Remarks by Ambassador Baxter at Marketing Management Association Luncheon

Uruguay-U.S. Bilateral Relations: Constructing a New Reality?
Remarks by U.S. Ambassador Frank E. Baxter
Asociacion de Dirigentes de Marketing del Uruguay (ADM)
Montevideo, Uruguay

July 30, 2008

(begin transcript)

Muchas gracias. Es un honor y un privilegio para mí dirigirme a tan selecto grupo de líderes uruguayos. Y también lo hago con mucha humildad. Los uruguayos parecen ser excelentes oradores por naturaleza. Con frecuencia, mientras miro las noticias en televisión, me asombra ver a los uruguayos que son entrevistados en la calle. Todos parecen ser Cicerón. Nunca seré Cicerón, pero puedo ser un poco mejor en mi lengua materna, de modo que continuaré en inglés. Les agradezco me disculpen.

I have been asked whether Uruguay and the United States are constructing a new reality. My answer is a resounding and positive yes. I think our relationship is advancing economically, politically, socially and culturally. Further, I think that citizens of both of our countries are benefiting and will benefit more from this evolving reality. Today, I would like to talk about that evolution.

To discuss this subject, it is very appropriate to be addressing a group dedicated to marketing. Marketing is essential to a free society and a global economy. Every individual and every group, including every city, region and country has a brand. A quick definition of a brand is that it is the perception that others have about an individual, a group, or a product. Companies spend millions in advertising in order to improve their brand and have customers think favorably about them. In our global economy, it is essential to continuously manage your brand. It is necessary to be clear about target audiences and to constantly sharpen the message. Uruguay has been working on its brand with the “Uruguay Natural” campaign and considerable outreach. Our embassy has sponsored at least 10 delegations to trade fairs over the last year. Your profile has been raised around the world and especially in my country. However, there is more to be done. I have heard you described as a secret paradise. I am sure that you can still be a paradise without being such a secret.

It’s a happy coincidence that today is also the 61st birthday of my friend Arnold Schwarzenegger. I mention Governor Schwarzenegger because besides being a good friend, he is also an inspiration. He represents many of the values and opportunities that have made the United States such a great country over the last two centuries. He arrived in the United States at the age of 21 with but a dream. Forty years later, he has become one of the most successful public figures in the United States He has said: “If you work hard and play by the rules, this country is truly open to you. You can achieve anything.” I believe that, and I know that most Uruguayans feel the same about your country.

In my 20 months as U.S. Ambassador to Uruguay, I have gotten to know many of you, and have often said that you are the nicest and kindest people in the world. Your hospitality and kindness to my wife, Kathy, and me have been incredible. Mi esposa y yo nos sentimos como en nuestra casa, tanto en Montevideo como en cualquier lugar del interior. Gracias, gracias y muchisimas gracias! While officially I represent the President, in reality we both represent the people of the United States. The strength of our country is not so much its government as it is its people. We, like you, are a nation of immigrants. It is always important to remember that we are really some 300 million different persons with some important common values. It is impossible to accurately generalize about us. Generalizations about both of our countries are usually more misleading than enlightening.

Since I represent the people of the U.S., Kathy and I have wanted to get to know the people of Uruguay as much as we can. In order to do that, we have tried to visit every part of your country. By next month we will have been to all 19 departments, many more than once. Some generalities about you that I feel comfortable with are that you are the nicest people I have met. You are very creative in the arts and music, but also in businesses like software and animation. You have a stable society. And you certainly have a beautiful country.

The world is changing rapidly, and my country is no exception. Soon we will have a new President and Congress. Regardless of who emerges victorious, I expect a continuation of the very positive view of Uruguay that Washington now has.

Another change is that we are presently experiencing some economic challenges. Our financial sector has been too exuberant and leveraged in financing homebuilding, and is suffering huge capital losses. Many new homebuyers have been unable to pay their mortgages. The concurrent drop in home prices has resulted in weakness in the retail sector. Petroleum dependent businesses have also been having a hard time. There is little consensus among economists. In the latest Wall Street Journal poll, slightly over ½ of them thought that the U.S. is in recession. In fact, parts of our economy remain strong. This is especially true in export industries. Our government and central bank have instituted very proactive fiscal and monetary policies addressing the weaknesses in our financial sector, stimulating the economy, and helping troubled home owners. The economy has been the number one topic recently in the presidential race.

Although I make no claims to be a forecaster, I don’t expect the difficulties in our financial sector to travel to Uruguay. Your banks do not appear to have anywhere near that kind of leverage.

One area which both countries need to carefully watch is the increasing prices of some commodities. Inflation impedes growth and is especially hard on working people.

For the longer term, I am very optimistic about our economic future. Businesses in our economy learn from setbacks, and emerge stronger than ever. Some of the doomsday scenarios we hear don’t strike me as very realistic. However, since forecasting isn’t especially reliable, it is always wise to be prepared for anything. It is also wise to remember that, in finance, hope is not a strategy.

There are also changes in our military. For more than a century, we been active in disaster relief around the world If there is a flood, a tsunami, an earthquake, or a fire it is likely that our military will be there assisting. Today, much more emphasis and resources are being devoted to preparation for and anticipation of disasters. We feel that an essential part of peace keeping is to reach out to friendly nations to help in training, including building medical and educational infrastructure. In our training exercises in the region, we have been able to provide lasting benefits such as schools and clinics.

Here I would like to applaud Uruguay for its inspiring leadership in peace keeping. Your contribution to United Nations peace keeping programs is an example for the world.

Despite all of the recent controversy about immigration in my country, it remains as one of the most open countries to legal immigrants and non-immigrants in the world. For instance, hundreds of thousands of people whose heritage is Latin American become U.S. citizens every year. Many of those new citizens continue to support their native countries with remittances and in other ways.

We are very open in many ways. We import over $6 billion in goods and services every single day. We educate hundreds of thousands of students from foreign lands. We welcome artists, politicians, government officials, teachers and others from all over the world. We have welcomed millions of refuges. We are a leading tourist destination. The lower dollar makes us a real bargain. Incidently, our consulate approves over 90% of all non-immigrant visa applicants.

The relationship between our countries has flourished for a long time. General Artigas expressed approval of our constitution, and there were communications between him and the U.S. government during the early part of the 19th century In 1817 our President Madison sent sailors from Baltimore to fight on the General’s side against a Portuguese blockade. When the general had to go into exile, President Monroe offered him a place to live and a pension, although he decided to stay closer to Uruguay by moving to Paraguay. In 1852, Uruguay and the United States signed a Treaty of Friendship, Commerce and Navigation in which we pledged “perpetual friendship between the U.S. and its citizens on one part, and Uruguay and its citizens, on the other part.” Our pledge still stands today. At the height of the 2002 crisis, the U.S. granted Uruguay a 1.5 billion dollar bridge loan and pressed the IMF hard to negotiate a long-term plan with Uruguay. We reopened our market to Uruguayan beef in record time. And our relationship continues to be very robust today.

In the past four years we have signed four important agreements:

1. In 2004, we signed an Open Skies Agreement to improve the air linkages in both our countries. It allows for extending flight frequencies and destinations.
2. In 2005, we signed a Bilateral Investment Treaty, known as the BIT, to protect and to promote bilateral investments.
3. In January 2007, we signed a Trade and Investment Framework Agreement, the TIFA. The TIFA is an excellent instrument for achieving substantial progress in many trade areas. Some 11 working groups are in constant communication, and their work has already yielded concrete results. The opening of the $180 million blueberry market to Uruguay was negotiated under the TIFA and we are also working on certifying de-boned lamb and in the longer term, citrus. We expect that later this year we will be signing agreements under the TIFA concerning the environment, e-commerce and business development.
4. As a result of the TIFA, in May of this year, we signed a Bilateral Science and Technology Cooperation Agreement. The new agreement provides a mechanism through which the United States and Uruguay can broaden cooperation in all scientific and technology fields, and move forward in areas of collaboration such as energy, health issues, science and technology education, engineering, sustainable development, agriculture, and natural resources. It will support government-to-government exchanges and scientific partnerships between private, academic, and non-governmental entities.

To follow up on the Science and Technology agreement our Undersecretary of State for Democracy and Global Affairs, Paula Dobriansky recently brought a blue ribbon delegation of scientists and doctors to Uruguay to discuss possible exchanges and joint projects.

In the last eighteen months Uruguay has been host not only to our President, but to the most important four members of our cabinet (Labor, Treasury, Commerce and State). In addition, U.S. Trade Representatives, Congressional Delegations, and several high-ranking officials from other Departments have visited the country. President Vazquez and many cabinet members have visited the U.S.. There is activity between most of our Cabinet Departments and commensurate Uruguayan Ministries.

As Ambassador I have made seven trips to Washington on Uruguay business, I have been with President Vazquez on his visit to California, where he had a successful meeting with Governor Schwarzenegger. I have also had two other meetings with a number of California businessmen. I have been to Montevideo, Minnesota, where they celebrated General Artigas’s birthday, and I have visited the partners of Uruguay in Minneapolis. I was with the Uruguayan delegation to the Americas Competitiveness Forum in Atlanta, which was the forerunner of the incredibly successful Americas Innovation forum held in Punta del Este in March. We have had scores of important visitors from all walks of life from the U.S. In our residence we have hosted over 6000 people from all over the world as well as Uruguayans. I know that many of you have been there. Mi casa is su casa.

The United States has a strong interest in constructive relationships with countries that respect fundamental democratic values and the rule of law. We will work closely with any government, regardless of its ideological persuasion, as long as it is committed to our shared principles and the well-being of its citizens. Therefore, Uruguay is very important to the United States. Economically, we see you as a valuable example of a stable, well-managed economy governed by sound market principles. Politically, you have the values, and the institutions needed to sustain a vibrant democracy. Socially, you are an example of rationality in a sometimes volatile region. I like to use a boxing analogy about you which is that you punch above your weight! My friend Arnold has said: “Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength.” We see a Uruguay that has gone through recent struggles, a Uruguay that in spite of it all did not surrender, a Uruguay that is now much stronger and much better prepared to take on any hardships, as well as opportunities, that the future may bring. You know that falling is not failure. The only failure is when you don’t get up again. We love that attitude.

We share beliefs that are essential to a free society:

• The belief that democracy, backed by free press, regular and transparent elections, and the rule of law, is the most effective and moral form of government.
• The belief that the free market, under the rule of law, with universal education, and effective support for the less fortunate are the best ways to develop economies and reduce poverty.
• The belief in the role of civil societies in the formation and policies of modern democracies.

In terms of commerce, we recognize that Uruguay has an excellent environment in which to do business. You enjoy many conditions which are unequaled in Latin America. You boast one of the best telecommunications systems in the region, You have good infrastructure and transportation networks which you are striving to improve. Montevideo has a world-class natural port and Uruguay’s secondary ports give access a waterway that flows deep into South America. Your port expansion plans are very creative and exciting. The new Airport terminal plus the expansion of Pluna will make you an even more important logistical hub.

You have a creative population, highly literate and capable, which, with the right training, can be able to adapt quickly to the technological changes that are required to compete today. You have the most even income distribution in Latin America, which is attractive to businesses and investors. You have a transparent business environment. Additionally, you show economic prudence, reliability, and an independent legal system.

The U.S. is already a major investor in your country, with a stock of direct investment of over $600 million, according to our Department of Commerce. Over 100 U.S. companies work here, especially in forestry, tourism, transportation, telecommunications, services, and agriculture. Just four U.S. companies - Weyerhaeuser, the Conrad Hotel, McDonald's, and Sabre - generate approximately 3,000 high-quality direct jobs. Sabre already employs over 900 people, some of whom are Uruguayans who have been recruited home from abroad. Its campus looks like Silicon Valley. These are high-paying, high-value-added service jobs. Weyerhaeuser employs over 1,000 people in the interior. It makes special efforts to ensure its projects work hand in hand with nearby communities. It has changed the face of Tacuarembó, and I encourage you to go and see for yourselves the positive impact that it has had on that Department. The McDonald’s chain of restaurants employs over 1,000 young people across Uruguay, which is the first job for many of them. The Conrad Hotel employs approximately 900 people during the low season and 1,500 during the summer. I think you know the very positive effect the Conrad has had not only in Punta del Este but in Uruguay as a tourism destination as a whole. I am sure you also know the very positive impact on Uruguay from American Airlines’ direct Montevideo to Miami flights. I was recently on one of those flights in which American Airlines was hosting 11 travel agents in order to develop more tourism business. Both of these U.S. companies are increasingly helping position Uruguay as an easily-accessible and affordable international tourist destination.

I strongly believe that you have an attractive environnment and that much more investment can be available, under the right conditions. Investors from the U.S. as well as other nations are looking for opportunities around the world. Uruguay is very interesting because of its safety, its stability, its climate, and its time zone. To date your focus has been on Direct Foreign Investment including buying and/or developing existing resources such as timber, infrastructure, and agriculture. You are taking steps to make Uruguay significantly more important.

First, you are focusing more on human resources. You know that human capital is the most important capital in the 21st century. This is the key to having state of the art businesses locate here. U S high tech companies are looking for trained workers. You know that to be a more serious competitor you must produce more business people, engineers, computer specialists, technologists etc. Our Embassy is helping by being involved in the training of 20,000 young Uruguayans to learn English, which is an essential tool to compete in this. We are also soliciting scholarships from U S business schools for Uruguayan students. Our joint efforts through the Fulbright Commission to exchange scores of teachers and other experts produces a signficant contribution to your human capital. We support DESEM Junior Achievement which is teaching hundreds of young people how to be entrepreneurs. Project CEIBAL is an indication of your serious desire to be a competitor with high quality workers.

I also applaud your current focus on demographics. Recruiting and retaining talented Uruguayans must be be an important part of your human resource strategy. This is such a beautiful place to live, and today it isn’t necessary to leave in order to have a fulfilling career. Today, trained people can live anywhere and offer their services to the world. I like to say that today you can export your brain without sending your body along.

Looking at polls, it is clear that most Uruguayan youth do not want to pursue a business career. Instead they would rather be in a profession such as medicine or law. I can identify with them. Ever since I was very young, I had wanted to be a lawyer. I envisioned myself using the law to fight for right and equality – but whether we like it or not, our lives are mostly the result of random events. It is said that if you want to make God laugh, tell him your plans. An important random event for me was that shortly after I finished high school, I joined the Air Force, instead of going on to university as I had planned. I hasten to add that I wound up flying typewriters rather than jets. While there, I met an airman slightly older than me who was trading in the stock market. I worked with him, for no pay, as he looked for investment opportunities. I became excited by the dynamics of finance and its role in creating value. In university I studied economics rather than law, and since have had a series of jobs as a trader, institutional salesman, investment banker and eventually running an investment banking firm. Because of a random set of events, I believe that I have been able to give more to society than if I had followed my original plan. In my former firm and the firms that we served, thousands of good jobs have been created. We also designed new processes that made financing more cost effective. I have been able to contribute significantly to education, health care, and the arts. I hope that more Uruguayan youth will take a look at business as a path to be creative, fulfilled and to make a contribution to society. Jose Pedro Varela, the father of Uruguayan free education started as a businessman. He said: “It is to the young people that I am speaking; from young people I expect everything.” Business is a very good way to meet those expectations. Bill Gates is an example of someone whose creativity has changed the world, and who now is using his resources to improve health and education around the world.

You are also beginning to address another necessary component for significant growth. That is the development of more sophisticated capital markets, and particularly revitalizing your stock market. As I mentioned before, direct investors are coming into Uruguay buying Uruguayan firms, and developing existing resources, such as timber and real estate. However, institutional investors, such as pension funds and mutual funds-which have the bulk of the world’s capital-, are also looking for ways to invest in this wonderful economy. Rather than running businesses themselves they want to buy shares in businesses. They need the vehicle of capital markets to invest in Uruguayan businesses, both existing growing companies as well as new ones. A liquid stock market provides many other benefits such encouraging risk capital for start ups and new ideas. Young people would be more anxious to stay home if they would have a better chance to develop their ideas here. A stock market also provides opportunities for existing business owners to liquefy without entirely selling out, thereby retaining their skills in Uruguayan businesses. In short, it will be impossible to achieve your full economic potential without viable capital markets. Having some background in this area, I stand ready to be of any help you wish.

Exports will always be a very major component of your economy. Over the last few years you have managed to diversify the variety and destination of your exports. The fact that your exports are shattering record after record is an excellent indication that your products are considered of excellent quality and price in markets world-wide. In 2007, the U.S. was the second largest buyer of Uruguayan products, purchasing just under half a billion dollars, or 11% of your total exports. Our total imports from you this year are way down, because other countries are willing to pay higher prices for your meat. This is a cyclical phenomenon which will change. For now, I feel lucky to have access to asados every day. Besides the traditional agricultural products, the U.S. purchased over three hundred different types of Uruguayan products including several non traditional exports such as gasoline (13% of the total exports to the U.S.), plywood, parts and accessories for motor vehicles, honey, and even floor tiles.

In fact, in 2007 the United States was the number one export destination of almost one hundred different Uruguayan products. Among these were:

• Sawed wood: taking almost 50% of the total exports (14.4 of 29.7 million dollars);
• Brake linings and pads: taking again almost 50% of the total exports (2.5 in 5.4 million);
• Live horses: again almost 50% of the total exports (1.6 in 3.3. million);
• Woven labels and badges: 22% of the total exports (.7 million in 3.2);
• Medical implants, mainly gastric stimulators, cardiac valves and parts for pacemakers: 55% of the total exports (0.8 million in 1.5);
• Breads and pastries, (HTSUS 1905), 26% of Uruguay’s total exports go to the U.S.. (1 in 3.9 million);
• Motorcycles and cycles fitted with an auxiliary motor: 62% (400,000 in 645,000)

I believe that we have only begun to tap the potential for more commercial activity.

The U.S. is the world’s largest market. As I mentioned previously, every day, we import over $6 billion in goods and services. The potential for Uruguay is virtually unlimited. As you know, the world economy is rapidly switching from an industrial economy to an information economy. Most of the employment growth in advanced developing countries and developed countries is in information technology and services. Actually, commodity and industrial employment is decreasing world wide. Uruguay has tremendous potential to take advantage of this trend. To capitalize, you will need to focus more on exporting molecules, bytes and services. These don’t face as many barriers such tariffs and quotas. Such a focus would be another factor in retaining your best talent.

In addition to information technology, I think the opportunities in tourism (including medical tourism), logistics, and alternative energy are also limitless. The U.S. is a demanding market. To win business, the customer has to come first. Those who want to sell in the U.S. must study the market and adapt to it. Quality, price and reliability are keys. Above all, you must market, market, and market. In my former firm, the motto was you go broke waiting for incoming calls. Marketing is not only for businesses. If academics, hospitals, labs, students or others look hard for opportunities in our country, I guarantee that they will find them. Our Embassy is always ready to be of help, but you must take the initiative.

There is much more to be done. Next month a delegation led by Minister Martinez is going to the Americas Competitiveness Forum in Atlanta. They will interact with businesses large and small, with academics, and with government officials from all over the hemisphere. Uruguay wants to have another Innovation Forum next year. I am sure that would be another big step in making you the innovation center of the Southern Cone or, probably, South America.

These are some of the things that are happening in this new reality. We are expanding our business ties, deepening our engagement, and are working together to improve the lives of the citizens of both of our countries. It is impossible to describe everything that is happening in and between free societies. I am certain that there are as many positive developments below the surface as those that we can see now. It is a very, very exciting time.

A muchos de ustedes les gusta decir que son un paísito. Hoy en día, ser un país pequeño es una gran ventaja. Se pueden adaptar a un mundo que cambia con mucha rapidez. Mi imagen de Uruguay es que es un país pequeño que piensa grande. Nos alegra que tengamos tantos lazos con este pequeño país que piensa tan en grande. Los lazos van en ambos sentidos. Hay un número importante de uruguayos / estadounidenses en cada segmento de la sociedad estadounidense. Muchos de ustedes tienen familiares en los Estados Unidos. Me alegra profundamente informarles que Kathy y yo tenemos una bisnieta nacida en Uruguay, de modo que siempre tendremos un vínculo muy personal con ustedes.

Mis buenos amigos, hemos hecho grandes cosas juntos en el pasado. Estamos haciendo grandes cosas en la actualidad. Tengo plena confianza de que lo mejor aún está por venir. Muchas gracias por todo.

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