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PP RUEHWEB

DE RUEHMN #1053/01 3532137
ZNR UUUUU ZZH
P 192137Z DEC 07
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC PRIORITY 7838
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

UNCLAS MONTEVIDEO 001053 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ECIN ECON ETRD AR BOL BR CH PY VZ XR UY
SUBJECT: MERCOSUR SUMMIT: POLITICAL ATMOSPHERICS IMPROVE, 
ECONOMIC STANDSTILL REMAINS 
 
SUMMARY 
------- 
 
¶1. (SBU) Summary: Presidents from the four Mercosur countries 
plus Chile, Bolivia and Venezuela met in Montevideo on 
December 18 at Mercosur%s 34th Common Market Council. 
Unlike in previous meetings, and contrary to pre-Summit 
expectations, the gathering was diplomatic and pleasant. 
Uruguayan President Vazquez was notably friendly with his 
Argentine counterpart in an apparent effort to tone down the 
harsh conflict between their two countries.  Argentine 
President Fernandez and Venezuelan President Chavez darted 
the USG, Bolivian President Morales called for an 
international investigation into recent events at Sucre, 
Paraguayan President Duarte celebrated the concessions 
granted to his country and Chilean President Bachelet called 
for Mercosur to move forward in areas such as services. 
Vazquez highlighted Mercosur%s trade agreement with Israel 
and insisted on the need for open regionalism and to allow 
member states to negotiate trade agreements independently. 
From an economic standpoint, Mercosur showed no tangible 
progress on most relevant issues.  END SUMMARY. 
 
¶2. (SBU) On December 18, Presidents Fernandez from Argentina, 
Da Silva from Brazil, Duarte from Paraguay, Vazquez from 
Uruguay, Morales from Bolivia, Bachelet from Chile and Chavez 
from Venezuela attended the Presidential Summit following the 
34th Mercosur Common Market Council, the bloc's principal 
body.  Russia's President Putin was represented by his 
Ambassador to Uruguay and Mexico's President Calderon by his 
Minister of Foreign Affairs.  The EU Commissioner for 
Monetary and Economic Affairs was a special guest to the 
Summit.  Contrary to previous Mercosur Summits - which were 
loaded with tension and recrimination-, the climate in 
Montevideo was affable and all presidents made positive 
remarks about the bloc. 
 
GOOD ATMOSPHERICS,... 
--------------------- 
 
¶3. (SBU) Vazquez was notably genteel with Fernandez, both in 
speech and gesture.  He told her she could feel at home in 
Montevideo and emphasized that "no Argentine is an alien in 
Uruguay". Vazquez' conciliatory speech, and his decision not 
to table the Botnia pulp mill, signaled his intention to tone 
down the conflict with Argentina and seek a positive 
relationship with the new Argentine president.  Meanwhile, 
protestors displayed a sign outside the Mercosur building 
sarcastically read "Welcome President Cristina Fernandez de 
Kirchner, enjoy Uruguay at ease, we are well-mannered and do 
not attack our guests, especially if they can not reply". The 
sign was promptly removed by the police. 
 
...SOME MINOR POLITICAL SUCCESSES,... 
------------------------------------- 
 
¶4. (SBU) Vazquez touted Mercosur%s achievements during 
Uruguay's six months pro-tempore presidency, and stated that 
"if in past occasions I have been critical of Mercosur, I 
must admit that it is making progress."  He nevertheless 
called for "concrete actions" to solve the bloc's problems, 
"as we medical doctors say, diagnoses do not cure, they help 
the therapeutic process but you need concrete actions." 
Referring to the FTA with Israel Vazquez called for the bloc 
to actively undertake open regionalism and, in closing, urged 
the bloc to allow its smaller members flexibility to 
negotiate trade agreements independently from Mercosur to 
help them resolve the bloc's huge asymmetries. 
 
¶5. (SBU) One of the most trumpeted results of the Summit was 
the FTA with Israel that provides for duty free trade of more 
than 90% of goods over an eight-year term.  The agreement 
represents limited commercial relevance since bilateral trade 
is very low (less than 0.5% of Mercosur%s exports go to 
Israel while Mercosur absorbs about 1.0% of Israel's sales) 
and concentrated on few goods (Mercosur exports beef and 
Israel exports fertilizers).  However, as the bloc's first 
extra-regional agreement with a developed country, the 
agreement is a positive sign of more open regionalism.  The 
Summit's Communiqu highlighted Mercosur%s "political will 
to reach an inter-regional association with the EU" and 
celebrated that the EU will provide 50 million euros for 
non-refundable cooperation under a bi-regional 2007-2013 
cooperation program. 
 
...BUT, CONTINUED STAGNATION ON ECONOMIC ISSUES 
--------------------------------------------- -- 
 
 
¶6. (SBU) The Summit once again failed to approve a customs 
code or to eliminate the double imposition of the common 
external tariff (CET). Currently non-Mercosur goods are 
subject to the bloc's CET upon entering each country. 
Brazil's President Da Silva partially blamed the presidents% 
lack of leadership for the lack of progress and proposed to 
address both issues aggressively during the coming semester. 
 
 
CRISTINA LASHES OUT AT THE U.S. 
------------------------------- 
 
¶7. (SBU) Argentina's President Fernandez delivered a spirited 
political speech that criticized neo-liberal policies, called 
for a multi-polar world, and indirectly lashed out at the US. 
 She stated that "in this South American neighborhood there 
are some visitors that do not recognize that neighbors get 
along well and (instead) promote actions to divide us and 
move us apart".  In a clear reference to the Antonini case 
she added that "...its not politics that is dirty, its 
politicians from inside and outside of our countries who make 
dirty operations".  She continued "many more times we will 
suffer, as we are currently suffering, interference ...by 
those who want subordinate countries..." and warned that 
"they will not bend us.".  On Mercosur, Fernandez stated that 
during its pro-tempore presidency the GOA will work actively 
to pass a customs code and eliminate the double imposition of 
the CET.  The GOA also plans work to sort out asymmetries (a 
leitmotivs of the summit), foster the integration of 
productive c 
hains across countries and develop infrastructure projects. 
Fernandez called for the prompt incorporation of Venezuela 
into Mercosur and argued that such integration would help 
"the energy equation" in a region that is rich on "energy, 
food and knowledge". 
 
CHAVEZ BRINGS A LIGHTER TOUCH, BUT WITH FOREBODING 
--------------------------------------------- ----- 
 
¶8.  (SBU) Chavez urged the Brazilian and Paraguayan 
Congresses to approve Venezuela's integration into Mercosur. 
He joked that Mercosur should give Venezuela a prize "for its 
resilience as it has been nine years since they first applied 
for full Mercosur membership."  Chavez argued that at that 
time the delay was somehow reasonable since Southern Cone 
countries were in the "midst of the freezing neo-liberal 
night."  He insisted that Venezuela was not backtracking to 
join the Andean Community or the G3.  In an improvised press 
conference outside the Summit, Chavez, joined by Morales, 
warned the USG "not to force them into violent revolution in 
Bolivia".  Quoting Kennedy, Chavez warned the U.S. that 
"those revolutions that are not pacific end up violent.  We 
both (referring to Morales) want to make a peaceful 
revolution.  Do not force us to make it violent." 
 
MORALES CALLS FOR AN INVESTIGATION INTO SUCRE 
--------------------------------------------- 
 
¶9. (SBU) Morales focused his speech on Bolivia's political 
situation and vowed that his administration "would never 
thwart human rights or democracy." He called for "an 
international investigation on the Sucre events" and 
complained that three weeks have gone by without forensic 
results.  In previous cases, he said, forensic exams only 
took a couple of hours.  President Vazquez and In its 
capacity as pro-tempore president, Uruguay championed a 
Mercosur statement in support of "Bolivia's institutional 
regime, based on democratic principles." 
 
PARAGUAY UNCHARACTERISTICALLY CONTENT 
------------------------------------- 
 
¶10. (SBU) Duarte, who like Vazquez had been extremely 
critical of Mercosur, also made positive remarks on the bloc 
and was particularly pleased with the its structural fund, 
FOCEM.  He mentioned FOCEM's recent announcement of $45 
million in new funding for Paraguay, bringing total funding 
to $114 million.  Duarte was also pleased with the exception 
granted to Paraguay to apply lower import tariffs on 
information and telecommunication goods until 2015.  He 
explained that this special import regime was essential for 
Ciudad del Este that accounts for about 20%-25% of Paraguay's 
exports. 
 
CHILE PROVIDES A SOBER ASSESSMENT 
--------------------------------- 
 
 
¶11. (SBU) Bachelet was the only president to highlight the 
importance of multilateral negotiations.  She gave a 
comprehensive and concise speech in which she acknowledged 
that Mercosur has made progress, but still needed to move 
forward on key areas like services, government procurement, 
investments and technological issues.  She stated that 
Mercosur is "more than a trading bloc" and mentioned the 
creation of a political coordination forum (proposed by the 
GOA), an anti-corruption working group (proposed by the GOU) 
and the bloc's statements on whale hunting in the Antarctic 
(proposed by Chile) as indications of positive political 
coordination. 
 
COMMENT 
------- 
 
¶12. (SBU) Comment: Unlike previous meetings, the Montevideo 
Summit took place in a remarkably diplomatic fashion, at 
least as far as criticism of the bloc was concerned.  In 
Uruguay, many observers anticipated that recent sparks 
between the GOU and GOA over the pulp mill dispute would 
taint the summit.  The lack of rhetoric on this front may 
offer a chance for the two governments to begin rebuilding 
their relationship.  Where ire was expressed, it was directed 
squarely at the U.S., giving the impression that more 
anti-U.S. bombast could yield greater regional unity. 
However, Uruguay continued its push, albeit with a softer 
tone, for open regionalism and freedom to negotiate 
independently from Mercosur.  From an economic standpoint, 
Mercosur continues to be at a standstill and has only kicked 
the "can" down the street. 
Harding