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DE RUEHMN #1012/01 2981847
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E.O. 12958: DECL: 10/24/2016 
TAGS: PGOV PREL ECON SOCI ELAB MARR UY
SUBJECT: VAZQUEZ' HONEYMOON IS OVER 
 
REF: MONTEVIDEO 0943 
 
Classified By: Charge D'Affaires James D. Nealon 
for reasons 1.4 (b) and (d) 
 
¶1. (C) Summary: President Vazquez' approval rating dipped 
below fifty percent for the first time according to an 
October poll. When he was sworn in eighteen months ago, his 
approval rating stood at sixty-nine percent.  The anti-climax 
surrounding a possible Free Trade Agreement (reftel), a 
worsening crime situation and the bungling of the pulp mill 
dispute contributed much to his twenty point drop.  But 
something more seems to be irritating the middle class and 
stirring the moribund opposition into rhetoric and action. 
The recent lock out strike by commercial vehicle owners and a 
counter-strike by Communist-led trade unionists has strong 
class struggle"" tinges to it. The abrupt firing of the Army 
Commander and the replacing of him with a far more junior 
officer smacks of long-harbored revenge by the left against 
the military.  This could be a defining period for Vazquez 
and Uruguay because the society clearly seems more polarized 
and angry than it was a year and half ago.  The ruling Frente 
Amplio (FA) coalition will conduct its internal party 
elections on November 12.  Already some observers believe 
that the moderate pragmatists have lost significant ground to 
the old-line radicals, in part because the radicals tend to 
be better organized.  We will have to wait until after the 
internal elections to see if Vazquez continues along his 
pragmatic path or if he feels obliged to tack to the left. 
End Summary. 
 
Dashed Expectations 
------------------- 
¶2. (U) It is too early to tell if the ""failed"" FTA talks at 
the October JCTI represented a high point in Vazquez' attempt 
to chart a moderate pro-U.S. path based on the ""Chilean 
model.""  Certainly the disappointment of a TIFA instead of an 
FTA and the decision to deepen trade relations on the slow 
track (""a la Uruguaya"") was a tremendous letdown for those 
who saw an FTA as a golden opportunity to revitalize the 
economy and stem the hemorrhaging brain drain that has sent 
14 percent of (mostly young) Uruguayans abroad in search of 
jobs.  Two months ago the polling firm ""Interconsult"" 
indicated that 56 percent of the Uruguayans surveyed were in 
favor of an FTA.  Among Frente Amplio respondents the number 
was 47 percent while Colorado and Blanco Party members 
surveyed were 77 percent in favor.  Many of the signals sent 
by Vazquez this year, including his petitions to Mercosur, 
led the Urugayans to believe that an FTA with the U.S. was on 
the way. 
 
¶3. (SBU) Now that that the prospect of an FTA seems to have 
vanished, other issues have opened the GOU to the criticism 
that it has not accomplished much during the last eighteen 
months except to strengthen a radical left that truly intends 
on implementing a radical brand of Socialism.  Among the 
charges: that the GOU is soft on crime, that it has 
strengthened the Communist-dominated labor unions, that it 
was motivated by revenge in its campaign to re-examine the 
human rights abuses of the dictatorship period, that it is 
violating the Constitution, that it tries to muzzle the press 
and that it has bungled the dispute with Argentina over the 
construction of giant pulp mills on a shared river.  (Note: 
The GOU's detractors assert that Vazquez is beholden to 
Nestor Kirchner for declaring a holiday in 2004 in Argentina 
so that Uruguayan voters could cross the river and vote for 
the Frente Amplio. End Note.) 
 
Signs of Discontent 
------------------- 
¶4. (SBU) The building discontent by the middle class, 
businessmen and opposition parties has come to something of a 
head recently. A proposed tax reform is the likely lightning 
rod. The lock out strike by commercial vehicle owners that 
began October 23 and a counter-strike by Communist-led trade 
unionists (PIT-CNT) is an unprecedented power struggle and 
dilemma for the Vazquez administration.  Fuel, food and 
commodities are being threatened on the eve of the important 
November 2-5 Ibero-American Summit, which must be 
disconcerting at the least. The Government has already 
delared some services essential and indicates that it might 
use the Army to move supplies. The GOU solved the initial 
obstacle of forcing a hike in the price of diesel fuel, but 
truckers stubbornly resist a portion of the tax reform 
proposal that would force them to make a 7.8 percent 
contribution to Social Security. Meanwhile, the GOU wants to 
ram the tax reform package through Congress by the end of the 
month without any real debate or changes.  Predictably the 
radical unions have struck on their own in ""defense of 
democracy"" and compare the current situation to ""bourgeois 
counter-revolutionary acts"" in Chile in 1973 against Allende. 
(Note: Curiously, the PIT-CNT's call for a counter-strike 
appears on the Presidential website. End note.)  In any event 
the rhetoric is at a high pitch on both sides, though no 
violence has been reported. 
 
¶5. (SBU) The other fairly momentous event was the abrupt 
sacking of Army Commander Carlos Diaz on October 19 for 
privately meeting with Colorado ex-President Maria Julio 
Sanguinetti and his then-Defense Minister Yamandu Fau. While 
we've heard different versions including ""a set-up"" and ""that 
Diaz lost his temper,"" the reason makes no difference in the 
end.  Diaz has been replaced by a far more junior officer 
(General Jorge Rosales was a Colonel only eight months ago) 
and a dozen more senior officers who served during the 
dictatorship have been bypassed, neutralized and effectively 
eliminated. The consequences of this ""decapitation"" have yet 	
to be determined. 	
 	
¶6. (C) Personifying the possible policy shift, the 	
anti-American Foreign Minister Reinaldo Gargano seems to be 	
riding high these days. Smug that he had predicted the demise 	
of an FTA, Gargano recently waxed eloquent in the media about 	
Mercosur's future benefits to Uruguay. By contrast, Econ 	
Minister Astori seems largely absent in the press except for 	
his role on unpleasant subjects such as collecting taxes and 	
pushing the controversial tax reform package. (Note:  In a 	
recent conversation with Emboff, Astori expressed some hope 	
that FTA interest could be revived, regardless of the 	
expiration of Trade Promotion Authority (TPA) in 2007. Also, 	
Astori recently lost one of his key advisors on trade 	
matters	 Dario Sarachaga quit last week reportedly in disgust 
as his year of intense work on an FTA had gone to waste. End 
Note.) 
 
¶7. (C) Comment: While Vazquez has faced crises before -- for 
example when key Ministers Danilo Astori and Jose ""Pepe"" 
Mujica threatened to resign or when the Bandes bank was on 
the verge of collapse -- none seem as defining as the current 
situation.  The ongoing lockout strike by commercial vehicle 
owners on the eve of the Ibero-American Summit and the 
virtual elimination of the Army's senior officer corps are 
fairly tectonic events in this setting.  However, it is too 
early to tell if the non-signing of an FTA at the JCTI 
earlier this month was the high point in Vazquez attempt to 
chart a moderate pro-U.S. path for Uruguay.  We will have to 
wait until after the November 12 internal elections to see if 
he resumes his pragmatic path, or if he calculates that he 
has no option other than to hitch his fortunes to a more 
radical and emboldened left. End Comment. 
Nealon