Identifier
Created
Classification
Origin
09MONTEVIDEO182
2009-04-02 12:54:00
UNCLASSIFIED
Embassy Montevideo
Cable title:  

URUGUAY: NEW RULES FOR CAMPAIGN FINANCE

Tags:  PGOV PREL ECON 
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ZNR UUUUU ZZH
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FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC 8918
INFO RUEAIIA/CIA WASHDC
RUCNMER/MERCOSUR COLLECTIVE
RUMIAAA/CDR USSOUTHCOM MIAMI FL
UNCLAS MONTEVIDEO 000182 

SIPDIS

STATE FOR WHA/BSC MDASCHBACH

E.O. 12958: N/A
TAGS: PGOV PREL ECON
SUBJECT: URUGUAY: NEW RULES FOR CAMPAIGN FINANCE

UNCLAS MONTEVIDEO 000182

SIPDIS

STATE FOR WHA/BSC MDASCHBACH

E.O. 12958: N/A
TAGS: PGOV PREL ECON
SUBJECT: URUGUAY: NEW RULES FOR CAMPAIGN FINANCE


1. SUMMARY. On the 2nd March, Uruguay's Senate passed draft
legislation detailing the rules for financing campaigns during
Uruguay's 2009 election cycle. Although, as in past years, the
proposal only covers this year's election cycle, if made into law,
it would mark the first time in Uruguay's history that donations
would be capped and that transparency in fundraising would be
mandatory. Uruguay has traditionally maintained a laissez faire
approach to campaign financing, but now, among other measures, the
new law limits anonymous donations, caps private donations and fines
any parties who fail to publically declare their funding sources.
Additionally, and also for the first time, funds can be used for the
parties' day-to-day operating costs. Implementation of the proposed
law may be problematic, however; officials in all parties have
expressed concern that Uruguay's Electoral Court lacks the resources
to enforce the legislation. END SUMMARY.
--------------

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


2. In Uruguay, state funding pays the majority of costs incurred by
political parties and candidates during election campaigns. Recent
elections have seen the state pick up around 80% of the bill, with
private sources providing the rest. Uruguay was the first country
in the world to introduce government funding for electoral
campaigns, but Uruguay has no general legislation that regulates
campaign financing for political parties. Instead, since 1954, the
Uruguayan parliament has voted on how to regulate costs on an
election-by-election basis. Until now, however, these regulations
only concentrated on detailing the nature of the state's provision
and made no mention of private funding.

3. Although voting on state funding on an election-by-election
system theoretically means that a well-financed party with a strong
majority could deny approval for state funding and thereby
strengthen its election chances, in practice no such attempts have
been made.

--------------
State Funding in 2009
--------------


4. Election regulations always calculate the amount of money
according to the votes that each party wins. The amount given is
expressed in 'indexed units' (financial units indexed to move with
inflation). For 2009, the State will remunerate the political

parties 87 indexed units (currently worth 166 pesos or USD 12.80)
per presidential vote, 10 indexed units (19 pesos or USD 0.80) per
runoff vote (if necessary),and 13 indexed units (24.8 pesos or USD
1.00) per vote for internal (primary) and local elections. This
marks the first time financial provision has been made for runoff
campaigns or primaries, two stages in the electoral cycle that have
hitherto placed significant strain on party funds.


5. In anticipation of this reimbursement, parties are able to secure
an advance on their campaign spending from the state-run Bank of the
Republic. These advances are calculated based on the number of the
votes won by the party during the previous election. This year's
legislation states that parties are required to present a summary of
their electoral budget to the electoral court 30 days before the
election. This must include projected costs and a record of
donations already received. Within 90 days of the election, parties
are obliged to submit details of how much money was actually spent
and from where it was sourced. Any parties who make it to the
second round of the presidential elections (the run-off) must
publish their campaign budget on their official party websites.

--------------
Private Funding: The Situation Before 2009
--------------


6. Before this year's draft legislation, Uruguay possessed no legal
barrier to prevent political parties from accepting donations made
by unions or other social organizations; government contractors;
anonymous private donors; or even foreign governments and
businesses. Neither were there stipulations on the amount that
could be received. Regionally, only Paraguay and Guatemala shared
such an open approach to funding. Almost all other Latin American
countries prohibit donations by foreign governments or businesses,
while a large majority oppose donations from government contractors
and anonymous sources. In the case of donations from unions or other
social organizations however, only Argentina, Bolivia, Brazil and
Paraguay have decreed them illegal.


7. Since Uruguay's return to democracy in 1985, numerous proposals
for permanent regulatory legislation have been floated, but none
made it very far. Although some commentators and politicians have
long felt that Uruguay's electoral funding process requires firmer
regulation and greater transparency, the issue is not particularly
contentious and, as yet, has generated little public attention. The
ruling Frente Amplio (FA) party, which is responsible for producing

this year's financing legislation, has been preparing the content of
the draft law since September 2007. As it is the FA's first term in
office, and with a majority in congress this is the first time they
have had the opportunity to decide how campaign financing should be
controlled.

--------------
Private Funding in 2009
--------------


8. The draft law places private donations under greater scrutiny.
An individual private donation may not exceed 300,000 indexed units
(573,384 pesos, or USD 23,891). If, however, the donation is made
by a candidate towards his own campaign, then the cap is raised to
three times that limit. A donor's name and details must be a matter
of public record. Any business in possession of a public service
concession is limited to a donation of 10,000 indexed units (19,104
pesos, or USD 796). Anonymous donations are limited to 4000 indexed
units(7,632 pesos, or USD 318) and must not exceed 15 percent of the
parties' declared income.


9. The draft law states that each party must appoint a three-person
committee in order to ensure that these regulations are followed.
Any party that fails to publish its campaign accounts in time faces
a daily fine of 5,000 indexed units (9,552 pesos, or USD 398). If
any funds are found to have been gained illicitly, the party must
pay double the amount received as a fine. Repeat offenders risk
state funding being suspended for up to a year.


10. Although full details of the draft law have not yet been
published, no reference to foreign or union donations has so far
been reported. It should be noted, however, that Uruguay's
political culture frowns on foreign donations, and that financial
support from unions is traditionally low. The umbrella union
PIT/CNT has publically supported the FA, but whether that support
has ever been translated into donations is not a matter of public
record.

--------------
General Party Funding
--------------


11. This year's proposed electoral law takes the unprecedented step
of earmarking USD 600,000 towards the daily running of the parties.
Until now the pre-election legislation has only allocated funds
specifically for campaign costs. No public financing has been
available for the day-to-day, non-electoral activities of the
parties. Campaigns place a large burden on party funds that are
frequently already over-stretched. That has led to unusual
arrangements, such as within the ruling FA coalition, where senators
and deputies pay a significant percentage of their salaries (ranging
from 5-50 percent, depending on their particular faction) to the
party. In some cases, individuals running for office have mortgaged
their homes to finance their campaign. Political parties are,
however, exempt from Uruguay's goods tax; car tax; property tax;
land tax; and from paying a share of social security for employees.


--------------
Pressures on the Electoral Court
--------------


11. Whether these measures will survive beyond this year's electoral
cycle to become general electoral law is presently unclear. Many
ministers from across the political spectrum, as well as officials
from the electoral court itself, have stated that the court lacks
the resources to be able to investigate party finances with the
requisite amount of vigor.


12. Additional pressure has been created through the Senate's
decision to make the electoral court responsible for placing the
electoral lists in the voting booths. Previously, this was the
responsibility of the parties themselves, although voters reported
cases in which they had entered voting booths only to find that
particular lists were missing. The difficulties that the court may
face in fulfilling its new obligations are compounded by recent
budget cuts.

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


13. This year's draft legislation marks a significant improvement
in the transparency of Uruguay's election financing. No one, apart
from those keeping the books of Uruguay's political parties, can be
sure of the extent of foreign or private donor financing in prior
campaigns. Although campaigns here have traditionally been
relatively low-budget affairs, perceived as generally free from the
undue influence often attendant with large contributions, this

year's campaign looks to be particularly hard-fought and the new
legislation promises some interesting revelations about who is
supporting whom. End comment.

MATTHEWMAN