Scenesetter for Assistant Secretary Valenzuela's December

UNCLAS MONTEVIDEO 000714

SENSITIVE
SIPDIS
FOR A/S VALENZUELA FROM CHARGE ROBIN MATTHEWMAN
WHA/BSC FOR MILT DRUCKER, BRUCE FRIEDMAN, AND MARY DASCHBACH

E.O. 12958: N/A
TAGS: PREL PGOV EAGR ECON SNAR UY
SUBJECT: Scenesetter for Assistant Secretary Valenzuela's December
16-17 trip to Uruguay

Summary

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1. ( SBU) Embassy Montevideo warmly welcomes your December 16-17
visit. You will be the highest-ranking U.S. official to visit
Uruguay during the Obama Administration. Arriving shortly after
Uruguay's Presidential elections, your visit will allow us to
recognize the excellent collaboration we have nurtured with the
outgoing Vazquez administration and to begin building a strong
relationship with former guerrilla turned president-elect Jose
"Pepe" Mujica and his team. Your visit will serve as an
affirmation of the important role Uruguay plays in promoting
regional stability, democracy, conflict resolution and peacekeeping
missions worldwide. End Summary.



President Vazquez's Legacy

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2. (SBU) Vazquez is the first Frente Amplio coalition president in
Uruguayan history. He has had an extremely successful presidency,
with an average 60% approval rating that is still seeing upticks in
his last months in office. Under Vazquez, the Frente demonstrated
that it could successfully combine its concern for social justice
with economic growth.




3. (U) Coming into the presidency on the heels of Uruguay's grave
economic crisis of 2002, the GOU (and in particular longtime
Minister of Economy and now Vice President-Elect Danilo Astori)
made prudent use of the subsequent recovery and the rise of
commodity prices to deliver five years of positive economic growth.
Vazquez's economic team also kept inflation steady and unemployment
fairly low, successfully diversified Uruguay's trade relationships
away from dependency on Argentina and Brazil, and strengthened its
banking system. The GOU maintains a positive investment climate,
keeping corruption low, providing juridical security, and
completing vitally important infrastructure projects such as a
world class container port, a new airport and improved roads. Tax
incentives have also played a part. The result has been rapidly
increasing foreign investment, and economic growth barely touched
by the world financial crisis. The Central bank has a good cushion
of international reserves and the GOU has proactively secured
credit lines from the World Bank, IDB and other IFIs.





4. (U) The Frente Amplio government strengthened Uruguay's
traditionally strong labor rights considerably. During Vazquez'
administration, 36 labor rights laws were passed, including a law
to promote greater employee participation in business; collective
bargaining in the public sector and expanded retirement options.
Poverty declined, which the Frente credits to its social policies,
including the GOU's program of assistance to low-income families.
That was funded, in part, by the implementation of a new income tax
on middle to high income individuals. A practicing oncologist,
Vazquez has taken special interest in public health. He banned all
indoor public smoking, extended health care to many low income
families through a payroll tax and invested in state of the art
medical facilities. Under Vazquez's leadership, Uruguay became the
first country in the world to make the one-laptop-per-child idea a
reality. Over 400,000 elementary school children across Uruguay
work daily on their laptops, using free internet at the schools and
in many public places. Finally, the GOU has sought ways to prod
science and technology cooperation, for example bringing the
Pasteur Institute to Uruguay and setting up organizations to foster
innovation and research.




5. (SBU) The Vazquez administration, in close coordination with the
DEA, also made significant strides in the areas of counternarcotics
and money laundering. The focus has led to several high profile
cocaine seizures, including two planes in 2008 and a record seizure
of over two tons on a yacht in 2009. The GOU has launched
specialized courts for organized crime, allowing the judicial


system to confront the growing problem of organized crime,
including money laundering and trafficking in persons. The prison
system remains overcrowded and underfunded, but after a 2009 visit
from the UN Special Rapporteur for Torture and other Cruel, Inhuman
or Degrading Treatment or Punishment, the administration moved
quickly to double the funding available to construct and remodel
prisons. By Latin American standards, Uruguay is relatively safe
and secure, but crime is growing and personal security is a major
concern. Many believe that the growing use of "pasta base," a form
of crack, is fueling the increase in crime.



Increasingly a Partner on Regional and Multilateral Issues

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6. (SBU) We have developed an increasingly collaborative and
constructive relationship with the initially skeptical Vazquez
administration. Especially in the last two years, Uruguay has been
an important voice for strong democratic institutions, prudent
economic policies, and the peaceful resolution of conflicts. The
GOU was helpful in the OAS General Assembly deliberations on Cuba,
helping us achieve the final compromise. Uruguay helped behind the
scenes to calm tensions between Colombia and Ecuador, worked with
Chile to calm the waters in Bolivia, argued for Colombia's
sovereign right to sign the U.S.-Colombia Defense Cooperation
Agreement, and was a constructive voice for the return to the
constitutional order in Honduras, arguing against outside
interference and supporting President Arias' peace process. As a
member of the International Atomic Energy Agency's Board of
Governors, Uruguay supported important resolutions on Iran and in
the selection of a new director general. Within the UN Human
Rights Council, the GOU voted for the USG candidate to the Council,
and was helpful on anti-Israeli resolutions, the Goldstone Report
controversy, and on various single country resolutions of interest
to the U.S.




7. (SBU) The USG's warm reception of President Vazquez during his
September visit to Washington and New York was well received by the
GOU. He and his delegation were impressed by and grateful for the
meeting with Secretary Clinton and her handling of the press
conference afterwards, as well as Vazquez' inclusion in President
Obama's meeting with leading peacekeeping mission countries, and
they are still thanking us for it. This was one more example of
the fact that small gestures can go a long with Uruguay.



The Outstanding Trade Issues

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8. (SBU) Conversations with Mujica and Foreign Minister Vaz will
likely come around to the issue of access to the U.S. market for
Uruguayan lamb and citrus. Vazquez placed a very high priority on
advancing these SPS issues with the U.S., and raised them again
with the Secretary in September. Indications are that they will be
important to Mujica as well. In parallel, we have been pushing
for more access to the Uruguayan market for U.S. beef, live cattle
and chicken. USDA has advanced significantly on a draft rule to
lift SPS restrictions on boneless lamb and the GOU has made great
strides on its risk assessment of U.S. beef.




9. (SBU) Your interlocutors will likely also be interested in the
USG's current policy on trade, and will seek your support for
Senator Lugar's proposal to extend the Andean trade preference
program to Uruguay. Mujica is on record opposing the negotiation
of an FTA with the U.S. but supportive of our robust Trade and
Investment Framework agreement (TIFA). It will be useful for you
to explain that the USG is not embarking on new trade agreements at
this time. We welcome Uruguay's continued support for a successful
outcome to the Doha talks, and will continue to seek to remove
barriers to trade and investment through the TIFA process.


Historic Elections

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10. (SBU) Mujica's historic transformation -- from a Tupamaro
guerrilla, who spent a brutal 15 years in prison, to leadership of
the country -- was considered highly unlikely by most observers of
Uruguayan politics only two years ago. However, aided by President
Tabare Vazquez's achievements and a strong communicator's ability
to connect with the electorate, Mujica and his Frente Amplio (FA)
coalition won big in the elections this fall. The Frente secured
absolute majorities in both houses of parliament in the October 25
general elections, and Mujica then soundly beat National Party
challenger Luis Alberto Lacalle by ten points (53-43) in a November
29 runoff election. Lacalle's poor showing disappointed National
Party supporters, and will lead to some soul searching. In
contrast, charismatic third-place candidate Pedro Bordaberry is
well positioned to renew and rebuild the previously failing
Colorado Party and will be a formidable opponent in the next
elections.



Mujica: Social Justice Focus, Foreign Policy Neophyte

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11. (SBU) As president, Mujica is expected to focus on the
domestic policy concerns that have been his lifelong passions -
poverty reduction, housing, education, crime, and the restructuring
of the state. He moving quickly to put together a Cabinet that he
hopes will consolidate the gains achieved "under the first Frente
Amplio government" and which satisfies his complex coalition's
desire for political balance among the various constituent
factions. He understands the importance of continuing Vazquez's
prudent macroeconomic policies and generating additional growth,
and will rely on Vice President Astori to oversee the economic
ministries.




12. (SBU) Mujica's foreign policy will be a work in process, as he
becomes more familiar with the key issues and builds his foreign
policy team. He tapped a career diplomat, Luis Almagro, to be his
foreign minister (currently Uruguay's ambassador to China),and
congressman Luis Angel Rosadilla as his Defense Minister. He will
likely focus at first on relations with his neighbors, mending the
relationship with Argentina, shoring up ties with Brazil, and
exploring ways to foster additional regional integration. He
participated actively with his Argentine, Brazilian, Paraguayan,
and Venezuelan counterparts during the December 7-8 Mercosur summit
in Montevideo. Many expect the Mujica government to continue to
support Uruguay's peacekeeping work. Mujica will seek a
constructive relationship with the United States. It will likely
take some time to reach the high level of cooperation that we
currently enjoy on regional and multinational issues.



Bilateral Assistance

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13. (U) The USG provides modest levels of bilateral assistance to
Uruguay, in part because the relatively high level of per capita
income (currently around $9,000). Many Uruguayans remember and
greatly appreciate the U.S. assistance provided during the
financial crisis of 1999 to 2002, including a vital $1.5 billion
bridge loan and increased public and private donations to
hospitals, schools, and humanitarian organizations, but that
short-term assistance has mostly ceased.




14. (U) The U.S. Southern Command's Humanitarian Assistance Program
(HAP) and Global Peace Operations Initiative (GPOI) programs
provide a significant portion of funds available to the U.S.


embassy for engagement. In 2009, construction and donations
amounted to approx $1.4 million. Donations in 2009 included
equipment for emergency operation centers, firefighting equipment,
dental clinic supplies, equine therapy programs, and supplies for
schools, orphanages and old age homes. IMET/CD funds of
approximately $650,000 annually provide the primary source of
training and education.




15. (U) The Inter-American Foundation provides small but effective
development grants to NGOs and community groups. In 2008 the IAF
funded three proposals at a total of USD 279,000. The USG has
ongoing technical assistance programs in place run by Treasury and
the FAA, and receives small amounts of counternarcotics funds from
INL, as well as support from DEA. We sponsor active scientific
exchanges and joint research in areas such as Antarctic research,
health, agriculture, and alternative energy.



Public Diplomacy and Outreach

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16. (U) Mutual understanding is Embassy Montevideo's number one
goal, and we have successfully raised the U.S. approval rating here
substantially, to a high 70% after President Obama's election. We
credit much of this to our dedicated outreach towards a variety of
audiences, as well the placement each year of around 1000 good news
stories in the local media. Our international visitor program
continues to attract outstanding Uruguayan candidates, including
Jorge Vazquez (the brother of the President) and his two senior
aides for drug control and money laundering. We have an exchange
programs in place that involve animation software students and
professors, and we also created exchange programs involving law
students, professors, and judges from schools in Montevideo and the

U. of Florida School of Law in Gainesville.


17. (U) English teaching is a priority here. We gave the local
school system funds to teach English to grade one through grade
three students in 56 schools. Uruguayan authorities are taking up
the funding and will expand the program to enable students from the
1st to the 6th grades to learn our language, over a phase-in period
lasting about three years. The Embassy was one of the first three
U.S. Missions to have its own FaceBook page. We now have over 3700
"FaceBook fans." Finally, successful lobbying from the Embassy
induced the Uruguayan government to end its six-year moratorium on
funding the local Fulbright Commission by giving the organization
$150,000 in 2009.

Comment

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18. (SBU) Our policy of engagement with Uruguay in areas of mutual
interest has succeeded quietly but effectively over the last five
years, and we have an excellent opportunity to build on this strong
foundation. As there were with the Vazquez administration, there
will be voices pushing the next Uruguayan government toward a
populist and more ideological stance, but pragmatism will likely
rein them in. There is a natural fit between President-elect
Mujica's priorities and our initiatives within Pathways, the Energy
and Climate Change Partnership, and the Interamerican Social
Protection Network. Your visit will help us underscore our message
that the USG is a good partner and sincerely cares about economic
and social justice in Latin America. Your visit will also
demonstrate that the USG understands the important role that
Uruguay plays, both in the region and beyond.
MATTHEWMAN