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### Viewing cable 07MONTEVIDEO1053, MERCOSUR SUMMIT: POLITICAL ATMOSPHERICS IMPROVE,

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07MONTEVIDEO1053 | 2007-12-19 21:37 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Montevideo

`

    VZCZCXYZ0025
    PP RUEHWEB

    DE RUEHMN #1053/01 3532137
    ZNR UUUUU ZZH
    P 192137Z DEC 07
    FM AMEMBASSY MONTEVIDEO
    TO RUEHC/SECSTATE WASHDC PRIORITY 7838
    INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
    RHEHNSC/NSC WASHDC PRIORITY
    RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

` `

    UNCLAS MONTEVIDEO 001053

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE PASS TO USTR

    E.O. 12958: N/A
    TAGS: ECIN ECON ETRD AR BOL BR CH PY VZ XR UY
    SUBJECT: MERCOSUR SUMMIT: POLITICAL ATMOSPHERICS IMPROVE,
    ECONOMIC STANDSTILL REMAINS

    SUMMARY
    -------

    ¶1. (SBU) Summary: Presidents from the four Mercosur countries
    plus Chile, Bolivia and Venezuela met in Montevideo on
    December 18 at Mercosur%s 34th Common Market Council.
    Unlike in previous meetings, and contrary to pre-Summit
    expectations, the gathering was diplomatic and pleasant.
    Uruguayan President Vazquez was notably friendly with his
    Argentine counterpart in an apparent effort to tone down the
    harsh conflict between their two countries.  Argentine
    President Fernandez and Venezuelan President Chavez darted
    the USG, Bolivian President Morales called for an
    international investigation into recent events at Sucre,
    Paraguayan President Duarte celebrated the concessions
    granted to his country and Chilean President Bachelet called
    for Mercosur to move forward in areas such as services.
    Vazquez highlighted Mercosur%s trade agreement with Israel
    and insisted on the need for open regionalism and to allow
    member states to negotiate trade agreements independently.
    From an economic standpoint, Mercosur showed no tangible
    progress on most relevant issues.  END SUMMARY.

    ¶2. (SBU) On December 18, Presidents Fernandez from Argentina,
    Da Silva from Brazil, Duarte from Paraguay, Vazquez from
    Uruguay, Morales from Bolivia, Bachelet from Chile and Chavez
    from Venezuela attended the Presidential Summit following the
    34th Mercosur Common Market Council, the bloc's principal
    body.  Russia's President Putin was represented by his
    Ambassador to Uruguay and Mexico's President Calderon by his
    Minister of Foreign Affairs.  The EU Commissioner for
    Monetary and Economic Affairs was a special guest to the
    Summit.  Contrary to previous Mercosur Summits - which were
    loaded with tension and recrimination-, the climate in
    Montevideo was affable and all presidents made positive
    remarks about the bloc.

    GOOD ATMOSPHERICS,...
    ---------------------

    ¶3. (SBU) Vazquez was notably genteel with Fernandez, both in
    speech and gesture.  He told her she could feel at home in
    Montevideo and emphasized that "no Argentine is an alien in
    Uruguay". Vazquez' conciliatory speech, and his decision not
    to table the Botnia pulp mill, signaled his intention to tone
    down the conflict with Argentina and seek a positive
    relationship with the new Argentine president.  Meanwhile,
    protestors displayed a sign outside the Mercosur building
    sarcastically read "Welcome President Cristina Fernandez de
    Kirchner, enjoy Uruguay at ease, we are well-mannered and do
    not attack our guests, especially if they can not reply". The
    sign was promptly removed by the police.

    ...SOME MINOR POLITICAL SUCCESSES,...
    -------------------------------------

    ¶4. (SBU) Vazquez touted Mercosur%s achievements during
    Uruguay's six months pro-tempore presidency, and stated that
    "if in past occasions I have been critical of Mercosur, I
    must admit that it is making progress."  He nevertheless
    called for "concrete actions" to solve the bloc's problems,
    "as we medical doctors say, diagnoses do not cure, they help
    the therapeutic process but you need concrete actions."
    Referring to the FTA with Israel Vazquez called for the bloc
    to actively undertake open regionalism and, in closing, urged
    the bloc to allow its smaller members flexibility to
    negotiate trade agreements independently from Mercosur to
    help them resolve the bloc's huge asymmetries.

    ¶5. (SBU) One of the most trumpeted results of the Summit was
    the FTA with Israel that provides for duty free trade of more
    than 90% of goods over an eight-year term.  The agreement
    represents limited commercial relevance since bilateral trade
    is very low (less than 0.5% of Mercosur%s exports go to
    Israel while Mercosur absorbs about 1.0% of Israel's sales)
    and concentrated on few goods (Mercosur exports beef and
    Israel exports fertilizers).  However, as the bloc's first
    extra-regional agreement with a developed country, the
    agreement is a positive sign of more open regionalism.  The
    Summit's Communiqu highlighted Mercosur%s "political will
    to reach an inter-regional association with the EU" and
    celebrated that the EU will provide 50 million euros for
    non-refundable cooperation under a bi-regional 2007-2013
    cooperation program.

    ...BUT, CONTINUED STAGNATION ON ECONOMIC ISSUES
    --------------------------------------------- --

    ¶6. (SBU) The Summit once again failed to approve a customs
    code or to eliminate the double imposition of the common
    external tariff (CET). Currently non-Mercosur goods are
    subject to the bloc's CET upon entering each country.
    Brazil's President Da Silva partially blamed the presidents%
    lack of leadership for the lack of progress and proposed to
    address both issues aggressively during the coming semester.

    CRISTINA LASHES OUT AT THE U.S.
    -------------------------------

    ¶7. (SBU) Argentina's President Fernandez delivered a spirited
    political speech that criticized neo-liberal policies, called
    for a multi-polar world, and indirectly lashed out at the US.
     She stated that "in this South American neighborhood there
    are some visitors that do not recognize that neighbors get
    along well and (instead) promote actions to divide us and
    move us apart".  In a clear reference to the Antonini case
    she added that "...its not politics that is dirty, its
    politicians from inside and outside of our countries who make
    dirty operations".  She continued "many more times we will
    suffer, as we are currently suffering, interference ...by
    those who want subordinate countries..." and warned that
    "they will not bend us.".  On Mercosur, Fernandez stated that
    during its pro-tempore presidency the GOA will work actively
    to pass a customs code and eliminate the double imposition of
    the CET.  The GOA also plans work to sort out asymmetries (a
    leitmotivs of the summit), foster the integration of
    productive c
    hains across countries and develop infrastructure projects.
    Fernandez called for the prompt incorporation of Venezuela
    into Mercosur and argued that such integration would help
    "the energy equation" in a region that is rich on "energy,
    food and knowledge".

    CHAVEZ BRINGS A LIGHTER TOUCH, BUT WITH FOREBODING
    --------------------------------------------- -----

    ¶8.  (SBU) Chavez urged the Brazilian and Paraguayan
    Congresses to approve Venezuela's integration into Mercosur.
    He joked that Mercosur should give Venezuela a prize "for its
    resilience as it has been nine years since they first applied
    for full Mercosur membership."  Chavez argued that at that
    time the delay was somehow reasonable since Southern Cone
    countries were in the "midst of the freezing neo-liberal
    night."  He insisted that Venezuela was not backtracking to
    join the Andean Community or the G3.  In an improvised press
    conference outside the Summit, Chavez, joined by Morales,
    warned the USG "not to force them into violent revolution in
    Bolivia".  Quoting Kennedy, Chavez warned the U.S. that
    "those revolutions that are not pacific end up violent.  We
    both (referring to Morales) want to make a peaceful
    revolution.  Do not force us to make it violent."

    MORALES CALLS FOR AN INVESTIGATION INTO SUCRE
    ---------------------------------------------

    ¶9. (SBU) Morales focused his speech on Bolivia's political
    situation and vowed that his administration "would never
    thwart human rights or democracy." He called for "an
    international investigation on the Sucre events" and
    complained that three weeks have gone by without forensic
    results.  In previous cases, he said, forensic exams only
    took a couple of hours.  President Vazquez and In its
    capacity as pro-tempore president, Uruguay championed a
    Mercosur statement in support of "Bolivia's institutional
    regime, based on democratic principles."

    PARAGUAY UNCHARACTERISTICALLY CONTENT
    -------------------------------------

    ¶10. (SBU) Duarte, who like Vazquez had been extremely
    critical of Mercosur, also made positive remarks on the bloc
    and was particularly pleased with the its structural fund,
    FOCEM.  He mentioned FOCEM's recent announcement of $45
    million in new funding for Paraguay, bringing total funding
    to $114 million.  Duarte was also pleased with the exception
    granted to Paraguay to apply lower import tariffs on
    information and telecommunication goods until 2015.  He
    explained that this special import regime was essential for
    Ciudad del Este that accounts for about 20%-25% of Paraguay's
    exports.

    CHILE PROVIDES A SOBER ASSESSMENT
    ---------------------------------

    ¶11. (SBU) Bachelet was the only president to highlight the
    importance of multilateral negotiations.  She gave a
    comprehensive and concise speech in which she acknowledged
    that Mercosur has made progress, but still needed to move
    forward on key areas like services, government procurement,
    investments and technological issues.  She stated that
    Mercosur is "more than a trading bloc" and mentioned the
    creation of a political coordination forum (proposed by the
    GOA), an anti-corruption working group (proposed by the GOU)
    and the bloc's statements on whale hunting in the Antarctic
    (proposed by Chile) as indications of positive political
    coordination.

    COMMENT
    -------

    ¶12. (SBU) Comment: Unlike previous meetings, the Montevideo
    Summit took place in a remarkably diplomatic fashion, at
    least as far as criticism of the bloc was concerned.  In
    Uruguay, many observers anticipated that recent sparks
    between the GOU and GOA over the pulp mill dispute would
    taint the summit.  The lack of rhetoric on this front may
    offer a chance for the two governments to begin rebuilding
    their relationship.  Where ire was expressed, it was directed
    squarely at the U.S., giving the impression that more
    anti-U.S. bombast could yield greater regional unity.
    However, Uruguay continued its push, albeit with a softer
    tone, for open regionalism and freedom to negotiate
    independently from Mercosur.  From an economic standpoint,
    Mercosur continues to be at a standstill and has only kicked
    the "can" down the street.
    Harding

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