The controversial Trade and Investment Framework Agreement signed by Uruguay and the United States during the current Uruguayan administration will not be affected even if the radical left-wing candidate is elected president in October, said the candidate’s economic adviser, Julio Battistoni.

“We do not consider rejecting the current agreement, although we never accepted a two-way economic trade. We believe each case should be studied separately because, otherwise, we would depend too much on only one or two big external economies,” said Mr. Battistoni.

The U.S.- Uruguay agreement, signed in 2007, is not a full free trade agreement; it is a Trade and Investment Framework Agreement, or TIFA. It serves as a forum for both countries to meet and discuss issues of mutual interest with the objective of improving cooperation and enhancing opportunities for trade and investment. It was signed as a result of negotiations held in 2006, when the U.S. was favorable to a Free Trade Agreement with the South American country.

Signing this document was not easy for the Uruguayan government because of the different points of view within Uruguayan President Tabaré Vázquez’s ruling party. Economy and Finance Minister Danilo Astori, who is currently a center-left presidential candidate, promoted this measure. But the most radical wing of the ruling party, represented by José Mujica, who is now running as a communist candidate in the upcoming national election, was against it. And Mr. Mujica is currently favored in the polls, with 43 percent of the expected votes.

While assuring that Mr. Mujica would not overturn the current TIFA if elected, Mr. Battistoni pointed out that Uruguay must be very careful when forming economic agreements and must improve its global position through integration in the region.

“The countries are growing together, integrated in economic areas. We believe in our region, MERCOSUR [trading bloc including Argentina, Brazil, Paraguay and Uruguay]. If we make it stronger, our country will grow,” he told GlobalAtlanta. Nevertheless, he admitted that Uruguay and Paraguay are at a disadvantage compared to Argentina and Brazil, which have bigger economies.

In the same political party but in a different position, Mr. Danilo Astori is favorable to these kinds of trade agreements. While working as economic and finance minister, Mr. Astori promoted a free trade agreement with the U.S. 

On the other end of the political spectrum, right-wing candidate, Luis Alberto Lacalle, plans to re-negotiate an FTA with the U.S. if elected. As established in the candidate’s platform, his government would “re-consider the negotiations with the U.S. in order to celebrate a commercial agreement between both parties.”

The Uruguayan business community generally agrees with Mr. Lacalle’s view of international trade. In fact, the U.S. Chamber of Commerce in Uruguay promotes a free trade agreement with the U.S.   

“Uruguay needed an FTA, but when the U.S. was finally interested in it, Uruguay missed the opportunity and signed a different accord that did not really change the relationship between these two countries. The best thing our government could have done was signing an FTA with the U.S.,” said Horacio Hughes, former president and current member of the board of the U.S. Chamber of Commerce in Uruguay.

Mr. Hughes also recognized the advantages of this kind of agreement. “Except for Europe, I would sign FTAs with everyone. An FTA with the U.S. would eliminate some taxes, and Uruguay would save almost $100 million every year.”

The TIFA, on the other hand, does not necessarily eliminate tariffs on products traded between the U.S. and Uruguay, but does address market access issues, labor, the environment, intellectual property rights and capacity building.

Meat, milk and technology

Uruguay is currently the 96th largest goods trading partner of the U.S. with $1.1 billion in total two-way goods trade during 2008. And the U.S. is the second-largest trading partner of Uruguay. The four largest imports from Uruguay in 2008 were: meat ($110 million), skins ($17 million), wood ($15 million) and fish and seafood ($12 million). The top export categories to Uruguay in 2008 were machinery ($315 million), perfumery and cosmetics ($68 million), plastics ($62 million), and optic and medical ($49 million).

Even Uruguay’s communist faction believes international commerce is important for such a small country as Uruguay, left-wing representative Mr. Battistoni added. “We have to assume that our local market is very small. Our big productive structures may grow much more and will always depend on external markets. In this way, we are thinking about policies that let us open to other destinations, and the U.S. plays an important role here,” he said.

The U.S.’s main role for Uruguay trade is as a market for meat. Uruguay is already positioned in this market, but as Mr. Battistoni says, it has to grow even more.

“Our country has developed high-quality products that are sold in exclusive markets. We have to grow this way by the incorporation of more technological advances.  As the produced amount cannot be so important, we need to sell quality, in order to have less dispersion in bigger markets such as Europe, Asia and the U.S.,” said Mr. Battistoni. He highlighted the fact that Uruguayan livestock has not had incidences of “mad cow” or foot–and-mouth disease.  

“We are also interested in selling elaborated dairy products, such as yogurt and cheese, as we already sell powdered milk.  We firmly believe that both meat and dairy products industries must live a technological revolution in order to penetrate in more markets,” he added.

And technology is the third product Mr. Mujica’s advisers want to sell in external markets. “Uruguay is well-positioned in this area, and our aim is to promote this sector by the growth and diversification of products for export,” said Mr. Battistoni. He noted that the contribution of technology to the country’s gross domestic product is not only growing constantly but is almost the same as that of milk, with $100 million and $120 million, respectively, in annual exports.

Waiting for the election

Uruguay’s first leftist government was elected in 2005, and the polls show that it is highly probable that the electorate will give the same party a second chance in the upcoming presidential election.

This does not mean, however, that the leftist candidates would reject the standing TIFA between their country and the U.S., according to both campaign teams. The future of the trade agreement remains to be seen.

“It is difficult to say what will happen with bilateral economic relations, because the presidents of both countries will need support from their parties. This cannot be taken for granted, as parties are divided in their internal structure,” Uruguayan political science professor Fernanda Boidi told GlobalAtlanta. "Considering the best political scenario in Uruguay - a ruling party with an important representation in Parliament - I am apt to believe that changes will take place at slow pace,” she said.

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