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C O N F I D E N T I A L SECTION 01 OF 02 SAO PAULO 000067 
 
SIPDIS 
 
STATE FOR WHA/BSC 
 
E.O. 12958: DECL: 03/14/2018 
TAGS: ECON ETRD EFIN EINV ENRG BR
SUBJECT: FIESP CALLS FOR A BILATERAL TRADE DIALOGUE 
 
REF: 08 SAO PAULO 0423 
 
Classified By: Consul General Thomas White; Reasons 1.4 (b) and (d). 
 
¶1.    (C)  SUMMARY:  On Monday, January 19, Ambassador Sobel 
met with FIESP (Federation of Industries of Sao Paulo) 
President Paulo Skaf, FIESP's chief trade negotiator, Mario 
Marconini, and others.  Skaf and Marconini underscored 
FIESP's concerns over the perceived Foreign Ministry's 
inactivity on the trade agenda (including bilateral 
investment and tax treaties) and would like to pursue a 
"bilateral dialogue" with USTR.  Skaf also expressed an 
interest in further discussing the new Energy Compact for the 
Americas and finding an appropriate role for FIESP. 
Continuing to engage the private sector in general and FIESP 
in particular could be helpful in reinforcing that the 
private sector in Brazil stands to benefit from successful 
negotiations on investment, double taxation, and other trade 
issues.    END SUMMARY. 
 
¶2.    (C)  According to Marconini, FIESP's chief 
international trade negotiator, Foreign Minister Celso Amorim 
has so far been unwilling, in their view, to engage actively 
on the issues of bilateral investment and tax treaties and 
the trade agenda in general.  Marconini stated that the 
private sector should apply pressure on the GOB, and thus he 
called for FIESP to engage directly with USTR.  FIESP will 
draft a letter inviting USTR to Brazil to open a bilateral 
dialogue with the private sector; however, Marconini asked to 
limit the issues to discuss to no more than five. 
 
¶3.    (C)  As regards the specific bilateral tax treaty, Skaf 
told the Ambassador that FIESP does not oppose a tax treaty, 
but instead is "totally in favor of this."  Deputy General 
Director Thomaz Zanotto expressed concerns that the Brazilian 
companies' legal departments are not technically prepared for 
such a treaty, but for Skaf, this reiterates the importance 
of including FIESP in the process.  Skaf cited Brazilian 
Senator Francisco Dornelles as the chief political opposition 
to the tax treaty.  (Comment:  During a follow-on 
conversation with Marconini, he informed Econoff that FIESP 
is not institutionally prepared to help with the tax treaty, 
but instead would prefer to focus on the investment treaty. 
End Comment.) (Note:  Tax treaties are negotiated by Receita 
Federal, which reports to the Finance Ministry.  End note.) 
 
¶4.    (C)  Paulo Skaf expressed FIESP's curiosity regarding 
the new Energy Compact for the Americas.  He suggested 
creating a working group between FIESP and the U.S. Chamber 
of Commerce to explore the issue.  (Note: Econoffs met with 
Carlos Cavalcanti, FIESP's Director for Energy Issues, on 
this issue and are further exploring this option.  End Note.) 
 Zanotto also believes that Brazilian organizations such as 
the Brazilian Sugarcane Growers Association (UNICA) are 
taking the wrong approach on the ethanol compact with the 
United States, when they advocate for the abolition of the 
U.S. tariff.  FIESP would like to focus on engaging the 
United States with duty-free imports of E85 ethanol (reftel). 
 According to Roberto Giannetti de Fonseca, Director for 
International Relations, the strategy would include allowing 
the duty-free import of E85 into the United States to help 
supply that market, while U.S. producers would supply the 
blended-E10 market.  (Note:  Giannetti de Fonseca previously 
shared these thoughts with Deputy Secretary of Energy Kupfer 
as well as other high-level visitors and with Consulate 
General staff.  End Note.) 
 
¶5.    (C)  COMMENT:  FIESP is the most powerful trade 
organization in Brazil, representing 42 percent of the 
country's GDP.  The organization has tremendous influence 
within the Brazilian government and could provide the impetus 
for GOB action on an investment treaty, a tax treaty, and a 
general bilateral trade dialogue.  Any discussions between 
USTR and FIESP should focus on building political consensus 
on next steps and take pains to not isolate the Foreign 
Ministry.  Intensified Brazilian private sector engagement 
 
SAO PAULO 00000067  002 OF 002 
 
 
with the highest levels of the Lula Administration, its 
Ministries, and with Congress may help in moving the 
investment, tax, and trade agenda forward.  However, anything 
that appears to be a formal dialogue between the USG and the 
Brazilian private sector would be seen by the GOB as 
interference in its internal policy making process.  MRE has 
already indicated (reftels) interest in pursuing an expanded 
trade discussion with the new Administration.  We want to 
encourage these discussions, as well as private sector 
engagement with their own government, rather than create a 
parallel negotiating process.  END COMMENT. 
 
¶6.    This cable was cleared by Embassy Brasilia and 
Ambassador Sobel. 
WHITE