Ambassador Frank E. Baxter interviewed by Uruguayan journalist Jorge Traverso during a FocoUruguay conference in Montevideo, September 20, 2007.   [AUDIO of the interview ]   Following the interview, ambassador Baxter spoke on "Bilateral Relations in the 21st Century"

U.S. Ambassador Frank E. Baxter participated as a guest speaker during a session of the FocoUruguay Conference held in Montevideo, September 20, 2007. The series of conferences on "Uruguay, the Region and the World" is sponsored and organized by Indumex, a financial service company. Ambassador Baxter spoke on "Bilateral Relations in the 21st Century."

Ambassador Frank E. Baxter delivering his remarks during a FocoUruguay conference in Montevideo, September 20, 2007. "There are no barriers to most 21st century businesses such as software and services, anything that can be transmitted and sold electronically, there are no barriers to it, and that’s where the world is going," Baxter says.

Following is transcript of Ambassador Baxter's remarks, as delivered:

AUDIO

Honorable Mr. President [former Uruguayan president Lacalle present], diplomatic corps, diputados, it’s a great pleasure to be here, I’m grateful to FocoUruguay and to Indumex for this invitation. I think Indumex is a very important industry. A very important component of a growing free society is to have the free trade of currency, and so it is very, very important. And speaking of currency, The Economist magazine has what they call “Big Mac Index” where they look at the price of Big Mac hamburgers all over the world, I think in a hundred-odd countries and that way by a concept called “purchasing power parity” they can decide which currencies are cheap and which currencies are expensive. The last time I looked, the peso was 33% under priced, so I hope that you own a lot of those, Indumex.

Currency trading is volatile, dangerous, I just read a couple of days ago that Japanese housewives are way under water, apparently they’re home trading in the currency market and the market has gone against them recently, and it’s just a reminder about markets, as we talk about markets, is that there really are two types of people, there are those who don’t know, and there are those who don’t know they don’t know.

I never tire of talking about your wonderful country, It is an important relationship for our country. We have a strong interest in constructive relations with nations that respect fundamental democratic values and the rule of law. We want to work closely with any government, regardless of their ideological bent, as long as that government is committed to democracy, the rule of law and the wellbeing of its citizens. That’s one reason that Uruguay is very important to us, but it is not the only one. The most important reason is that, as I said earlier, is that you have a good and kind culture, a creative culture, and we have many, many one-on-one relationships, it's hard to meet somebody from your country that doesn’t have a relative in our country, and I mentioned earlier at a breakfast that a great number of people from the U.S. want to come here, I just heard in the last few weeks that there are 80 people that are applying for residency in Uruguay from the United States, and I think there’s going to be more of that.

I think that you have the culture and institutions needed to sustain a vibrant democracy and a growing economy. Very importantly, your culture, is an example of rationality in a sometimes volatile region. I like to use the boxing metaphor for you, “I think you punch above your weight.” This of course doesn’t mean that our governments, our people, always agree, but we agree on the fundamental values of democracy and the rule of law.

We have a very long lasting history of working closely and constructively, in fact, General Artigas took a lot from the U.S. Constitution, and there’s been documentation of that in some of his presentations early in the 19th century. In 1815, he asked for help from our President Madison who sent down some sailors from Baltimore to help repel the Portuguese. And in 1820, when things were not really going well for him and he wanted to go on exile, our President Monroe wrote him a letter, said “come to the United States, we’ll even give you a pension,” so, we have a long, long relationship, and, I think it was in 1852, we signed our first treaty which, we agreed on “perpetual friendship and the reciprocal freedom of commerce,” so, you can see that we have a long history of treaties and of relationship. In recent past it just continues, you know, since the crisis when most of the world turned their back on you, we were able to get a bridge loan started of a billion and a half dollars which was just the equivalent to the demand deposits and stop the run on the banks, change the psychology, kind of muscle the IMF into taking the loan. And you have vindicated our faith, you reciprocated by paying the loan off quickly. Another thing that we did that is hard in our country, we expedited the approval of the import of your beef, that there had been a ban on it for, I think for hoof-and-mouth disease. We put you at the head of the queue. There’s still other countries, other neighbors, who are still waiting in that queue several years later.

We’ve had a number of agreements since. In 2004 we had an Open Skies Agreement, where we can exchange flights, and, just recently, just this year, again we had you jump another queue. In order to fly an aircraft into the United States you have to be in what’s called a “category one.” We had a group from our Federal Aviation Association come down and tell your airport what it would take to be “category one,” within a few weeks. It usually takes years to get them to do that, and now the airport is doing those things, I believe. There isn’t that much to do, but it’s really important for us to be able to let your airline fly into our country. And I know the Atlanta airport is very much recruiting PLUNA to have a flight go into there rather than all the flights go into Miami.

I have to say that the feeling about you in Washington DC, our capital, is very impressive. When I go up there as the Ambassador to Uruguay, the doors open for me, from the Cabinet members and other officials, and it’s resulted in a lot of good things that have happened.

In addition to the Open Skies Agreement, we’ve had a Bilateral Investment Treaty, which is really important as it insures investors safety, for the free exchange of currency, of their ownership in your country. We had a signing of the TIFA earlier this year, which is quite important because it explores all the trade things that can be done without parliamentary approval, the most recent example, just on Monday, the approval of the importation of blueberries is an example of that work from the TIFA. In addition to the blueberries, now you can export pears and apples. We’re working very hard and I think within a year we’ll be able to do boneless lamb, and there are other things down the line, so the TIFA is extremely helpful. Within the TIFA there are several working groups from both parties, from both countries, that are working on a number of issues. We’ve had a number of U.S. Government leaders come to Uruguay to learn more about your country and to show our respect for your country, including the President and members of the Cabinet, we have Secretary Gutierrez is coming early next month, members of Congress. Further, our embassy has invited many business leaders, academic leaders, to get more acquaintanted with Uruguay.

I think that we are working hard, very good, in trying to improve trade relations. Unfortunately the world is still, although free trade definitely, irrefutably, empirically, good for all nations, there’s still a tremendous protectionist bias, and I think it’ll take years to heal that, but I think there are a lot of things that can be done now without any further agreements. The greatest potential for increasing our relationships, and talking about the future, is people to people, business to business, institution to institution. Governments can only do so much. We are in a world that is getting flat and where the long distances aren’t as much of a barrier for relations at all levels. For me, one of the best ways of getting acquainted is always to do business with someone. If you can have a good business relationship, your relationships improve. We already have a number of good relationships on the business side. We’ve been a significant purchaser of your products, in 2004 and 2005 we were the largest buyer of your products, we’re now at about the same level as Brazil. As of July we have bought about 335 million dollars from you which is about the same as Brazil, two thirds more than Argentina and three times more than Germany. Over 40% of your beef exports come to us, we love it, that’s one of the great benefits of being here, I eat it all the time. There really is so much more business to be done. While the process is slow on the government-to-government treaty basis, I always say, embrace the hand that you are dealt, and [while we will continue to pursue treaties] there’s a lot of great opportunities without signing any treaties. There are no barriers to most 21st century businesses such as software and services, anything that can be transmitted and sold electronically, there are no barriers to it, and that’s where the world is going. Some of your real strengths are tourism, logistics and services, and there are no barriers there, the only barriers are in the mind, but there are no government barriers.

Total imports to the United States last year were up 5%, phenomenal number, and I think that almost all of that increase was not in protected products but it was in new products that don’t have barriers. A sad fact is that the imports from Latin America were flat last year, and if you take Mexico out, they were actually down. According to Andres Oppenheimer, Asians seem to be reading our market better, your markets better, our market better, and taking market share. The U.S. is a tough market, but is far from impenetrable. Cracking it requires focusing on your strengths, finding niches, and targeting specific populations. Instead of going after the entire country, it’s better to pick a smaller spot, like a state. As a possible example, Uruguay is fairly well known in the state of Minnesota, as you know there is a Montevideo, they call it “Monte”, in Minnesota, where they celebrate General Artigas’ birthday for a whole week, there’s an 11-meter high statue of him, and I would think that it is probably possible to make every Minnesotan feel that life is not complete if they don’t visit Uruguay. That’s what focus can do. And further, with more than 40 million latinos in the United States, there are plenty of niches, it definitely would help if you had more of a business brand, it might make sense to characterize yourselves as a technological center, or a headquarter center, something that people can identify you with as a business. As I say, you already have many, many strengths that need to be expanded like software, tourism, and especially logistics. With the right marketing plans there are really no limits. It may take more than one try, but it’s worth it to keep at it, develop relationships and adapt to the market.

In addition to the U.S. as a customer, it is already an important investor. I think Uruguay has a very attractive investment environment, as I talked about, there is a respect for private property, respect for exchange, there is a free currency exchange, and it’s a great place to live. We are a major investor, our stock of direct investment we know of is over 600 million dollars. There are over 100 American companies in Uruguay, and for instance just two of them, Weyerhaeuser and Sabre, generate almost 2,000 high quality jobs. Sabre already employs 900 people, many of them are young graduates, these are high-paying high value added jobs. Weyerhaeuser employs 900 people in the interior, it has literally changed the face of Tacuarembo, you should go to see that. Many U.S. companies are very, very committed to being good citizens, and Tacuarembo is a very good example of that.

In the past few years, many investors from the U.S. have been buying real estate and agricultural businesses. But there are many other opportunities that can be developed right now to attract investors. I think of Uruguay as a natural headquarters country. It has the people to do it, it has accountants, lawyers, etc. It has a stable society. Investors should be encouraged to think of Uruguay as a potential headquarters, not just to think of it as a small market. It should be the headquarters for the region. I think that’s something that can be sold.

Over the longer term, there are three steps in my opinion that are absolutely necessary to attract significant investment from the U.S. or anywhere else. The first is to prepare and retain more skilled workers. The scarcest resource in the world today is human capital. Firms will generally not go into an area that doesn’t have a pool of trained workers. In fact I know of one major technological firm from our country that looked at Uruguay, liked what it saw, but didn’t feel that the trained worker pool was sufficient, and that has nothing to do with the size of the country or population, is just, what they saw in terms of workers who are trained to do 21st century work. [broken audio] …and that’s certainly true, nobody that’s not prepared is going to make it in the future. The loss of your human capital through emigration of course is a concern. The reality is today that workers create jobs as much as employers do. If a person is qualified, and lets potential employers know about it, they’ll come to him. I like to say, today it is possible to export your brain without sending your body along, you can live in this wonderful country and sell your service through the Internet anywhere in the world. Eventually more young people will understand that.

Regarding education, it’s been my experience in Los Angeles, California, where I’m from and being involved in educating adolescents, that it takes a society-wide commitment to make a change. A government alone can’t do it; it has to be everyone wanting to make the change, so that is the challenge to you.

Another need to gain significant investment is that of viable capital market. The world has been awash in capital, at least until the last couple of weeks, we don’t know what’s going to happen now [with the credit crisis]. Uruguay has enjoyed the benefits of this because the banks are liquid and willing to lend. However, there is presently no vehicle here for financial investors and therefore little access to permanent capital. I’ve had large money managers come here, they like the environment, but there is no vehicle for passive investment. Many entrepreneurial small companies in Uruguay would be very attractive to many global investors if there were a way to invest in them and have a chance for exit. Venture capital will not come to an area without capital markets. The result is that there is very little financial support for start ups and bright people with a good business plan. Small and medium businesses are where the greatest world growth in employment has been for the last several years. When you are measuring direct foreign investment you must look at new business that are starting not so much at businesses that are being sold to foreigners by retiring entrepreneurs. New business is the lifeblood of the future.

An important area that I haven’t talked about are exchanges to improve our relationship. We have encouraged trips in both ways and frequently they are life-changing events for the individuals involved, for government officials, students, academics, and I think we need to think about using technology to leverage the exchanges. Unfortunately a very small number of people from both countries can come for, say four years for an education, three years for an MBA, we have to think of ways of having small visits supplemented by distance learning if we really want to reach large numbers of both of our societies. The technology is there, the drive just has to be there to back it up.

I just have to say that after being here for ten months, I’m very, very optimistic about your country. I love it here, I love your people, my wife loves it. I think your population is very creative, that’s apparent not only in the arts but also in businesses like software animation and movie production. You are definitely strategically located from a geographic and a time standpoint. Your people are the nicest in the world and it’s just a wonderful place to live.

I often hear from your countrymen that you’re a small country and that’s a disadvantage. I believe that that is a tremendous asset as I said to Jorge earlier. Look at the success of small countries like Ireland which is now the richest country per capita in the world, Estonia, Finland, New Zealand. A little more than 15 years ago, Ireland was the poorest country in Europe is now the richest in the world. What happened? All sectors of this society: government, unions, businesses, educational entities, got together to map out the country’s future. They thought of themselves as Irish, not as one party or another party, or as a union or as a business, they said “We’re Irish, what can we do together?” The result is that, as I say, it is the richest country in the world. They were losing a lot more people than you are losing, they are coming back in droves, it’s not a miracle, it’s something that can be done with a nation-wide commitment. I really believe that Uruguay has the potential to be THE place in South America or in the world, that’s why I’m so optimistic.

I wish that all Uruguayans would share my optimism. Optimism is a quantum force. In my home state of California, we learned from the gold rush that anyone with optimism could make it, and that the only failure was not starting over. [That mostly explains the success of Silicon Valley.]

Uruguay is a very special place. I hope that there are some useful ideas that can come from this talk. I can assure you that I will be working tirelessly to let more of my countrymen know what a special place it is [and do whatever I can to improve our wonderful relations.] Thank you very, very much.

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