Scenesetter for the Secretary's March 1 Trip to Uruguay

UNCLAS MONTEVIDEO 000132

SIPDIS
FOR SECRETARY CLINTON FROM AMBASSADOR NELSON
WHA FOR A/S VALENZUELA, DAS MCMULLEN, AND DRUCKER
NSC FOR RESTREPO

E.O. 12958: N/A
TAGS: PREL PGOV ETRD UY
SUBJECT: Scenesetter for the Secretary's March 1 Trip to Uruguay

Summary

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1. ( SBU) Embassy Montevideo warmly welcomes your March 1 visit to
attend the inauguration of Jose "Pepe" Mujica, a former Tupamaro
guerrilla with a remarkable life trajectory. Mujica's ascension to
power at the age of 74 can be seen as a success story of national
reconciliation and the maturing of Uruguayan democracy. Observers
credit Mujica's solid victory in Uruguay's November run-off
elections both to his compelling, albeit polarizing, personal story
and the Uruguayan population's satisfaction with the results of his
Frente Amplio coalitions's successful performance under the
leadership of incumbent President Tabare Vazquez. We expect Mujica
to continue Uruguay's prudent macroeconomic policies and a centrist
foreign policy, despite occasional leftist rhetoric. Given his
past there are some public questions about the future of our
relationship. However, he has indicated that he understands the
importance of the United States to Uruguay, and at this point we
anticipate being able to work productively with him to keep the
bilateral relationship strong. Your visit will be a welcome
affirmation that we appreciate and seek to maintain the cooperative
relationship, recognizing the important role Uruguay plays in
promoting regional stability, democracy, conflict resolution and
peacekeeping missions worldwide. End Summary.



Uruguay at a Glance

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2. (U) Positioned (sometimes uncomfortably) between regional giants
Brazil and Argentina, Uruguay is a stable, democratic nation of 3.3
million people, almost half of them residing in its capital,
Montevideo. Uruguay is one of Latin America's wealthiest and most
egalitarian countries, with an economy characterized by a reliance
on tourism and an export-oriented agricultural sector, a
well-educated work force, and high levels of social spending.




3. (SBU) The current government, led by outgoing president Tabare
Vazquez, was the first in Uruguay's long democratic history to be
formed by the Frente Amplio (Broad Front) coalition, an
amalgamation of groups from the left side of Uruguay's political
spectrum. Uruguay has some of the oldest active political parties
in the world (its two "traditional" parties began operating around
1830),so the Frente Amplio's ascension to power in 2005 raised
questions in many minds about how well Uruguay would function under
new leadership. Those questions are asked no longer: Vazquez has
had an extremely successful presidency, and he is leaving office
with a historically unprecedented public approval rating of around
75 percent. Coming to power on the heels of the country's 2002
economic collapse, Vazquez and his team made prudent use of the
subsequent recovery and the rise of commodity prices to deliver
five years of economic growth, poverty reduction, and strengthened
labor rights, thereby demonstrating that the Frente could
successfully combine its long-stated concern for social justice
with sound economic management.




4. (U) The Vazquez administration's highest profile domestic
success story has been 'Plan Ceibal,' Uruguay's version of the
one-laptop-per-child program. Uruguay is the first country in the
world to have achieved the goal of providing every primary school
child a laptop computer; over 400,000 elementary school children
across Uruguay are now working daily on their laptops, and using
free internet at the schools and in many public places. Solid
economic growth and focused social spending have also significantly
reduced the number of people in extreme poverty.



Uruguay's Resilient Economy

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5. (U) The global crisis was felt later and more mildly in Uruguay
than in most other countries. Lessons learned from the regional
economic crisis in 2002, including prudent macroeconomic policies,
improved banking supervision and risk assessment policies,
diversification of trade and investment put Uruguay in an excellent
position to survive the global downturn. The Ministry of Economy
estimates that Uruguay grew 1.2 percent in 2009, and, perhaps
optimistically, predicts 3.5 percent growth for 2010. Inflation is
now historically low, in the 6-7% range. The unemployment rate is
hovering around 6.4 percent, down from a 2009 peak of 8.3%. Total
debt is 53% of GDP. The Central bank has a good cushion of
international reserves and, in order to ensure sufficient
financing, the GOU proactively secured credit lines from IFIs in
2009 for almost $900 million ($400 million from the World Bank,
$285 million from the Inter-American Development Bank and $400
million from the Andean Development Corporation (CAF)). Uruguay's
credit rating has been improving steadily. Relatively low levels
of corruption and a stable legal environment contribute to an
attractive investment climate-which is however limited by the small
size of its domestic market and the disfunctionality of Mercosur as
a customs union.





President-elect Mujica

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6. (SBU) After outgoing President Vazquez, the earthy, charismatic
Jose "Pepe" Mujica is Uruguay's most popular politician. Still,
Mujica's historic transformation -- from a Tupamaro guerrilla who
spent around 15 years in prison, to leadership of the country --
was considered highly unlikely only two years ago by most observers
of Uruguayan politics, who thought him too polarizing a figure.
Aided by President Tabare Vazquez's achievements and a
man-of-the-people's ability to connect with the electorate,
however, Mujica was successful in extending his appeal to the
political middle ground. Not only did Mujica signal continuity
with Vazquez's moderate policies by selecting ex-Finance minister
Danilo Astori as his running mate, but he has also tempered his
rustic charm of late, cultivating a new, more clean-shaven image.
During a campaign visit to Brazil, photographs of the usually
shambolic Mujica resplendent in his first-ever suit made national
headlines and served to counter charges that his homespun image
would make him an other-than-ideal representative of Uruguay
abroad.




7. (SBU) Although sometimes portrayed by political enemies as a
volatile left-winger, Mujica has shown himself to be a pragmatic
politician who can build bridges and consensus. He constantly
reminds followers that their side has no monopoly on the truth, and
his public pronouncements almost always stress conciliation and the
need to understand other points of view. In that regard, he has
made concrete signals to work across party lines to build more
housing, improve public education, address crime, and reform the
state bureaucracy, and has also announced similar intentions with
regard to continued opening of the economy, such as plans to
revitalize the national rail system. He has built confidence in
the private sector by promising a secure investment climate.




8. (SBU) Mujica continues to live in a humble property in an
undistinguished area of Montevideo, which he has long occupied with
his wife Lucia Topolansky and their three-legged dog, Manuela.
Topolansky is also an ex-Tupamaro, and she is the current leader of
Uruguay's Senate. Mujica has always abided by salary restrictions
imposed by his political movement, which means that he will only
accept around USD 1,800 dollars per month from the Uruguayan
president's salary of over USD 12,000 per month.



President-elect Mujica's Election Victory

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9. (U) Mujica and his Frente Amplio (FA) coalition won big in
Uruguay's November 2009 runoff election. He beat National Party
challenger Luis Alberto Lacalle by ten points (53-43),and the FA
had earlier secured absolute majorities in both houses of
parliament as a result of October 25 general elections.



Foreign Policy: A Work in Progress, but Good Early Signs

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10. (SBU) We expect an initially cautious approach to foreign
policy as Mujica's new team takes office and begins to become
familiar with international and regional issues. We should
anticipate some degree of rhetoric and symbolic gestures reflecting
the intellectual formation of Mujica and much of his cabinet in the
revolutionary Latin American zeal of the 1960s. That will
sometimes compete with the pragmatism and focus on current national
interests we believe will be the final guide to their policy.
Treating them as a respected and independent partner will be a key
to working past the rhetorical 'shots'; your visit for the
inauguration sends an invaluable signal of that respect.




11. Mujica plans to focus on regional integration and shoring up
ties with Argentina and Brazil. Mujica has expressed admiration
for the progress made in recent decades by the People's Republic of
China, and the career diplomat tapped by Mujica as his foreign
minister, Luis Almagro, was Uruguay's ambassador to that country.
Mujica has made an effort to demonstrate that he understands the
importance of the bilateral relationship with the U.S., and would
like to continue and expand our educational and scientific
exchanges. He has been clear that he will continue to support
Uruguay's peacekeeping participation.




12. (SBU) We've had strong support from Uruguay on regional and
multilateral issues in the last two years, standing for
reinforcement of democratic institutions, prudent economic
policies, and the peaceful resolution of conflicts. Uruguay has
done excellent work in Haiti, where it has one of the largest
contingents of peacekeepers. The GOU has played a constructive
role on regional issues, such as the OAS General Assembly
deliberations on Cuba, the debate over the U.S.-Colombia Defense
Cooperation Agreement, and Honduras, and is now a full member of
the Pathways to Prosperity initiative. As a member of the
International Atomic Energy Agency's Board of Governors, Uruguay
supported us with regard to an important resolution 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 also helpful recently on anti-Israeli resolutions, the
Goldstone Report controversy, and on various single country
resolutions of interest to the U.S.



Trade Issues

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13. (U) Conversations with Mujica and Foreign Minister Almagro may
include the issue of access to the U.S. market for Uruguayan lamb
and citrus. The USDA conducted an evaluative survey of fresh lamb
meat in Uruguay in May 2007 and is working on a proposed rule to
allow imports subject to conditions to prevent the introduction of
Foot and Mouth Disease. GOU efforts to seek market access for
citrus have been ongoing for several years. The Uruguayan citrus
pest risk assessment (PRA) has been on hold pending a USDA domestic
policy evaluation on citrus canker. Similarly, the U.S. seeks
access to the Uruguayan market for U.S. beef and chicken. Uruguay
closed its market to U.S. beef in 2003 due to Bovine Spongiform
Encephalopathy (BSE),but has since reopened for U.S. bovine
genetic products. In August 2007, the United States requested
access for all U.S. beef and beef products and live cattle
consistent with the World Organization for Animal Health (OIE)
guidelines. In June 2009 the GOU began work on a risk analysis for
U.S. beef. In 2007, Uruguay granted market access for U.S. turkey

and turkey products, but did not include chicken and other poultry
species in the approved health certificate. USDA has requested
specific import requirements for chicken meat following completion
of Uruguay's study in accordance with OIE guidelines. Almagro has
also raised with us Uruguay's desire for improved access to the
U.S. market for wool textiles that could be achieved by adding
Uruguay to Andean Trade Preferences.



Bilateral Assistance

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14. (U) The USG provides modest levels of bilateral assistance to
Uruguay, in part because the relatively high level of per capita
income (around USD 9,100) affects the country's eligibility for
USAID and MCC programs. 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 (which
they repaid in 10 days) and increased public and private donations
to hospitals, schools, and humanitarian organizations, but that
short-term assistance has mostly ceased.




15. (U) The Inter-American Foundation, active in Uruguay since
1974, funded three grants for at a total of USD 279,000 in 2008.
The Embassy's Office of Defense Cooperation also funds donations
ranging from equine therapy and rural dental clinic equipment to
health clinics and recreation centers to communities around the
country, using DOD Humanitarian Assistance Project funds. The USG
has ongoing technical assistance programs in place run by Treasury
and the FAA, and receives small amounts of funds for provides INL
counternarcotics funding.



Public Diplomacy and Outreach

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16. (U) The U.S. approval rating here recovered substantially from
the lows reached in the earlier part of the decade (even before the
election of President Obama),rising to the 50 percent level in
2008 and 77 percent at the end of 2009. We credit much of this to
our diversified outreach strategy, which includes active youth
programs, social networking, work with NGOs and travel to the
Interior. 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. 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 USD 150,000 in 2009.
Nelson