Identifier
Created
Classification
Origin
07MONTEVIDEO1050
2007-12-19 18:09:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Montevideo
Cable title:  

SECRETARY CHAO HIGHLIGHTS GLOBAL COMPETITION FOR

Tags:  PREL KPAO ELAB ETRD UY 
pdf how-to read a cable
VZCZCXYZ0005
PP RUEHWEB

DE RUEHMN #1050/01 3531809
ZNR UUUUU ZZH
P 191809Z DEC 07
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC PRIORITY 7835
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
UNCLAS MONTEVIDEO 001050 

SIPDIS

SENSITIVE
SIPDIS

DOL PASS TO D/US CHARLOTTE PONTICELLI

E.O. 12958: N/A
TAGS: PREL KPAO ELAB ETRD UY
SUBJECT: SECRETARY CHAO HIGHLIGHTS GLOBAL COMPETITION FOR
TALENT IN URUGUAY


Summary
--------
UNCLAS MONTEVIDEO 001050

SIPDIS

SENSITIVE
SIPDIS

DOL PASS TO D/US CHARLOTTE PONTICELLI

E.O. 12958: N/A
TAGS: PREL KPAO ELAB ETRD UY
SUBJECT: SECRETARY CHAO HIGHLIGHTS GLOBAL COMPETITION FOR
TALENT IN URUGUAY


Summary
--------------

1. (SBU) SUMMARY: Secretary of Labor Elaine Chao
highlighted the critical need to create the right climate for
growth in light of global competition for talent. She spoke
about ways to manage emigration and provide retraining for
employees affected by the opening economies. During a
two-day visit to Uruguay, the Secretary met Minister of Labor
Eduardo Bonomi, who was optimistic about Uruguay's ability to
meet standards in the labor chapter of the TIFA. She also
met Minister of Industry Jorge Lepra, business leaders and
toured some of Uruguay's most promising companies, which are
creating new and innovative jobs for the Uruguayan labor
force. Her visit played prominently in the press, helping
spread the Mission's message that our countries' shared
commitment to democracy, respect for the rule of law,
transparency and accountability were an important competitive
advantage in the global economy. END SUMMARY.

Media Coverage
--------------


2. (SBU) Recognizing the importance of getting her message
out to the media, Secretary Chao talked about the job
opportunities of the future at her December 11 press
conference. Every Montevideo newspaper gave her serious
attention and even the outlets which don't like the U.S.
recognized the importance of what she had to say. Deepening
investment and trade ties were topics she discussed in
greater detail at her media-covered American Chamber of
Commerce breakfast on December 12, The result: very positive
headlines for Uruguay, such as "TIFA is a good starting
point," which leading dailies El Pais and La Republica
printed on December 12. Ultimas Noticias, another key
newspaper, echoed on Chao's call for job training assistance
programs to give displaced workers the skills to thrive in
the future.
Chao's Counterpart Optimistic on the TIFA Labor Chapter
-------------- --------------


3. (SBU) In a December 11 meeting with her counterpart,
Minister of Labor Eduardo Bonomi was positive about his
Ministry's role in leading the labor chapter discussions in
the TIFA. "We meet and exceed the fundamental principles

outlined in the U.S. chapter on labor," he said, and "we
largely meet the standards on unionization, child labor, and
collective bargaining. We should have no problem." He did
acknowledge a potential problem with intellectual property
rights, coming from the pharmaceutical sector.


4. (SBU) Bonomi described his ministry's actions since
President Vazquez was inaugurated in March 2005 (the time of
Secretary Chao's last visit),with an emphasis on tri-partite

SIPDIS
salary negotiations. Uruguay has held two rounds of
negotiations, comprising nearly 400 agreements - the vast
majority made by consensus. The GOU has sought to extend the
term of agreements beyond one year and plans a two-year term
for all agreements after June 2008 in order to avoid
negotiations during the electoral season in late 2009. He
said the GOU's goal was to recoup 20% of the salary loss due
to the 1999-2003 economic crisis - it has managed 14-15% so
far. Unemployment has dropped from 14% to 8.5% and continues
to decline, but Uruguay still faces problems with structural
unemployment.

Lepra: The GOU is Not Excited About Mercosur
--------------


5. (SBU) Minister of Industry Jorge Lepra briefed the
Secretary on the Uruguay's economic outlook, citing healthy

SIPDIS
indicators. Uruguay enjoyed good levels of investment, its
recovery since the economic crisis was going well, and it was
working hard on improving education and innovation. He
highlighted the Innovation Forum planned in March 2008 and
Uruguay's leading role in rolling out the one laptop per
child initiative. The Frente Amplio (FA),he said, was
working to continue economic growth, while maintaining social
inclusion, in order to provide the best future for Uruguay.
On job creation, Lepra said there was 0% unemployment in the
IT sector, and that GOU needed to work harder to direct more
students into this and related fields.


6. (SBU) Responding to the Secretary's questions on how
Uruguay can attract investment and compete against much
larger neighbors, Lepra said businesses are attracted to
Uruguay as a base of operations in the region, by the low
levels of corruption, and the relatively lower business

income taxes - 25% vice 35% in many neighboring countries.
However, the GOU was not "excited about Mercosur," he said.
While Uruguay was born between two giants, it needed to have
an uncle abroad. "Unless we further cooperation with the
U.S. and others, we risk becoming a subsidiary country to one
of our neighbors, he explained. Secretary Chao agreed that
President Bush supported further engagement. She recounted
the achievement on trade during the past year, but cautioned
that the USG still faces internal challenges to broadening
the trade relationship. Both agreed the GOU-USG relationship
was very good and was slated for even better times.

Business Paints a Less Rosy Portrait
--------------


7. (SBU) Secretary Chao met business leaders and
entrepreneurs during tours of the Zonamerica free trade zone
and LATU, a business incubator sponsored, in part, by the
GOU. During a working lunch in her honor, business
luminaries complained about the impact the FA government was
having on business in Uruguay, particularly by changing the
balance of power in favor of labor unions and the increased
level of conflict between labor and business. They countered
Bonomi's statements in para 4, saying the government had
abandoned business interests within its tri-partite salary
councils. These factors affected the profitability of the
private sector resulting in the loss of $300 million a year
in investments, claimed Dr. Ignacio de Posadas, a former
Minister of Economy from the Nationalist (Blanco) Party.


8. (SBU) Participants agreed that Uruguayans wanted change,
and had voted for changed in 2005, but for many change
represented a return to the idealized past and the certainty
it represented. They identified some erosion of support for
the FA, but cited polls that still show Uruguay as a
left-of-center, conservative society. Posadas distilled the
electoral math in Uruguay - with 600,000 social security
recipients and at least one additional voter dependent on
each one, that left 1.2 million out of 2 million voters
focused on the past instead of the future. A vice-president
of a leading investor in Uruguay argued that with the left in
control of all branches of government, people were starting
to see that the disruptive element is not the left as a
whole, but the extreme coalition members, who block roads,
occupy factories and stop production.



9. (SBU) Where change was occurring, the business leaders
felt it was being driven by the private sector. Change was
coming in the corporate area, not the political, said Nicolas
Jodal, the founder of Uruguay's most successful software
development firm - Artech. Within the corporate area he
described two broad sectors, one old and one new. New
companies such as firms specializing in forestry, software,
call centers and back office solutions were driving change
and creating new jobs.

Comment
--------------


10. (SBU) COMMENT: As President Bush's delegate at President
Vazquez' inauguration in 2005, Secretary Chao's return to
Uruguay provided an excellent opportunity to underscore the
positive developments of the Vazquez government during the
past 2.5 years. While acknowledging the successes we have
made on the TIFA, exporting blueberries and building
investment ties, the Secretary was also able to identify some
of the issues the GOU will need to address as it seeks to
open up to the world economy. The GOU's ability to keep
educated Uruguayans in Uruguay, entice youth to seek more
value-added skills, and create new and innovative jobs will
determine the degree of its success in the global economy.
END COMMENT.


11. (SBU) This cable was cleared by the Secretary's
delegation.
Harding