Identifier
Created
Classification
Origin
08MONTEVIDEO489
2008-08-27 18:50:00
UNCLASSIFIED
Embassy Montevideo
Cable title:  

URUGUAY: SCENESETTER FOR CODEL PETERSON'S SEPT 6-8

Tags:  OREP AMGT ASEC AFIN UY 
pdf how-to read a cable
VZCZCXYZ0008
RR RUEHWEB

DE RUEHMN #0489/01 2401850
ZNR UUUUU ZZH
R 271850Z AUG 08
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC 8437
INFO RUEHBR/AMEMBASSY BRASILIA 2465
RUEHBU/AMEMBASSY BUENOS AIRES 2594
UNCLAS MONTEVIDEO 000489 

CODEL
SIPDIS

FROM AMBASSADOR BAXTER TO REPRESENTATIVE COLLIN PETERSON
H FOR LYNNEA SHANE AND TYREA LONON
WHA/BSC FOR CAROLINE CROFT

E.O. 12958: N/A
TAGS: OREP AMGT ASEC AFIN UY
SUBJECT: URUGUAY: SCENESETTER FOR CODEL PETERSON'S SEPT 6-8
VISIT

REF: STATE 91300

UNCLAS MONTEVIDEO 000489

CODEL
SIPDIS

FROM AMBASSADOR BAXTER TO REPRESENTATIVE COLLIN PETERSON
H FOR LYNNEA SHANE AND TYREA LONON
WHA/BSC FOR CAROLINE CROFT

E.O. 12958: N/A
TAGS: OREP AMGT ASEC AFIN UY
SUBJECT: URUGUAY: SCENESETTER FOR CODEL PETERSON'S SEPT 6-8
VISIT

REF: STATE 91300


1. This telegram is sensitive but unclassified, and not for
Internet distribution.

--------------
SUMMARY
--------------


2. (SBU) Your visit on September 6-8 comes at a time of
strong and growing engagement between the U.S. and Uruguay.
President Vazquez steers a moderate course that includes
active efforts to expand commercial ties with the USG. As
Uruguayans look ahead to the 2009 Presidential and
legislative elections, we expect the GOU to seek to ensure
that moderate legacy while simultaneously shore up its
political base. End Summary.

--------------
POLITICAL SITUATION
--------------


3. (U) Uruguay is a stable democratic nation of 3.3 million
people, almost half of them residing in its capital,
Montevideo. Once known as "the Switzerland of South
America," it was one of Latin America's wealthiest and most
egalitarian countries. A four-year recession, which ended in
2003, cut personal income 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 seven percent in 2007, in
large part thanks to continued orthodox economic policies.
Today, GDP per capita is approaching $7,000, and the GOU
repaid its entire IMF debt early in the past year. However,
job creation is not keeping up with expectations, and many
young people emigrate to seek their fortunes abroad.


4. (SBU) With Tabare Vazquez heading the ticket, the
left-leaning Frente Amplio (FA) party won the presidency and
the majority in the legislature for the first time in October
2004, narrowly beating out the more traditional Colorado and
Nationalist parties. President Vazquez steers a moderate
course that balances prudent macroeconomic policies with
expansion of social programs, especially in the areas of
health and education.


5. (SBU) With national elections in October 2009, the Vasquez
administration is coming into the home stretch. The
President has successfully completed much of his agenda, and
seeks to ensure his legacy as well as position his party for

the 2009 elections. A March 2008 cabinet shake up eased out
ideologues, put in technocrats, and put a new emphasis on
foreign policy. Relations with the U.S. are cordial and
productive, but election-year politics are likely to limit
the profile of our cooperation over the next year.


6. (SBU) Many Uruguayans were traumatized by the 1973-85
period of military dictatorship, when security forces
committed serious human rights violations in their campaign
against violent insurgents and their sympathizers. Some
people blame the U.S. for indirectly supporting the region's
military governments during the Cold War. Slick propaganda
and declassified U.S. documents from the period are
frequently touted by our detractors as "proof" of 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 today. The real and imagined
lessons from the dictatorship period continue to shape modern
politics, including the Uruguayans' perceptions of the U.S.,
especially where the global war on terrorism, Iraq,
Afghanistan and Guantanamo are concerned.

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


7. (U) Outgoing Economy Minister Astori has pursued orthodox
macro-economic policies to control inflation (6.4% in 2006)
and promote growth and investment. The result has been
sustained strong growth, with Uruguay maintaining a 7% growth
rate over the past two years. The GOU paid off its debt to
the IMF ahead of schedule and has regularly issued bonds at
favorable terms in the international financial markets,
lowering its debt service costs. The debt to GDP ratio was
down to 67% at the end of 2007, from over 101% in 2004.

Unemployment is now in the single digits for the first time
in six years. The country risk stood at 277 basis points as
of late July. Uruguay is now better positioned to handle
external shocks than it was during the economic crisis of
2001-2002, but challenges remain with the weakened dollar,
political volatility in Argentina, and high oil prices.


8. (SBU) Uruguay is a major agricultural producer relative to
its size. Agriculture and agro-industry account for 23% of
GDP and over 75% of total exports. Major exports are meat
(over $1 billion in 2006 and $885 million in 2007),
long-grain rice, dairy products, wool and soybeans. Uruguay
does not import agricultural products but does import
processed foodstuffs. Uruguay applies a 6.6% average tariff
on imported agricultural goods and does not impose any kind
of import quota.


9. (U) Biofuels represent an emerging area of interest for
Uruguay and for potential cooperation with the U.S. Uruguay
is working to develop ethanol from sweet sorghum, sunflower,
soy, and sugarcane in the near term to comply with a recently
passed law that requires state petroleum company ANCAP to
incorporate five percent ethanol into gas (by 2014) and five
percent bio-diesel into diesel (by 2012). ANCAP has already
established a plant -- in association with Venezuela -- to
produce ethanol and electricity from sugarcane. ANCAP also
plans to build a bio-diesel plant fueled by soy or sweet
sorghum. ANCAP's president and other high level Uruguayan
officials traveled to the U.S. in 2007 with Ambassador Baxter
to visit several institutions related to biofuels.


10. (U) ANCAP is interested in working with the U.S.,
especially in the area of using biomass such as forestry
waste or woodchips to add value to its rapidly growing
forestry industry. ANCAP and other GOU elements hope
biofuels will one day generate a significant percentage of
Uruguay's fuel needs, with similarly high percentages of
Uruguay's electrical generation coming from biomass.
Weyerhauser is one of the largest companies in Uruguay's
forestry sector, and a leader in exploring ways to produce
biofuels from its forestry byproducts.


11. (SBU) Uruguay's National Institute for Agricultural
Research (INIA) is looking to cooperate with a number of U.S.
universities on biofuels, most notably with Texas A&M, the
University of Georgia, and North Carolina State. Texas A&M
has one of the world's most important sweet sorghum breeding
programs, and is evaluating the suitability of Texas A&M
genotypes for Uruguay. Texas A&M is also considering having
Uruguayan research stations help its breeding program to
advance generations. INIA hopes to work with North Carolina
State's Worldwide Knowledge Center for the Development of
Second Generation Biofuels.


12. (SBU) Given the importance of the agricultural sector for
the economy, Uruguay has been active in bilateral and
multilateral fora to push for trade liberalization, and U.S.
agricultural subsidies are a hot topic. Uruguay played a
useful and constructive role during the last Doha Round
meetings in Geneva in July. The Uruguayan delegation was
particularly vocal about the need for developing countries to
offer improved market access, and pressed home that point at
every opportunity during informal meetings that took place
daily during that ministerial. GOU officials have commented
to us that they believe Mercosur to have been negatively
affected by Argentina's position in that forum.


13. (SBU) In 2006, Uruguay and the U.S. started a dialogue on
a Trade and Investment Framework Agreement (TIFA),which was
signed in January 2007. The sanitary and phytosanitary
working group has focused on particular barriers to trade,
resulting in the opening of the Uruguayan market to U.S.
turkey and the U.S. blueberry market to Uruguayan producers.
Work on citrus, deboned lamb and U.S. beef is ongoing, as are
discussions on ecommerce, the environment, and trade
facilitation is also ongoing. The USG and the GOU signed a
Science and Technology (S&T) cooperation agreement in April.
Uruguay's current level of development, education, and
infrastructure present an excellent opportunity for
cooperation with the USG on S&T issues. The agreement
strengthens the bilateral relationship in the spirit of
deepening economic ties between the two nations.


14. (SBU) Bilateral Agricultural Issues:

-- Beef: Uruguay suffered an outbreak of foot-and-mouth

disease in 2001, but prompt reporting and solid controls led
APHIS to reopen the U.S. market to Uruguayan beef in 2003.
The U.S. was Uruguay's main beef export market by 2004, but
Uruguayan beef exports to the U.S. have declined since that
year, as beef prices in the EU have risen and Uruguayan
exporters began to concentrate on that market. Uruguay
closed its market to U.S. beef in 2003 due to Bovine
Spongiform Encephelopathy (BSE),but has since reopened for
U.S. genetics (bovine semen and embryos). We continue to
press for Uruguay to resume imports of U.S. beef.

-- Citrus: Uruguayan citrus producers have requested a pest
risk assessment. APHIS expects to conduct such an assessment
by the end of September.

-- Poultry: Uruguay banned all imports of poultry from the
U.S. in 2003, citing the threat of Newcastle disease (Note:
the ban on U.S. turkey was subsequently lifted in 2007). We
continue to work toward a broader re-opening of this market.

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


15. (SBU) The March 1, 2008 replacement of Foreign Minister
Gargano with the President's close advisor Gonzalo Fernandez
has strengthened opportunities for improved U.S.-Uruguayan
relations. Uruguay is also working to reestablish its
traditional role in international institutions. Uruguay is
the largest contributor to peacekeeping missions in the
world, on a per capita basis, and currently has substantial
deployments in Haiti and the Congo. Uruguay is seeking to
expand economic ties outside of Mercosur to the rest of South
America and beyond, in part to reduce its reliance on
sometimes volatile neighbors. Uruguay played a moderating
role in the Colombia-Ecuador-Venezuela dispute. Chilean
President Michelle Bachelet's July visit demonstrated the
countries' close relations and the desire to strengthen
partnerships.


16. (SBU) Uruguay receives assistance from Venezuela in the
form of subsidized oil, but chooses to stay relatively quiet
on Venezuelan issues. Venezuelan FM Nicolas Maduro visited
Montevideo in August, and the GOU downplayed the significance
of the trip. President Vasquez visited Cuba in June; Cuba
sends many doctors to work in Uruguayan hospitals, a fact
praised by supporters of the Castro regime but controversial
to others as issues such as medical accreditation and safety
have been raised. Iran maintains an active commercial
section at its embassy, with Uruguay exporting a significant
amount of high-quality rice to Iran.


17. (SBU) Relations with Argentina (and by extension
Mercosur) have been frosty, mainly as a result of a two-year
dispute with Argentina over a paper pulp mill on the
Uruguayan side of the Uruguay River. The USD 1.2 billion
mill, owned by Finnish Botnia, employs 2,500 persons at the
plant or in related industries and significantly boosts
Uruguayan GDP. The plant began production in November 2007
and boasts the highest level of pulp production in the world
and the latest environmental protection technology.
Argentina sued Uruguay in the International Court of Justice
(ICJ) in 2006 (a verdict is expected around the end of 2008)
and Argentine protesters have blockaded bridges between the
two countries for more than two-years. The GOA and the
protesters claim that the mill environmentally damages the
Uruguay River which borders both countries; Uruguay and
Botnia are confident the court will rule otherwise.
Baxter