VZCZCXRO1247
RR RUEHRG
DE RUEHSO #0650/01 3101315
ZNR UUUUU ZZH
R 061314Z NOV 09
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 0030
INFO RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAC/AMEMBASSY ASUNCION
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA 0028
RUEHBU/AMEMBASSY BUENOS AIRES 0009
RUEHCV/AMEMBASSY CARACAS 0005
RUEHLP/AMEMBASSY LA PAZ 0009
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHPE/AMEMBASSY LIMA
RUEHRG/AMCONSUL RECIFE 0021
RUEHRI/AMCONSUL RIO DE JANEIRO
RUEHSO/AMCONSUL SAO PAULO

UNCLAS SECTION 01 OF 02 SAO PAULO 000650 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ENRG PGOV ELAB EFIN EAGR SENV BR
SUBJECT: SAO PAULO ECONOMIC AND ESTH ROUND-UP, OCTOBER 15-30, 2009 
 
¶1. (U) SUMMARY: Below is the first in a new series of biweekly 
economic round-up cables from Consulate General Sao Paulo.  This 
cable covers the period of October 15-30, 2009.  The purpose of the 
new series is to highlight economic, energy, environmental, 
transportation, and science and technology developments in the Sao 
Paulo Consular District that are not covered by broader reporting. 
END SUMMARY. 
 
 
 
Creation of world's second largest sugar cane processor 
 
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¶2. (U) On October 27, the Brazilian unit of French commodities 
group Louis Dreyfus took over Brazilian firm Santelisa Vale to 
create the world's second largest sugar cane processor.  The merger 
is the latest in a growing consolidation trend in the Brazilian 
ethanol market (septel).  The new venture, called LDC-SEV, will 
control 13 sugar and ethanol plants and have annual cane crushing 
capacity of 40 million tons, second only to Brazilian industry 
leader Cosan. Dreyfus and a group of financial partners pledged 
$460 million to the venture and will hold a 60 percent stake, 
Santelisa Vale shareholders will have 18 percent, third party 
investors 9 percent and the remaining 13 percent will be in the 
hands of Goldman Sachs and Brazil's state-run development bank 
BNDES. While LDC-SEV Chief Executive Bruno Melcher publicly stated 
that local cane output in Brazil must increase by 30 million tons 
per year to meet growing sugar and ethanol demand, he indicated 
that LDC-SEV would allocate initial investments to raising mills' 
electrical cogeneration capacity.   He said new investments to 
boost sugar and ethanol production capacity would come later, 
including through possibly building new mills. 
 
Labor Market's Positive Trends 
 
------------------------------ 
 
 
 
¶3. (U) According to a study by Brazil's economic research institute 
IPEA, over the last 17 years Brazil has reduced the number of 
children in the labor market twice as fast as the global average. 
The study indicates that in 1992, 13 percent of Brazilian children 
between 5 and 14 years old were working.  The rate fell to 5 
percent in 2008, which represents 3 million children leaving the 
labor market.  While IPEA statistics indicate that 1.7 million 
children between the ages of 5 and 14 are still working in Brazil, 
the World Labor Organization predicts Brazil will completely 
eliminate child labor (5 to 9 year-olds) within two years. 
 
 
 
Brazil's Real Appreciation Likely to Resume 
 
------------------------------------------- 
 
 
 
¶4. (SBU) Following the GoB's October 21 re-imposition of the IOF 
financial tax (reftel), Brazil's currency depreciated nearly 4 
percent in the first week of implementation. Banking experts and 
local Central Bank contacts in Sao Paulo attribute much of the 
decline to the recent fall in global markets. Looking ahead, Sao 
Paulo-based Central Bank Economist Alexandre Pundek told Econoffs 
that the Real will likely appreciate over the next 6 to 12 months 
due to Brazil's investment pipeline, continued high carry yields, 
expectations of accelerating growth and rate increases in 2010, and 
low financial risk.  Meanwhile, in a recent survey, nearly 
two-thirds of foreign investors reported the IOF will have either 
no effect or is very unlikely to affect their portfolio investment 
in Brazil. 
 
SAO PAULO 00000650  002 OF 002 
 
 
Brazilian Analysts & FTC Commissioner Examine Anti-Trust Policy 
 
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¶5. (U) In an October 15-16 international conference organized by 
Brazil's Administrative Counsel for Economic Defense (CADE), public 
and private sector representatives discussed efforts to modernize 
Brazilian competition and anti-trust policy.  Panels, which 
included participation by U.S. Federal Trade Commissioner William 
Kovacic, examined regulation in several sectors including 
telecommunications, banking, intellectual Property, as a means for 
promoting commerce and competition.  Experts agreed that Brazilian 
laws regulations are in need of revision, especially in regards to 
innovation and the commercialization of new technologies. 
Participants also identified longstanding national industrial 
policies, agricultural subsidies, sector "agreements" granting 
special immunities, as competition challenges and a source of 
higher consumer prices.  In addition to sharing the United States' 
experience with competition policy in the conference, FTC 
Commissioner Kovacic gave an interview published in leading 
business daily Valor Economico. 
 
 
 
Sao Paulo Authorities Push Sustainable Logging 
 
--------------------------------------------- - 
 
 
 
¶6. (SBU) On October 30, Department of Justice Senior Trial Attorney 
for Environmental Crimes Richard Udell met with Sao Paulo 
environmental and logging authorities to discuss amendments to the 
Lacey Act.  The Sao Paulo State Secretariat of Environment 
highlighted its Cadmadeira program, which has reduced illegal 
logging through commercial incentives and intercepted 8 million 
tons of illegally harvested wood through transparent 
point-of-origin information.  Brazilian environmental legislator 
Fabio Feldmann said Brazilian NGOs could help provide evidence of 
illegal logging necessary for prosecution under the Lacey Act. 
State prosecutors and industry representatives told Udell that more 
focus is being given to environmental crimes, but said more 
effective enforcement mechanisms were needed nationally to 
prosecute crimes and clarify legal obligations for legitimate 
loggers. 
White