New York Times | September 12, 2006
Uruguay at Center of Lively U.S.-Venezuela Chess Game
By LARRY ROHTER
MONTEVIDEO, Uruguay - Long taken for granted by its much larger neighbors, 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 of Venezuela are jockeying for position here, each trying to undercut the other by winning over Uruguay’s left-wing government.
Washington is offering a free-trade agreement that would pull Uruguay into the United States’ orbit and weaken Mercosur, the regional trade group to which Uruguay and Venezuela belong. Mr. Chávez has countered with attention-getting investments, subsidized oil, acts of charity and a growing alliance with left-wing factions of the ruling 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 situated 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.
Mr. Chávez, for example, has pledged to invest an estimated $500 million 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 supplying petroleum products at a discount, and Mr. Chávez has promised that a gas pipeline he wants to build from Caracas to Buenos Aires will pass through here.
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. Left-wing groups aligned with Mr. 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 three million people and total trade with the United States amounting to slightly more than $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 neighbors to negotiate bilateral accords with Washington.
Uruguay’s relations with Argentina and Brazil have been tense recently. Argentina is trying to block work by a Finnish-Swedish consortium and a Spanish company on two cellulose plants, the largest foreign investment in Uruguay’s history.
Brazil declined Uruguay’s request to mediate the dispute - Argentina says the plants violate a border treaty - which has raised what Uruguayans consider unreasonable barriers to trade and torpedoed the candidacy of an Uruguayan, Carlos Pérez del Castillo, to be director of the World Trade Organization.
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.”
Mr. Vázquez was reluctant, though, to say explicitly that he favored 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 exists 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 Bush will lose his authority to negotiate “fast track” trade agreements 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 Mr. Bush announced, during a visit by Mr. Vázquez to the White House in May, that he favored “extending our commercial relations” and suggested that talks begin here as soon as possible.
Mr. Bush made his offer as Venezuela was preparing to join the Mercosur group, which was founded in 1991 and is based here. Venezuela was formally accepted into the group in July, and Mr. 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.
But Mr. Chávez may have overplayed his hand by suggesting the creation of a NATO-like alliance and a common Mercosur army. That proposal was not well received in the four original member countries, Argentina, Brazil, Paraguay and Uruguay, all of which endured military dictatorships in the 1970’s that committed major rights violations, and Mr. Vázquez said in the interview that the idea did not interest him.
Within Mr. Vázquez’s governing coalition, though, left-wing groups close to Mr. Chávez and his “Bolivarian Revolution” to raise living standards for the poor have been working to undermine Mr. Vázquez’s flirtation with Washington. Montevideo is awash in graffiti that emphatically proclaim “No F.T.A. with the Yankees!” and an “anti-imperialist forum” held here late in August called for closer ties with Venezuela.
At a 10-hour televised congressional hearing here in late August, those differences were on display.
Uruguay’s finance minister, Danilo Astori, argued for an accord with Washington. Its foreign minister, Reinaldo Gargano, made the case for Venezuela: a 314 percent increase in trade in the first half of this year, more than a score of cooperation accords signed in the last 18 months and the strengthening of what he called “South-South relations.”
But “the Chávez option is only interesting if he can compensate what we lose in trade opportunities each year by being inside Mercosur,” an official, speaking on condition of anonymity because Mr. Vázquez has said only he is authorized to speak on the subject. “But his internal situation won’t let him spend that kind of money year after year. He can afford millions, but not billions.”