URUGUAY'S ECONOMY MINISTER: MUJICA AND ASTORI ARE

C O N F I D E N T I A L MONTEVIDEO 000513

SIPDIS

STATE PASS TO TREASURY FOR WLINDQUIST

E.O. 12958: DECL: 09/08/2019
TAGS: ECON PGOV UY
SUBJECT: URUGUAY'S ECONOMY MINISTER: MUJICA AND ASTORI ARE
LIKE-MINDED ON THE ECONOMY

Classified By: Charge d'Affaires Robin H. Matthewman
for reasons 1.4 (B) and (D)


1. (C) SUMMARY: Minister of Economy Alvaro Garcia told the
charge September 3 that "no question" should remain that
ruling Frente Amplio coalition Presidential candidate Jose
Mujica and his running mate Danilo Astori "are on the same
page" on Economic policy. Garcia explained that the Frente
Amplio (FA) understands that to effect social change, a
strong economy is needed to provide government revenues. The
Minister also shared his thoughts on developing capital
markets in Uruguay ahead of public/private policy strategy
session planned the next day. He discussed his planned
September 14 trip to Washington to accompany President
Vazquez. END SUMMARY

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MUJICA HAS SETTLED ANY DOUBTS SURROUNDING HIS ECONOMIC POLICY
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2. (C) Starting off with the day's news about Moody's
cautioning investors that a Mujica Presidency could involve a
move toward populism, Garcia said he is convinced that Mujica
and Astori are on the same page on economic policy. He
called the perceived risk of Mujica following the policies of
Bolivia or Ecuador "unrealistic," and said Mujica has made it
clear that President Lula's leadership in Brazil would be his
model. Mujica has repeatedly deferred economic issues to
his running mate Danil Astori, who is well regarded
internationally and who is perceived as a steady hand on the
economic tiller, and Garcia commented that their public
interaction seemed to confirm this to him. Garcia questioned
the sincerity of the opposition National Party's invocation
of Chile as an economic model. NOTE: Opposition candidate
Luis Lacalle was on a campaign visit to Chile when the charge
met Garcia. END NOTE. He argued that the Chilean model
depended on making key microeconomic changes to promote
business, investment and innovation. He commented that it
wasn't until the FA came to power in 2005 that the GOU
started making these changes.

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INNOVATION IS KEY DRIVER OF THE ECONOMY
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3. (SBU) Garcia cited GOU efforts to strengthen agencies
involved in investment promotion, the creation of the
National Development Corporation to promote significant
investment projects and the National Research and Innovation
Agency (ANII) as critical building blocks for economic
success. "The Frente Amplio understands that to effect
social change, the money has to come from somewhere," Garcia
said, "and innovation is the driver."

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CAPITAL MARKETS
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4. (C) Minister Garcia also shared his thoughts on capital
markets ahead of a planned public-private sector policy
meeting planned for the next day. Garcia mapped out the key
pillars of his strategy to develop capital markets in
Uruguay. First is passage of a draft capital markets law
currently pending before the Parliament. This new law would
create an inter-ministerial body to advise the President on
promotion of capital markets and also includes a full chapter
on tax exemptions and credits directed at investors,
exchanges, and listing companies. Second was the need to
change the culture of entrenched traders who have a lock on
the limited number of "safe" bond transactions, perhaps by
reorganizing the national stock exchange.

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LISTING PUBLIC COMPANIES ON THE EXCHANGE
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5. (C) Finally, Garcia said developing interest among private
sector and public sector companies to list stocks would be
critical. He commended the efforts of the Embassy and former
Ambassador Frank Baxter to encourage private businesses to
consider listing. He also said that while privatizing
Uruguay's state-owned companies would not likely be
politically palatable in the near future, there were several
independent subsidiaries of the state-owned companies that
could be ideal candidates for partial listing. Among those,
he mentioned state oil company ANCAP's distribution company,
DUCSA S.A., its sugar and biofuels venture, ALUR and the
state-owned telephone company ANTEL's call center. Garcia
argued that a public listing of these companies would promote
public sector reform and increase transparency. NOTE: Mujica
E

publically supported the idea of public companies offering a
portion of their shares to common citizens when he visited
the stock market in July. The candidate called this a way to
"socialize" state-owned companies and allow them to compete
with banks as a savings instrument for the average Uruguayan.
END NOTE.

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TRAVEL TO WASHINGTON
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6. (SBU) Minister Garcia will accompany President Vazquez to
Washington, but not New York. He will participate in a trade
mission to Spain on the way to World Bank meetings in
Istanbul in early October. President Vazquez will meet
Senator Lugar, Representative Engel, Vice President of the
World Bank Pamela Cox, and he has requested a meeting with
the Secretary of State. The Uruguayan Embassy has also
requested meetings for Minister Garcia and the Foreign
Minister with senior officials at Commerce, State, Treasury
and USTR.
Matthewman