Uruguay plays balancing act between US, leftists

MONTEVIDEO, Mar 4 (Reuters) Uruguay, a small, often-overlooked cattle-raising country in a corner of South America, is drawing attention as Washington and key Latin American leaders jockey for regional influence.

When US President George W Bush arrives on Friday in Montevideo, he will follow Brazil's President Luiz Inacio Lula da Silva as the second prominent leader to touch down in this nation of 3.3 million people in recent weeks.

''In some ways, it seems Uruguay's importance has taken on a size bigger that its own,'' said Adriana Raga, a political analyst at the Cifra polling firm in Montevideo.

Uruguay's President Tabare Vazquez, whose moderate leadership belies his former praise of Cuba and criticism of Washington, will host Bush as he seeks to reach out to some of Latin America's left-leaning governments in a region where he is widely unpopular.

The Bush administration is also looking to bolster its push for bilateral free-trade agreements with Latin American countries and has offered a deal to Uruguay -- which Vazquez has hinted he might be interested in.

That angered some countries in the South American trading bloc Mercosur, which is dominated by Brazil, Argentina, and new member Venezuela.

Mercosur, which also includes Paraguay, prohibits bilateral trade pacts, instead calling for the bloc to negotiate as a whole. Some analysts have warned a Washington-Montevideo alliance could weaken the customs union.

Vazquez complains regional trade imbalances within Mercosur have unfairly hit smaller economies like Uruguay's while the United States has steadily become one of the country's biggest buyers of its chief export, beef.

In a visit late last month that some Brazilian media said was arranged after Bush's announced tour, Lula offered Vazquez assurances Mercosur would improve conditions for its smaller members.

''For Brazil, keeping Mercosur intact is important for its regional leadership,'' Raga said.

Venezuela's President Hugo Chavez, a Washington antagonist also seeking to expand his regional influence, gives Uruguay subsidized oil and has pushed for greater cooperation between the two country's state oil companies.

BALANCING ACT Since coming to office in 2005 as Uruguay's first left-wing leader, Vazquez has carved out a moderate path in the mold of Lula and Chilean President Michelle Bachelet, promoting pro-market policies and wary of antagonizing Washington.

It marks an evolution for Vazquez, an oncologist and former mayor of Montevideo, who only years ago openly challenged Washington-backed economic policies and touted the benefits of the Cuban revolution.

He heads an unruly coalition known as the Broad Front, grouping factions ranging from the Communist Party to former Tupamaro guerrillas to socialists to social democrats.

Talk of Uruguay's interest in a trade agreement with the United States has opened divisions within Vazquez's governing coalition with some outwardly challenging it.

Some Vazquez supporters disagree.

''Times change,'' said Marisel, 57, a housewife who only gave her first name. ''I voted for the left, but it would foolish if we stay rooted in our stance of the 60s and 70s.'' During a rally on Friday marking his second year in office, Vazquez referred to his balancing act as a moderate leftist leader.

''Are there differences between the governments of the United States and Uruguay? Of course there are. This is a democratic, anti-oligarchy, anti-imperialist government,'' Vazquez said referring to his own administration.

''But we also have some things that we agree on.'' REUTERS SP KP2223