MercoPress. South Atlantic News Agency

Uruguay at center of US/Venezuela power play

Long taken for granted by its much larger neighbours, Uruguay suddenly finds itself one of the main fronts in the struggle between the United States and Venezuela for dominance in South America.

The Bush administration and President Hugo Chávez are jockeying for position here, each trying to undercut the other by winning over Uruguay's leftist government.

Washington is offering a free-trade agreement that would pull Uruguay into the U.S. orbit and weaken Mercosur, the regional trade group to which Uruguay and Venezuela belong.

Chávez has countered with attention- getting investments, subsidized oil, acts of charity and a growing alliance with leftist factions of the governing Broad Front.

Pablo da Silveira, a professor of political philosophy at Catholic University of Uruguay and a political commentator, likens what is happening to "a geopolitical chess game, in which Venezuela is playing the black pieces - in other words, oil" - in an effort to gain influence.

In this small, strategically located place, he added, "Chávez and the United States are seeking the same thing, and for the same reason: to make Uruguay a test case" for their widely varying visions of the region.

Chávez, for example, has pledged to invest an estimated 500 million US dollars in an oil refinery here and has invited the Uruguayan state oil company to join its Venezuelan counterpart in exploration projects.

As it has done in Cuba and the Caribbean, Venezuela is also supplying petroleum products at a discount, and Chávez has promised that a gas pipeline he wants to build from Caracas to Buenos Aires will pass through Uruguay.

Venezuela has also put up money that allows some unprofitable ventures in Uruguay that employ relatively large numbers of people - like tire, glass, and sugar plants - to stay in business.

Most recently, the Chávez government has offered support for an ailing government financial cooperative that makes small loans to people and small businesses that normally do not qualify for bank loans.

"It doesn't cost Chávez a lot of money, but it generates a lot of good will," said Danilo Arbilla, a former editor in chief at the weekly magazine Búsqueda. "That way, when he comes here, he's solved people's problems, and they will go out for him"

Not to be outdone, the United States has countered with a proposal to build a medical and dental clinic near a working-class area of Montevideo. Leftist groups aligned with Chávez maintain that the offer is really a plot by the Pentagon to establish a military base in Uruguay.

The Bush administration's main thrust, however, is its offer of a free- trade accord that would allow Uruguay to increase exports of meat, leather, cheese and other products to the United States.

Uruguay's population and economy are small, with barely 3 million people and total trade with the United States amounting to slightly more than 25 billion pesos, or $1 billion, last year.

But the country is a member of the Mercosur customs union, which includes Brazil and Argentina, and a free- trade agreement with the United States would weaken the group and put pressure on Uruguay's two big neighbours to negotiate bilateral accords with Washington.

Early this year, Tabaré Vázquez, Uruguay's first Socialist president, told a radio station here that "Mercosur has become more a problem than a solution." But in an interview in late August, he said his country had no intention of leaving the group, but wanted instead "more and better Mercosur," without "giving up our right to open ourselves to the rest of the world."

Vázquez was reluctant, though, to say explicitly that he favoured a free-trade agreement with the United States. Brazil and Argentina have suggested at various times that such an accord with the United States would be incompatible with membership in Mercosur and could be grounds for expulsion.

"Both countries want to improve their commercial exchanges with each other, and we have agreed that paths exist that allow us to achieve that objective," he said, referring to the United States and Uruguay.

"We've set a methodology and a timetable," he added, a reference to the fact that President George W. Bush will lose his authority to negotiate "fast track" trade agreements on June 30, 2007, unless Congress renews it.

Though the United States has already signed an investment treaty with Uruguay, Washington initially showed little interest in a free-trade accord. Two Bush administration officials had all but ruled out the idea before Bush announced, during a visit by Vázquez to the White House in May, that he favoured "extending our commercial relations" and suggested that talks begin as soon as possible in Uruguay.

Bush made his offer as Venezuela was preparing to join the Mercosur group, which was founded in 1991 and is based in Uruguay. Venezuela was formally accepted into the group in July, and Chávez's public statements have made it clear that he would like to transform Mercosur into more of a political alliance with an anti-American tint.

Larry Rohter. The New York Times, published: September 13, 2006 in The International Herald Tribune