This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 04 BRASILIA 003459 
 
SIPDIS 
 
DEPT PLEASE PASS TO USTR FOR RWILSON, KLEZNY, SCRONIN 
NSC FOR MIKE DEMPSEY 
USDA FOR JB PENN, U/S, FFAS 
 
E.O. 12958: DECL: 10/26/2013 
TAGS: ETRD BR FTAA
SUBJECT: CAN ITAMARATY'S STRANGLEHOLD ON FTAA POLICY BE 
BROKEN? 
 
 
Classified By: Janice Fair, Economic Officer, Reasons 1.5 (b) and (d) 
 
¶1. Summary.  Widespread reporting in Brazil on the outcome of 
the FTAA TNC meeting in Trinidad & Tobago (T&T) unleashed a 
hail of criticism directed at Itamaraty, both on the 
substance of its FTAA policy and its conduct in T&T.  By the 
end of the TNC meeting, Brazilian dailies were reporting that 
Brazil, along with Argentina, were isolated re their 
insistence on a draft FTAA Ministerial Declaration based 
along the line of Mercosul's 3-track proposal.  Brazil's 
struggle during the TNC to keep Uruguay and Paraguay in the 
Mercosul fold was viewed as particularly damaging.  Minister 
of Agiculture Rodrigues and Minister of Development Furlan 
joined  the fray publicly charging that Itamaraty had not 
vetted the proposal it made in T&T with CAMEX, Brazil's 
high-level trade decision-making body, and claiming that 
Itamaraty intransigence is threatening the FTAA.  President 
Lula convened a lunch meeting with Ministers on October 8 in 
which he ordered Ministers to cease and desist the public 
squabble.  Chief of Staff Dirceu stated publicly that 
President Lula will more actively follow the negotiations and 
that the proposal presented in Trinidad and Tobago was "not 
the last word."   Post held meetings with President Lula's 
Chief of Staff, and interlocutors in the Agriculture and 
Finance Ministries to explore possible implications of the 
internal dissent on the government's FTAA policy.  Despite 
widespread frustration with Itamaraty's direction and 
stranglehold on FTAA policymaking, it is unlikely that a 
sufficient challenge will be mounted that could change GOB 
policy before the FTAA Ministerial in Miami at the end of 
November.  End Summary. 
 
Casa Civil 
------------ 
 
¶2. Chief of Staff Jose Dirceu conveyed to Ambassador during a 
lunch meeting on October 10 that President Lula wants an FTAA 
agreement and that Lula had instructed Foreign Minister 
Amorim to work with USTR Zoellick to that end when (if) they 
meet in late October.  Dirceu commented that Minister 
Amorim's position within the government is very strong given 
Itamaraty's foreign policy successes over the past six 
months, but also stressed that President Lula sets policy and 
Itamaraty is charged with carrying it out.  Dirceu said that 
he personally would be following the FTAA negotiations more 
closely, and planned to speak directly with Ministers 
Rodrigues and Furlan to better understand  their concerns. 
On substance, he asked how the USG could expect Brazil to 
include sensitive issues such as IPR, services, investment 
and government procurement in the negotiations when it will 
not discuss agriculture.  Ambassador noted that domestic 
support is only one aspect of agriculture and that we are 
actively negotiating a variety of agricultural issues, 
including market access.  Dirceu expressed skepticism that 
the US would be very forthcoming in an election year. 
 
Agriculture Ministry 
------------------------ 
 
¶3. On October 8, econoff met with Paulo Venturelli, the 
Agriculture Ministry's representative at the Trinidad & 
Tobago TNC meeting and General Coordinator of the Agriculture 
Policy Secretariat in the Department of Agricultural Economy 
to explore AGMIN views following the TNC, and to gain a 
better understanding of AGMIN's position following Minister 
Rodrigues' public criticism of Itamaraty.  In a conversation 
with econoff in T&T, Venturelli had commented that the 
Itamaraty negotiators were "paranoid;" he was no less frank 
in the October 8 meeting, claiming that Itamaraty has been 
lying to President Lula regarding the FTAA.  Clearly 
frustrated, Venturelli asserted that Itamaraty does not want 
to negotiate in any forum, FTAA or WTO, noting the collapse 
of talks in Cancun. 
 
¶4. Venturelli said that top level officials of Itamaraty are 
formulating policy based totally of 1960's North-South 
ideology and without real economic consideration.  Continuing 
to vent, he claimed that agriculture was not the central 
concern underlying Itamaraty trade policy, but rather was 
being used to shield their real interest, which is to avoid 
negotiation of rules in services, investment, IPR and 
government procurement.  As if the substance of the position 
is not bad enough, Venturelli complained that Itamaraty had 
not vetted the Mercosul proposal for a ministerial 
declaration presented in T&T with any of the other 
Ministries. 
 
¶5. On domestic support, he said AGMIN understands the US 
position and wants to approach the issue from the standpoint 
of addressing the effects of domestic support within the 
hemisphere; according to him, it is not necessary to 
negotiate disciplines in the FTAA.  He said AGMIN had 
developed some proposals along this line, but Itamaraty has 
not tabled them.  He also said AGMIN doesn't have a problem 
with the US differentiated offer, which "represents more or 
less the relative access that exists today."  According to 
Venturelli, AGMIN is anxious to work on a more specific 
level, toward negotiation of better access for products of 
particular interest. 
 
¶6. Venturelli noted that CNA, the National Agriculture 
Confederation, is opposed to Itamaraty's approach.  He also 
claimed that Argentina is not staunchly in the Brazil camp. 
According to Venturelli, Argentina had produced a proposal 
for the ministerial declaration that was much "softer" than 
the eventual Mercosul proposal presented in T&T, prompting 
Itamaraty Secretary General, Pinheiro Guimaraes, to go to 
Buenos Aires a week and half before T&T.  He also insinuated 
that Argentine Vice Minister Martin Redrado departed from T&T 
early to distance himself from the Brazilian position. 
 
¶7. On 4 1 negotiations, Venturelli said Amorim continues to 
claim that USTR Zoellick agreed to approach these 
bilaterally.  Venturelli was present during the Mercosul-US 
bilateral in T&T and insists that despite the clear 
communication from the US regarding the need to keep any 
discussion within the FTAA, Itamaraty keeps trying to make it 
into something else. 
 
¶8. Venturelli was pessimistic about a successful outcome in 
Miami.  He suggested the USG adopt a hardline with the GOB, 
going so far as to tell Brazil to take the FTAA as is, or be 
left behind as the US and the other countries proceed to form 
the FTAA.  His view is that this shock may be necessary 
before the government will admit that Itamaraty's policy is a 
failed policy.  (Comment: It is doubtful that Minister 
Rodrigues would agree with this prescription, but its mere 
suggestion illustrates the intensity of frustration currently 
within AGMIN over the GOB's FTAA policy.)  Venturelli also 
advised against allowing Itamaraty to define the language of 
the debate.  His example was Itamaraty asserting that "the 
U.S. won't negotiate agriculture."  He said that U.S. should 
say it is willing to negotiate everything -- even domestic 
support, his point being that there are many ways to 
negotiate an issue; it doesn't have to be through 
disciplines.  He also suggested increasing pressure on 
Argentina. 
 
Finance Ministry 
-------------------- 
 
¶9. On October 10, Ecouns and Econoff met with Arno Meyer, 
Deputy Secretary for International Affairs in the Finance 
Ministry and the Ministry's representative to the T&T TNC 
meeting.  Meyer provided a frank and thoughtful analysis of 
the current state of play in the GOB on the FTAA and 
suggestions of how the USG could strengthen pro-FTAA forces 
within the government.  He explained that while the Finance 
Ministry wants the FTAA because of the economic benefits 
associated with trade liberalization, Itamaraty has 
responsibility for trade policy.  Other Ministries have an 
opportunity to interject their opinions, but he identified 
four perceptions that Itamaraty uses to justify its policy 
and that the other ministers find difficult to challenge. 
Given this, the other ministers have not been able to 
effectively insert their constituency's economic interests 
into the policy debate. 
 
¶10. The four perceptions he identified are: 
1) The U.S. won't negotiate agriculture.  Unlike Venturelli's 
view, Arno said that agriculture is the key issue for the 
GOB, and the unwillingness of the U.S. to negotiate domestic 
support in the FTAA provides the main justification for 
Itamaraty's approach of removing other issues from the 
negotiation.  While he understands the US argument about the 
best forum in which to negotiate disciplines, if there was 
some way that the U.S. could deal with the effects of 
domestic support in the region, Arno said this would 
significantly undercut one of Itamaraty's main arguments 
against the US position. 
 
2) The U.S. won't negotiate antidumping rules.  He said the 
US is vulnerable when it says "everything is on the table." 
Arno cited Treasury Secretary Snow reiterating this when he 
traveled to Brazil a number of months ago. 
 
3) The U.S. position regarding agricultural 
liberalization/reform has changed as a result of election 
year politics.  Echoing a point Dirceu raised with 
Ambassador, Arno said that Itamaraty has portrayed the 
pre-Cancun joint U.S.-EU agriculture paper as proof the U.S. 
has changed its position and is adopting a more protectionist 
stance.  He said this perception is important in terms of how 
it affects the overall attitude toward the US and any 
analysis of U.S. motives. 
 
4) The U.S. is out to isolate Brazil.  Itamaraty personalizes 
US aggressive trade policy suggesting that US CAFTA 
negotiations and discussions with Colombia, Peru, etc are 
aimed at "encircling" Brazil.  Ecouns and econoff argued that 
the US motivation for these trade talks is to pursue trade 
liberalization as quickly as possible with like-minded 
countries that are ready and willing; if Brazil becomes 
isolated it will be the result of its own decisions and trade 
policies, which don't coincide with those of a majority of 
countries in the region.  Arno said he understands; he had 
witnessed the isolation in T&T and knows that countries there 
were acting out of their own economic interests, but 
Itamaraty tries to portray it as is they have been forced by 
the US. 
 
¶11. Arno advised that if DUSTR Allgeier during his meetings 
in Brasilia October 20-21 could provide information/arguments 
to Minister Palocci and others that they could use to 
challenge these perceptions, it would enable them to more 
forcefully make pro-FTAA arguments. 
 
¶12. Since he had identified agriculture as the GOB's key 
issue, we asked Arno whether he thought the GOB would 
withdraw its 3-track proposal if a way around the impasse on 
domestic support was found.  He was unsure, noting that 
Minister Amorim had stated publicly that week that Brazil 
would not accept any agreement that would "tie our hands" on 
industrial policy.  He added that the Finance Ministry 
supports negotiation of rules in services and investment 
because Brazil is relatively open in these areas and would 
not have difficulty negotiating a satisfactory agreement. 
The Finance Ministry does not share Itamaraty's view that the 
country must safeguard the possibility of adopting 
nationalistic industrial policies in the future.  He also 
noted that the Finance Ministry had been very favorably 
disposed toward USTR Zoellick's ideas about a possible 
baseline approach, having common rules and then allowing 
others that want to go beyond doing so through bilaterals or 
plurilaterals. 
 
¶13. As an aside, he opined that one positive thing to have 
occurred during a tumultuous week of intra-governmental 
squabbling was the rallying of pro-FTAA forces, in the press, 
private sector, academia, and government.  He also said that 
personally he was very disappointed by the way the Brazilian 
delegation conducted itself in T&T and did not understand why 
they did not use it as an opportunity to explain and sell 
their proposal. 
 
Conclusions 
-------------- 
¶14. Some key points to emerge from these meetings and the 
post T&T public debate: 
 
-- President Lula's support for Minister Amorim means that 
Itamaraty will continue to retain a stranglehold on trade 
policy in general, FTAA in particular.   It appears 
increasingly that Amorim may not accurately portray for Lula 
the US position or the situation vis-a-vis lack of regional 
support for the Brazilian position. 
 
-- Itamaraty's defensive interest in avoiding disciplines in 
services, investment, government procurement, and IPR, is at 
least as important, if not more so, than its offensive 
interests in agriculture.  This makes it unclear if 
resolution of the impasse over domestic support would induce 
Itamaraty to withdraw its 3-track proposal or its proposal in 
T&T of text for a ministerial declaration.  Lack of any give 
by the USG on negotiating antidumping rules will continue to 
provide Itamaraty with an excuse to push for removal of 
issues it deems sensitive from the FTAA. 
 
-- Criticism of Itamaraty concerning Brazil's isolation on 
substance, and most importantly its struggle to keep Uruguay 
and Paraguay Mercosul partners in line, interjected doubt 
about the wisdom of its approach into the policy debate. 
This opened the door for wide ranging criticism from the 
press, economic commentators and even other ministers.  This 
undermines Amorim's image as a regional foreign policy leader 
and introduced the idea that Brazil could be acting as a 
spoiler. 
 
-- There is substantial support for an FTAA within the GOB. 
However, despite frustration with Itamaraty over policy 
formulation and implementation, the other ministries are not 
well positioned at this time to force a significant change. 
 
-- There appears to be real concern that there will be a 
train wreck in Miami.  The fact that ministers made this a 
public debate indicates the seriousness with which it is 
being taken and perhaps was intended as a way of drawing 
President Lula's attention to the problem. 
 
Comment 
----------- 
 
¶15. Although the prospect of a change in GOB policy direction 
before the Miami Ministerial is dim, pressure to change 
course may grow afterward as other ministers and as the 
Brazilian private sector come to realize the costs associated 
with Itamaraty's minimalist approach to the FTAA, whether it 
is isolation and being left outside an agreement, or possibly 
accepting major reductions in market access for lower level 
commitments on rules.  Whatever construct the USG decides to 
pursue for the negotiations in Miami, it would be wise to 
orchestrate it in a way that amicably leaves the door open 
for greater participation of Brazil in the future; not only 
to enable the USG to continue to strive for the larger goal 
of a totally integrated hemisphere, but also to minimize the 
opportunity for anti-FTAA factions within Brazil to lay the 
blame for "failure," or alienation of Brazil, in Miami at the 
feet of the USG.  A consistent message from other countries 
in the region that their interests do not coincide with 
Brazil's will be key to helping with the latter. 
HRINAK