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C O N F I D E N T I A L MONTEVIDEO 000811 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/BSC AND EB 
DEPT PASS USTR FOR EISSENSTAT AND CRONIN 
NSC FOR FISK AND CARDENAS 
TREASURY FOR OASIA FOR DOUGLASS 
USDOC FOR ITA/MAC/WBASTIAN 
SOUTHCOM FOR POLAD 
 
E.O. 12958:  DECL: 09/01/16 
TAGS: PREL ETRD ECON UY
SUBJECT: US-URUGUAY TRADE AGENDA: VAZQUEZ CONTINUES TO SHAPE THE 
DEBATE AND BUILD CONSENSUS 
 
REF:  A) MONTEVIDEO 774; B) MONTEVIDEO 746 
 
Classified By: Charge d'Affaires James D. Nealon for 
reasons 1.4 (b) and (d). 
 
¶1. (C) Summary:  President Vazquez has now expanded the debate 
beyond a trade agreement with the U.S. by seeking similar 
accords with India and China.  In a meeting with the Charge, 
Industry Minister Lepra confirmed that Vazquez is very much in 
charge and determined to succeed.  Lepra said he understood that 
the Peru TPA was likely to form the basis of an FTA with the 
U.S., but asked for some flexibility on the text, "as was done 
with the BIT", in order to provide Vazquez with political cover. 
 As for Mercosur's attitude regarding an FTA, Lepra said that 
Vazquez had talked with Lula, with whom he would meet later on 
this month.  Vazquez continues to shape the debate and build a 
broad national consensus for a trade policy focused on 
agreements with the world's major markets.  End Summary. 
 
¶2. (U) On August 28, Vazquez met with the Indian Ambassador to 
discuss the possibility of negotiating a trade agreement, and 
the next day met with the Chinese Ambassador for the same 
purpose.  Uruguay is committed to free trade, Vazquez said to 
the press, and India and China are, along with the United 
States, the major markets of interest outside of Mercosur.  "We 
are aiming at a trade policy based on two basic concepts: a 
focus on the region and the opening of new extra-regional 
markets," he noted.  On August 31, Vazquez met with the five 
ministers leading the technical groups on trade (Economy, 
Industry, Agriculture, Tourism and Foreign Affairs) to chart the 
way forward. 
 
¶3. (C) Industry Minister Jorge Lepra called the Charge for a 
meeting on September 1 to share what had happened in the 
ministerial meeting and to discuss the way forward.  President 
Vazquez uses Lepra as his de facto Foreign Minister in dealing 
with the U.S.  Lepra said Vazquez had reminded his ministers of 
his May 4 meeting with President Bush and had recalled the U.S. 
President's offer to discuss an FTA.  Lepra said Vazquez had 
appeared very much in charge and on track on the FTA issue. 
Asked about news from Uruguay's Mercosur partners, Lepra said 
that Vazquez had talked to Lula and would be meeting with him 
sometime in September in the south of Brazil.  "I don't know 
about Itamaraty," he said, "but Lula will support Vazquez." 
Lepra also believed that Vazquez had talked to Chavez, whom 
AgMin Mujica would soon visit in Caracas. 
 
¶4. (C) Lepra planned to travel to Washington, possibly on 
September 14-15, to prepare the October 2-3 JCTI in Montevideo. 
Lepra said he understood that the basic text of an agreement 
would most likely be the Peru FTA, and he implied that Vazquez 
was aware of that as well.  He asked several times for 
flexibility to alter minor elements of the text ("like we did 
with the BIT") so as to provide Vazquez with political cover 
(i.e. putting Uruguay's imprint on the text to counter the 
perception that the GOU is accepting a document without 
negotiation).  Charge replied that this was something Lepra 
should raise with USTR when in Washington. 
 
¶5. (U) A couple of days earlier, the new Brazilian Ambassador to 
Uruguay, Jose Felicio, was asked in a press interview about his 
country's position on an Uruguay-U.S. FTA.  Felicio was very 
cautious in his reply, as Brazilian ForMin Celso Amorin's 
shoe-pounding in June had been perceived here as a blatant 
interference in internal affairs.  "We prefer to maintain 
Resolution 32/00 (the resolution whereby Mercosur members agree 
to negotiate as a bloc) in terms of commercial negotiations", 
Felicio said, "but this does not impede countries from making 
requests in a sovereign manner and coming to Mercosur to discuss 
things."  While Felicio pointed out that Brazil's preference was 
to negotiate as a bloc, "if there are countries that want to do 
otherwise, we will study specific cases." 
 
¶6. (U) Referring to Amorin's statements here in June, Felicio 
cautioned that they "were based on the known formats for free 
trade.  But we don't know what is being negotiated (between 
Uruguay and the U.S.)."  Asked specifically if an FTA with the 
 
U.S. is compatible with Mercosur, he said, carefully, that "it's 
not compatible, but that's my opinion."  Felicio acknowledged 
that President Vazquez "will know how to preserve Mercosur" and 
"has the obligation to defend the interests of Uruguayans." 
 
¶7. (U) At a conference held in Montevideo this week, former 
Argentine Economy and Finance Minister Roberto Lavagna opined 
that it was important for Argentina and Brazil to make an effort 
to facilitate Uruguay's negotiation of an FTA with the U.S., if 
that is what Uruguay desired.  Legally, it can be done, Lavagna 
said, as the existing FTA between Uruguay and Mexico clearly 
shows.  He noted that what is needed now is political will from 
Argentina and Brazil. 
 
¶8. (C) On August 30, Charge met with former Economy Minister and 
influential Colorado Senator Isaac Alfie, who confirmed that the 
GOU could count on the three Colorado senators, should an FTA 
come up to a vote.  Looking at the Frente Amplio senators, Alfie 
saw only five votes against (one Communist, two Socialists and 
two MPP).  Assuming that the opposition Blancos vote in favor 
-and Blanco Leader Laranaga told USTR's Eissenstat that they 
favor a trade deal-, Alfie predicted support by 26 out of 31 
votes in the Senate. 
 
¶9. (U) The radical PIT-CNT labor union is gearing up to oppose a 
trade agreement with the U.S.  The PIT-CNT's President Juan 
Castillo said the union would foster discussion, promote debates 
and invite Mexican and Peruvian speakers to outline the negative 
effects that FTAs will have on the Uruguayan economy.  Castillo 
said that President Vazquez had written to the union to explain 
his decision to keep the major political parties informed of the 
government's progress, but to keep the PIT-CNT out of the loop. 
When there are concrete results and the JCTI reaches a 
conclusion on the path to follow, Vazquez is said to have 
written, "social actors" would be informed. 
 
¶10. (C) Comment:  Vazquez has firmly taken the reins of the 
trade agenda and appears determined to succeed.  He has now 
expanded the debate, until now limited to discussion of a trade 
agreement with the U.S., to include talks of agreements with 
India and China.  He has informed the major political parties 
(ref B) of his progress and ministerial technical groups have 
consulted with the business community.  Vazquez is shaping the 
debate and building consensus.  As this consensus evolves -and 
momentum appears to be mostly positive-, it may become 
increasingly difficult for the domestic opposition to an FTA, 
all of it within Vazquez's own Frente Amplio, to gain traction 
and for Uruguay's Mercosur partners to oppose what is starting 
to emerge as a consensus national trade policy of opening to 
world markets.  End Comment. 
 
NEALON