VZCZCXYZ0000
RR RUEHWEB

DE RUEHMN #0455/01 2191516
ZNR UUUUU ZZH
R 071516Z AUG 09
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC 9267
INFO RUCNMER/MERCOSUR COLLECTIVE

UNCLAS MONTEVIDEO 000455 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ETRD ENGY UY
SUBJECT: Uruguayan Priorities as Mercosur President 
 
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SUMMARY 
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¶1. (SBU) SUMMARY:  As Uruguay assumes the pro tempore presidency of 
the Mercosur trade bloc, President Vazquez signaled a measured 
approach to dealing with commercial barriers the GOU claims its two 
dominant neighbors have imposed.  Uruguay's priorities include 
pressing Argentina to allow Mercosur development funds to finance an 
electrical interconnection project between Brazil and Uruguay, 
pushing Argentina and Brazil to end pre-licensing requirements on 
imports, and proposing a reorganization of Mercosur's 256 
institutions.  In addition, the GOU will seek to address the chronic 
Mercosur problems of double taxation within the bloc and stalled 
commercial negotiations with other blocs, notably the European 
Union.  END SUMMARY. 
 
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MEASURED APPROACH WITH NEIGHBORS 
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¶2.  (SBU) Uruguay began its six-month term as Mercosur's president 
pro tempore following the June 23-24 Mercosur summit in Asuncion. 
While the GOU has consistently expressed its dissatisfaction with 
Mercosur's failure to fulfill its original objective to create a 
common external tariff, President Vazquez signaled he would listen 
first and take actions later with regard to addressing tariff 
barriers imposed by Uruguay's two larger neighbors.  Director of 
Economic Affairs Walter Cancela also struck a congenial tone on 
working with Argentina and Brazil, saying "Uruguay will not take 
reciprocal measures," which he suggested would have a greater 
negative impact on Uruguay itself. 
 
¶3.  (SBU) While publically taking a measured approach toward dealing 
with Argentina and Brazil, Foreign Minister Gonzalo Fernandez raised 
the issue of non-tariff barriers and para-tariff measures at the 
Mercosur Summit in Asuncion.  He labeled them "protectionist 
measures that might be understandable, but could not be accommodated 
or justified," and other Foreign Ministry officials stated the GOU 
was concerned about delays in obtaining import licenses for products 
such as textiles going to Argentina and dairy products for Brazil. 
NOTE: the Uruguayan press reported delays in Brazil issuing import 
licenses for 10,000 tons of powdered milk and a $400,000 retread 
tire transaction in July, causing Uruguayan operations to stop work 
due to the backlog.  END NOTE.  Meanwhile, the weekly business 
newspaper Busqueda describes Uruguay's ambassador in Argentina as 
"an administrative facilitator" who has been relegated to working 
daily to kick-start import license applications that have gotten 
stuck. 
 
¶4.  (SBU) GOU officials say that if the free flow of goods continues 
to be obstructed in Mercosur, it will push to extend a current 
regime for the temporary admission of goods, which is set to expire 
in 2013. 
 
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FOCEM - ELECTRICAL GRID INTERCONNECTION WITH BRAZIL 
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¶5. (SBU) A GOU priority is to convince Argentina to withdraw its 
veto of a $80M loan from FOCEM, the Mercosur fund set up to 
facilitate structural integration.  Foreign Minister Gonzalo 
Fernandez considers Argentina's veto a strictly political decision, 
and will insist its approval should be based solely on technical 
considerations.  The technical aspects of the projects were approved 
earlier this year by a Mercosur committee, pending formal approval 
by each of the Mercosur members.  Uruguayan diplomats have been 
quoted in the local media as describing Argentina's veto as a 
"political blockade" by the Fernandez Kirchner administration, 
alluding to the longstanding "blockade" by Argentine activists of 
the international bridge at Fray Bentos.  These same sources say 
that - barring a breakthrough -- the GOU will seek external funding, 
describing the project as exceptionally economically viable. 
 
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DOUBLE TAXATION AND COMMERCIAL OUTREACH 
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¶6. (SBU) In addition to addressing immediate concerns related to 
pre-licensing, the GOU intends to raise long-standing issues such as 
eliminating double imposition of the Mercosur's common external 
tariff and moving forward on trade agreements with other blocs, 
especially the European Union.  FM Fernandez said that Uruguay 
stands absolutely in favor of eliminating double-tariffs.  The GOU 
understands that progress will be difficult to achieve with 
approaching elections at home and in Brazil. 
 
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MERCOSUR BASHING IN THE CAMPAIGN ARENA 
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¶7.  (SBU) Uruguay's two principal candidates for president share the 
generalized Uruguayan disappointment with Mercosur.  Jose Mujica 
called Mercosur "lame and in misery" and told voters that Latin 
America suffered difficulties finding the cohesion that other blocs 
enjoy.  "We face extraordinary problems.  I realize that to demand 
something from the world that is coming we must integrate, we must 
stand together so that we can have certain weight, if not we are 
condemned," he said.  Meanwhile, also on the campaign trail, Luis 
Alberto Lacalle criticized Mercosur's parliament, Parlasur, and 
suggested the Bolivian delegation be removed.  Lacalle has opposed 
inclusion of Venezuela and Bolivia in the bloc in favor of Chile, a 
country he considers more aligned with Uruguay's interests. 
 
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COMMENT 
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¶8.  (SBU) The Frente Amplio government came into power in 2005 with 
a positive feeling toward Mercosur, but time spent dealing with the 
organization has given many officials a decidedly less enthusiastic 
view.  The fact that Frente Amplio candidate Jose Mujica, who 
maintains some political affinity with current governments in 
Argentina, Venezuela and Bolivia, openly criticizes Mercosur, 
underscores the real frustration the GOU and Uruguayans in general 
have with the bloc. 
 
SCHANDLBAUER