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Cablegate: Vazquez' Honeymoon Is Over

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DE RUEHMN #1012/01 2981847
ZNY CCCCC ZZH
P 251847Z OCT 06
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC PRIORITY 6449
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 2546
RUEHCV/AMEMBASSY CARACAS 0451
RUEHLP/AMEMBASSY LA PAZ OCT SANTIAGO 2927
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
RHEHNSC/NSC WASHDC

PP RUEHWEB

DE RUEHMN #1012/01 2981847
ZNY CCCCC ZZH
P 251847Z OCT 06
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC PRIORITY 6449
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 2546
RUEHCV/AMEMBASSY CARACAS 0451
RUEHLP/AMEMBASSY LA PAZ OCT SANTIAGO 2927
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
RHEHNSC/NSC WASHDC","C O N F I D E N T I A L MONTEVIDEO 001012

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DEPT ALSO FOR WHA/BSC (FBAXTER) AND EB
DEPT PASS USTR FOR EEISSENSTAT AND SCRONIN
TREASURY FOR OASIA FOR DDOUGLAS
COMMERCE FOR ITAITA/MAC/WBASTIAN
NSC FOR DFISK AND JCARDENAS
SOUTHCOM FOR POLAD

E.O. 12958: DECL: 10/24/2016
TAGS: PGOV PREL ECON SOCI ELAB MARR UY
SUBJECT: VAZQUEZ' HONEYMOON IS OVER

REF: MONTEVIDEO 0943

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

1. (C) Summary: President Vazquez' approval rating dipped
below fifty percent for the first time according to an
October poll. When he was sworn in eighteen months ago, his
approval rating stood at sixty-nine percent. The anti-climax
surrounding a possible Free Trade Agreement (reftel), a
worsening crime situation and the bungling of the pulp mill
dispute contributed much to his twenty point drop. But
something more seems to be irritating the middle class and
stirring the moribund opposition into rhetoric and action.
The recent lock out strike by commercial vehicle owners and a
counter-strike by Communist-led trade unionists has strong
class struggle"" tinges to it. The abrupt firing of the Army
Commander and the replacing of him with a far more junior
officer smacks of long-harbored revenge by the left against
the military. This could be a defining period for Vazquez
and Uruguay because the society clearly seems more polarized
and angry than it was a year and half ago. The ruling Frente
Amplio (FA) coalition will conduct its internal party
elections on November 12. Already some observers believe
that the moderate pragmatists have lost significant ground to
the old-line radicals, in part because the radicals tend to
be better organized. We will have to wait until after the
internal elections to see if Vazquez continues along his
pragmatic path or if he feels obliged to tack to the left.
End Summary.

Dashed Expectations
-------------------
2. (U) It is too early to tell if the ""failed"" FTA talks at
the October JCTI represented a high point in Vazquez' attempt
to chart a moderate pro-U.S. path based on the ""Chilean
model."" Certainly the disappointment of a TIFA instead of an
FTA and the decision to deepen trade relations on the slow
track (""a la Uruguaya"") was a tremendous letdown for those
who saw an FTA as a golden opportunity to revitalize the
economy and stem the hemorrhaging brain drain that has sent
14 percent of (mostly young) Uruguayans abroad in search of
jobs. Two months ago the polling firm ""Interconsult""
indicated that 56 percent of the Uruguayans surveyed were in
favor of an FTA. Among Frente Amplio respondents the number
was 47 percent while Colorado and Blanco Party members
surveyed were 77 percent in favor. Many of the signals sent
by Vazquez this year, including his petitions to Mercosur,
led the Urugayans to believe that an FTA with the U.S. was on
the way.

3. (SBU) Now that that the prospect of an FTA seems to have
vanished, other issues have opened the GOU to the criticism
that it has not accomplished much during the last eighteen
months except to strengthen a radical left that truly intends
on implementing a radical brand of Socialism. Among the
charges: that the GOU is soft on crime, that it has
strengthened the Communist-dominated labor unions, that it
was motivated by revenge in its campaign to re-examine the
human rights abuses of the dictatorship period, that it is
violating the Constitution, that it tries to muzzle the press
and that it has bungled the dispute with Argentina over the
construction of giant pulp mills on a shared river. (Note:
The GOU's detractors assert that Vazquez is beholden to
Nestor Kirchner for declaring a holiday in 2004 in Argentina
so that Uruguayan voters could cross the river and vote for
the Frente Amplio. End Note.)

Signs of Discontent
-------------------
4. (SBU) The building discontent by the middle class,
businessmen and opposition parties has come to something of a
head recently. A proposed tax reform is the likely lightning
rod. The lock out strike by commercial vehicle owners that
began October 23 and a counter-strike by Communist-led trade
unionists (PIT-CNT) is an unprecedented power struggle and
dilemma for the Vazquez administration. Fuel, food and
commodities are being threatened on the eve of the important
November 2-5 Ibero-American Summit, which must be
disconcerting at the least. The Government has already
delared some services essential and indicates that it might
use the Army to move supplies. The GOU solved the initial
obstacle of forcing a hike in the price of diesel fuel, but
truckers stubbornly resist a portion of the tax reform
proposal that would force them to make a 7.8 percent
contribution to Social Security. Meanwhile, the GOU wants to
ram the tax reform package through Congress by the end of the
month without any real debate or changes. Predictably the
radical unions have struck on their own in ""defense of
democracy"" and compare the current situation to ""bourgeois
counter-revolutionary acts"" in Chile in 1973 against Allende.
(Note: Curiously, the PIT-CNT's call for a counter-strike
appears on the Presidential website. End note.) In any event
the rhetoric is at a high pitch on both sides, though no
violence has been reported.

5. (SBU) The other fairly momentous event was the abrupt
sacking of Army Commander Carlos Diaz on October 19 for
privately meeting with Colorado ex-President Maria Julio
Sanguinetti and his then-Defense Minister Yamandu Fau. While
we've heard different versions including ""a set-up"" and ""that
Diaz lost his temper,"" the reason makes no difference in the
end. Diaz has been replaced by a far more junior officer
(General Jorge Rosales was a Colonel only eight months ago)
and a dozen more senior officers who served during the
dictatorship have been bypassed, neutralized and effectively
eliminated. The consequences of this ""decapitation"" have yet
to be determined.

6. (C) Personifying the possible policy shift, the
anti-American Foreign Minister Reinaldo Gargano seems to be
riding high these days. Smug that he had predicted the demise
of an FTA, Gargano recently waxed eloquent in the media about
Mercosur's future benefits to Uruguay. By contrast, Econ
Minister Astori seems largely absent in the press except for
his role on unpleasant subjects such as collecting taxes and
pushing the controversial tax reform package. (Note: In a
recent conversation with Emboff, Astori expressed some hope
that FTA interest could be revived, regardless of the
expiration of Trade Promotion Authority (TPA) in 2007. Also,
Astori recently lost one of his key advisors on trade
matters Dario Sarachaga quit last week reportedly in disgust
as his year of intense work on an FTA had gone to waste. End
Note.)

7. (C) Comment: While Vazquez has faced crises before -- for
example when key Ministers Danilo Astori and Jose ""Pepe""
Mujica threatened to resign or when the Bandes bank was on
the verge of collapse -- none seem as defining as the current
situation. The ongoing lockout strike by commercial vehicle
owners on the eve of the Ibero-American Summit and the
virtual elimination of the Army's senior officer corps are
fairly tectonic events in this setting. However, it is too
early to tell if the non-signing of an FTA at the JCTI
earlier this month was the high point in Vazquez attempt to
chart a moderate pro-U.S. path for Uruguay. We will have to
wait until after the November 12 internal elections to see if
he resumes his pragmatic path, or if he calculates that he
has no option other than to hitch his fortunes to a more
radical and emboldened left. End Comment.
Nealon

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