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PP RUEHWEB

DE RUEHSG #0011/01 0031753
ZNR UUUUU ZZH
P 031753Z JAN 06
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC PRIORITY 8155
INFO RUEHBR/AMEMBASSY BRASILIA PRIORITY 3004
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 2825
RUEHSO/AMCONSUL SAO PAULO PRIORITY 0541

UNCLAS SANTIAGO 000011 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/BSC AND H 
 
E.O. 12958: N/A 
TAGS: PREL PGOV CI
SUBJECT: SCENESETTER FOR CODEL MCCONNELL 
 
¶1. Summary: You arrive in Santiago three days before the 
presidential run-off election on January 15.  This election 
pits the top two vote-getters from the December 11 first 
round election: center-left Concertacion coalition's Michelle 
Bachelet and the center-right National Renewal Party's 
Sebastian Pinera.  It will be both an exciting and a ho-hum 
time, as this is the fourth post-Pinochet free and open 
election in the stable democracy.  Chile continues to support 
U.S. policy objectives in the region.  Chile continues to 
play a leading role in Haiti, and cooperates with us on 
non-proliferation, counter-terrorism and counter-narcotics 
issues.  Military relations are expanding, and President 
Lagos continues to express interest in strengthening 
relations as an element in modernizing the Chilean military 
and integrating it completely as a respected member of 
Chilean society.  A sweeping nationwide judicial reform was 
completed in June. 
 
¶2. Chile's economy is strong and stable.  Bilateral trade is 
robust in this second year of the U.S.-Chile Free Trade 
Agreement, although Chile,s insufficient protection of 
intellectual property rights remains a serious area of 
concern.  Educational, cultural and sports exchange programs 
enjoy success and attention in Chile, but could always use 
more funding.  Chile suffers from many of the usual 
challenges a modern society faces - crime, drug addiction, a 
faltering retirement/pension system, etc.  While in the Latin 
American context, Chile stands out as a political and 
economic success story, the Embassy is constantly vigilant. 
Complacency or resting on its perceived laurels will neither 
benefit Chile,s global competitiveness, nor make it the kind 
of serious regional partner the U.S. needs.  End summary. 
 
¶3. In this cable: 
 
- The Domestic Scene 
- Regional Issues 
--Middle East 
--UN Issues 
- Chilean Economy 
- IPR Issues 
- Non-proliferation 
- Military Cooperation 
- International Criminal Court/Article 98 
- Counter-terrorism 
- Counter-narcotics 
- Americans in Chile 
- Hague Convention Child Custody Issues 
- Fulbright Scholarship Program in Chile 
- Proposal to bring back the Peace Corps 
- Cultural and Youth Sports Exchanges 
 
------------------ 
THE DOMESTIC SCENE 
------------------ 
 
¶4. Chile held its first round of presidential elections on 
December 11.  Ruling center-left Concertacion's Michelle 
Bachelet won 45.9 percent of the vote; center-right National 
Renewal's Sebastian Pinera 25.44 percent; rightist 
Independent Democratic Union's Joaquin Lavin 23.23 percent; 
and leftist "Together We Can" coalition's Tomas Hirsch 5.39 
percent.  (President Ricardo Lagos, who is riding high in the 
polls at 70 percent, as incumbent is constitutionally barred 
from serving consecutive terms.)  None of the presidential 
candidates won more than 50 percent of the vote.  As a 
result, the top two vote-getters -- Bachelet and Pinera -- 
will compete in a run-off election on January 15.  If 
Bachelet wins, she will be Chile's first female president and 
the fourth consecutive Concertacion president.  This is 
Chile's fourth presidential election since the end of the 
Pinochet era in 1989.  All four have been judged free and 
fair. 
 
¶5. Chileans also voted for half of the elected Senators, and 
all 120 members of the Chamber of Deputies (the lower house) 
on December 11.  For the first time, the Concertacion 
coalition won a majority in both houses.  The new president 
and members of Congress will take office on March 11, 2006. 
 
¶6. Chile has taken several significant steps to strengthen 
democratic institutions to deal with the human rights abuses 
of the past.  In November 2004, the National Commission on 
Political Prisoners and Torture (Valech Commission) issued a 
landmark report on human rights abuses during the Pinochet 
era.  Also, the judicial system continues to investigate and 
prosecute a 
number of human rights cases.  One, that of AmCit Boris 
Weisfeiler, who disappeared in Chile in 1985, is of 
particular importance to us.  In June 2005, a historic, 
nationwide judicial reform went fully into effect, with 
Santiago joining the other 12 regions in moving to an 
adversarial American-style legal system.  In September, 
President Lagos signed into law several constitutional 
amendments passed by Congress.  These include eliminating the 
positions of appointed senators and senators-for-life, 
granting the President authority to remove the 
commanders-in-chief of the armed forces and police, and 
reducing the presidential term from six to four years. 
 
--------------- 
REGIONAL ISSUES 
--------------- 
 
¶7. Haiti: Chile has been in Haiti as part of the UN 
peacekeeping force for almost two years.  Chile responded 
positively to the USG's request for support in February 2004, 
and self-deployed a battalion to Haiti within 48 hours.  The 
GOC currently has more than 500 troops there as part of the 
UN Mission, a Chilean civilian serves as UN Special 
Representative, and a Chilean general serves as the deputy 
commander of the UN military forces.  In May 2005, the 
Chilean Congress voted to extend Chile's troop deployment for 
six months to December 2005, with a provision that the 
Government can extend the deployment for an additional six 
months to June 2006.  Chile also has offered election 
assistance.  However, domestic support for the troop presence 
in Haiti should not be taken for granted.  Chilean casualties 
in Haiti, or deepening problems there, could threaten the 
GOC,s resolve.  Four Chilean peacekeepers were recently 
injured in an attack in Haiti.  Chile has also voiced 
concerns about what it sees as too much emphasis on security 
and not enough on development and humanitarian projects, 
echoing Brazil,s concerns. 
 
¶8. Venezuela: Despite its center-left political orientation, 
the governing Concertacion coalition is wary of President 
Chavez.  The GOC generally shares U.S. frustrations with the 
Venezuelan leader's actions, particularly his non-democratic 
ways, and is concerned that Chavez, rhetoric and actions 
(especially regarding Bolivia) could prove destabilizing for 
the region.  FM Walker met with the Venezuelan opposition 
group SUMATE in Santiago in August 2005.  However, the GOC 
believes that dialogue and engagement offers the best chance 
to promote democratic practices in Venezuela. 
 
¶9. Cuba: Relations between Chile and Cuba have been strained 
since Lagos became president in March 2000.  In one of his 
first major foreign policy decisions, President Lagos 
instructed the Chilean mission in Geneva to vote in favor of 
the resolution condemning Cuba's human rights record -- a 
position he has maintained ever since.  Chile does, however, 
oppose the U.S. embargo, believing it hurts the average 
Cuban.  In just the last two weeks, the Cuban ambassador 
ended his tour amid widespread press reports that he had been 
unsuccessful as he had been unable to change Chile's policies 
toward Cuba during his tenure. 
 
¶10. Bolivia: Chile and Bolivia do not enjoy full diplomatic 
relations.  Their historic border dispute stemming from the 
War of the Pacific (1879-1883), in which Bolivia lost the 
province of Antofagasta in the north to Chile and thus became 
landlocked, continues to cloud bilateral relations.  However, 
President Lagos and former Bolivian President Rodriguez took 
several steps during the last six months to improve 
relations, including agreements to eliminate a range of 
tariffs on Bolivian imports and passports for cross-border 
travel.  Morales' election victory has intensified Chilean 
concerns about Bolivian stability, given his populist 
tendencies, anti-Chilean rhetoric and close ties with 
Venezuelan President Chavez as well as Fidel Castro. 
 
----------- 
MIDDLE EAST 
----------- 
 
¶11. The Lagos Administration has been generally supportive of 
the Road Map and other U.S. initiatives to establish peace 
and security in the Middle East.  Foreign Minister Walker 
visited Israel and Ramallah in March 2005 -- the first 
official trip by a Chilean foreign minister to Israel and the 
Palestinian territories.  In May, Palestinian President Abbas 
visited Chile (at the invitation of President Lagos), where 
he met with congressional leaders, business groups and 
members of the Palestinian community, in addition to 
President Lagos.  Chile has third and fourth generations of 
Palestinian, Lebanese, and Syrian immigrants who are 
well-integrated into society.  The American Jewish Committee 
recently gave its "Light of the Nations" award to President 
Lagos.  At the United Nations, Chile historically has adopted 
what it considers to be a balanced approach to the Middle 
East.  Most recently, Chile supported the Holocaust 
Remembrance Resolution, while also voting in favor of 
resolutions that would maintain international organizations 
that the U.S. considers anti-Israel. 
 
----------------------------- 
SUPPORT AT THE UNITED NATIONS 
----------------------------- 
 
¶12. Aside from opposing the Iraq intervention in early 2003, 
the GOC played a supportive role during its 2002-04 term on 
the UNSC.  Chile supported U.S. initiatives on Afghanistan 
and Iraqi reconstruction, and provided the crucial ninth vote 
for UNSCR 1559, reaffirming Lebanon's territorial integrity. 
During the recent United Nations General Assembly (UNGA) 
meeting, Chile endorsed several key U.S. foreign policy 
objectives.  Chile voted in favor of: Haiti-related 
resolutions; the Holocaust Remembrance Resolution; key 
resolutions condemning human rights practices in some 
countries; and the re-election of a U.S. judge to the 
International Court of Justice (ICJ).  Chile played a leading 
role in supporting the Third Additional Protocol to the 
Geneva Convention.  This should pave the way for Magen David 
Adom (MDA) membership in the International Red Cross and Red 
Crescent Movement, with a third symbol - the red crystal. 
 
--------------- 
Chilean Economy 
--------------- 
 
¶13. Chile's robust economy is a key reason behind President 
Lagos' 70 percent approval rating.  The Chilean economy grew 
at an impressive 6.1 percent in 2004 -- almost double the 
rate in 2003.  It is on track to expand by as much as 6 
percent in 2005, due in large measure to record-level global 
copper prices.  Bilateral trade increased over 30 percent 
during 2004, the first year of the U.S.- Chile Free Trade 
Agreement, and related cooperation on labor and environmental 
protection has gone smoothly.  U.S. exports in the first 
three quarters of 2005 have already outpaced total exports 
for 2004.  U.S. imports from Chile continue to grow as well. 
The U.S. remains Chile's most important source of foreign 
investment, although Spain surpassed us in 2004 as the number 
one provider of foreign direct investment.  The U.S. is the 
top destination for overseas Chilean investment.  Since 1990, 
U.S. firms have invested over USD 16 billion in Chile, with a 
concentration in the energy, telecommunications and mining 
sectors.  U.S. companies are generally welcome in Chile's 
mostly transparent but close-knit business climate. 
 
¶14. Chile continues to seek to codify its diversified trading 
relations through an ever-expanding web of bilateral trade 
agreements with a particular eye towards the markets of Asia. 
 In the last few years, it has concluded free trade 
agreements with South Korea, New Zealand, Singapore, Brunei 
and most recently with China.  It will begin talks for free 
trade agreements with India and Japan in 2006.  Fully one 
third of Chile's trade is already with Asia -- China, Japan, 
and South Korea are its number two, three and four trading 
partners, respectively -- and all indications are that Chile 
is seeking to expand further its ties with Asia. 
 
---------- 
IPR ISSUES 
---------- 
 
¶15. The dark cloud hanging over the roaring success of the 
FTA is Chile,s weak and unwilling protection of patents, 
copyrights and trademarks.  American companies are directly 
affected by patent violations, particularly in the 
pharmaceutical industry.  Though the FTA contains clear 
language on this issue, IPR is a contentious problem between 
the U.S. and Chile.  On the Chilean side, there is no 
effective inter-agency policy for protecting IPR.  There was 
some effort in the latter half of 2005 to respond to U.S. 
concerns, but the jury is still out. 
 
----------------- 
NON-PROLIFERATION 
----------------- 
 
¶16. Chile shares many of our non-proliferation and 
disarmament objectives.  The GOC supported a number of 
U.S.-sponsored initiatives during its tenure on the UNSC and 
its chairmanship of the Asia-Pacific Economic Cooperation 
forum.  It recently co-sponsored the OAS MANPADS resolution. 
The GOC has expressed general support for the USG's 
Proliferation Security Initiative (PSI) and attended both PSI 
anniversary events.  While the GOC has stopped short of 
publicly endorsing it, there are some indications the GOC may 
be willing to step up to the plate on PSI. 
 
¶17. Chile is a signatory to the IAEA additional protocol. 
Chile enforces the United States Coast Guard's International 
Ship and Port Facility Security Code (ISPS).  Chile is not a 
signatory to the Container Security Initiative (CSI) or the 
Megaports Initiative.  The GOC is considering seeking 
membership in the Missile Technology Control Regime (MTCR), 
the Australia Group and the Wassenaar Group. 
 
-------------------- 
MILITARY COOPERATION 
-------------------- 
 
¶18. President Lagos has expressed interest in strengthening 
U.S.-Chile military relations as an element in modernizing 
and normalizing the Chilean military's role in Chilean 
society.  Chile has never signed a Status of Forces Agreement 
(SOFA) with any country.  There is little chance of starting 
negotiations between the U.S. and Chile until after the new 
Chilean administration takes over in March 2006.  That said, 
the GOC provided limited yet adequate protections to DOD 
personnel involved in the seven military exercises that took 
place during 2005. 
 
¶19. The GOC will begin taking delivery in January 2006 of ten 
F-16 fighter aircraft -- the first major purchase of U.S. 
equipment since our cut-off of military sales during the 
Pinochet era.  The Army and Navy are also considering 
significant purchases of U.S.-manufactured systems.  The U.S. 
has provided over USD 1 million to Chile's topnotch military 
peacekeeping training facility and has been working to 
increase the GOC's global peacekeeping role.  Chile has 
contributed small contingents to UN missions in Cyprus, 
Bosnia and Kosovo, in addition to the 600 troops and 
engineers currently stationed in Haiti. 
 
--------------------------------------- 
INTERNATIONAL CRIMINAL COURT/ARTICLE 98 
--------------------------------------- 
 
¶20. Chile has signed but not yet ratified the Rome Statute. 
The U.S. and Chile do not have an Article 98 agreement, and 
the current Chilean government insists that there is no 
political support for such an accord.  ICC ratification in 
the absence of an Article 98 agreement would trigger 
sanctions under the American Servicemembers' Protection Act 
(i.e. a cut-off of IMET and FMF funds).  Support for ICC 
ratification in Chile runs across the political spectrum. 
However, the GOC executive branch and Congress have agreed 
not to move forward on ICC ratification during the remainder 
of the Lagos Administration, to allow Chile time to find "a 
creative solution" to avoid the cut-off of U.S. military 
assistance. 
 
----------------- 
COUNTER-NARCOTICS 
----------------- 
 
¶21. While not itself a center of illicit narcotics 
production, Chile is a transit country for cocaine and heroin 
shipments destined for the U.S. and Europe.  Chile also has 
its own internal cocaine and marijuana consumption problem, 
with ecstasy continuing to grow in popularity.  From the 
production angle, Chile is a source of essential chemicals 
for coca processing in neighboring Peru and Bolivia.  Chile 
is a party to the 1988 UN Drug Convention, and U.S. and 
Chilean law enforcement entities generally cooperate 
smoothly.  Through the Operation Pipeline program, national 
law enforcement officials work closely with the U.S. to 
interdict drug traffickers using northern Chile's road 
system.  In addition, through the Operation "Seis Fronteras" 
("Six Borders") Program established in 2004, Chile is working 
with its neighbors to halt the export of illicit production 
chemicals from Chile.  Chile recently strengthened its 
legislation to regulate these precursor chemicals.  The 
September 2002 Letter of Agreement between Chile and the U.S. 
remains the most recent accord for cooperation and mutual 
assistance in narcotics-related matters. 
 
----------------- 
COUNTER-TERRORISM 
----------------- 
 
¶22. Chile is a signatory to the UN International Convention 
for the Suppression of the Financing of Terrorism and is a 
signatory to all 12 Anti-Terrorism Conventions and Protocols. 
 Chile continued to demonstrate its regional  leadership in 
combating terrorism by completing a successful two years on 
the UN Sanctions Committee in 2004.  It remains on the UN's 
"least desirable" country list for terrorist operations in 
the hemisphere.  As a result, the Chilean Government and law 
enforcement agencies do not perceive international terrorism 
as a major concern or threat for Chile.  However, the GOC 
often characterizes the activities of certain indigenous 
groups as "domestic terrorism."  In mid-2004, Chile 
established a Financial Intelligence Unit (FIU) to combat 
money laundering and terrorist finance.  For the first time, 
the banking sector has begun to submit suspicious transaction 
reports to a single agency.  However, the enabling laws for 
the FIU's enforcement mechanisms are weak and legislation to 
increase its authority are stalled in Congress. 
 
------------------ 
AMERICANS IN CHILE 
------------------ 
 
¶23. The American community in Chile numbers about 15,000, of 
which 10,500 are registered with the Embassy,s American 
Citizen Services unit.  There about 1300 retired Americans 
living in Chile who receive Social Security or other federal 
benefits.  The resident American community has grown rapidly 
in recent years thanks largely to the growth of student 
exchange programs.  There are about 1000 U.S. exchange 
students in Santiago, the largest number in any South 
American city.  Another factor has been the implementation of 
the U.S.-Chile Free Trade Agreement.  Chile is an 
increasingly popular destination for U.S. tourists and 
business visitors.  The number of Americans entering Chile 
leapt 35 percent since 2003, according to official Government 
of Chile statistics.  Much of the increase has been driven by 
the rapid development of the cruise ship industry.  For 
example, while 80,000 cruise ship passengers arrived in 2004, 
this figure is projected to triple in the next five years. 
About 85 percent of these passengers are American citizens. 
The rapid growth of the American community and of tourism 
from the U.S. has had a profound impact on the Embassy,s 
workload.  For example, during 2003-2005, the Embassy,s 
passport application rate increased 34 percent, while the 
number of death cases increased a staggering 84 percent.  The 
latter was due to several factors -- cruise ship passengers 
tend to be elderly; the resident American community includes 
aging retirees; and, high-risk "adventure" sports enthusiasts 
gravitate toward Chile,s mountains. 
 
------------------------------------- 
HAGUE CONVENTION CHILD CUSTODY ISSUES 
------------------------------------- 
 
¶24. Chile was cited as "Not Fully Compliant" in last year's 
State Department report on compliance with the Hague 
Convention on the Civil Aspects of International Parental 
Child Abduction.  We have five pending Hague Convention 
cases.  In each, Chilean appellate courts have demonstrated a 
tendency to ignore the Convention's requirement that abducted 
children be returned to their place of habitual residence and 
set aside lower Chilean court rulings.  Instead, the Chilean 
appellate courts have tended toward custody decisions which 
have favored the taking Chilean citizen mother over the 
left-behind American citizen father.  The Chilean government 
is aware of this trend at the appellate level and works 
cooperatively with us on Hague issues.  The Ministry of 
Justice -- in conjunction with the Embassy and the State 
Department's Office of Children,s Issues -- is sponsoring a 
seminar on the Hague Convention for judges in late January 
¶2006. 
 
----------------------------- 
FULBRIGHT SCHOLARSHIP PROGRAM 
----------------------------- 
 
¶25. The Fulbright Educational Exchange Program in Chile 
boasts the first Commission created in Latin America.  It 
celebrated its 50th anniversary last year.  It is 
administered by a binational board with both governments 
funding scholarships.  This year, the USG is providing USD 
1,139,000, while the Government of Chile and its universities 
are providing USD 1,132,000.  The Fulbright Scholarship 
Program in Chile has enabled more than 1500 Chileans to study 
in the U.S. and 800 Americans to study in Chile. 
Distinguished Chilean alumni include Minister of Foreign 
Affairs Walker (whom you will meet) and the current 
Vice-Ministers of Justice and the Interior.  Separately, the 
State Department runs an International Visitors (IV) program 
under which rising national leaders visit the U.S. for 3-4 
weeks of professional exchange.  In a year-end listing for 
2005 of the 100 most important women in Chilean society, 
eleven were IV alumni. 
 
-------------------------------------- 
PROPOSAL TO BRING BACK THE PEACE CORPS 
-------------------------------------- 
 
¶26. The Government of Chile proposed a return of the Peace 
Corps for a specialized program of English teaching.  This 
would present a unique opportunity to demonstrate USG support 
for democratic stability and economic progress.  An 
assessment team from the Peace Corps came to Chile in August 
2005 to lay the foundation for re-entry, meeting with the 
Ministries of Education and Foreign Affairs.  While the team 
concluded that a return would be beneficial for Chile and 
would further U.S. policy goals, the project was put on hold 
for budgetary reasons.  Chile has chosen the national goal of 
English language proficiency as a benchmark for attaining 
"First World" status and as a bridge to international 
integration.  The return of the Peace Corps to Chile would 
mutually benefit U.S. and Chilean goals. 
 
---------------------------------- 
CULTURAL AND YOUTH SPORTS EXCHANGE 
---------------------------------- 
 
¶27. Little League Chile, which has just finished its second 
season, is part of the Embassy's effort to foster stronger 
U.S.-Chilean cultural ties through our nations' common love 
of sport.  Fifteen teams now comprise the Santiago league. 
Several other cities are hoping to launch affiliate Little 
Leagues in the coming year.  Little League now has status as 
a non-profit foundation in Chile, which has prompted interest 
from both U.S. and Chilean corporations to sponsor teams and 
donate equipment and funding.  The Embassy hopes to widen the 
sports arena to include soccer ("futbol") and tennis in 2006. 
 
¶28.  The Embassy has inherited 11 active binational centers 
(BNCs) located in most major and "minor" cities and towns in 
Chile.  Offering English language instruction, these BNCs 
also offer potential venues for guest lecturers, cultural 
presentations, classes on American history and literature, 
and art exhibitions.  While the former USIA (U.S. Information 
Agency) stopped subsidizing textbooks and teachers, salaries 
more than a decade ago, these BNCs are still viewed as 
outposts of America.  Along with the newer "American 
Corners," the Embassy is constantly seeking funding for these 
worthy institutions.  The Embassy believes these BNCs and 
American Corners are excellent informal channels for dialogue 
and exhibitions on the broader range of American culture and 
values. 
 
-------------- 
FINAL THOUGHTS 
-------------- 
 
¶29.  We hope you will return home with three distinct 
memories of your trip to Chile.  First, Chile is a stable, 
democratic and generally U.S.-friendly country with a robust, 
export-led economy that is capable in the coming decades of 
raising the country into the ranks of the "First World." 
Second, in spite of the worldwide budget crunch and the 
falling exchange rate, the Embassy is actively and broadly 
engaged with the Chilean government, military, academia, 
media and sports and cultural worlds on a wide range of key 
mutual interests.  Third, your visit provided our Mission 
staff with a wonderful opportunity to introduce you to our 
work world, to hear the Washington view from congressional 
leaders such as yourselves, and to exchange ideas on how best 
to represent U.S. ideals, policies and traditions overseas. 
KELLY