright
Scholarship program in Chile celebrated its 50th anniversary
last year and has enabled more than 1,500 Chileans to study
in the U.S. and 800 Americans to study in Chile. The State
Department's International Visitors program has been
successful in identifying rising national leaders: in a 2005
listing of the 100 most important women in Chilean society,
eleven were IV alumnae.


19. (U) In the area of youth sports exchange, Little League
Chile has the status of a non-profit foundation and just
finished its second season. The Embassy hopes to widen
sports exchanges to include soccer and tennis in 2006. As
part of general public outreach, the Embassy works with
binational centers in 10 Chilean cities. They offer English
language instruction, guest lecturers, cultural
presentations, classes on American history and literature,
and art exhibitions. The Embassy has also opened two
"American Corners" and has plans to open three more.
KELLY