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_2006/06.15_Uruguays_Vazquez_Assessment.html

Weekend Release: Saturday, March 4, 2006

• Populist palaver or a vision of social justice at the forefront?
• Fight with Argentina could shatter MERCOSUR
  • Vazquez is popular, but his political standing might be more broad than deep
  • Washington could be more than interested in prying Uruguay away from MERCOSUR via a bilateral trade agreement
• Vazquez moderation and sense of caution could make him the first “pink tide” leader to cave in to Washington

It’s been just over a year since Tabaré Vazquez was elected as Uruguay’s first left-leaning president, breaking nearly two centuries of two-party conservative rule, and one brutal decade of military rapacity. Vazquez came to power in October, 2004, as the candidate of the Broad Front Party, (Frente Amplio), an umbrella group of 18 political parties, ranging from former Tupamaro guerrillas, to Christian Democrats. At the time, his victory was hailed as another tally for a new democratic left that was sweeping South America.

Today, Vazquez continues to be mentioned as Uruguay’s representative at the region’s newly founded roundtable of recently enfranchised, autonomously-minded leaders of a growing list of “pink tide” social democracies. He has been embraced by Venezuelan leader Hugo Chávez, while at the same time acting quickly to restore diplomatic relations with Cuba. However, in many ways, Vazquez’s election contained far more revolutionary elements than have his policies since his inauguration.

In effect, Vazquez appears to be following in the footsteps of Brazilian president Luiz Ignacio Lula de Silva, in that while elected from the left, he has been governing from the center. For now, this pragmatic approach seems to be working for him, and he now enjoys a higher approval rating than he did while running for president. Under economic minister, Danilo Astori, financial policy has leaned towards the model upheld by the neo-conservative school. Indeed, Vazquez seems to be largely unconcerned with qualifying for a seat at the hemispheric leftist symposium. What is certain is that he has sought to tackle Uruguay’s problems through a unique, if somewhat controversial, mix of programs, with an emphasis on the practical.

Background
Both Vazquez and his political coalition have uncommon histories, a reality that has contributed to the free-thinking nature of his government. While Vazquez was training as an oncologist and studying in Paris in 1971, the Frente Amplio was being founded, only to be outlawed by 1973 when the military took control of the country. Vazquez’s election as mayor of Montevideo in 1989 represented the first real political foothold for the coalition after it gained control of the city council. Since half of Uruguay’s 3.3 million people live in the capital city, Vazquez’s victory there was considered auspicious for good reason. As mayor, Vazquez gained wide prominence with his articulate anti neo-liberal stance, and helped lead a campaign to defeat a proposal aimed at privatizing the state owned oil company (ANCAP), when the question was put to a referendum in 2003. Vazquez also made efforts to decentralize government and encourage greater popular participation in politics.

Yet, these successes were only one factor in Vazquez’s rise to national power. When the 2001 Argentine economic crisis caused a huge run on Uruguay’s banks and led to a drastic devaluation of its currency, Uruguay echoed the effect by suffering an 11% decline in GDP, and an unemployment rate which rose to 20% of the work force. Rural unemployment skyrocketed, as one third of its citizens sank into poverty. This grim outlook was compounded by a crippling debt to the IMF, with loans totaling $2.3 billion. All these factors, plus a precipitously declining reputation of then president Jorge Batalle of the Colorado party, helped set the stage for Vazquez’s presidential bid. He previously had made failed efforts to win the presidency in 1994 and in 1999. However, his victory in the 2004 elections was regarded as a ‘sure thing’ months before ballots were cast. Building on popular discontent, Vazquez ran on a platform specifically attacking the “Washington Consensus” and other White House fiscal initiatives. However, unlike his Venezuelan counterpart, Hugo Chávez, Vazquez avoided the spotlight, skirted public debate, and did not make fiery anti-imperialist speeches with an eye towards winning over the hemisphere’s streets. Instead, Vazquez let public excitement over the prospect of electing a third party running a left-leaning candidate carry him to office. This momentum, however, did not necessarily translate into radical policies, as Vazquez seems to have interpreted his mandate as one of ensuring economic stability rather than promoting creative tumult, and he has been more than willing to swim against the “pink tide” of left-leaning governments, or even disregard it, when his political compass tells him to do otherwise.

Vazquez’s Policies
Like many of his regional counterparts, one of Vazquez’s main challenges is how to manage Uruguay’s large IMF debt. In contrast to Argentina, which defaulted on its IMF debt after its economic meltdown, Vazquez backed Batalle’s centrist decision not to default on Uruguay’s IMF loans. This effort to steady Uruguay’s financial trajectory has helped maintain the global credibility of its economy, which was once referred to as the “Switzerland of South America” because of its successful European-style planning and banking system. The decision has clearly had the desired effect, as Uruguay sold $500 million in bonds to foreign investors in January. Vazquez’s economic minister, Danilo Astori, has said that he sees foreign investments as accounting for 20% of Uruguay’s GDP by 2010. Vazquez is also seeking to bolster foreign investment as a means of job creation, and has plans to soon welcome a Japanese auto plant to the country.

Progress, at What Cost?
Such hunger for investment has occasionally left Vazquez at odds with other Latin American leaders. The prime example of this category of conflict is the current controversy raging over plans by European investors to build two cellulose plants, 10 km apart, along the Uruguay River, which forms part of its border with Argentina. The two nations share joint jurisdiction over the river, and the numerous bridges which span it provide important economic and symbolic connections. The plans, which call for an estimated $1.8 billion in total investment by the Finish company Botnia and Spanish company Empresa Nacional de Celulosa de España (ENCE), have provoked strenuous objections from Argentina, as well as Uruguayan environmental and civic groups, who point to major concerns about the plants pollution, fears which World Bank has downplayed. Vazquez has refused to back down, however, indicating the importance of the project to Uruguay’s future development.

The $1.8 billion figure involved in setting up the proposed cellulose facilities is not only equivalent to 11% of Uruguay’s current GDP, but it would also be the biggest capital investment in the country’s history. Six months ago, Vazquez and Argentine President Nestor Kirchner established a bilateral commission to discuss the possible environmental impacts of the plants. In the following period, numerous technical discrepancies emerged, preventing any kind of agreement. Buenos Aires feels that Uruguay has not presented a detailed enough analysis of the probable ecological damage the new industrial facility would cause, while Montevideo insists that both companies’ environmental standards conform to those of both Europe and Uruguay, and have met the World Bank’s pollution standards.

Vazquez has been forced to respond to the protests of activists, who have blocked bridges preventing trucks from delivering building supplies to construction sites, as well as preventing Uruguayans from returning home, and Argentine tourists from making their traditional trips to Uruguayan vacation resorts. The Uruguayan president commented on this wave of demonstrations in an interview with the Buenos Aires Herald, noting, “Greenpeace is an NGO that has every right to express itself [but] we will not allow it, or anyone, to overrun the rights of the citizenry in Uruguay.”

The dispute over the new plants seems likely to drag on, because no agreement was reached through the deliberations by the bilateral commission set up to resolve the dispute, and Argentina will now most likely take Uruguay to the International Court of Justice in the Hague, Netherlands. The legal proceedings are sure to prove a long and costly experience for both countries, if they are allowed to begin at all. In the meantime, Argentina is attempting to block a loan from the World Bank’s International Finance Corporation, which would cover 9% of the Uruguayan plants’ construction costs.

Vazquez’s unwillingness to negotiate with Buenos Aires on this issue displays a willingness to pursue perceived vital economic initiatives even if it means threatening the cohesiveness of MERCOSUR. Needless to say, the forward motion of the “pink tide” doesn’t appear to be a particularly important agenda for him. In a recently announced regional tour designed to justify the plants’ construction, Vazquez pointedly left Argentina off his travel agenda. Moreover, the cellulose plants case is not the only example of Uruguayan-Argentine friction, and indeed Vazquez has bitterly pointed to inequalities within the MERCOSUR regional trade accord, and has talked about taking an independent direction when it comes to trade issues in the future.

Breaking away from MERCOSUR?
Uruguay and Paraguay, MERCOSUR’s smallest members, both physically and economically, have long complained about their marginalized positions in the trade bloc, relative to Brazil and Argentina. The smaller nations routinely have had trouble competitively exporting their goods in the face of challenges from the more powerful members. Last month, Astori, floated the possibility that Uruguay was prepared to seek a bilateral trade pact with the United States. Such an agreement, while seemingly unlikely, would directly violate the pact signed by MERCOSUR members in 2000, which ensures that no country may independently draw up a bilateral trade agreement with an outside country. Uruguay claims that this restriction is merely another example of the larger MERCOSUR countries pursuing their own self-interest at the expense of the well-being of the smaller partners.

Montevideo argues that a bilateral free trade agreement with the U.S. could lead to an expansion of Uruguay’s service sector, and would aid the country’s stalled development. This stance sharply contrasts with Brazilian and Argentine opposition to Washington’s free trade models, which have been disputed over continued agricultural subsidies to U.S. producers. Although Uruguayan foreign minister Reinaldo Gargano denied in February that his country was pursuing a bilateral accord with the U.S., the issue remains on the table, and it is not likely to be forgotten.

Keeping it Real
Such maverick positions have not necessarily represented a betrayal, since Vazquez technically has remained true to the social pledges that got him elected. Although Uruguay’s debt currently represents 85% of its GDP, Vazquez has instituted an effective emergency anti-poverty program, Plan de Astisencia Nacional a la Emergencia Social (PANES), which has helped bring unemployment down to 12%. PANES is designed to address health and education concerns, and to raise approximately 1 million people out of poverty. Plans include constructing homeless day-shelters to serve 1,400 people, building health centers, increasing the number of teachers in order to serve more students, and supplying 50,000 school uniforms to families who cannot afford them. Other programs include a food assistance project, and a partnership with Cuba which involves sending nearly 150 Uruguayans with eye problems to the island to be treated by Cuban optometrists.

Vazquez has also spoken out against human rights violations dating back to the era of military rule, and has vowed to resolve the cases of some 180 Uruguayans, mostly students and union leaders, who “disappeared” under the armed forces junta, in an effort to address the nation’s dark recent past. This action clearly separates Vazquez from the previous Uruguayan leaders who granted amnesty to military personnel known to have committed human rights violations.

Conclusion
Though Vazquez’s policies are distinctly more cautious than those being sponsored by other more prominent “pink tide” leaders, he nonetheless has won wide public support for his bedrock agenda aimed at rebuilding Uruguay. He desires to be seen as an independent leader heading a progressive coalition to deal with pressing domestic issues, and appears to be doing so with some success. While the hue of his pink may not be as bright as that of other regional leaders, and his interest in regional foreign policies far less intense, Vazquez’s accomplishments are still noteworthy. Ultimately, the man from Montevideo seems to have a firm and clear grasp on his mission: however lean he may be when it comes to a vision. When addressing the fourth congress of the Frente Amplio shortly after his election, he declared, “We have to revive utopia. We have to recreate the illusion. We have to reconstruct the future from the limitations of our own times.” Of course, none of these tasks seem to be on Vazquez’s current “must do” list.

This analysis was prepared by COHA Research Associate Matthew Beagle

March 4, 2006

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