VZCZCXYZ0000
RR RUEHWEB

DE RUEHMN #0182/01 0921254
ZNR UUUUU ZZH
R 021254Z APR 09
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC 8918
INFO RUEAIIA/CIA WASHDC
RUCNMER/MERCOSUR COLLECTIVE
RUMIAAA/CDR USSOUTHCOM MIAMI FL

UNCLAS MONTEVIDEO 000182 
 
SIPDIS 
 
STATE FOR WHA/BSC MDASCHBACH 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON
SUBJECT:  URUGUAY:  NEW RULES FOR CAMPAIGN FINANCE 
 
¶1. SUMMARY.  On the 2nd March, Uruguay's Senate passed draft 
legislation detailing the rules for financing campaigns during 
Uruguay's 2009 election cycle.  Although, as in past years, the 
proposal only covers this year's election cycle, if made into law, 
it would mark the first time in Uruguay's history that donations 
would be capped and that transparency in fundraising would be 
mandatory.  Uruguay has traditionally maintained a laissez faire 
approach to campaign financing, but now, among other measures, the 
new law limits anonymous donations, caps private donations and fines 
any parties who fail to publically declare their funding sources. 
Additionally, and also for the first time, funds can be used for the 
parties' day-to-day operating costs.  Implementation of the proposed 
law may be problematic, however; officials in all parties have 
expressed concern that Uruguay's Electoral Court lacks the resources 
to enforce the legislation.  END SUMMARY. 
---------- 
 
Background 
---------- 
 
¶2. In Uruguay, state funding pays the majority of costs incurred by 
political parties and candidates during election campaigns.  Recent 
elections have seen the state pick up around 80% of the bill, with 
private sources providing the rest.  Uruguay was the first country 
in the world to introduce government funding for electoral 
campaigns, but Uruguay has no general legislation that regulates 
campaign financing for political parties.  Instead, since 1954, the 
Uruguayan parliament has voted on how to regulate costs on an 
election-by-election basis.  Until now, however, these regulations 
only concentrated on detailing the nature of the state's provision 
and made no mention of private funding. 
¶3. Although voting on state funding on an election-by-election 
system theoretically means that a well-financed party with a strong 
majority could deny approval for state funding and thereby 
strengthen its election chances, in practice no such attempts have 
been made. 
 
--------------------- 
State Funding in 2009 
--------------------- 
 
¶4. Election regulations always calculate the amount of money 
according to the votes that each party wins. The amount given is 
expressed in 'indexed units' (financial units indexed to move with 
inflation).  For 2009, the State will remunerate the political 
parties 87 indexed units (currently worth 166 pesos or USD 12.80) 
per presidential vote, 10 indexed units (19 pesos or USD 0.80) per 
runoff vote (if necessary), and 13 indexed units (24.8 pesos or USD 
1.00) per vote for internal (primary) and local elections.  This 
marks the first time financial provision has been made for runoff 
campaigns or primaries, two stages in the electoral cycle that have 
hitherto placed significant strain on party funds. 
 
¶5. In anticipation of this reimbursement, parties are able to secure 
an advance on their campaign spending from the state-run Bank of the 
Republic.  These advances are calculated based on the number of the 
votes won by the party during the previous election.  This year's 
legislation states that parties are required to present a summary of 
their electoral budget to the electoral court 30 days before the 
election.  This must include projected costs and a record of 
donations already received.  Within 90 days of the election, parties 
are obliged to submit details of how much money was actually spent 
and from where it was sourced.  Any parties who make it to the 
second round of the presidential elections (the run-off) must 
publish their campaign budget on their official party websites. 
 
------------------------------------------ 
Private Funding: The Situation Before 2009 
------------------------------------------ 
 
¶6. Before this year's draft legislation, Uruguay possessed no legal 
barrier to prevent political parties from accepting donations made 
by unions or other social organizations; government contractors; 
anonymous private donors; or even foreign governments and 
businesses.  Neither were there stipulations on the amount that 
could be received.  Regionally, only Paraguay and Guatemala shared 
such an open approach to funding.  Almost all other Latin American 
countries prohibit donations by foreign governments or businesses, 
while a large majority oppose donations from government contractors 
and anonymous sources. In the case of donations from unions or other 
social organizations however, only Argentina, Bolivia, Brazil and 
Paraguay have decreed them illegal. 
 
¶7. Since Uruguay's return to democracy in 1985, numerous proposals 
for permanent regulatory legislation have been floated, but none 
made it very far.  Although some commentators and politicians have 
long felt that Uruguay's electoral funding process requires firmer 
regulation and greater transparency, the issue is not particularly 
contentious and, as yet, has generated little public attention.  The 
ruling Frente Amplio (FA) party, which is responsible for producing 
 
this year's financing legislation, has been preparing the content of 
the draft law since September 2007. As it is the FA's first term in 
office, and with a majority in congress this is the first time they 
have had the opportunity to decide how campaign financing should be 
controlled. 
 
----------------------- 
Private Funding in 2009 
----------------------- 
 
¶8.  The draft law places private donations under greater scrutiny. 
An individual private donation may not exceed 300,000 indexed units 
(573,384 pesos, or USD 23,891).  If, however, the donation is made 
by a candidate towards his own campaign, then the cap is raised to 
three times that limit.  A donor's name and details must be a matter 
of public record.  Any business in possession of a public service 
concession is limited to a donation of 10,000 indexed units (19,104 
pesos, or USD 796).  Anonymous donations are limited to 4000 indexed 
units(7,632 pesos, or USD 318) and must not exceed 15 percent of the 
parties' declared income. 
 
¶9. The draft law states that each party must appoint a three-person 
committee in order to ensure that these regulations are followed. 
Any party that fails to publish its campaign accounts in time faces 
a daily fine of 5,000 indexed units (9,552 pesos, or USD 398).  If 
any funds are found to have been gained illicitly, the party must 
pay double the amount received as a fine.  Repeat offenders risk 
state funding being suspended for up to a year. 
 
¶10. Although full details of the draft law have not yet been 
published, no reference to foreign or union donations has so far 
been reported.  It should be noted, however, that Uruguay's 
political culture frowns on foreign donations, and that financial 
support from unions is traditionally low.  The umbrella union 
PIT/CNT has publically supported the FA, but whether that support 
has ever been translated into donations is not a matter of public 
record. 
 
--------------------- 
General Party Funding 
--------------------- 
 
¶11.  This year's proposed electoral law takes the unprecedented step 
of earmarking USD 600,000 towards the daily running of the parties. 
Until now the pre-election legislation has only allocated funds 
specifically for campaign costs.  No public financing has been 
available for the day-to-day, non-electoral activities of the 
parties.  Campaigns place a large burden on party funds that are 
frequently already over-stretched.  That has led to unusual 
arrangements, such as within the ruling FA coalition, where senators 
and deputies pay a significant percentage of their salaries (ranging 
from 5-50 percent, depending on their particular faction) to the 
party.  In some cases, individuals running for office have mortgaged 
their homes to finance their campaign.  Political parties are, 
however, exempt from Uruguay's goods tax; car tax; property tax; 
land tax; and from paying a share of social security for employees. 
 
 
-------------------------------- 
Pressures on the Electoral Court 
-------------------------------- 
 
¶11. Whether these measures will survive beyond this year's electoral 
cycle to become general electoral law is presently unclear.  Many 
ministers from across the political spectrum, as well as officials 
from the electoral court itself, have stated that the court lacks 
the resources to be able to investigate party finances with the 
requisite amount of vigor. 
 
¶12. Additional pressure has been created through the Senate's 
decision to make the electoral court responsible for placing the 
electoral lists in the voting booths.  Previously, this was the 
responsibility of the parties themselves, although voters reported 
cases in which they had entered voting booths only to find that 
particular lists were missing.  The difficulties that the court may 
face in fulfilling its new obligations are compounded by recent 
budget cuts. 
 
------- 
Comment 
------- 
 
¶13.  This year's draft legislation marks a significant improvement 
in the transparency of Uruguay's election financing.  No one, apart 
from those keeping the books of Uruguay's political parties, can be 
sure of the extent of foreign or private donor financing in prior 
campaigns.  Although campaigns here have traditionally been 
relatively low-budget affairs, perceived as generally free from the 
undue influence often attendant with large contributions, this 
 
year's campaign looks to be particularly hard-fought and the new 
legislation promises some interesting revelations about who is 
supporting whom.  End comment. 
 
MATTHEWMAN