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DE RUEHMN #0415/01 1301724
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O 101724Z MAY 06
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5750
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 2510
RUEHCV/AMEMBASSY CARACAS 0402
RUEHLP/AMEMBASSY LA PAZ MAY SANTIAGO 2845
RUMIAAA/CDR USSOUTHCOM MIAMI FL//J-5//
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAWJB/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

,UNCLAS MONTEVIDEO 000415 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/OAS AMBASSADOR JOHN F. MAISTO, DAN CENTO AND 
OLWYN STAPLES 
DEPT ALSO FOR WHA/BSC DBARNES, CCROFT AND SMURRAY 
DEPT PLEASE PASS USTR RPORTMAN AND EEISSENSTATT 
TREASURY FOR OASIA FOR DDOUGLAS 
COMMERCE FOR SECRETARY CGUTIERREZ AND ITAITA/MAC/WBASTIAN 
NSC FOR DFISK AND SCRONIN 
SOUTHCOM FOR POLAD 
 
E.O. 12958: N/A 
TAGS: OVIP PREL AORC PGOV SOCI UY
SUBJECT: SCENESETTER AMBASSADOR MAISTO'S VISIT TO URUGUAY 
 
 
¶1. (SBU) Summary: Your visit to Uruguay on May 18 comes on 
the heels of a very successful May 4 meeting between 
Uruguayan President Vazquez and President Bush in Washington. 
 Uruguay is important to U.S. interests as an example of 
temperate, long-standing democracy in a region that has 
largely lurched to the populist left.  Vazquez stated that he 
seeks expanded trade ties with the U.S.  While he is 
sometimes hesitant to use the words "Free Trade Agreement" in 
public, has also stated that if expanded trade with us means 
an FTA, so be it.  Uruguay has also expressed general 
frustration with the Mercosur trading bloc -- and in 
particular Mercosur's unwillingness to resolve Uruguay's very 
serious papermill dispute with Argentina. Vazquez is a 
pragmatist above all, and what he most wants for Uruguay is 
jobs, investment and growth.  At home and abroad he has been 
caught between the competing demands of radicals and 
moderates who vie on how best to achieve his goals.  End 
Summary. 
 
---------- 
Background 
---------- 
 
¶2. (SBU) Domestic politics: Vazquez and his coalition Frente 
Amplio (FA) Government completed their first year in power on 
March 1, with generally high marks (reftel).  Polling in 
January estimated that Vazquez enjoyed a 54% approval rating. 
It is apparent that his adroit and pragmatic leadership along 
with Uruguay's strong institutions and the basically 
conservative nature of its society prevented the radical tilt 
some observers predicted during the 2004 electoral campaign. 
The President seems to prefer the term "progressive" rather 
than "leftist" to describe his administration.  Looking back, 
Vazquez' campaign promise to "shake the trees to their roots" 
has meant more in terms of rejecting outdated socialist 
thinking than anything else.  The moderates in his cabinet 
generally have the upper hand, and Vazquez has been more 
challenged by the radicals within his FA coalition than he 
has by the two discredited opposition parties (Blancos and 
Colorados) who ruled the country during the past century.  In 
his efforts to be practical, Vazquez relies on a relatively 
small cadre of experienced officials to get things done.  A 
key ally in domestic politics has been AgMinister and 
ex-Tupamaro guerrilla leader Jose Mujica, who has often 
countered the ideologues on the far-left.  Vazquez was also 
able to appease many radicals by addressing the human rights 
abuses committed during the "dirty war" period of the 
military dictatorship and by finding the buried bones of 
disappeared persons.  His leadership style is now 
predictable: he stays above the fray and allows competing 
factions in the FA to debate an issue to exhaustion and then 
weighs in with a final decision.  This method will be sorely 
tested in 2006 as the GOU attempts to reform taxes, 
education, and defense -- and possibly faces an eventual 
showdown with powerful communist-dominated labor unions. 
 
¶3. (SBU) Foreign policy has been a formidable challenge, 
compounded by the stubbornly ideological, anti-US Foreign 
Minister Reinaldo Gargano.  By far, the GOU's most serious 
problem has been the severe bilateral dispute with Argentina 
over the construction of paper mills on the shared Uruguay 
river -- not only because of soured bilateral relations with 
Uruguay's closest neighbor, but also because of the 
implications to foreign investment, an independent foreign 
policy, and Mercosur.  Uruguay has a heavy debt burden and no 
known hydrocarbon deposits, so that Venezuelan oil and money 
provide considerable temptation for boosting the economy. 
However, Vazquez appears to model himself more after Chile's 
ex-President Ricardo Lagos, and his mild leadership style 
stands in sharp contrast to the populist bombast of Hugo 
Chavez, Nestor Kirchner and Evo Morales.  His well-qualified 
economic team, headed by Economy Minister Danilo Astori and 
Industry Minister Jorge Lepra, pursues prudent and sensible 
macroeconomic policies and further reflects his 
administration's pragmatic emphasis.  As much of the region 
has lurched to the left, Vazquez has gone out of his way to 
seek good relations with the U.S., and Uruguay remains a 
stable anchor in a storm-tossed region. 
 
------------------------ 
Issues Likely to Surface 
------------------------ 
 
¶4. (SBU) We expect that President Vazquez would actively 
engage in a discussion of how regional political and economic 
trends may develop in the years to come and the U.S. vision 
for the region. Vazquez will be open to commenting on Hugo 
Chavez, Fidel Castro, Evo Morales and Nestor Kirchner, etc. 
Soliciting Vazquez' views of China and the EU may also be 
useful.  Foreign Ministry officials will be more willing to 
discuss non-regional relationships, for instance with Iran 
and the EU.  They will also gladly engage in discussions on 
Argentina, Bolivia, the OAS, and various multi-lateral 
issues. 
 
¶5. (SBU) President Vazquez' stated interest in closer trade 
ties with the United States has implications for Mercosur. 
The FM, more than other parts of the GOU, tends to value the 
relationship with Mercosur quite highly.  A follow-up meeting 
of the Joint Commission on Trade and Investment (JCTI) which 
met in April is scheduled for October in Uruguay.  The 
administration has stated publicly that it hopes to present 
some sort of expanded trade agreement at that time.  FM 
Gargano has threatened to resign if the GOU begins 
negotiations of an FTA. 
 
¶6. (SBU) The paper mill dispute with Argentina is Uruguay's 
most pressing foreign policy problem.  The dispute over one 
Finnish and one Spanish pulp mill under construction on the 
Uruguayan side of the Uruguay River, is an issue of paramount 
national interest.  The proposed $1.7 billion investment is 
equivalent to 10% of Uruguay's GDP.  Argentine government 
officials, some local inhabitants and environmental activists 
claim the plants would harm fishing, farming, and tourist 
areas along the Uruguay-Argentina border. Protesters from 
Argentina have blocked bridges between Argentina and Uruguay 
off and on since the first of the year at great cost to 
Uruguay's trade and tourism revenues.  An independent review 
of the preliminary World Bank environmental impact study 
(CIS) reports that these concerns appear exaggerated, since 
the plants use the latest EU technology. Uruguay has recently 
complained at the OAS and pressed its case with the World 
Bank.  On May 4, Argentina filed a case with the World Court 
in opposition to the construction of the paper mills. 
 
¶7. (SBU) Uruguayan fugitive Juan Peirano Basso is sought by 
Uruguayan authorities for stealing hundreds of millions of 
dollars from bank depositors.  Peirano was given Legal 
Permanent Resident status in the U.S., but Uruguayan and U.S. 
authorities have since worked closely towards his eventual 
arrest and possible extradition. 
 
¶8. (SBU) Uruguay has no known hydrocarbons deposits and is 
seeking energy supplies from Bolivia and Venezuela, which is 
using this vulnerability to expand its exports of oil and is 
seeking to take an interest in Uruguay's refinery. Uruguay 
currently buys 50 pct of its oil from Venezuela under 
favorable terms. Venezuela has said that it wants to 
participate with Uruguay in a proposed gas pipeline from 
Bolivia that would pass through Paraguay and Brazil, but 
exclude Argentina.  We can recognize Uruguay's need for 
reliable energy supplies, while pressing the GOU to enter 
into agreements that are market-based and do not come with 
political strings from Caracas. The GOU's reaction to Evo 
Morales' nationalization of hydrocabons in Bolivia is not yet 
clear. 
 
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Comment 
------- 
 
¶9. (SBU) Given your compressed schedule in Uruguay, your 
remarks to the press will be especially important. You are 
well and favorably known to the Uruguayan media from your 
previous visits.  You will have ample opportunity to speak on 
the role of the OAS, the Summit of the Americas (SOA), the 
hemispheric social charter, transparency in government and 
the effect of modern knowledge-based society on governability 
and development. End Comment. 
Nealon