VZCZCXYZ0000
OO RUEHWEB

DE RUEHMN #0312/01 1561926
ZNR UUUUU ZZH
O 051926Z JUN 09
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9059
INFO RUCNMER/MESUR COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/USDA WASHDC
RHEHNSC/NSC WASHDC

UNCLAS MONTEVIDEO 000312 
 
SIPDIS 
SENSITIVE 
 
 
E.O. 12958: N/A 
TAGS: PREL ETRD UY
 
SUBJECT: Staffdel Meacham visit to Uruguay 
 
------- 
SUMMARY 
------- 
 
¶1.  (SBU) SUMMARY:  Staffdel Meacham visited Uruguay May 
26-28 to explore ways to expand trade and political ties 
with Uruguay.  GOU officials expressed their interested 
in continuing and strengthening ongoing Trade and 
Investment Framework Agreement (TIFA) discussions.  GOU 
officials emphasized their hope that the U.S. will clear 
away sanitary-phytosanitary barriers for Uruguay lamb and 
citrus in the U.S. market. If the U.S. Congress looks 
into inclusion of Uruguay in a trade preference program 
in the medium term, the GOU believes this would help 
Uruguayan exporters of wool textiles and wool apparel, 
sectors that have been hit severely by the worldwide 
economic slowdown. 
END SUMMARY. 
 
¶2.  (SBU) Carl Meacham, Senior Advisor for Senator 
Richard Lugar,  and WHA/BSC Deputy Director Bruce 
Friedman met with the Ministries of Foreign Affairs; 
Economy and Finance; and Industry as well as trade 
officials, legislators, and representatives from the 
private sector during their three-day stay in Montevideo. 
 
---------------------------------- 
Foreign Minister Gonzalo Fernandez 
---------------------------------- 
 
¶3.  (SBU) Foreign Minister Gonzalo Fernandez emphasized 
that during his participation in the June 4-5 Trade and 
Investment Committee meeting in Washington, he wanted to 
make as much progress under the Trade and Investment 
Framework Agreement as possible,  as his time in office 
was drawing to a close.  That meeting will include 
discussion of sanitary-phytosanitary issues (Uruguayan 
boneless lamb and citrus, and U.S. beef and poultry). 
On possible future inclusion in a U.S. trade preference 
program, Minister Fernandez explained that U.S. trade 
preferences for textiles and apparel would have a 
dramatic positive economic impact on Uruguay but very 
small effect on U.S. producers. 
 
¶4.  (SBU) Uruguay needs to diversify its markets and 
commercial ties, the Foreign Minister noted that the 
benefits Uruguay gained as a member of Mercosur were 
consolidated 8-10 years ago.  Today Mercosur is not 
progressing, but regressing.    He cited ArgentinaQs 
refusal to approve the use of three years of FOSEM funds 
(Structural Convergence Funds from Mercosur) to finance 
the electrical grid interconnection project between 
Brazil and Uruguay.  Fernandez pointed out that this was 
the first time FOSEM funds were blocked by a Mercosur 
member for political motives (ArgentinaQs dispute with 
Uruguay over the Botnia pulp mill). 
 
----------------------------- 
Ministers Garcia and Martinez 
----------------------------- 
 
¶5.  (SBU) Minister of Economy Alvaro Garcia and Minister 
of Industry Daniel Martinez each underscored the 
importance to Uruguay of helping the textile and apparel 
sectors.  Garcia described these sectors in Uruguay as 
traditional, focused on a high quality product with China 
competing from below and Italy firmly installed at the 
top of the market.  Garcia stressed that the GOU sought 
to maintain the greatest amount of space possible for the 
textile and apparel industries, which provided much 
needed employment.  Garcia said Mercosur is troubled. It 
would not be an impediment to future trade agreements or 
U.S trade preferences. 
 
--------------------------------------------- --------- 
GOU OFFICIALS LAMBAST MERCOSUR AND SAY FTA IS POSSIBLE 
--------------------------------------------- --------- 
 
¶6.  (SBU) Other senior officials (past and present) were 
also critical of Mercosur and the limitations it imposes 
on Uruguay.  UruguayQs Senior Trade Negotiator Alvaro Ons 
described Uruguay as the only disciplined member of 
Mercosur, and that ArgentinaQs economic policy posed real 
challenges.  He stated that the textile and apparel 
sectors represented the greatest potential for immediate 
economic impact. 
¶7.  (SBU) Former head of Macroeconomic Planning Division 
at the Ministry of Finance (and currently campaign 
Manager for Danilo AstoriQs campaign to be the Frente 
Amplio partyQs  candidate for President) Fernando Lorenzo 
said Uruguay was at the most frustrating point in what 
has been a frustrating period with Mercosur.  He said 
U.S. market access for the textile and apparel sectors 
would be an important signal to Uruguayans that there are 
opportunities outside of Mercosur.   UruguayQs ongoing 
disputes with Argentina were affecting bilateral 
relations in other areas as well, he said. 
 
¶8.  (SBU) Lorenzo said that Uruguay must conserve trade 
preferences it receives through Mercosur  that represent 
25% of exports, while opening markets abroad.  He 
advocates that Uruguay work during its turn as Mercosur 
President for an agreement for members work on key issues 
at variable speeds.  A first step would be to reduce 
common external tariffs, to give Paraguay some fiscal 
breathing room. 
 
--------------------- 
A VOICE OF OPPOSITION 
--------------------- 
 
¶9.  (SBU) Frente Amplio Senator Alberto Couriel, a member 
of Presidential hopeful Jose MujicaQs MPP bloc, was more 
skeptical of the possibility of strengthening commercial 
ties with the U.S., noting that negotiations could harm 
relations with Brazil and Argentina, UruguayQs two main 
trading partners and a key source of tourism revenues. 
He cautioned though, that despite a general global 
economic opening in the 1990Qs, the U.S., Europe and 
Japan continued to employ tariffs and quotas, especially 
on agricultural goods UruguayQs major export products. 
 
--------------------------------- 
FORMER TRADE NEGOTIATOR WEIGHS IN 
--------------------------------- 
 
¶10.  (SBU) Isidoro Hodara was skeptical about the TIFA 
and viewed it as an Qside showQ.  He was also skeptical 
about the USQs chances to grant a special treatment to 
UruguayQs producers of textiles and apparel. An adamant 
advocate of an FTA between Uruguay and the United States, 
Isidoro Hodara highlighted the need to Qkeep the sacred 
fireQ of a bilateral FTA QaliveQ and be ready for any 
window of opportunity that may arise.  Hodara --who is 
the Vice President of UruguayQs leading business park -- 
was the coordinator of the US-Uruguay Joint Commission on 
Trade and Investment (JCTI) during the Jorge Battle 
administration (2000-2005).  11.  (SBU) Hodara was 
particularly grateful to Senator Lugar, who in 2002 
sponsored a bill (supported by nine other senators) to 
start the negotiation of a free trade agreement with 
Uruguay. 
 
------------------------- 
TEXTILE INDUSTRY MEETINGS 
------------------------- 
 
¶11.  (SBU) In a meeting with the Apparel Chamber and the 
Uruguayan Textile Association, textile industry 
representatives emphasized that although their products 
do not compete with U.S. products, Uruguay cannot enter 
the U.S. market because it cannot compete with countries 
who have trade preferences with the U.S.  Visits to 
apparel manufacturer, Welcolan S.A., and textile factory, 
Hisud S.A., produced similar stories of a declining 
industry primarily based on inability to compete with 
countries that have U.S. trade preferences and lower 
labor costs.  Neighboring ArgentinaQs recent moves to 
close off its economy, MercosurQs inaction on lowering 
tariffs, and the global economic crisis has also 
negatively impacted the industry.  The Uruguayan textiles 
sector currently employs 5,000 workers and it is based on 
the production of wool-based fabrics. 
 
 
-------------------------------- 
MEACHAM VISITS BINATIONAL CENTER 
-------------------------------- 
 
¶11.  (SBU) Maria Blanco Pate, the Director of 
MontevideoQs Binational Center (known locally as the 
Alianza), gave Meacham a half-hour tour of her 
classrooms, offices, and library, and hosted a luncheon 
in his honor.  Guests included members of the AlianzaQs 
staff and board of directors, whose ranks include local 
businessmen, educators, and cultural figures.  Blanco was 
eager to build on the good will and dialogue she began in 
early May, when she traveled to Washington and met Senate 
Foreign Relations staffer Paul Foldi.  At the time, Foldi 
and Blanco discussed an article Senator Lugar wrote about 
American binational centers and she was eager to 
reciprocate his hospitality and interest with a luncheon 
and tour for Meacham.  She liked the STAFFDELQs ideas for 
expanding AlianzaQs attractiveness to non-traditional 
audiences by popularizing American sports events, like 
the Superbowl, and is looking into ways of making them 
happen (by purchasing a cable television subscription, 
for example).  Blanco also told Meacham about the 
collaboration she receives from the U.S. Embassy, such as 
funding for English language microscholarships directed 
towards poor Uruguayan students, and discussed how an 
infusion of resources would allow her to expand language 
instruction throughout Uruguay. 
 
 
MATTHEWMAN