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C O N F I D E N T I A L MONTEVIDEO 000746 
 
SIPDIS 
 
SIPDIS 
 
DEPT ALSO FOR A/S SHANNON, WHA/BSC AND EB 
DEPT PASS USTR FOR EEISSENSTAT AND SCRONIN 
TREASURY FOR OASIA FOR DDOUGLAS 
COMMERCE FOR ITAITA/MAC/WBASTIAN 
NSC FOR DFISK AND DTOMLINSON 
SOUTHCOM FOR POLAD 
 
E.O. 12958: DECL: 08/14/2016 
TAGS: ETRD PREL ECON PGOV AORC UY
SUBJECT: USTR VISIT PROMPTS PRESIDENT VAZQUEZ TO OPENLY 
ENDORSE FREE TRADE 
 
REF: A. MONTEVIDEO 00707 
 
     ¶B. MONTEVIDEO 00616 
     ¶C. MONTEVIDEO 00616 AND PREVIOUS 
 
Classified By: Charge D'Affaires James D. Nealon 
for reasons 1.4 (B) and (D) 
 
¶1. (C) Summary:  The recent visit by Assistant United States 
Trade Representative for the Americas Everett Eissenstat and 
USTR's Senior Director for Brazil and the Southern Cone, Sue 
Cronin, sparked an intense internal debate over the future 
direction of Uruguay's trade relationships and pitted 
outward-looking free trade advocates against the old-time 
statists wedded to the Mercosur trading bloc. President 
Tabare Vazquez came out squarely in favor of more trade with 
the outside world and for deeper ties with the US, 
persuasively arguing that such moves might result in a 
"bigger and better" Mercosur, although he could not say how 
an FTA with Uruguay would be reconciled with Mercosur.  The 
stubbornly ideological Foreign Minister Reinaldo Gargano 
publicly defied the President's message, but said he would 
not resign.  The USTR officials were invited here to 
participate in a Council of the Americas event, but their 
presence precipitated an informal referendum on a Free Trade 
Agreement (FTA) with the United States.  During their broad 
public and private discussions, USTR officials made it 
abundantly clear that the US was not negotiating or 
pressuring the GOU on an FTA.  However, they identified the 
difficult commitments, constraints and concessions necessary 
should a trade agreement be formally pursued.  The week was 
particularly significant in terms of the Frente Government's 
search for a balance between pragmatic needs and its 
increasingly awkward socialist rhetoric.  There seemed to be 
a palpable sensation that the country was at some kind of 
tipping point.  The national debate on Uruguay's place in the 
world, and its place in Mercosur was significant and will be 
closely monitored going forward.  Below are some highlights 
and selected excerpts from the USTR officials' 
visit.  End Summary. 
 
¶2. (U) A/USTR Everett Eissenstat and USTR Director for Brazil 
and the Southern Cone Sue Cronin arrived in 
Montevideo on August 7 to attend a Council of the Americas 
event entitled "Uruguay in the Global Economy." This was a 
significant event here that received widespread media 
attention. The USTR officials also had ample opportunity to 
consult with a wide variety of key decision makers during 
their 3-4 days of meetings, including with President Vazquez. 
 
August 8 Meeting With President Vazquez 
--------------------------------------- 
 
¶3. (C) USTR officials and the Charge met with President 
Vazquez at their request on August 8 at the Suarez Residence. 
The President insisted that the meeting be kept from the 
public. Initially Vazquez appeared nervous, perhaps 
anticipating that A/USTR Eissenstat was going to press him to 
define his thoughts on an FTA.  Vazquez soon relaxed after 
realizing that the A/USTR was not there to apply any 
pressure. Eissenstat began by conveying greetings from 
President Bush, to which Vazquez inquired if he was well. 
Eissenstat said that he was, and that POTUS appreciated his 
support for a shared vision of spreading democracy, opening 
markets, and enhancing the rule of law.  Vazquez responded 
(paraphrased). "Please send my regards to President Bush.  We 
had an excellent meeting in Washington.  Tell him I haven't 
yet had a chance to use the fishing rod.  I feel good about 
tomorrow's (Council of the Americas) conference, as it's 
important for the country.  Let's cooperate so that it is a 
success.  We're going to have a deep discussion about the 
right path to deepen our trade relationship. It's a turning 
point.  We have had good relations historically - artistic, 
cultural, in the defense of liberty, peace, fighting for 
social justice, defense of liberty.  Now perhaps we can 
enhance our relationship in the trade field.  Our technical 
 
people are exploring which road would be the best to achieve 
that.  I wouldn't be honest if I didn't say that there are 
distinct different voices within my government.  But I am 
optimistic that we can advance.  All in my government share 
the basic goal of enhancing the trade relationship.  If there 
is political will, we can do it.  You have lots of experience 
in this arena, but we have very limited experience outside of 
Mercosur.  We only have a free trade deal Mexico, signed two 
years ago.  We don't want to damage Mercosur.  We want to 
protect our investment in regional integration.  We don't 
want any new agreement to harm Mercosur.  That is our 
challenge now that you are here." 
 
¶4. (C) A/USTR Eissenstat responded that the US is committed 
to the multilateral trade system and was disappointed at the 
suspension of the latest Doha WTO talks.  He thanked Uruguay 
for its constructive help in Geneva and for playing a 
positive role. Eissenstat remarked that market access is the 
key that can help a small country like Uruguay. Vazquez 
responded (paraphrased) "Yes, in my speech I'll say we can't 
just discuss possible bilateral agreements, we need a broader 
context.  I think we can begin a new relationship between the 
United States and Latin America.  This may seem like a 
paradox now that there are so many "progressive" governments 
in Latin America, but it isn't.  This political ferment 
creates the conditions in which a new relationship could 
thrive.  It's in this context that we need to think about a 
possible trade agreement.  Let's find a point where our 
interests meet.  According to the report I've received from 
my (trade) team, a lot of technical progress has been made. 
Now the work ahead, for us, is mostly political.  I believe 
your President will see things the same way.  Let's take 
advantage of the political momentum that we currently enjoy. 
I don't believe in populism.  I believe in delivering better 
living standards for our people by creating jobs.  I will be 
flexible.  If we have the political will we can move ahead. 
You know, this is what your President told me." 
 
¶5. (C) Eissenstat indicated that USTR has been very pleased 
with the progress made under JCTI auspices.  He noted that 
President Bush stated that he wanted to deepen our trade 
relationship -- and as a result USTR is talking to Vazquez, 
team to find the most appropriate way to do just that.  He 
said that our measured approach is the correct approach 
because, "We want to continue to be successful and we want 
you to understand that we don't want to undermine Mercosur 
either.  We leave it to you to work out your path with 
Mercosur as we move forward.  For us, the goal is to enhance 
the trade relationship.  We want to choose the best path to 
do that, a path that works for both of us." Vazquez responded 
that Uruguay wanted to continue the dialogue and to enhance 
the trade relationship.  He assured the A/USTR that Uruguay 
has 
consensus on that commitment and that he could rest assured 
that the GOU will move ahead in a serious manner. 
 
¶6. (C) Eissenstat commented that "It sounds like we have a 
shared vision," and asked Vazquez to give his opinion on 
Mercosur.  Vazquez laughed and said, "It's not easy. I'll 
base my answer on statements made by Lula and Kirchner back 
in May, in Brazil.  When I made my statements then that 
Mercosur isn't currently serving the interests of the smaller 
members and that bold words and good intentions need to be 
put into practice, both Lula and Kirchner said to me that 
they would not stand in the way of trade negotiations with 
third countries outside of Mercosur.  I have those statements 
in my files.  Later, Celso Amorim came here and delivered a 
very different message, but I choose to remember what Lula 
had said instead.  In Cordoba, Minister Astori made a 
proposal to allow the smaller countries to negotiate outside 
the Mercosur bloc.  There was no resolution, but Astori said 
the atmosphere was positive.  But look, if we signed an FTA 
with Mexico two years ago and they didn't kick us out then, 
why would they kick us out now?  We're working on all this 
through Mercosur channels.  I believe that maybe our improved 
 
trade relations with you can also help improve our regional 
relations.  We need to start somewhere, and this is a good 
place to begin." 
 
¶7. (SBU) Highlights of 8/9 Council of the Americas Event 
--------------------------------------------- ----------- 
 
-- President Vazquez observed that individuals respond to the 
global economy by either trying to avoid it or by "planting 
their feet squarely in reality" and participating in it. He 
opined that his Governments "principles and pragmatism were 
not incompatible" and strongly urged the latter approach. In 
reference to a Uruguay/U.S. trade deal, he said, "History 
doesn't rewind, it doesn't stop, it doesn't repeat.  The 
train, sometimes, comes only once," and concluded that 
Uruguay should actively pursue deepened trade relations with 
the United States. 
 
-- Foreign Minister Gargano followed Vazquez in a somewhat 
incoherent speech that lambasted agricultural subsidies and 
complained that Bilateral Investment Treaties gave too many 
advantages to foreign investors. Outside the conference room 
he later openly contradicted the President when he told the 
press that he was opposed to an FTA because he had to "remain 
faithful to the voters who had elected the Frente 
Government." 
 
-- Former Chilean Ambassador to the U.S. Andres Bianchi 
proved to be one of the most useful interlocutors on 
discussing a Free Trade Agreement since he had been closely 
involved in Chile's FTA negotiations with the US. He outlined 
the difficult steps that were needed and surprised his 
audience when he told them that Chile had unilaterally 
lowered its trade tariffs as part of its poverty alleviation 
program, with a positive benefit to government coffers. 
 
-- AUSTR Eissenstat's remarks revolved around three themes, 
1) Uruguay's success in following good policy, both 
politically and economically, in particular its adherence to 
the rule of law and democratic institutions, 2) the 
importance of re-engaging to bring the Doha Development 
Agenda to a successful conclusion and 3) our joint commitment 
to deepening the trade relationship.  Eissenstat left the 
means of achieving that goal open, saying that he would 
return in October for a meeting of the Joint Committee on 
Trade and Investment to discuss the best means of moving 
forward. 
 
-- Economy Minister Danilo Astori stated that Uruguay should 
look beyond the borders of Mercosur to expand its trade and 
thereby develop its economy.  He also argued that while the 
larger countries benefit from the protection of a closed 
Mercosur system, the smaller countries, such as Uruguay, are 
hurt by restrictions against trade outside the bloc. Astori 
highlighted accomplishments in the US/Uruguayan trade 
relationship thus far including JCTI, the BIT, Uruguay's 
removal from the 301 list and the meeting with POTUS last 
May. He opined that market access to the world's biggest 
economy was essential for Uruguay and said that Uruguay's 
commitment to the rule of law and its fight on poverty would 
pay off in terms of foreign investment. 
 
-- A peaceful protest mainly by Communists, radicals and 
trade unionists against an FTA took place in downtown 
Montevideo without incident in the early evening.  Estimates 
of the size of the crowd varied from 400 to 1,000. 
 
¶8. (C) Other Key Contacts 
-------------------------- 
 
-- On August 7 Eissenstat, Cronin and the Charge met with the 
GOU members of the Joint Commission on Trade and Investment 
(JCTI), including Ambassador to the U.S. Carlos Gianelli, the 
MFA's Carlos Amorin and the Economic Ministry's Dario 
Sarachaga. Most important issues covered: If an FTA was to be 
 
pursued what are the potential obstacles. Among them: Antel, 
ANCAP, Beef BSC, Pharmaceuticals, and Intellectual Property 
Rights. That evening, at dinner at the Charge's Residence 
Eissenstat and Cronin met with Minister of Economy Danilo 
Astori, Minister of Industry Jorge Lepra and Ambassador to 
the US Carlos Gianelli. 
 
-- On August 8 the USTR officials met separately with 
opposition National Party Leader Jorge Larranaga and former 
Colorado President Jorge Batlle. Batlle shared President 
Vazquez' vision on building a new relationship between the US 
and Latin America. He said that. "If Uruguay signs an FTA 
with the US it will be like dominoes in the region. Paraguay 
and yes, Argentina will follow." The USTR officials also held 
an off-the-record meeting with the American Chamber of 
Commerce where one businessman remarked "if you want an FTA 
with us all you have to do is change the name and yield in 
one discussion. That will do the trick." 
 
USTR Senior Southern Cone Director's Meetings with Key Sectors 
--------------------------------------------- ----------------- 
 
¶9. (SBU) Sue Cronin separately met August 9-10 with 
representatives in key sectors of the economy to discuss 
potential problem areas and to exchange views. These 
included: Daniel Belerati (Executive Director of the Chamber 
of Beef Exporters), Gustavo Zerbino (President of the Chamber 
of Foreign Pharmaceuticals), Pedro Otegui (China Camber of 
Commerce),  Dr. Luis Fratti and Dr. Fernando Perez Abella 
(President and vice-president of INAC Organic Beef 
Association) and members of the Uruguayan Information 
Technology (IT) Chamber. Among general themes, Cronin 
explained that the US was a common law country and was bound 
to propose the same texts on regulations to all countries 
concerned with little room for maneuver, making it virtually 
impossible to accommodate sensitivities that may be unique to 
Uruguay. To this end, she encouraged her interlocutors to 
review the openly-available relevant texts of the Peru TPA as 
well as the FTA texts for Colombia and Costa Rica in order to 
understand US requirements on touchy issues such as 
Government Procurement, Intellectual Property rights, US beef 
exports, Pharmaceuticals etc. she also encouraged her 
interlocutors to study niche markets and the benefits 
intra-hemispheric trade apart from the US. It is worth noting 
that during Cronin's discussions private sector players 
generally did not see Mercosur as a key to economic growth or 
a benefit to their own enterprises.  They were concerned 
about Venezuela's entry into the bloc, and noted that it 
could change the nature of Mercosur, making it less a trade 
agreement, and far more political. 
 
COMMENT 
------- 
¶10. (C) The USTR senior officials' visit was exceptionally 
useful in promoting the deepening of the Uruguay-US trade 
relationship while providing a dose of reality about the 
challenges entailed in launching an FTA. It also had the 
unintended effect of sparking an internal debate on where 
Uruguay should be headed in the increasingly globalized world 
economy.  Both in private and in public President Vazquez 
demonstrated his unwavering commitment to constructive 
engagement and a deepened trade relationship with the US and 
confidence in his ability to counter domestic and regional 
opposition to this vision.  This is not the first time that 
he has told us that he wants to be part of a new relationship 
between the U.S. and the region.  It was a bold political 
move that Vazquez, in front of his Vice President, his 
obstreperous Foreign Minister, and all but two members of the 
Cabinet, told Uruguayans that he would continue to pursue 
regional integration that serves Uruguay's interests, but 
that he would also pursue deeper ties with the United States. 
 Concern regarding Venezuela's entry into Mercosur was a 
recurrent theme in meetings with government officials and 
opposition representatives. Like the private sector, 
government/opposition leaders thought Chavez would make 
 
Mercosur far more political.  They also noted that 
Venezuela's ascendance posed a threat to Brazil's leadership 
in the region.  When the time comes, they thought this 
concern might be manifested through an active debate in 
Uruguay and Brazil over legislative approval of Venezuela's 
Mercosur membership, though approval of Venezuela's 
membership is a foregone conclusion.  This telegram was 
cleared by USTR.  End Comment. 
Nealon