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,C O N F I D E N T I A L MONTEVIDEO 000268 
 
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E.O. 12958: DECL: 03/20/2016 
TAGS: PREL PGOV SOCI EINV ECON AORC UY
SUBJECT: PULP MILLS: VAZQUEZ' TRIP EXPOSES HARSH REALITIES 
 
REF: A. MONTEVIDEO 00259 
     ¶B. MONTEVIDEO 00256 
     ¶C. CARACAS 0720 
     ¶D. MONTEVIDEO 0230 
     ¶E. MONTEVIDEO 0229 
 
Classified By: Charge D'Affaires James D. Nealon 
for reasons 1.4 (B) and (D) 
 
¶1. (C) Summary:  President Tabare Vazquez returned 
empty-handed from an erratic eight-day tour of regional 
countries designed to drum up support for Uruguay's position 
in the serious paper mill dispute with Argentina (ref A). 
From our point of view, the trip was a disaster, especially 
his confusing signals out of Venezuela (refs C&D) and his 
constant flip-flop of positions.  More importantly, his 
inability to convince anyone that the Argentine blockades of 
the international bridges (now in their 43rd day) -- that 
violate international law and treaties -- is worrisome in 
terms of foreign policy capacity and domestic support.  The 
Embassy notes that the loss of the paper mills would be truly 
catastrophic for this country.  Vazquez also faces the stark 
possibility that Uruguay may be unable to attract massive 
foreign direct investment to wean it off of its traditional 
reliance on vulnerable beef exports by diversifying to 
renewable wood products.  Embassy maintains its assessment 
that Vazquez is a capable and moderate leader who wants 
closer relations with the U.S. (refs D&E), but that Uruguay 
may be just too small and weak to stand up against anyone in 
this tough regional neighborhood.  This is a defining moment 
for the GOU.  Should the plants' construction actually be 
halted for any length of time, the consequences for this 
government could prove fatal.  End Summary. 
 
Paper Mills are Vital for Uruguay's Vision of the Future 
--------------------------------------------- ----------- 
 
¶2. (C) Despite a seemingly innocuous issue, the pulp mills 	
carry tremendous strategic importance ($ 1.7 billion	 
equivalent to ten percent of GDP) for Uruguay.  Already the 	
dispute with Argentina has caused major harm to the country's 	
national pride, economy (estimates range from $200-300 	
million), and relations with Argentina and Mercosur.  Faced 	
with high unemployment and brain drain, the GOU is eager to 	
attract foreign investment, and prides itself on its ""green"" 	
environmental image. ""Uruguay Natural"" is a popular slogan 	
for selling both grass-fed beef and tourism here. This is why 	
Vazquez and the GOU have become increasingly frustrated that 	
no international organization or neighboring country has come 	
to Uruguay's rescue in the ""economic war"" it perceives that 	
Argentina is waging. 	
 	
¶3. (C) Little wonder then, that Vazquez embarked on a tour of 	
Mercosur and Mercosur-associate countries to drum up support 
for UrugQ's position in the paper mill dispute.  From what 
we gather, he botched the trip entirely and only succeeded in 
dividing a previously united domestic constituency.  On March 
11, in Santiago he prematurely declared ""peace in our time"" 
after his brief meeting and misfired attempt at magnanimous 
statesmanship with Nestor Kirchner, and reversed his earlier 
adamant position that the plants' construction would not be 
halted.  Flushed with ""success"", he then failed to transmit 
the urgency of the issue in his pull-aside meeting with 
Secretary Rice.  Then in La Paz, after accepting a coca-leaf 
portrait of guerrilla icon Che Guevara (and learning that 
folks at home were angry) he reversed himself again, saying 
that the GOU would not negotiate under pressure.  Despite a 
mini-love fest with Chavez, where he sold off a few ailing 
parastatals, he failed to garner support for the paper mills 
from the GOV.  Later in Brasilia, Lula offered little visible 
support and Paraguay's Duarte's was reportedly unable to 
provide any relief.  Ten days after Vazquez began his trip to 
garner support for Uruguay, nothing much has changed on the 
ground. The bridges remain blocked --for almost six weeks 
now--  though the media continues to report that a 
breakthrough is imminent. 
 
Consequences for Vazquez 
------------------------ 
 
¶4. (C) While we are still somewhat puzzled by Vazquez' 
behavior during the regional trip, we continue to believe 
that he is a capable and moderate leader who genuinely wants 
closer relations with the U.S.  On March 18, Industry 
Minister Lepra told the Charge that Vazquez' position on 
U.S.-Uruguay relations and an eventual FTA remains unchanged. 
 Embassy further believes that Uruguay can serve as a useful 
bridge to the region, indirectly advance U.S. interests, and 
that Vazquez can exert some moderating influence on his more 
radical regional counterparts, as he did during both of 
Chavez' visits to Montevideo.  But we must recognize that the 
gentle doctor is something of a ""babe in the woods"" when he 
deals with ex-guerrillas, former union leaders, and 
golpistas.""  While he might want a Chilean-style moderate 
socialism, they may not.  Vazquez is also constrained by 
ideologues in his coalition government, such as ForMin 
Gargano and by the size of Uruguay vis-a-vis its powerful 
neighbors.  Vazquez' trip was a disaster in many ways.  He 
came across as prevaricating and raised doubts at home and 
abroad about his ability to conduct foreign policy, but his 
behavior is in some ways understandable.  The Frente Amplio 
(FA) government has been overwhelmed by the paper mill 
dispute and paralyzing bridge blockades that threaten vital 
national interests.  Vazquez is also hamstrung by an old-line 
Socialist foreign minister who lacks ability and vision in 
foreign affairs and does not believe in the kind of 
bipartisan foreign policy that was carried out professionally 
for generations by the Blancos and Colorados. 

Comment: Embattled Vazquez Has Few Options 
------------------------------------------ 
 
¶5. Comment: Embassy stresses that the paper mill dispute is 
perceived here as a life-or-death struggle by this 
government. The GOU's feckless strategy of threatening (but 
not taking) Argentina to international or Argentine court 
rings hollow in the face of an opponent who holds all the 
cards. (Note: The Charge was privy to and obtained a copy of 
what is the likely GOU strategy: internationalize the issue, 
but avoid confrontation with Argentina at all costs.  End 
Note.)  What is next in the continuing saga of the paper mill 
dispute and attendant blockades is unknown, but we are by now 
convinced that the issue is the most serious challenge yet to 
face President Vazquez and his Frente Amplio government. 
Vazquez' failure to gather regional support for Uruguay's 
plight makes his outreach to the U.S. on trade issues all the 
more important.  End Comment. 
Nealon