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FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC PRIORITY 5913
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 0417
RUEHLP/AMEMBASSY LA PAZ JUN SAN JOSE 0285
RUEHSG/AMEMBASSY SANTIAGO 2865
RUMIAAA/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

C O N F I D E N T I A L MONTEVIDEO 000555 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/BSC AND EB 
DEPT PASS USTR FOR EEISENSTAT AND MSULLIVAN 
NSC FOR DTOMINSON AND DFISK 
TREASURY FOR OASIA FOR DOUGLASS 
USDOC FOR ITA/MAC/WBASTIAN 
SOUTHCOM FOR POLAD 
 
E.O. 12958: DECL: 06/14/2016 
TAGS: ECON ETRD PREL AORC UY
SUBJECT: SCENESETTER FOR UPCOMING TRADE TALKS IN WASHINGTON 
 
REF: MONTEVIDEO 00418 AND PREVIOUS 
 
Classified By: Charge d'Affaires James D. Nealon 
for reasons 1.4 (b) and (d) 
 
¶1. (C) Summary: Following the successful Vazquez/POTUS 
encounter in the Oval Office on May 4, trade talks between 
GOU negotiators and USTR have been scheduled to take place at 
a meeting in Washington during the last week of June. The GOU 
is now much more focused on discussing a Free Trade Agreement 
(FTA). This is mainly due to President Vazquez leadership, 
but also to advance preparations made by Uruguayan technical 
experts. The GOU is also less obsessed with its paper mill 
dispute with Argentina, after a favorable preliminary readout 
from the court case in The Hague.  There is a palpable sense 
of urgency in the GOU to move forward on an FTA, derived in 
great part from the realization that this opportunity will 
not present itself again and that time is running out on 
Trade Promotion Authority (TPA). Embassy notes that an FTA 
with Uruguay would hand a defeat to Chavez, at a time when 
Venezuela is formally being inducted into Mercosur. 
 
¶2. (C) In response to a barrage of misinformation by 
opponents of of a trade agreement with the U.S., spearheaded 
by ForMin Gargano, Post provided background information to 
journalists to help educate the public and dispel 
misconceptions.  Emboffs also met with senior GOU officials, 
representatives from all political parties and key business 
leaders. Recent polling suggests that there is now greater 
public support for an FTA, though there is still opposition, 
particularly from hard-line Socialists and Communists. The 
June 13-15 visit of WHA/BSC Director Douglas M. Barnes was 
useful in furthering discussions of GOU plans for trade 
talks.  During his visit, a number of senior GOU officials 
told Barnes that Uruguay is ready for serious trade talks and 
is earnest about exploring an FTA.  End Summary. 
 
MFA's Economic Affairs Director General Amorin 
--------------------------------------------- - 
¶3. (C) On June 14, WHA/BSC Director Doug Barnes and EconCouns 
met with the MFA's Director for Economic Affairs Carlos 
Amorin.  Amorin was open and forthcoming.  He confirmed that 
the Uruguayan Embassy in Washington and USTR were close to 
finalizing dates for a meeting in Washington during the last 
week of June.  He explained that the dates had gone back and 
forth because of the need for the Uruguayan negotiating team 
to attend WTO meetings in Geneva, where he was optimistic 
that progress was in the making. 
 
¶4. (C) Amorin said the purpose of the Washington meeting will 
be to focus on working groups and areas/chapters to be 
discussed.  While it may not be possible to define at this 
meeting whether the final agreement would be an FTA, he 
noted, such a decision would not take much longer.  He said 
other ways to address market access --i.e. through the WTO-- 
were much more complicated than an FTA, thus implying that 
the only way forward was an FTA.  Amorin then reviewed the 
chapters to be discussed.  He commented that the BIT had 
taken care of the investment chapter and that the GOU should 
have "no problem" with services and IPR.  He added that the 
GOU had forwarded WIPO internet treaties to Parliament for 
ratification.  Market access and governmental purchases would 
require more work, Amorin noted.  He did not expect 
resistance from local industries, but mentioned possible 
issues with small farmers, rice, pork and wool textiles.  On 
the positive side, he noted that computer and capital goods 
currently benefit from an exception to the Mercosur Common 
External Tariff (CET), with a tariff of only 2%, something 
that could easily be eliminated.  Turning to the 
Uruguay-Mexico FTA, Amorin said it was quite similar to a 
typical U.S. FTA, but mentioned that the mechanism used by 
Uruguay in this instance to comply with Mercosur rules was 
through an ALADI agreement. 
 
¶5. (C) Barnes then asked how the GOU intended to handle 
Mercosur --and in particular Brazil-- if it were to move 
forward on FTA talks with the U.S.  Amorin replied that the 
 
issue would be defined long before the Mercosur Summit in 
Argentina on July 20-21.  "We are preparing documents for our 
friends," he said, and noted that Brazilian ForMin Celso 
Amorin will visit Montevideo the week of June 19 (June 23, 
according to media reports) to meet with the five ministers 
involved in trade talks with the U.S. and with President 
Vazquez.  He was optimistic: "We have a case for an 
exception", adding that "what we have now in Mercosur is a 
customs union without the benefits."  In an obvious reference 
to the favorable conditions for accession being granted to 
Venezuela, Amorin said "if we are talking about flexibility 
on the part of our partners, then let's talk about 
Venezuela."  He noted "flexibility" within Mercosur, taking 
into account the "new reality of Mercosur", which he thought 
worked in Uruguay's favor.  In a related development, Carlos 
"Chacho" Alvarez, ex-Argentine Vice-President and current 
President of the Permanent Commission of Mercosur, declared 
in full-page interview published on June 16 by left-leaning 
Uruguayan daily La Republica that "I believe what President 
Vazquez and Uruguay are asking is just, in that Mercosur must 
be flexible to allow Uruguay to enter into commercial 
agreements with the United States, in the same way that 
Brazil, Argentina and Uruguay signed agreements with Mexico 
(...) I am convinced that Mercosur must be flexible and allow 
such agreements, so that countries can find better 
opportunities in the international markets." 
 
EconMin Trade Policy Director Sarachaga 
--------------------------------------- 
¶6. (C) Barnes and the Charge then met with Dario Sarachaga, 
Trade Policy Director at the Economy Ministry.  Sarachaga was 
very clear as to the purpose of the Washington meeting. 
"What we have to do," he said, "is define what we are 
negotiating, how often we will meet and what the time frame 
is."  He said the GOU team will propose negotiation of an 
"ATUM" ("Acuerdo tipo Uruguay-Mexico" or "Agreement of the 
Uruguay-Mexico type") as a starting basis.  He added that 
there is no mystery that what is being talked about is an 
FTA, but that he was using this name to take care of current 
"political sensibilities." 
 
¶7. (C) Sarachaga then outlined in detail the preparations of 
the GOU team, which appeared to be well underway.  He 
explained that five working groups had been formed: 1) goods 
(to deal with 18 groups of products, access issues, SPS, 
technical barriers), 2) services (e-commerce, monopolies; he 
noted that some work has already been done in services with 
the BIT), 3) IPR issues, 4) government purchases, and 5) 
institutional issues.  Sarachaga commented that the GOU has 
contracted outside expertise to prepare itself for 
negotiations.  The World Bank is currently providing an 
advanced trade statistics course, Chilean experts will be 
invited on July 11-12 to discuss IPR issues, and Costa Rican 
ex-Trade Minister Alberto Trejos has been invited for 
consultations. 
 
¶8. (C) Asked about Mercosur, Sarachaga confirmed the upcoming 
visit of Brazilian ForMin Amorim.  He said that the issue of 
an FTA with the U.S. had already been broached with the 
Brazilians a week ago and that GOU EconMin Astori would meet 
with Amorim.  As for private sector reaction to an FTA, 
Sarachaga pointed out that the EconMin and Industry Ministry 
were in consultations with the Chamber of Industry, to 
determine "offensive" and "defensive" areas.  (Note: The four 
major private sector chambers, including the Chamber of 
Industry, recently published an open letter supporting the 
negotiation of an FTA with the U.S. and calling on the GOU to 
approach its Mercosur partners in this regard.  End Note.) 
Sarachaga did not expect much friction with the issue of 
monopolies either, noting that in telecommunications, the 
entire cellular sector is free and only fixed-line telephony 
is a state monopoly.  As for governmental purchases, he 
commented that all FTAs reserve some space for national 
companies.  Sarachaga closed the meeting by pointing out that 
the average Uruguayan tariff on U.S. goods is 4 percent, 
while the average U.S. tariff on Uruguayan exports is 14 
percent.  That is why we are talking about an FTA, he said. 
 
What's in a Name? 
----------------- 
¶9. (C) Sarachaga's inclination to find an alternate name for 
an FTA was echoed at practically every other meeting with 
Uruguayan officials.  They suggested it would be useful to 
change the name from that of a Free Trade Agreement to 
something more politically palatable to the left-leaning, 
"anti-neoliberal" elements in Congress.  Especially egregious 
to the Left is the word "agreement", which has been 
translated into Spanish as "treaty", thus carrying heavy 
political overtones.  One interloctutor pointed out that 
Chavez's own alternative to FTAA (ALCA in Spanish) for 
Venezuela, Cuba and Bolivia is termed with the catchy acronym 
of "ALBA", meaning "Dawn." (ALBA stands for "Bolivarian 
Alternative to the Americas".)  Embassy recommends that USG 
interlocutors in Washington be sensitive to the issue and 
open-minded to alternative names for an agreement whose 
substance would essentially be an FTA.  We note, for example, 
that Peru's FTA with the U.S. is called a Trade Promotion 
Agreement (TPA). 
 
Presidential Chief of Staff Gonzalo Fernandez 
--------------------------------------------- 
¶10. (C) On June 14, the Charge met one-on-one with President 
Vazquez's Chief of Staff Gonzalo Fernandez. The Charge began 
by congratulating him on his appointment as the head of 
Uruguay's team for upcoming trade negotiations.  Fernandez 
said that President Vazquez is "completely committed" to 
deepening trade relations with the U.S.  He said that his 
appointment as lead negotiator was a sign that Vazquez wanted 
to "keep the reins in his own hands" in order to avoid 
bickering among ministers and to maintain political control. 
While Fernandez admitted that he was not an expert on trade 
negotiations, he said that Ambassador to the U.S. Carlos 
Gianelli, the MFA's Carlos Amorin and the Econ Ministry's 
Dario Sarachaga were well up to the task.  Fernandez said the 
GOU was still looking at three options: an FTA, an expanded 
Bilateral Investment Treaty (BIT) and possible "sectoral or 
unilateral agreements." (Note: Unlike the technical experts 
from the MFA and EconMin, Fernandez still seemed to believe 
that something other than an FTA was possible to achieve 
Uruguay's goals.  End Note.)  Fernandez confirmed that 
Uruguay wants to emulate Chile and said that at present 
Uruguay and Chile are the only "serious " countries in the 
region. 
 
MFA's Director General Jose Luis Cancela 
---------------------------------------- 
¶11. (C) In the late afternoon, WHA/BSC Director Barnes and 
the Charge met with Ambassador Cancela, the MFA's Secretary 
General.  Cancela began by reporting a favorable assessment 
of Uruguay's prospects at the International Court of Justice 
in The Hague regarding the paper mill dispute with Argentina. 
When the conversation turned to trade, Cancela said he 
understood that "important advances had been made" including 
that the GOU's negotiating team was in place and that the 
dates for the next meeting had been agreed upon. He said he 
expected that A/USTR's Everett Eisenstat would visit Uruguay 
before October of this year. The Charge responded that he 
could not confirm Eisenstat's travel but would inquire about 
it with USTR.  With respect to obtaining Mercosur's 
"permission" to allow Uruguay to engage in a trade deal with 
the U.S., Cancela thought that Brazil was apt to be 
"flexible", but observed that "it would not be unusual for a 
customs union to debate such an issue." 
 
Media Reactions 
--------------- 
¶12. (C) In response to a barrage of disinformation by 
opponents of a trade agreement with the U.S., spearheaded by 
ForMin Gargano, Post provided background information to 
journalists to help educate the public and dispel 
misconceptions.  Emboffs also met with senior GOU officials, 
representatives from all political parties and key business 
leaders.  A full-page interview with the Charge in the June 8 
issue of the respected business weekly "Busqueda" received 
excellent reviews, and we heard from many supporters that the 
USG's silence had been taken as ambivalence.  Then media 
picked up the Charge's talking points in pro-FTA editorials 
that followed the Busqueda interview.  Recent polling suggest 
increasing public support for an FTA, though there is still 
opposition within the Frente government, particularly from 
the Socialists and Communists.  The private sector came out 
recently with an open letter supporting an FTA with the U.S. 
and urging the GOU to discuss it with its Mercosur partners. 
Trade talks with the U.S. remain front-page news, and we get 
asked about them every day.  Post would welcome robust, 
usable talking points as we continue to fight Minister 
Gargano's disinformation campaign. 
 
Meeting with MFA Officials 
-------------------------- 
¶13. (C) At a dinner on June 14, WHA/BSC Barnes met with the 
Acting Director General for Political Affairs, Alvaro 
Gallardo, the Director for Multilateral Affairs Gustavo 
Alvarez and the Deputy Director for the Americas, Mario 
Liori.  Liori thought that Brazil was not likely to oppose 
Uruguay's bid for an FTA with the U.S.  His reasoning was 
that Brazil knew that sooner or later it also would enter 
into an FTA with the U.S., because both countries are natural 
partners facing the same competition from the Far East.  This 
meant, he said, that an Uruguayan FTA was no threat to Brazil 
or to Mercosur.  Liori also believed that Brazil's 
"cooperation" with Argentina within Mercosur was a "marriage 
of convenience" based largely on Brazil's need to garner 
support for its own bid for a permanent UNSC seat. 
 
Comment:  An Opportunity to Send a Clear Message 
--------------------------------------------- --- 
¶14. (C) WHA/BSC Barnes' visit to Uruguay confirmed the GOU's 
focus on concrete decisions and timetables for serious trade 
talks.  It appears that the GOU understands the challenges 
involved in negotiating an FTA with us and seems willing and 
prepared to undertake serious efforts towards this objective. 
 There is a palpable sense of urgency within the GOU and a 
realization that there will not be another opportunity for an 
FTA any time soon, with time running out on Trade Promotion 
Authority (TPA).  Our interlocutors kept repeating that the 
June meeting is crucial and cannot be delayed.  Constant 
encouragement and monitoring by the USG will still be 
required, however, both here and in Washington, to ensure a 
positive outcome. 
 
¶15. (C) The table is set for a renewed dynamic on free trade 
in the Southern Cone, in the wake of the deadlock with 
Mercosur at the Mar del Plata Summit.  As Mercosur prepares 
to welcome Venezuela at the July Summit, FTA talks with 
Uruguay could deliver a strong signal to Venezuela's Chavez 
that left-of-center "serious" countries do not buy into his 
grand scheme.  The formal approval of Uruguay's "FTA 
exception" to Mercosur rules could occur at the same July 
Mercosur Summit in Argentina when Venezuela's entry into the 
bloc as a non-voting member will be formalized.  The message 
could not be clearer.  WHA/BSC Director Barnes cleared on 
this cable before his departure.  End Comment. 
Nealon