MercoPress. South Atlantic News Agency

How Argentina torpedoed Uruguay’s FTA with the US, according to Wikileaks

Uruguayan former president Tabare Vazquez and former president Nestor Kirchner

Although in public former Argentine president Nestor Kirchner was supportive of Uruguay’s negotiations for a free trade agreement (FTA) with the United States, members of his cabinet warned the US embassy in Buenos Aires that Argentina would block such an initiative in Mercosur, according to the contents of several Wikileaks cables published in Montevideo and Buenos Aires.

Kirchner talked publicly about the issue for the first time in Brasilia in 19 January 2006 saying that if Argentina and Brazil “can’t offer Uruguay what Uruguay needs, “it’s not bad should they sign an FTA with the US”.

He added that “we believe in Mercosur but Argentina and Brazil are struggling to climb out from a deep economic crisis and it could be we can’t offer Uruguay all the tools its people need, so we therefore can’t impede them from reaching a deal with the US”.

Kirchner also mentioned that his peer Brazil’s Lula da Silva has stated he “was more flexible” on the issue and that he supported that stance.

Under the four full member Mercosur chart all decisions are unanimous.

However from Buenos Aires US ambassador Lino Gutierrez said it “was not clear” why Kirchner adopted that attitude, but did venture some explanations in a January 2006 Wikileaks diplomatic cable.

Gutierrez speculated that Kirchner could ease tensions with Uruguay regarding the pulp mills dispute by being supportive of an FTA, but not ordering pickets to be lifted. As a deep rooted ‘nationalist’ (who went as far as slapping extra tariffs on Brazilian shoes) Kirchner could understand that his Uruguayan peer Tabare Vazquez was intent in the best for his people.

Furthermore since Argentina’s trade with Uruguay is relatively small, “he doesn’t have much to loose with a Uruguay/US FTA”.

In January 2006, the US embassy in Montevideo believed an FTA with Uruguay was feasible in spite of the opposition from ‘radical groups’ in the country’s ruling coalition and “troublesome neighbours”.

In March President Vazquez specifically informed the head of the Embassy in Montevideo James Nealon that Uruguay is interested in an FTA with the US.

However the US embassy in Buenos Aires remained perplexed by President Kirchner’s public statements which differed entirely from what members of the Argentine Foreign Affairs ministry argued in their talks with US diplomats.

In July 2006, a US diplomat contacts Ernesto de la Guarda, from the Mercosur office in the Foreign Affairs ministry to talk about the issue. De la Guarda reports that Argentina has investment accords with 56 countries, but none with Mercosur member countries.

“We even have a bilateral investment agreement with Bulgaria but not with Uruguay” and added that Uruguay had so far not formally presented the possibility of an FTA with the US, and for which the country would have to ask for an exception under Mercosur rules, “but Argentina was not expecting any discussion on that issue during the coming Mercosur summit”.

He added that although he didn’t read Kirchner’s mind as to what would happen if Uruguay pressed with the issue he said it was “a particularly bad moment” for such an initiative.

In effect the International Court of The Hague which was just taking the case of the pulp mills dispute, rejected on 13 July 2006, an initial request from Argentina to freeze all construction at the Botnia plant as a precautionary measure

Months later in September the US embassy in Buenos Aires sends a cable to the Department of State under the heading: “Argentine Foreign Trade Secretary: why Uruguay can’t sign an FTA”.

Ambassador Alfredo Chiaradia who held the Foreign Trade post at the time sends a clear signal that the Argentine government would not allow Uruguay to sign an FTA and remain inside Mercosur, as had been suggested by President Vazquez he would be asking to fellow members.

Chiaradia told the US diplomats that if the US wanted to offer Uruguay some kind of export quotas or special tariffs, it could do so, but Uruguay as member of Mercosur could not have a reciprocal attitude.

Uruguay would be crossing ‘a red line’ if it finally agreed to an FTA which includes services, government procurement and intellectual property rights more favourable that those between Mercosur members.

When Chiaradia was asked about Kirchner’s public statements, who promised not to block Uruguay’s plans, he replied that “presidents always make generic statements” and that Mercosur rules in those areas “were very clear and inflexible”.

When the suggestion of Uruguay abandoning Mercosur was put on the table, Chiaradia said that if that happened, “the US action would have costs”.

Nevertheless and in spite of President Vazquez failed attempt, then Economy minister, and currently Vice-President Danilo Astori did not give up the idea of a FTA with the US, according to a cable from Ambassador in Montevideo, Frank Baxter in December 2006.

“Astori emphasized the strong interest of Uruguay to continue negotiations with the target of reaching an FTA; ‘we shall begin again’” was Astori’s remarks to Ambassador Baxter.