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C O N F I D E N T I A L SANTIAGO 000957 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 07/01/2030 
TAGS: ECON ETRD OVIP PGOV PRELMARR MARR CI
SUBJECT: SCENESETTER FOR AETC/CC VISIT TO CHILE (U) 
 
Classified By: AMBASSADOR CRAIG C. KELLY; REASONS: 1.4 (B AND D). 
 
¶1. (C) Summary: Your arrivals in Santiago follow shortly on 
the historic inauguration of Chile's first female president, 
former Defense Minister Michelle Bachelet.  In foreign 
policy, Bachelet has declared a focus on strengthening ties 
with neighbors, while maintaining important relations with 
the U.S., Europe and Asia.  We expect a positive bilateral 
relationship, with continued outstanding military to military 
relationships, but Bachelet's degree of support for U.S. 
positions on international political issues and free trade is 
unclear at this point.  A possible complication is imminent 
ratification of the International Criminal Court and the 
application of American Servicemembers, Protection Act 
sanctions.  Most notably, your visits add to a succession of 
high profile military to military visits during the last six 
months which include General Hagee (Oct 2005), General 
Schoomaker (Nov 2005), General Craddock (Nov 2005), the 
Defense Consultative Commission (Jan 2006), and Lieutenant 
General Schmidt and Mr. Bruce Lemkin visiting for the FIDAE 
airshow (Mar 2006). End summary. 
 
Michelle Bachelet 
----------------- 
 
¶2. (SBU) Michelle Bachelet's public statements, cabinet 
appointments and policy priorities appear to show her 
intention to govern independently, while generally continuing 
Concertacion coalition policies on free trade, human rights, 
fiscal caution and multilateral diplomacy.  Her cabinet is 
comprised of experienced political figures and new faces, and 
is equally divided between men and women.  Bachelet has 
highlighted pension and healthcare reform, environmental 
protection, public security and education as 
her top domestic priorities.  Her first week in office 
included an immediate declaration for free medical care for 
all Chileans age 60 and above. The center-left Concertacion 
coalition, which emerged from the December 2005 congressional 
elections with a majority in both houses of Congress, is 
expected to facilitate legislative approval for her 
initiatives.  On foreign policy, Bachelet has indicated she 
intends to focus on strengthening Chile's ties with Latin 
America (i.e., Bolivia, Argentina, Peru).  She advocates 
continued engagement with Venezuelan President Chavez, whom 
she emphasizes, "was democratically elected." 
 
Chilean Economy 
--------------- 
 
¶3. (SBU) Bachelet inherited an economy that saw real GDP grow 
an estimated 6.3 percent in 2005, following 6.1 percent 
growth in 2004.  An unemployment rate of 7 percent is now at 
its lowest level since 1997.  While the impressive numbers 
are due partly to record-level global copper prices, Chile's 
expanding web of bilateral trade agreements and responsible 
fiscal policy also play key roles.  In recent years, Chile 
has concluded trade agreements with the U.S., E.U., South 
Korea, New Zealand, Singapore, Brunei and most recently with 
China and India.  It has just begun talks with Japan.  After 
the U.S., fully one third of Chile's trade is with Asia -- 
China, Japan, and South Korea are its number two, three and 
four trading partners, respectively.  All indications are 
that Chile is seeking to expand further its economic ties 
with Asia. 
 
¶4. (SBU) During the first two years of our own Free Trade 
Agreement, U.S.-Chilean bilateral trade has risen 84 percent. 
 The main cloud hanging over the FTA's roaring success 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.  We have pressed hard on the issue privately and 
publicly. 
 
Bolivia 
------- 
¶5. (C) Chile and Bolivia do not have full diplomatic 
relations.  Their historic border dispute stemming from the 
War of the Pacific (1879-1883), in which Bolivia lost the 
province of Antofagasta and thus became landlocked, continues 
to cloud bilateral relations.  Former President Lagos and 
former Bolivian President Rodriguez took several steps during 
the last six months of 2005 to improve relations, including 
agreements to eliminate tariffs on Bolivian imports and waive 
passports for cross-border travel. 
 
¶6. (C) Evo Morales' election victory has raised Chilean 
concerns about a radical shift in Bolivia's foreign policy. 
At the same time, it also raised hopes that agreements could 
be reached with a Bolivian president who has clear popular 
support.  Former President Lagos told WHA A/S Shannon during 
their meeting (Jan 2006) in La Paz, where they were attending 
Morales' inauguration, that Morales' mandate might enable him 
"to act sensibly" on the controversial issue of access to the 
sea.  The two countries are engaged in confidence-building 
measures, including a recent visit to Chile by Bolivia's 
Defense Minister and cooperative de-mining operations along 
the Chile-Bolivia border. 
 
Venezuela 
--------- 
 
¶7. (C) The Chilean government under Lagos privately shared 
our frustration with the Venezuelan leader's behavior, but 
believed it better to remain engaged in Venezuela in order to 
bring about democratic reform.  Former President Lagos met 
with representatives of the Venezuelan opposition during his 
April 2005 visit to Caracas.  Foreign Minister Walker, Senate 
President Romero and then presidential candidate Bachelet 
received SUMATE officials during their August 2005 visit to 
Santiago.  However, Chile is reluctant to confront Chavez 
directly, due to economic and commercial interests in 
Venezuela, Venezuela's early, support for Chilean Jose 
Insulza's OAS SecGen candidacy, and Chavez' ability to stir 
up trouble for Chile with its neighbors. 
 
Haiti 
----- 
 
¶8. (C) Chile's peacekeeping operation in Haiti has enjoyed 
largely bipartisan support since the Chilean military 
self-deployed a battalion within 48 hours in February 2004. 
Congressional approval for the more than 500 Chilean 
peacekeeping troops in Haiti expires on June 1, 2006.  Any 
extension beyond that date should not be taken for granted. 
President Bachelet was Defense Minister then, but her views 
are unclear at this point.  Opposition members of Congress 
recently have questioned the need for Chilean troops to 
remain in Haiti now that elections have taken place. 
Concerns about Chilean casualties (none to date), deployment 
costs, and the perceived slow pace of economic development in 
Haiti are likely to resurface when Congress debates the issue 
in May. 
 
International Criminal Court/Article 98 
--------------------------------------- 
 
¶9. (C) Chile has signed but not yet ratified the Rome 
Statute.  The Lagos government agreed not to move forward on 
ratification during the remainder of its term to give Chile 
and the U.S. time to find "a creative solution" to avoid a 
cut-off of U.S. military assistance under the American 
Servicemembers' Protection Act (ASPA).  However, support for 
ICC ratification runs across the political spectrum in Chile, 
as does opposition to signing an Article 98 agreement with 
the U.S.  There are indications Chile will ratify the ICC 
sometime in 2006.  While total U.S. assistance potentially 
affected by ASPA sanctions is relatively small (just over USD 
5 million in 2006), GOC officials worry that sanctions could 
chill an increasingly valuable relationship and create 
openings for other countries to cooperate with the Chilean 
military. 
Middle East 
----------- 
 
¶10. (C) The Lagos Administration was generally supportive of 
the Road Map and other U.S. initiatives to establish peace 
and security in the Middle East.  FM Walker visited Israel 
and Ramallah in March 2005, and Palestinian 
President Abbas visited Chile in May 2005.  Chile has third 
and fourth generations of Palestinian, Lebanese, and Syrian 
immigrants (the majority Christian) who are well-integrated 
into society.  The Palestinian community is said to number 
over 300,000 -- the largest outside of the Middle East.  The 
American Jewish Committee recently traveled to Santiago to 
bestow its "Light of the Nations" award to President Lagos. 
At the United Nations, Chile generally has adopted what it 
considers to be a "balanced" approach to the Middle East. 
Chile supported the Holocaust Remembrance Resolution, while 
also voting in favor of resolutions to fund international 
organizations that the U.S. considers anti-Israel. 
 
Support at the United Nations 
----------------------------- 
 
¶11. (C) 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 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.  Chile played a leading 
role in supporting the Third Additional Protocol to the 
Geneva Convention. 
 
Military Cooperation 
-------------------- 
 
¶12. (C) President Lagos expressed interest in strengthening 
U.S.-Chile military relations as an element in modernizing 
and normalizing the Chilean military's role in society.  We 
do not have the same affirmation from the two-week old 
Bachelet government, but expect a similar orientation.  Chile 
does not have a Status of Forces Agreement (SOFA) with any 
country, including the U.S.  However, the U.S. and Chile 
exchanged diplomatic notes to provide limited protections to 
DOD personnel in Chile for military exercises in 2005.  A new 
exchange of notes covers exercises through June 2006, and 
Chile has put forth a draft proposal for concluding a 
long-term SOFA. 
 
¶13. (SBU) The GOC took delivery in January 2006 of the first 
two of ten new F-16 fighter aircraft -- the first major 
purchase of U.S. equipment since the 1976 U.S. 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 joint 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 500-plus troops and engineers currently stationed in 
Haiti. 
 
Cuban Migrants 
-------------- 
 
¶14. (C) In February 2006, Chile agreed in principle to accept 
for resettlement of 27 protected Cuban migrants from 
Guantanamo.  It had been agreed Chile would begin conducting 
interviews with the migrants by mid-March.  However, on March 
2, Chile informed us that further movement on the 
resettlement process would be postponed until the Bachelet 
government had the opportunity to reaffirm the overall 
decision to accept the migrants. 
 
Cooperation on Global Issues 
---------------------------- 
 
¶15. (SBU) Chile supports U.S. non-proliferation, 
counter-narcotics and counter-terrorism objectives.  It 
supported U.S.-sponsored non-proliferation initiatives during 
its UNSC tenure and recently co-sponsored the OAS MANPADS 
resolution.  Chile enforces the United States Coast Guard's 
International Ship and Port Facility Security Code, but is 
not a signatory to the Container Security Initiative or the 
Megaports Initiative.  While not a producer of illicit 
narcotics, Chile is a transit country and has its own 
domestic drug abuse problems.  Chilean law enforcement 
entities are generally cooperative. 
 
¶16. (SBU) Chile is a signatory to the UN International 
Convention for the Suppression of the Financing of Terrorism, 
as well as all 12 anti-terrorism conventions and protocols. 
In 2004, Chile completed two successful years chairing the UN 
Sanctions Committee.  The UN considers Chile to be among the 
least hospitable countries for terrorist operations in the 
hemisphere.  Chile has established a Financial Intelligence 
Unit to combat money laundering and terrorist finance, 
although relevant laws and institutional experience remain 
weak. 
 
Deepening People to People Ties 
------------------------------- 
 
¶17. (U) Chile has set a national goal of English language 
proficiency, and President Lagos asked the Peace Corps to 
return for a specialized program of English teaching.  An 
assessment team visited in August 2005 and concluded the 
program would benefit Chile and further U.S. policy goals. 
However, the 
project was put on hold for budgetary reasons.  The Fulbright 
Scholarship program in Chile celebrated its 50th anniversary 
last year and has enabled more than 1,500 Chileans to study 
in the U.S. and 800 Americans to study in Chile.  The State 
Department's International Visitors program has been 
successful in identifying rising national leaders: in a 2005 
listing of the 100 most important women in Chilean society, 
eleven were IV alumnae. 
 
¶18. (U) In the area of youth sports exchange, Little League 
Chile has the status of a non-profit foundation and just 
finished its second season.  The Embassy hopes to widen 
sports exchanges to include soccer and tennis in 2006.  As 
part of general public outreach, the Embassy works with 
binational centers in 10 Chilean cities.  They offer English 
language instruction, guest lecturers, cultural 
presentations, classes on American history and literature, 
and art exhibitions.  The Embassy has also opened two 
"American Corners" and has plans to open three more. 
KELLY