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UNCLAS SECTION 01 OF 05 SAO PAULO 000049 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/BSC, INL, EEB/IFD/ODF 
DEPARTMENT ALSO FOR DS/IP/WHA, DS/IP/ITA, DS/T/ATA 
STATE PASS USTR FOR KATE DUCKWORTH 
STATE PASS EXIMBANK, OPIC, AND TDA 
NSC FOR TOMASULO 
TREASURY FOR OASIA - DAS O'NEILL AND JHOEK 
DHS FOR PLCY/OIA DONNA MONTIEL 
USDOC FOR 4332/ITA/MAC/WH/OLAC 
USDOC ALSO FOR 3134/USFCS/OIO 
DOL FOR ILAB 
SOUTHCOM ALSO FOR POLAD 
USAID FOR LAC/AA 
 
E.O. 12958: N/A 
TAGS: PGOV SNAR EINV EFIN BEXP ASEC KJUS EAIR BR
SUBJECT: BRAZIL: INFRASTRUCUTRE COOPERATION AND SECURITY ISSUES: 
AMBASSADOR SAO PAULO GOVERNOR, AND DAS O'NEILL 
 
REF: (A) 07 SAO PAULO 447 (B) 05 SAO PAULO 1181 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY 
 
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SUMMARY 
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¶1.  (SBU) Ambassador met January 28 with Sao Paulo Governor Jose 
Serra to follow up on previous discussions of cooperation between 
the state government and the USG on law enforcement and public 
security issues.  He also conveyed USG's interest in supporting 
Brazil's efforts to develop its physical infrastructure.  Governor 
Serra was pleased to learn that under the new USG-GoB Letter of 
Agreement (LOA) on counter-narcotics and cooperation, USG may 
provide training, expertise, and other assistance directly to the 
state government with prior notification of the GoB.  With respect 
to infrastructure, the Governor outlined several major undertakings, 
such as the "Rodoanel" (ring road around the metropolitan area), 
which could benefit from TDA feasibility studies or other 
U.S.-sponsored technical expertise, and suggested that post follow 
up on the specifics with Planning Secretary Vidal Luna.  Governor 
Serra, a likely 2010 presidential candidate and currently considered 
the front-runner, is looking to establish a solid record of 
achievement in developing the state's economy and improving its 
quality of life as a means of bolstering his expected candidacy. 
End Summary. 
 
¶2.  (U) Ambassador was accompanied by Treasury DAS for the Western 
Hemisphere Brian O'Neill, Consul General (CG), LEGAT, and Financial 
Attache.  In addition to State Secretary for Economy and Planning 
Francisco Vidal Luna, Governor Serra was accompanied by State 
Secretary for Public Security Ronaldo Bretas Marzagao and foreign 
 
SIPDIS 
affairs advisors Helena Gasparian and Jose Roberto de Andrade. 
 
--------------------------- 
LAW ENFORCEMENT COOPERATION 
--------------------------- 
 
¶3.  (SBU) Ambassador began by reminding the Governor of the May 2007 
meeting with then-INL A/S Anne Patterson (ref A), which featured 
discussions of the state government's need for law 
enforcement-related training and technical assistance.  As one 
result of A/S Patterson's visit, he noted, Embassy has two new 
positions in its Narcotics Affairs Section (NAS), a Resident Legal 
Advisor (RLA) and a Law Enforcement Advisor (LEA).  In addition, the 
GoB has indicated that it will sign a bilateral Letter of Agreement 
(LOA) during the week of February 11.  The combination of new 
personnel and a new framework, the Ambassador said, will make it 
possible for the USG to move forward to address some of Sao Paulo's 
needs. 
 
¶4.  (SBU) Elaborating on the Ambassador's overview, LEGAT explained 
that the RLA will focus on training for prosecutors and judges, 
while the LEA will assist in coordinating post's counter-narcotics 
efforts.  When appropriate, the RLA and LEA will be able to help 
match requests for specific types of assistance with the USG agency 
best equipped to provide it, whether DOJ, FBI, DHS, DEA, State, or 
some other entity.  Signing of the LOA will free up funding for post 
 
SAO PAULO 00000049  002 OF 005 
 
 
to provide some technical assistance to state entities that support 
our mutual objectives. 
 
¶5.  (SBU) Serra asked whether the LOA requires prior federal 
authorization for the U.S. to provide assistance to the state and 
was pleased to learn that the state government may ask Embassy 
directly for training or assistance, and the Embassy need only 
notify, not seek authorization from, the GoB.  (Note: Under the LOA, 
USG would coordinate with the National Public Safety Secretariat 
(SENASP) in addition to working with the states.  End Note.)  He 
noted that the state prison system is "very problematic" and cited 
the need for technical expertise in prison administration.  He and 
State Secretary Marzagao also expressed interest in improving police 
intelligence methods and wiretapping capabilities.  Finally, the 
Governor urged that we not neglect the fight against IPR piracy, 
noting that during his brief stint (2005-06) as Mayor of Sao Paulo, 
his administration had taken a hard line against stores selling 
pirated goods (ref B), and that IPR enforcement is one area where he 
and the USG are in total agreement.  Ambassador and Serra agreed 
that Embassy and Sao Paulo state security personnel would pursue 
working-level discussions to work out details of training and 
technical assistance. 
 
-------------------------- 
INFRASTRUCTURE DEVELOPMENT 
-------------------------- 
 
¶6.  (SBU) Turning to a new topic, Ambassador recalled that at the 
March 2007 Camp David meeting between Presidents Bush and Lula, the 
latter had expressed interest in tapping into U.S. expertise to help 
Brazil pursue regional integration and to develop its 
infrastructure.  Brazil needs in particular to improve its 
transportation - roads, railroads, ports, pipelines - and energy 
infrastructure.  Ambassador noted that OPIC provides loan guarantees 
and insurance, EXIM offers financing for projects with the potential 
to increase U.S. exports, and TDA conducts feasibility studies and 
project analysis.  The U.S., he said, wants to help stimulate U.S. 
investors' involvement in Brazil's infrastructure projects.  He 
introduced Treasury DAS Brian O'Neill, who was scheduled to meet in 
Brasilia with Minister of Planning Paulo Bernardo and National 
Economic and Social Development Bank (BNDES) President Luciano 
Coutinho.  O'Neill noted that in working with the GoB, Treasury has 
found that often the problem is not in financing, but rather in 
identifying the best projects and making them viable. 
 
¶7.  (SBU) Governor Serra said that for the state government, the 
main bottleneck is actually doing the project.  The "Rodoanel" - a 
ring road around the Sao Paulo metropolitan area designed to 
facilitate movement of cargo and to alleviate urban traffic - is a 
prime example.  The stretch of highway west of the city has been 
built and is in use, and construction has begun on the southern 
tranche.  Serra would like to get started on the eastern side as 
well, but a variety of environmental issues have stalled the 
process.  The state government wants to put together a package that 
would make the private concessionaire responsible for all elements 
of the project.  Foreign affairs advisor Gasparian noted that TDA 
has experience working in Sao Paulo state, citing its funding of 
technical assistance to enable the City of Sao Paulo to improve its 
network of urban infrastructure (gas, oil, water, sewage, 
 
SAO PAULO 00000049  003 OF 005 
 
 
telecommunications networks).  O'Neill noted that U.S. technical 
experts engage directly with project developers, and that the only 
prerequisite is that the project have the potential for U.S. 
involvement.  While there is some skepticism in the investor 
community about Brazilian federal government projects and 
public-private partnerships, he said, most state 
government-sponsored projects appear more realistic and sound. 
 
¶8. (SBU) Ambassador noted that he is arranging a dinner in Brasilia 
for several Ministers to meet with the heads of U.S. investment 
banks, and that he could if desired arrange a similar encounter for 
Governor Serra and some of his key advisors.  Serra expressed 
interest.  He joked about how his attitude towards the United States 
had evolved over the years.  In his youth, when Serra was President 
of the National Students' Union (UNE), he and all his friends 
considered USAID "deadly."  Also, at a 1963 dinner hosted by 
then-President Joao Goulart, Serra recalled, he urged the President 
to expel U.S. Ambassador Lincoln Gordon from Brazil.  But those were 
different times, he said.  (Biographic Note: Student radical Serra 
went into exile after the 1964 coup, first to Chile, where he met 
his wife, and subsequently to the United States, where he earned a 
PhD in Economics at Cornell and taught for two years at Princeton's 
Institute for Advanced Studies.  End Biographic Note.) 
 
¶9. (SBU) Another project where the U.S. might be helpful is the 
proposed "bullet train" between Rio de Janeiro and Sao Paulo.  Serra 
noted that, speaking as an economist, he did not believe a 
European-style high-speed or bullet train was viable.  O'Neill 
agreed, noting that such a project would require either a capital 
subsidy or an operating subsidy.  According to Serra, some Italian 
visitors claimed that the private sector could develop and operate 
such a project, but that he believed their calculations were skewed 
and that a better alternative might be an express similar to the 
Washington-New York Amtrak model. 
 
¶10.  (SBU) Ambassador and DAS O'Neill suggested that on future 
visits to Washington to meet with IDB and World Bank officials, 
Governor Serra meet also with USG agencies that can help with 
technical project assistance, and that he also designate a POC to 
discuss areas of common interest in infrastructure development. The 
Governor suggested that Financial Attache follow up with Planning 
Secretary Vidal Luna. 
 
SIPDIS 
 
---------------------- 
AIRPORT INFRASTRUCUTRE 
---------------------- 
 
¶11.  (SBU) CG inquired into the Governor's view on the state's 
aviation capacity, which has been a topic of ongoing public debate 
since the July crash of TAM 3054 at Sao Paulo's Congonhas airport 
exposed that airport's severe capacity problem.  Serra lamented that 
the state government is not yet well organized to address the 
question and that the federal government's public handling of civil 
aviation has not been coherent.  Contrary to the GoB's position, 
Serra does not believe that Sao Paulo state needs a new airport, 
which would require a large amount of expensive infrastructure 
support.  He would prefer to improve access to the international 
airport at Guarulhos - where a third terminal is being developed - 
and upgrade Viracopos airport in Campinas.  In fact, the state has a 
 
SAO PAULO 00000049  004 OF 005 
 
 
number of small domestic airports that, if expanded, could help 
carry the commercial aviation load, he said.  The state government 
will soon send a bill to the Legislative Assembly to create a state 
company dedicated to airport development.  O'Neill suggested that 
the Governor consider having TDA conduct a pre-feasibility study to 
help identify options. 
 
¶12. (SBU) Ambassador noted that the International Air Transport 
Association (IATA) has been engaging with Solange Vieira, the 
recently installed President of the National Civil Aviation Agency 
(ANAC), with respect to U.S. airlines' serious concerns with 
proposed enormous aircraft parking fees at Sao Paulo airports. 
Given the importance of aviation to Sao Paulo, Ambassador suggeste 
that Serra coordinate with Vieira and Defense Miister Nelson Jobim 
(since the Brazilian militaryruns the airport agency, Infraero). 
 
----------------------- 
BREAST CANCER AWARENESS 
----------------------- 
 
¶13.  (U) The Ambassador noted the involvement of the Governor's wife 
in breast cancer prevention and awareness and the potential linkages 
between her work and the USG's Partnership for Breast Cancer 
Awareness and Research of the Americas.  Following up on Mrs. 
Serra's recent meeting with Health and Human Service's Secretary 
Michael Leavitt, the Ambassador and Governor agreed to further 
explore areas for joint cooperation within the framework of the 
partnership. 
 
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COMMENT 
------- 
 
¶14.  (SBU) As Governor of a state of 41 million people which 
accounts for approximately one third of Brazil's GDP, Serra retains 
deep interest in expanding capacity.  The state is home to South 
America's largest port at Santos, and developing port infrastructure 
as well as highways and railroads to transport goods are critical to 
reducing the "custo Brasil," the cost of doing business that 
private-sector leaders frequently cite as a major hindrance to the 
country's global competitiveness.  Serra recently called for bids on 
a 30-year concession to improve and operate some 1500 kilometers of 
major state highways.  He also plans soon to privatize the Sao Paulo 
Energy Company (CESP), which operates six hydroelectric plants in 
the state. 
 
¶14.  (SBU) Public security is also a key concern of Serra's.  While 
statistics show a continuing decline in violent crime throughout the 
state, the organized criminal gang First Capital Command (PCC) 
remains a serious threat, and the Governor has repeatedly 
highlighted the importance of combating drug and arms trafficking 
and other forms of contraband.  He has been a major USG ally in 
combating IPR piracy.  Like most state Governors, he finds 
coordinating with the federal government extremely frustrating and 
therefore relishes the possibility of doing business directly with 
the USG with minimal federal interference. 
 
¶15.  (SBU) As of this writing, most observers consider Serra the 
front-runner for Brazil's 2010 presidential election, assuming he 
 
SAO PAULO 00000049  005 OF 005 
 
 
can defeat his principal rival, Minas Gerais Governor Aecio Neves, 
for his party's nomination.  Serra, who ran unsuccessfully against 
Lula in 2002, knows that in order to retain his advantage, he needs 
to show a solid record of achievement in governing his home state, 
both in developing its economy and in improving its quality of life. 
 End Comment. 
 
¶16.  (U) This cable was coordinated with Embassy Brasilia and 
approved by Ambassador Sobel. 
 
WHITE