SCENESETTER FOR AETC/CC VISIT TO CHILE (U)

C O N F I D E N T I A L SANTIAGO 000957

SIPDIS

SIPDIS

E.O. 12958: DECL: 07/01/2030
TAGS: ECON ETRD OVIP PGOV PRELMARR MARR CI
SUBJECT: SCENESETTER FOR AETC/CC VISIT TO CHILE (U)

Classified By: AMBASSADOR CRAIG C. KELLY; REASONS: 1.4 (B AND D).


1. (C) Summary: Your arrivals in Santiago follow shortly on
the historic inauguration of Chile's first female president,
former Defense Minister Michelle Bachelet. 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, with continued outstanding military to military
relationships, but Bachelet's degree of support for U.S.
positions on international political issues and free trade is
unclear at this point. A possible complication is imminent
ratification of the International Criminal Court and the
application of American Servicemembers, Protection Act
sanctions. Most notably, your visits add to a succession of
high profile military to military visits during the last six
months which include General Hagee (Oct 2005),General
Schoomaker (Nov 2005),General Craddock (Nov 2005),the
Defense Consultative Commission (Jan 2006),and Lieutenant
General Schmidt and Mr. Bruce Lemkin visiting for the FIDAE
airshow (Mar 2006). End summary.

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


2. (SBU) Michelle Bachelet's public statements, cabinet
appointments and policy priorities appear 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. Her first week in office
included an immediate declaration for free medical care for
all Chileans age 60 and above. 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 inherited 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 the U.S., E.U., 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. Former 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 waive
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 has clear popular
support. Former President Lagos told WHA A/S Shannon during
their meeting (Jan 2006) 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 de-mining operations along
the Chile-Bolivia border.

Venezuela
--------------


7. (C) The Chilean government under Lagos privately shared
our frustration with the Venezuelan leader's behavior, but
believed it better to remain engaged in Venezuela in order to
bring about democratic reform. Former 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, support for Chilean Jose
Insulza's OAS SecGen candidacy, and Chavez' ability to stir
up trouble for Chile with its neighbors.

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


8. (C) Chile's peacekeeping operation in Haiti 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.
President Bachelet was Defense Minister then, but her 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 a
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 in 2006. 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 was 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 expressed interest in strengthening
U.S.-Chile military relations as an element in modernizing
and normalizing the Chilean military's role in society. We
do not have the same affirmation from the two-week old
Bachelet government, but expect a similar orientation. 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 1976 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 of 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 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 abuse 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.

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


17. (U) Chile has set a national goal of English language
proficiency, and President Lagos 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.


18. (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