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Cablegate: Mercosur Summit: Political Atmospherics Improve,

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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