Identifier
Created
Classification
Origin
07MONTEVIDEO1017
2007-12-04 16:48:00
CONFIDENTIAL
Embassy Montevideo
Cable title:  

URUGUAY: SCENESETTER FOR COMMANDER, SOUTHCOM

Tags:  PREL PGOV ECON MARR MASS UY 
pdf how-to read a cable
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C O N F I D E N T I A L MONTEVIDEO 001017 

SIPDIS

SIPDIS

SOUTHCOM FOR THE COMBATANT COMMANDER
SOUTHCOM ALSO FOR POLAD
DEPT ALSO FOR S/ES AND WHA A/S TOM SHANNON
NSC FOR DFISK AND GTOMASULO

E.O. 12958: DECL: 11/28/2017
TAGS: PREL PGOV ECON MARR MASS UY
SUBJECT: URUGUAY: SCENESETTER FOR COMMANDER, SOUTHCOM

Classified By: Charge d'Affaires,a.i. Peter X. Harding
for reasons 1.4 (B) and (D)

C O N F I D E N T I A L MONTEVIDEO 001017

SIPDIS

SIPDIS

SOUTHCOM FOR THE COMBATANT COMMANDER
SOUTHCOM ALSO FOR POLAD
DEPT ALSO FOR S/ES AND WHA A/S TOM SHANNON
NSC FOR DFISK AND GTOMASULO

E.O. 12958: DECL: 11/28/2017
TAGS: PREL PGOV ECON MARR MASS UY
SUBJECT: URUGUAY: SCENESETTER FOR COMMANDER, SOUTHCOM

Classified By: Charge d'Affaires,a.i. Peter X. Harding
for reasons 1.4 (B) and (D)


1. (C) Summary and Introduction: The U.S. Mission in
Montevideo welcomes you and your delegation's visit to
Uruguay. Though led by a left-leaning government, Uruguay
shares many of our values and remains an island of democratic
stability and good governance in a turbulent region. Your
arrival follows a string of high-profile visits this year,
including President Bush in March. Those visits highlighted
that we favor good relations with sensible, pragmatic
governments which respect democracy, human rights, and the
rule of law, regardless of political label. Your visit is
also an opportunity to advance our improving bilateral
relationship beyond trade and to underscore U.S. policy
priorities in the region: consolidating democracy, promoting
prosperity, investing in people, and enhancing security.
Though progress is being made on all these goals, enhancing
security poses some special challenges because of Uruguay's
unique history, location and culture. We expect your visit
will shed more light on the extent and pace that U.S.
security cooperation can proceed.


2. (C) Uruguay faces a philosophical quandary between
economic dynamism and socialist egalitarianism. Many
elements for strong economic growth are in place. The
traditional pillars of its economy -- agriculture, tourism
and finance -- are all doing well, and foreign investment is
increasing. However, four things hold Uruguay back. The
first is Uruguay's membership in Mercosur, which now includes
Venezuela. Mercosur has increasingly devolved from an
imperfect customs union into a more restrictive and
anti-American political organization. Second, the current
Frente Amplio (FA) government still harbors hard-line
Socialists, Communists, and ex-guerrillas. While in the

minority, these groups are nevertheless vocal and ardently
oppose engagement with the U.S. Third, many ordinary
Uruguayans seem content to leave large segments of their
economy, including telecoms, power generation, oil imports
and several banks, in state hands. Finally, the culture
still values professions which are not particularly useful in
the global economy. Still, an educated population, strong
respect for the rule of law, and good infrastructure make
Uruguay one of the most attractive destinations in the region
for foreign investment.


3. (C) Uruguay punches above its weight in foreign affairs,
but ideological divisions within the Frente Amplio (FA or
"Broad Front") also explain its sometimes ambiguous foreign
policy. For example, the anti-American Foreign Minister has
been virtually absent from the substantive bilateral trade
discussions with the U.S. He has also been a non-player in
Uruguay's number one foreign policy concern: the
long-running, serious dispute with Argentina over pulp mills.
While the GOU does not agree with the U.S. on many
international issues ranging from Kyoto to Cuba to the War in
Iraq, both countries value freedom and independence.
Uruguay's vibrant democracy highlights the fallacy of
populist regimes such as those in Venezuela, Bolivia, Cuba
and Ecuador -- and to a lesser extent Argentina. The
Economist magazine rated Uruguay as the only country in South
America to enjoy "full democracy." The GOU seeks more U.S.
trade and investment, but is vulnerable on energy supplies
and is very concerned about its dispute with Argentina.
Uruguay also faces a long-term demographic problem: a low
birth rate (except among the poor) is exacerbated by the
brain drain of young people who are emigrating abroad in
search of jobs. To the extent that we can, we need to
reassure the Uruguayans that we are their friends, increase
our cultural exchanges and try to encourage them to cooperate
more assertively on issues of regional stability and security
-- including counter-terrorism, counter-narcotics and
mil-to-mil cooperation. End Summary and Introduction.

--------------
Background
--------------

4. (U) Uruguay is a small, stable democratic nation of 3.3
million people, almost half of them residing in its capital,
Montevideo. It has long been one of Latin America's
wealthiest and most egalitarian countries, with per capita
GDP exceeding $6,000 during periods of growth. However, a
four-year recession which ended in 2003 cut this figure
nearly in half and lowered Uruguay's historically excellent
socio-economic indicators. Uruguay's economy has been
recovering well over the past three years, with GDP growth of
7 percent in 2006, in large part thanks to continued orthodox
economic policies. GDP per capita is back to $5,700, and the
GOU recently repaid its entire IMF debt early.


5. (C) Many Uruguayans were traumatized by the 1973-85 period
of military dictatorship, when security forces committed
serious human rights violations in the campaign against
insurgents and their sympathizers. Some people blame the
U.S. for indirectly supporting the region's military
governments during the Cold War. Our detractors frequently
use slick propaganda and declassified U.S. documents from the
period to "prove" our involvement. The complex history of
the dictatorship created heroes and villains for both the
left and right. Some of the persons involved -- including
former Tupamaro guerrillas -- are still active in politics.
The real and imagined lessons from the period continue to
influence modern politics, including Uruguayans' perceptions
of the U.S. (and its armed forces),especially where the
Global War on Terrorism, Iraq and Afghanistan are concerned.

--------------
Bilateral Relations: Key Issues
--------------

6. (C) Expanding the trade relationship has been the
foundation of our engagement with the GOU. Recent visits by
President Bush, U/S Nicholas Burns, Secretary of Commerce
Gutierrez and Treasury Secretary Paulson have focused on
deepening trade, investment and commercial ties between the
two countries. Aside from trade, we also need to intensify
bilateral cooperation in areas such as counter-terrorism,
counter-narcotics, mil-to-mil cooperation, container
security, bio-fuels, the upgrade of Uruguay's civil aviation
authority to Category 1, alternative sources of energy
(especially wind, bio-diesel and ethanol),phytosanitary
issues, science and technology, English language teaching,
and cultural exchanges.

--------------
President Vazquez
--------------

7. (C) A practicing physician, President Vazquez is a
cautious and prudent man who is sometimes shy in
international settings. He appears to style himself after
Chile's ex-President Ricardo Lagos, and his mild leadership
style sharply contrasts with the populism of Venezuela's Hugo
Chavez and other radicals in the region. As a pragmatist,
his primary focus for Uruguay is jobs, investment and growth.
At home and abroad he has been caught between the competing
demands of radicals and moderates, and he often faces a
tremendous challenge to balance these opposing forces. His
leadership style is predictable - he tends to stay above the
fray and allow competing factions in the FA to debate an
issue to exhaustion and then weighs in with a final decision.
Vazquez' adroit and pragmatic leadership along with Uruguay's
strong institutions and the basically conservative nature of
its society prevented the radical tilt some observers
predicted during the 2004 electoral campaign. Under the
Constitution, Vazquez cannot run for second consecutive term.

--------------
Domestic Politics
--------------

8. (C) By December 2007, Vazquez and his coalition Frente
Amplio Government will have been in power for almost three
years and are starting to show signs of midterm fatigue, with
approval ratings for the administration below 50% for the
first time. (Note: The FA was founded by a military man,
General Liber Seregni, who died in 2004. End note.) In the
lead-up to the 2009 presidential elections, there is a
sometimes heated debate within the FA to define the party's
ideological platform. The moderates in his cabinet,
especially Econ Minister Danilo Astori and Energy Minister
Jorge Lepra, favor greater trade and investment
liberalization and have generally enjoyed high approval and
considerable sway in foreign policy and the economy. The
radicals within the FA coalition hold on to the core
anti-imperialist, anti-American position and have challenged
Vazquez to return the party to its ideological roots. At
times, Vazquez has a more contentious relationship with the
radical wing of the FA than with the two opposition parties
(Blancos and Colorados) who ruled the country during the past
century. In his efforts to be practical, Vazquez relies on a
relatively small cadre of experienced officials to get things
done. A key ally in domestic politics has been Agriculture
Minister and ex-Tupamaro guerrilla leader Jose Mujica, who,
despite his violent past, has often countered the extreme
ideologues on the far-left. Vazquez was also able to appease
many of the far-left radicals when he addressed the human
rights abuses committed during the "dirty war" period of the
military dictatorship, uncovered the buried bones of
disappeared persons, and prosecuted some of the perceived
worst human rights abusers. The cabinet consists of mostly
elder party leaders.

--------------
Foreign Policy
--------------

9. (C) The country's foreign relations have historically
reflected the efforts of a small nation to advocate
self-determination, respect for human rights and the rule of
law, the pacific settlement of disputes, and economic
cooperation. Uruguay favors engagement with multilateral
institutions like the UN and OAS in order to advance its
foreign policy objectives and resolve disputes. Its robust
participation in international peacekeeping operations can be
partly explained by its dedication to and faith in
international organizations. However, foreign policy under
the Vazquez administration has been a formidable challenge,
compounded by the stubbornly ideological, anti-U.S. Foreign
Minister Reinaldo Gargano.


10. (C) In 2005, the GOU proposed a $20 million
reconstruction and development project for Haiti as an
extension of their involvement in MINUSTAH, requesting
funding from the USG, Canada and other sources. The State
Department is currently reviewing the feasibility and
fundability of the project. Anecdotal reporting indicates
that the GOU is interested in supporting the Haitian
government, in part, due to its left leaning tendencies.


11. (C) By far, the GOU's most serious recent challenge has
been its dispute with Argentina over the construction of a
Finnish-owned paper mill on a shared river -- not only
because of soured bilateral relations with Uruguay's closest
neighbor, but also because of the negative implications to
foreign investment. At $1.2 billion, the plant's
construction cost represents 8% of Uruguay's GDP and its
operation is expected to generate exports worth 2% of
Uruguay's GDP. It represents the largest foreign investment
in Uruguay's history. Argentine government officials, some
inhabitants of the Province of Entre Rios across the river,
and environmental activists claim the plant would harm
fishing, farming, and tourist areas along the
Uruguay-Argentina border. Argentina also claims that Uruguay
violated the 1975 Uruguay River Treaty. Aspects of the case
have gone before the International Court of Justice in The
Hague and a Mercosur Tribunal. While the USG has remained
neutral, we did vote to support the World Bank's IFC loan to
the project. Protesters from Argentina have blocked bridges
between Argentina and Uruguay off and on since December 2005
at great cost to Uruguay's trade and tourism revenues. The
Uruguayans have felt bullied by Argentina's treatment and
disappointed by Brazil's indifference. President Vazquez
authorized Botnia to begin operations during the contentious
Ibero-American summit in Santiago in November 2007.

--------------
The Economy, Trade and Investment
--------------

12. (U) Uruguay is a major agricultural producer.
Agriculture and agro-industry account for 23 percent of GDP
and over 75 percent of total exports. Significant exports
include meat (over $1 billion this year),long-grain rice,
dairy products, wool, and soybeans; with forestry products an
emerging sector. Economy Minister Astori has pursued
orthodox macro-economic policies on controlling inflation
(6.4 percent in 2006) and promoted growth and investment.
This has resulted in continued strong growth over the past
couple of years, at 6.6 percent in 2005 and 7.0 percent in

2006. The GOU has also paid off its debt to the IMF early
and has regularly issued bonds on favorable terms in the
international financial markets. The debt to GDP ratio was
down to 71 percent at the end of 2006, from over 101% in 2004.


13. (C) Still, Uruguay has a heavy debt burden and no known
hydrocarbon deposits, so that Venezuelan oil and money
provide considerable temptation to boost the economy.
Uruguay's state oil monopoly ANCAP recently signed a deal
with Venezuela's state-owned PDVSA to help fund 24 percent of
the cost of oil exploration in the Orinoco region of
Venezuela in return for a proportional share of the resulting
oil. Venezuela has also invested in several failing firms in
Uruguay and has promised to do more. So far, except for oil
at preferential prices, most of Chavez's promises to Uruguay
remain unfulfilled.

--------------
Military Overview
--------------

14. (U) The Uruguayan military of 25,000 men and women can be
characterized as a small, professional and proud force. With
approximately 60 percent of military members having served in
peacekeeping missions outside the country, the military has a
professionalism not seen in many nations in Latin America.
The Army is the predominant branch with over 17,000 personnel
in uniform, most of the military's resources and the only
bases outside of Montevideo. The Navy has more influence
than its size would dictate, while the Air Force is not as
influential at the national level. Many of the officer
corps, besides having experience in missions abroad, have had
the opportunity to attend military courses in Latin America,
the United States, Europe and more recently the People's
Republic of China. Major pol-mil issues in Uruguay include:
increasing MOD control and transparency, difficulties
associated with reduced resources for the Armed Forces,
continuing support for PKO and the ongoing re-defining of the
military's role under the current government. (Note: The
Foreign Ministry has almost no one versed in pol/mil issues.
End Note.)


15. (U) Engagement in peacekeeping operations continues to be
the primary international role of the Uruguayan Armed Forces.
Per capita, Uruguay is the number one troop contributing
country for PKOs globally, with major deployments in support
of MINUSTAH in Haiti and in the Congo. With a few
exceptions, there is broad political support for Uruguay's
PKO engagements. In November 2007, the Uruguayan Congress
voted to re-authorize the country's involvement in Haiti
through 2008. Uruguay is able to meet its PKO obligations at
their current levels, but is unlikely to take on new
deployments due to a lack of capacity. The Minister of
Defense has on several occasions remarked that Uruguay will
not deploy forces to Darfur/Chad. Uruguay's civilian
leadership delegates most of the logistical and
decision-making responsibilities for PKO to the Uruguayan
military, mainly the Army. There have been concerns about
PKO financial accountability, as well as organizational
communication issues. The UN is several months in arrears on
PKO payments to Uruguay, which has been a source of concern
to the GOU.


16. (U) The military accepts its apolitical role in the new
government. After the end of the military dictatorship in
1985, the Armed Forces returned to the barracks and supported
democracy and civilian leadership. There are greater
tensions between the military and the Frente Amplio
government than there were under National and Colorado party
leadership, but the military is steadily building a working
relationship with the FA despite their ideological
differences. The GOU's Armed Forces are independent and
pragmatic when it comes to offers for security assistance and
bilateral cooperation. The military ensures that its
engagements are in sync with the GOU's policy of
non-intervention. As ASPA sanctions diminished USG
contributions of equipment and training, Uruguay turned to
Russia, Europe and Canada for equipment and to Europe, Latin
America and the People's Republic of China for military
training.

--------------
Comment: U.S. National Interests
--------------

17. (C) Uruguay is being actively courted by both the radical
(including Chavez) and moderate left in Latin America. Our
goal is to ensure that Uruguay remains within the moderate
camp. Expanded security cooperation between the U.S. and
Uruguay is a key goal for both the GOU Armed Forces and the
USG, but we caution that the uniformed military officers tend
to be more eager for cooperation than their civilian
counterparts. Though Uruguay is unlikely to become a
strategic partner of the U.S., it can be a valuable friend in
a region that has sought to distanced itself from us in many
instances. Over the last two and a half years, we have been
able to build a remarkable level of confidence with President
Vazquez through enhanced trade initiatives and other
confidence-building measures. We will continue our efforts
in this regard, but it will take time. Meanwhile, your visit
serves as an important building block for deepening our
overall engagement with Uruguay, especially related to
security cooperation, one of our key policy objectives. End
Comment.

Harding