URUGUAY: HIGHLIGHTS OF PRESIDENT VAZQUEZ'S VISIT TO CHINA

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STATE PLEASE PASS USTR

E.O. 12958: N/A
TAGS: PREL ECON ETRD EINV PGOV CH UY
SUBJECT: URUGUAY: HIGHLIGHTS OF PRESIDENT VAZQUEZ'S VISIT TO CHINA

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Summary
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1. President Vazquez made his first Presidential visit to China
March 21-26, leading a delegation of ministers, government
representatives and over fifty entrepreneurs. Vazquez's trip was
the fifth presidential visit to China since both countries
established diplomatic relations in 1988. During the visit,
President Vazquez met President Hu Jintao, Prime Minister Wen Jiabao
and President of the Permanent Committee of the National Assembly Wu
Bangguo. Uruguay and China signed several cooperation agreements, a
Memorandum of Understanding on Trade and Investment, and agreed to
draft a Trade Promotion Agreement by late April. Among the private
sector announcements, Chinese company Chery committed to expand its
automotive assembly investment in Uruguay. Bilateral trade has
soared in recent years, turning China into Uruguay's third largest
trading partner. Since 2004, however, Uruguay has endured an
ever-growing trade deficit with China. END SUMMARY.

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The Agenda
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2. President Vazquez made his first official visit to China March
21-26, accompanied by his ministers of Finance and Industry, the
presidents of the Port Administration and the National Innovation
Agency, the director of Uruguay's Meat Institute and over fifty
private entrepreneurs. President Vazquez visited Beijing and
Shanghai, and met President Hu Jintao, Prime Minister Wen Jiabao and
President of the Permanent Committee of the National Assembly Wu
Bangguo.

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Overview of Agreements Signed
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3. Uruguay and China signed a Memorandum of Understanding on Trade
and Investment and agreed to draft a Trade Promotion Agreement by
late April. Both governments also signed cooperation agreements on
sports and on the environment and established a Joint Commission on
Science and Technology to work on projects related to renewable
energy, energy efficiency, agro-industry, biotechnology, information
technologies and Antarctic research. China donated a port scanner
and USD 1.5 million to fund bilateral projects. Prior to the trip,
China had donated medical equipment for USD 2.5 million to Uruguay.
The GOU invited the Chinese minister of science and technology to
participate in the Second Innovation Forum of the Americas, to be
held in Uruguay in May 2009.

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Commercial Highlights
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4. President Vazquez participated in a business event sponsored by
the Chinese Council for Trade Promotion featuring over one hundred
Chinese firms. During the forum, Economy Minister Garcia
underscored Uruguay's role as a logistics center for the Mercosur
region. According to Minister of Industry Martinez, results of
Uruguay's commercial outreach included the following: Chery -- a
Chinese firm which is already producing cars in Uruguay -- committed
to invest an additional $12 million in its local plant. Chery also
expressed interest in assembling a new cargo van in Uruguay,
experimenting with cars fueled with alternative energies, and
building a shipyard. Huawei Technologies donated data equipment
worth $0.5 million and announced the expansion of its current IT
business oriented to e-government with a focus on the Mercosur
region. SDIC and Chinatex, two Chinese firms that are the largest
importers of Uruguayan wool, promised to keep purchasing wool and
start buying wood and soy as well as invest in agro-industry.
Uruguay announced its intention to stage a large beef restaurant in
ExpoShanghai 2010.

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Trade patterns
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5. Uruguay's trade with China has soared in recent years -- from
under $300 billion in 2004 to over $1 billion in 2008 -- turning
China into Uruguay's third largest trading partner (surpassed only
by neighbors Brazil and Argentina). At the same time, Uruguay's
balance of trade with China has deteriorated sharply. After fairly
balanced bilateral trade from 1988 through 2003, in 2008 Uruguay's
trade imbalance with China reached $735 million (as it exported
goods for $174 million and imported goods for $909 million). That
imbalance prompted Vazquez to refer during his trip to the need to
re-balance bilateral trade. Uruguay's sales to China are largely
soy and wool, for which China is Uruguay's largest buyer.
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Comment: A rapidly expanding relationship
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6. Uruguay's relationship with China has expanded significantly
since the two countries established diplomatic relations in 1988.
Since then, five Uruguayan presidents have visited Beijing (in 1988,
1993, 1997, 2002 and 2009) and two Chinese presidents have visited
Uruguay (in 1990 and 2001). Common themes from those visits have
been building cooperation, strengthening exchanges, and promoting
trust and cooperation with the region. At least from a commercial
standpoint, China's strategy appears to be bearing fruit in Uruguay.


MATTHEWMAN