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### Viewing cable 06MONTEVIDEO38, FTA COMMENTS IGNITE INTERNAL/EXTERNAL DEBATES

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06MONTEVIDEO38 | 2006-01-12 18:38 | 2011-07-12 00:00 | CONFIDENTIAL | Embassy Montevideo

`

    VZCZCXYZ0001
    PP RUEHWEB

    DE RUEHMN #0038/01 0121838
    ZNY CCCCC ZZH
    P 121838Z JAN 06
    FM AMEMBASSY MONTEVIDEO
    TO RUEHC/SECSTATE WASHDC PRIORITY 5219
    INFO RUCNMER/MERCOSUR COLLECTIVE
    RUEHBO/AMEMBASSY BOGOTA 2455
    RUEHCV/AMEMBASSY CARACAS 0364
    RUEHLP/AMEMBASSY LA PAZ JAN SANTIAGO 2762
    RUMIAAA/CDR USSOUTHCOM MIAMI FL//J-5//
    RUEHC/DEPT OF AGRICULTURE WASHDC
    RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
    RUEAWJA/DEPT OF JUSTICE WASHDC
    RUEATRS/DEPT OF TREASURY WASHDC
    RUEAHLC/HOMELAND SECURITY CENTER WASHINGTON DC
    RHEHNSC/NSC WASHDC
    RUEHMN/ODC MONTEVIDEO UY
    RUEKJCS/SECDEF WASHDC
    RUEHMN/USDAO MONTEVIDEO UY
    RUEHGV/USMISSION GENEVA 0459
    RUEHUB/USINT HAVANA 0040

` `

    ,C O N F I D E N T I A L MONTEVIDEO 000038

    SIPDIS

    SIPDIS

    DEPT FOR WHA A/S SHANNON AND WHA/BSC
    DEPT FOR EB A/S WAYNE AND EB/TPP
    DEPT PLEASE PASS USTR
    NSC FOR DFISK AND SCRONIN
    USDOC FOR WHA/DAS WBASTIAN

    E.O. 12958: DECL: 01/10/2016
    TAGS: PREL PGOV ETRD EINV UY
    SUBJECT: FTA COMMENTS IGNITE INTERNAL/EXTERNAL DEBATES

    REF: A. MONTEVIDEO 0011

         ¶B. MONTEVIDEO 004
         ¶C. 05 MONTEVIDEO 1428

    Classified By: Charge D'Affaires James D. Nealon
    for reasons 1.4 (B) and (D)

    ¶1. (C) Summary: Economy Minister Astori's open advocacy of a
    Free Trade Agreement (FTA) with the US (ref A) last week has
    drawn sharp reactions at home and abroad because a ""leftist""
    Mercosur government has publicly said it wants to talk with
    us about free trade.  Domestically, there's been the
    predictable negative reactions from the far-left, but also a
    surprising amount of public support for the idea (one poll
    shows 91 pct public approval for an FTA.)  Other Mercosur
    partner countries seem to have been caught off balance by
    Astori's proposal and in a quandary over how to react.  (At
    least this is how it is perceived in the press.)  While we
    are convinced that President Vazquez backs Astori out of
    conviction, the dramatic FTA trial balloon was probably
    triggered by the soured relations with Argentina over the
    construction of pulp mills on a shared river (ref B) and
    frustration with the way Mercosur treats its junior partners.
     At a minimum, the GOU has drawn attention to the FTA issue,
    but it may also have added to a fight over the ""soul"" of the
    Latin American Left by openly extolling the virtues of the
    Chilean model.""  It is a high stakes game, however, since
    the danger for little Uruguay lies in a two-front war of
    independence against hardened lefties in the Frente Amplio
    and regional partners who opposed the Free Trade of the
    Americas (FTAA) at the Summit of the America's (SOA).  We see
    the FTA flap as another opportunity for us to meaningfully
    engage the GOU and help it achieve what it wants most --
    economic growth and jobs.  End Summary.

    Reactions
    ---------

    ¶2. (SBU) It's the summer doldrums here and many folks are
    vacationing on the beach, including Minister Astori who
    sparked the whole flap.  Nevertheless, the local media has
    succeeded in finding a hot story over whether Uruguay should
    negotiate an FTA with the US.  Folksy AgMinister Mujica
    contributed to the chorus of opinions by saying in an
    interview that, ""Mercosur is not worth a damn"" because of
    the undeclared war"" launched by Argentina over paper mill
    construction in Fray Bentos.  Mujica also reminded listeners
    that the 2002 bank run (""corralito"") that began in Buenos
    Aires, dragged Uruguay into its worst financial crisis in
    recent years.  (Note: Mujica avoided mention of Argentina's
    role a few year's back in allowing hoof and mouth infected
    cattle to contaminate Uruguay's livestock, but it seemed
    clear in his interview that Mujica connected the paper mill
    dispute to Uruguay's need for diversified trading partners.
    End Note.)

    ¶3. (SBU) The weekly ""Busqueda"" also reported an excerpt from
    a December 29 meeting in which President Vazquez told former
    (Blanco) President Luis Alberto Lacalle that he was
    disappointed"" with Nestor Kirchner over the pulp mill
    affair.  (Note: We understand that Vazquez will be in La Paz
    for two days attending Evo Morales' January 22 inauguration,
    but will not meet with Kirchner on this issue. End Note.)
    The same article highlighted previous quotes from Vazquez in
    which he said, ""The US buys the most and the best. Last year
    it bought $447 million. I hope it buys $800 million.."" (Note:
    The US is a bigger client for Uruguay than Argentina and
    Brazil combined. End Note.)
    ¶4. (SBU) ForMin Gargano was the first Uruguayan to dash cold
    water on Astori's pro-FTA remarks.  As president of the
    Socialist Party, he has called a  party meeting for January
    13 to debate the issue.  Local pundits said Gargano's
    opposition was to be expected (though Industry Minister
    Lepra, Tourism Minister Lescano and others sided with
    Astori.) But they considered statements by GOA Undersecretary
    for Latin American Integration Eduardo Sigal and other
    foreign officials to be more serious because they called into
    question the ""legality"" of such a move within Mercosur by
    citing the Ouro Preto Protocol and 2000 Decision No. 32
    purportedly banning ""bilateral commercial treaties with third
    countries.""  However, an editorial in the daily ""El Pais""
    entitled, ""the Ultimate Impertinence"", pointed out the
    hypocrisy"" of this argument by highlighting that Argentina
    and Brazil have signed 20 commercial bilateral accords with
    other countries (as well as a ""market accord"" with China)
    without prior Mercosur consultation. The same author
    maintained that Argentina's paper mills on the Parana river
    are its major source of pollution.

    ¶5. (SBU) There has been plenty of incoherence as well. MPP
    Senator Jorge Sarvia was quoted as saying, ""I'm not in favor
    of the FTA, even though it benefits Uruguay but because I'm
    for Mercosur and against FTAA."" (!?)

    ¶6. (SBU) Brazilian Foreign Minister Celso Amorin was also
    quoted in the media as saying on January 11 that ""It would be
    impossible for a member of Mercosur to individually negotiate
    commercial agreements, unless it intended to leave the
    trading bloc, a decision we haven't been informed about.""
    Amorin's reported comments appeared to soften when he added,
    If Uruguay feels that Mercosur hasn't produced enough
    benefits...maybe it is because we haven't done enough.""

    Comment:
    --------
    ¶7. (C) The GOU has gotten a lot of attention focused on the
    FTA issue and has rightly succeeded in exposing Mercosur's
    canard about its treatment of junior partners.  But this is a
    high-stakes game for Vazquez because of the size and strength
    of his opposition and worries that Argentina could affect the
    pulp mills financing.  Still, Vazquez probably calculates
    that it is better to air Uruguay's gripes over Mercosur
    publicly by using the FTA debate.  From our vantage point,
    the FTA flap represents another opportunity for the USG to
    engage Uruguay at a high level. We expect that 2006 will be a
    critical year for Vazquez in which he needs to show economic
    results.  As an Evo Morales-led Bolivia prepares to join
    Mercosur as a full member, it is also probably in our
    interest to lend a helping hand to GOU that is struggling to
    emulate a moderate Chile rather than a Bolivarian Venezuela.
    End Comment.
    Nealon

`