Identifier
Created
Classification
Origin
08MONTEVIDEO587
2008-10-23 09:28:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Montevideo
Cable title:  

SCENESETTER FOR TRIP TO URUGUAY OF DASD STEPHEN JOHNSON AND

Tags:  OVIP PREL ECON UY 
pdf how-to read a cable
VZCZCXYZ0010
OO RUEHWEB

DE RUEHMN #0587/01 2970928
ZNR UUUUU ZZH
O 230928Z OCT 08
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8534
INFO RUCNMER/MERCOSUR COLLECTIVE
UNCLAS MONTEVIDEO 000587 

SENSITIVE
SIPDIS

FOR DAS MCMULLEN AND DASD JOHNSON FROM AMBASSADOR BAXTER
STATE ALSO FOR WHA/BSC DASCHBACH

E.O. 12958: N/A
TAGS: OVIP PREL ECON UY
SUBJECT: SCENESETTER FOR TRIP TO URUGUAY OF DASD STEPHEN JOHNSON AND
WHA DAS CHRISTOPHER MCMULLEN, OCT 27-30, 2008

REF: MVD 583 AND PREVIOUS

UNCLAS MONTEVIDEO 000587

SENSITIVE
SIPDIS

FOR DAS MCMULLEN AND DASD JOHNSON FROM AMBASSADOR BAXTER
STATE ALSO FOR WHA/BSC DASCHBACH

E.O. 12958: N/A
TAGS: OVIP PREL ECON UY
SUBJECT: SCENESETTER FOR TRIP TO URUGUAY OF DASD STEPHEN JOHNSON AND
WHA DAS CHRISTOPHER MCMULLEN, OCT 27-30, 2008

REF: MVD 583 AND PREVIOUS


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

SUMMARY
- - - -


2. (SBU) Your visit comes at a time of strong and growing engagement
between the U.S. and Uruguay's left-leaning Frente Amplio (FA)
coalition government. Our areas of focus include trade, education,
science and technology, and counter-narcotics cooperation. Our
military-to-military relationship is also prospering, with
increasing cooperation as Uruguay's armed forces assume a wider
regional profile. The bilateral relationship overall is solid, and
local polling shows that over 55 percent of Uruguayans have a
positive image of the U.S., a favorable percentage for the region
and up from just 36 percent in 2003. We are working with all
segments of Uruguayan society to ensure a continuation of those
positive circumstances beyond the 2009 presidential and legislative
elections, campaigning for which has already begun. End Summary.

Uruguay Today
- - - - - - -


3. (U) Uruguay is a stable, democratic nation of 3.3 million people,
almost half of them residing in its capital, Montevideo. Uruguay is
one of Latin America's wealthiest and most egalitarian countries,
despite a four-year long severe recession that ended in 2003, cut
personal income nearly in half and lowered Uruguay's historically
excellent socio-economic indicators.

Current Politics
- - - - - - - - -


4. (SBU) President Vazquez has charted a moderate course since
taking office after the Frente Amplio's first-ever victory in
October 2004. Until its rise from opposition, the FA rallied its
followers with considerable anti-U.S. rhetoric, and both the USG and
the FA were unsure how the relationship would proceed when the FA
came to power. However, President Vazquez has consistently
demonstrated a desire for strong relations with the U.S. and a
willingness to pursue a cooperative agenda to that end, including
active trade discussions with the USG.


5. (SBU) With national elections in October 2009, the Vazquez
administration is coming into its home stretch. President Vazquez
maintains high approval ratings, and his handling of the FA

coalition of disparate parties is widely admired. He is determined
to ensure his legacy as a moderate and practical head of state, as
well as position his party for the 2009 elections. A March 2008
cabinet shake-up eased out ideologues, put in technocrats, and
placed a new emphasis on a more stable and balanced foreign policy.
Vazquez' program also focuses on social and labor policies. Our
bilateral relationship under Vazquez has been productive, but
election-year politics -- jockeying within each party for its
presidential candidacy has already begun in earnest -- might limit
the public profile of our cooperation over the next year.


Political System and 2009 Presidential Candidates
- - - - - - - - - - - - - - - - - - - - - - - - -


6. (U) Uruguay's constitution institutionalizes a strong presidency,
subject to legislative and judicial checks. The constitution also
provides for a bicameral General Assembly (congress). A 30-member
Senate and 99-member Chamber of Deputies comprise the General
Assembly. Uruguay's presidents and members of both houses of
congress serve five-year terms.


7. (U) There are three major political parties in Uruguay: the
ruling Frente Amplio; the National (Blanco) Party; and the Colorado
Party. The two traditional parties, the Blancos and Colorados, were
founded in the early 19th century and are among the oldest political
parties in the world. Throughout most of Uruguay's history, they
garnered about 90 percent of the vote, with the Colorados usually in
power and Blancos as the traditional opposition. That dominance was
challenged with the founding of the Frente Amplio in 1971. The
status quo was further unsettled after the economic crisis early in
this century, which occurred under a Colorado president and served
to relegate the party to Uruguay's political wilderness. The FA won
Uruguay's last presidential elections with 50.7 percent of the vote,
followed by the Blancos with 34.1 percent and the Colorados with
10.3 percent. There is also an Independent Party that polls at only
1-2 percent, but which is a possible factor in the 2009 elections.


8. (U) There will be an election -- roughly equivalent to a one-day
distillation of the U.S. primary process -- in June 2009 that will

determine the selection of presidential candidates from the Blanco
and Colorado parties. It is not yet known whether the FA will be
able to come to consensus on a single candidate before the primaries
(as traditionally is the case). A 1996 constitutional reform
introduced a runoff election between the top two vote-getters if no
candidate receives over 50 percent of the overall vote, and most
observers believe a run-off between the FA and Blanco candidates to
be the likely result of the first round of presidential elections in
October, 2009.


9. (SBU) Front runner candidates for the upcoming elections have
emerged, and they are already fully engaged in maneuvering toward
June 2009 party primaries.

FRENTE AMPLIO

Two candidates, Danilo Astori and Jose Mujica, are expected to
comprise the FA ticket, and are now in a heated debate over which of
them will lead that ticket.

- Danilo Astori: Former Economy and Finance Minister Danilo
Astori is now identified with sweeping tax reform that includes a
new income tax highly unpopular with the middle class. He has been
a leading proponent of deepening economic ties with the U.S. Astori
has President Vazquez's support.

- Jose Mujica: Senator Jose Mujica is a former guerrilla and
the leader of the far-left Movimiento de Participacion Popular
(MPP). His populist message has made him the favorite within the
Frente Amplio. However, Mujica's history makes many analysts
question his electability in general elections.

NATIONAL (BLANCO) PARTY

- Jorge Larranaga: Senator Jorge Larranaga is the former
administrator of one of Uruguay's most important provinces,
Paysandu. He represents the center/left movement within the party,
which emphasizes a strong state. He recently stepped down from his
post as head of the party.

-Luis Alberto Lacalle Herrera: Senator Lacalle is a lawyer,
rancher, former President of the Republic (1990-95),former
Congressman (1972-73),and Senator (1984-89). His faction is
considered more to the right of Larranaga's on the political
spectrum, but he employs a centrist message.

COLORADO PARTY

- Pedro Bordaberry: Bordaberry, son of former President of
the Republic Juan Maria Bordaberry (1972-77),is the current
frontrunner. He is regarded as dynamic and hard working. He has
little chance of overcoming the association with his father, whose
presidency led to the military dictatorship of 1973-85. However,
his candidacy may serve to increase the size of the vote (and
subsequent Parliamentary representation) of his party.

Current Economic Situation
- - - - - - - - - - - - - -


10. (SBU) Uruguay's economy has recovered well over the four years
following its economic crisis, thanks in large part to
implementation of sound economic policies. Today, GDP per capita is
approaching $7,000, and the GOU repaid its entire IMF debt early.
That's the positive news. On the negative side, however, are
plummeting world prices for its key commodity exports such as beef,
wheat, rice and soybeans. Uruguay is a major agricultural producer
relative to its size, and agriculture and agro-industry account for
23% of GDP and over 75% of total exports. GOU officials are
watching carefully manufacturing layoffs, a return of expatriates
from Europe, and reserves.


11. (U) Uruguay is much better positioned economically now than it
was during the 2002 crisis. That downturn was precipitated by a
devaluation of the Brazilian Real (and was later exacerbated by
Argentina's economic meltdown),and came at a time when Brazil and
Argentina purchased two-thirds of Uruguay's exports. Since then,
Uruguay has diversified its export destinations. Brazil's currency
is sliding again, but Brazil and Argentina together only account for
30 percent of current Uruguayan exports.

Issue: Uruguay's Tax Regime
- - - - - - - - - - - - - -


12. (U) Tax system reform and instituting a personal income tax were
central campaign themes for the FA. A comprehensive tax reform took
effect in July 2007. The reform simplified the tax system by
eliminating some taxes and consolidating others, cut the VAT from a
general rate of 23% to 22% and cut corporate income tax from 30% to

25%. The reform also imposed an income tax on all incomes generated
in Uruguay. Incomes from capital gains are taxed with a flat 10%
rate, and other income, including pensions, are taxed with
progressive rates ranging from 10% to 25%. Even with the reform
Uruguay's tax system will continue to rely heavily on the VAT.
Opposition parties have been critical of the income tax, arguing
that it imposes an unfair burden on the middle class.

Foreign Policy
- - - - - - - -


13. (SBU) The March 1, 2008 replacement of anti-American 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.


14. (SBU) Uruguay receives assistance from Venezuela in the form of
subsidized oil, but chooses to stay relatively quiet on Venezuelan
issues. Even when in disagreement with Venezuelan policy, the GOU
tends to keep a low profile. President Vazquez 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,
and Uruguay exports a significant amount of high-quality rice to
Iran.


15. (SBU) Relations with Argentina 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 in the coming
months) and Argentine protesters have blockaded bridges between the
two countries for more than two years.

Military Overview
- - - - - - - - -

16. (U) The Uruguayan military of 25,000 men and women can be
characterized as a small, professional and proud force. With
approximately 60% of the military members having served in
peacekeeping missions outside the country, the military has a
professionalism that is not seen in many nations in Latin America.
Many of the officer corps, besides having experience in missions
abroad, have the opportunity to attend military courses in Latin
America, the United States, Europe and recently the People's
Republic of China.


17. (U) Their professionalism also leads the Armed Forces to be more
independent and pragmatic when it comes to offers for Security
Assistance and bilateral cooperation. The military ensures that its
military cooperation and exercises are in sync with the national
foreign policy of non-intervention, peaceful solution of controversy
and self-determination. This is the lens through which each offer
from the U.S. to participate in an exercise and event is filtered.
The size and the relative lack of resources also make the Uruguayan
Armed Forces very pragmatic when it comes to Security Assistance.
As ASPA sanctions diminished USG contributions of equipment and
training, Uruguay shifted to Russia, Europe and Canada for equipment
and to Europe, Latin America and the People's Republic of China for
military training.


18. (U) The military is slowly accepting an 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 the civilian leadership. This support and acceptance was
considerably easier under the Blanco and Colorado party leadership,
since most of the officers are members of those parties. The
military is coming to grips with serving a political leadership that
the majority did not support during the elections and has steadily
built a working relationship despite philosophical differences.


19. (U) The Army is the predominant force of the Armed forces with
over 17,000 of the approximately 25,000 in uniform. The Army
commands most resources and is the only service with bases outside
the Montevideo area. The Navy has more influence than their size
would dictate and the Air Force is not as influential as the other
two services at the national level.


20. (U) The major political military issues in Uruguay are the
increase of MOD control and transparency, the difficulties of

reduced resources for the Armed Forces, continuing Peacekeeping
operations support and the Armed Forces mission redefinition.

PKO Participation
- - - - - - - - -

21. (U) Uruguay does not have problems finding enough troops and
military observers to staff UN peacekeeping missions. Although we
have received inquiries from the Minister of Interior, providing
police for any UN peacekeeping mission would be difficult due to
domestic political concerns about crime. Uruguay is likely to
maintain its unmatched per capita contributions to PKO, but is
unlikely to take on new deployments due to a lack of capacity to
provide additional troops. The Minister of Defense has on several
occasions remarked that Uruguay will not deploy forces to
Darfur/Chad.


22. (U) Officials also complain that the UN is months in arrears on
PKO payments for salaries and equipment. This places a heavy burden
on the cash-strapped armed forces here and limits the Armed Forces'
ability to provide equipment since it involves a large expenditure
prior to the deployment.

Update on Other Key Areas of Bilateral Cooperation
- - - - - - - - - - - - - - - - - - - - - - - - - -


23. (SBU) Military-to-Military: In September, Uruguay and the U.S.
Army co-hosted the PKO South 2008 Decision-Making exercise in
Uruguay. That exercise involved over 200 multinational troops, and
was the first time Uruguay hosted the training. Eleven separate
Humanitarian Assistance Program (HAP) projects were completed in the
last year or are ongoing, involving USD 772,000 in 2007 and USD
797,000 in 2008. Those funds are directed towards emergency
operations centers, a disaster relief warehouse, and many small
projects including the purchase of medical equipment and computers
for schools. In another example, representatives from SOUTHCOM's
Office of Science and Technology and the Office of Naval Research
composed part of the delegation accompanying U/S Paula Dobriansky on
her July visit to Uruguay, which led to commitments to pursue joint
data sharing activities and bioinformatics programs. MOD Bayardi's
July meetings with SecDef Gates and others in Washington and Miami
allowed him to give a very positive press interview regarding the
4th Fleet, in which he accurately explained the fleet's mission and
scope.


24. (SBU) Science and Technology: In April 2008, the USG and GOU
signed a Science and Technology agreement that outlined a broad
array of areas for increased cooperation. In July 2008, State Under
Secretary Dobriansky led a science and technology fact-finding
mission to Montevideo, which led to the launching of several
projects and exchanges. Foremost among these is a National Cancer
Institute commitment to establish an extensive cancer research
program in Uruguay. In a follow-up meeting in September 2008, U/S
Dobriansky and FM Fernandez reconfirmed their intention to further
scientific cooperation and designated the following priority areas:
biofuels and alternative energy; biomedical and behavioral research;
experimentation, response tools, and advanced technologies;
agriculture; measurement standards; basic and cross-cutting science;
meteorology and hydrology; fisheries and marine science; and other
capacity building opportunities. More specifically, we signed a
bilateral Memorandum of Understanding on biofuels cooperation in
September 2008, and in October 2008, the Uruguayan Antarctic
Institute extended an offer to host U.S. scientists on 2009 research
missions to Antarctica.


25. (SBU) Counter-Narcotics: Ambassador Baxter and Jorge Vazquez,
Uruguay's Chief of the National Counter-narcotics Council (and the
president's brother),signed a bilateral Letter of Agreement on
counter-narcotics cooperation September 25. The Embassy's
counter-narcotics team, represented by State, DOD, and regional
representatives from DEA, DHS, and FBI, followed up by meeting on
October 7 with Uruguay's counter-narcotics commission, composed of
vice ministers from relevant ministries and top officials from
Uruguay's drug-fighting agency. The Embassy team offered ideas
about how both sides could most effectively interact, and the GOU
committed to deepening cooperation and detailing Uruguay's specific
counter-narcotic deficiencies and needs.

BAXTER