MERCOSUR SUMMIT PREDICTABLY SHORT ON ECONOMIC PROGRESS, BUT

UNCLAS MONTEVIDEO 000726 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECIN ECON ETRD UY SUBJECT: MERCOSUR SUMMIT PREDICTABLY SHORT ON ECONOMIC PROGRESS, BUT OFFERS POLITICAL SOAPBOX REF: MONTEVIDEO 700; MONTEVIDEO 718 -------------- SUMMARY -------------- ¶1. (SBU) SUMMARY: On December 8, heads of state of Mercosur's four full members and aspiring member Venezuela gathered in Montevideo for the bloc's 38th Presidential Summit. As expected, (ref A) dialogue at the summit focused more on regional politics and less on tangible progress of the economic bloc, which was scarce. Summit leaders signed a strident declaration refusing to accept the results of the November presidential elections in Honduras. On Colombia, Venezuela's President Chavez said there would "never be war with a brother nation," but railed against U.S. use of Colombian bases and lambasted Colombian President Uribe for giving asylum to individuals alleged to have attempted to assassinate him. Leaders at the summit failed to advance long-standing issues such as elimination of the double imposition of the common external tariff and agreement on a customs code, but reaffirmed the bloc's intent to further free trade discussions with the EU and extended the temporary admission system, which allows some imported materials to enter free of tariffs, until 2016. END SUMMARY -------------- MERCOSUR'S 38TH SUMMIT -------------- ¶2. (U) On December 8, Montevideo hosted the 38th Presidential Summit of Mercosur; the Southern Cone Common Market composed of Argentina, Brazil, Paraguay and Uruguay that has Chile and Bolivia as associate members, and to which Venezuela is in process of adhering. The presidents of Argentina, Brazil and Paraguay and aspiring member Venezuela were in attendance. Colombian Vice President Francisco Santos participated as an observer while Chile and Mexico each sent their Foreign Ministers. Peru was represented by a mid-level official and Bolivia chose to not attend. -------------- REGIONAL POLITICS TAKES CENTER STAGE -------------- ¶3. (U) The Presidents of the four full members of Mercosur and Venezuela signed a declaration condemning the "coup" in Honduras and refused to recognize the result of the November 29 Presidential elections in that country. In the declaration, the presidents stated that they "reiterate their most energetic condemnation of the coup d'etat in the Republic of Honduras and consider unacceptable the serious violations of human rights and fundamental liberties of the Honduran people." The declaration called the elections unconstitutional, illegitimate, illegal and a blow to the democratic values of Latin America and the Caribbean. In her summit speech, Argentine President Fernandez de Kirchner hinted that Mercosur should apply economic sanctions against Honduras and emphasized her belief that the matter should be resolved in the OAS. ¶4. (SBU) Venezuelan President Chavez used his 10-minute time allocation, and several subsequent interjections, to rail against the U.S. presence in Colombia, Colombia in general, and "Mexico's intervention in Honduras," for nearly an hour. Chavez also criticized Colombia for giving asylum to those accused of trying to oust him in 2002. Vice President Santos countered that his country has not shown aggression towards its neighbor and that asylum, like it or not, was a well-established institution in Latin America. He pointed out a couple of Colombian fugitives currently enjoying asylum in Brazil and Uruguay. There was a single positive exchange between the two, when Chavez said that Venezuela would never go to war against a brother nation. Santos welcomed that comment. -------------- MERCOSUR DEVELOPMENTS -------------- ¶5. (SBU) Leaders at the summit did not advance long-standing issues such as elimination of the double imposition of the bloc's common external tariff and agreement on a customs code. Paraguay's President Lugo took the mantle usually carried by Uruguay, and criticized the function of Mercosur and the bloc's failure to address economic asymmetries. As the host, President Vazquez did not dwell on the lack of progress on its key goals: harmonizing competitiveness-distorting public policies, eliminating current non-tariff barriers (NTBs),and adopting mechanisms to deal with new NTBs. ¶6. (SBU) Mercosur extended its temporary admission system until ¶2016. That system offsets some of the effects of double application of tariffs. The temporary admission regime allows imported materials, which are later re-exported, to be free from tariffs and is an important, legal loop-hole that benefits Uruguayan industry. ¶7. (U) Mercosur also reaffirmed the bloc's longstanding stated intent to further free trade discussions with the European Union, announcing a meeting in the first half of 2010 when Spain and Argentina will hold the EU's and Mercosur's presidencies, respectively. ¶8. (U) Brazilian President da Silva argued in favor of Venezuela's adhesion to Mercosur, saying it would add scale and balance to the bloc. During his discourse, he predicted his country's senate would affirm Venezuela the next day. NOTE: On December 9, the Brazilian senate postponed its decision on the matter. The Paraguayan parliament has yet to take up the matter. END NOTE. ¶9. (SBU) After the summit, emboffs met three of the four Mercosur Secretariat technical consultants to discuss its outcomes. While the group admitted politics took its usual place at the center of Mercosur discussions and several key issues seem to be on ice, they noted that the bloc continued to strengthen and refine its institutions, and cited progress in certain areas that remained in the background. For example, an earlier decision to allow open residency within Mercosur was implemented during Uruguay's presidency. In addition, they noted progress to increase coordination of judicial processes, and reciprocal recognition of certain academic degree programs, especially in the medical fields. Mercosur may not stand up to the economic integration achieved in the EU, the officials said, but it is doing reasonably well when compared to other economic blocs. -------------- COMMENT: POLITICS AS USUAL -------------- ¶10. (SBU) COMMENT: The GOU seemed happy to get through its turn at the helm, which came at an awkward time of transition as President Vazquez prepares to transfer the Presidential sash to Jose "Pepe" Mujica. Mujica took full advantage of having the Mercosur summit in his backyard, meeting individually with each of his soon-to-be counterparts (Ref B). MATTHEWMAN