VZCZCXRO7682
OO RUEHRG
DE RUEHSO #0702/01 3381250
ZNR UUUUU ZZH
O R 041249Z DEC 09
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0235
INFO RUEHAC/AMEMBASSY ASUNCION
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHPE/AMEMBASSY LIMA
RUEHRG/AMCONSUL RECIFE 0047
RUEHRI/AMCONSUL RIO DE JANEIRO
RUEHSG/AMEMBASSY SANTIAGO
RUEHSO/AMCONSUL SAO PAULO

UNCLAS SECTION 01 OF 02 SAO PAULO 000702 
 
SENSITIVE 
SIPDIS 
STATE PASS TO USTR KKALUTKIEWICZ 
 
E.O. 12958: N/A 
TAGS: ETRD ECON PGOV BR EFIN KPAO
SUBJECT: BRAZIL: Charge Discusses Tax, Trade and Cotton with AmCham 
 
REF: BRASILIA 1271 
 
¶1.  (SBU) Summary: In a November 20 meeting with Charg???? d'Affaires 
(CDA) Kubiske, Sao Paulo American Chamber of Commerce (AMCHAM) 
Director Gabriel Rico stressed the Brazilian private sector's 
interest in continued collaboration with the United States. 
Specifically, Rico suggested that the new Ambassador visit AMCHAM 
as part of his first official visit to Sao Paulo to establish ties 
with the business community.  Rico also expressed confidence for 
progress on a bilateral tax treaty in 2010, avoiding 
cross-retaliation in the WTO Cotton dispute, and opportunities for 
cooperation on innovation policy.  End Summary. 
 
 
 
Engagement with New Ambassador 
 
------------------------------ 
 
 
 
¶2.  (SBU) AMCHAM Director Rico began by expressing the Sao Paulo 
business community's interest in welcoming a new U.S. Ambassador 
and continuing the private sector's close engagement with the 
United States.  Rico suggested to the CDA that the Ambassador 
participate in a high-profile event, maybe a luncheon, with the 
private sector during his first visit to Sao Paulo.  He suggested 
that AMCHAM could arrange this as a joint event with FIESP 
(Federation of Industries in the state of S????o Paulo), so that the 
new U.S. ambassador could meet a larger portion of the Sao Paulo 
business community at one time. 
 
 
 
Bilateral Tax Treaty 
 
-------------------- 
 
 
 
¶3.  (SBU) Rico emphasized that the Bilateral Tax Treaty (BTT) 
continues to be one of AMCHAM's top five priorities for 2010. In 
particular, AMCHAM has been increasingly engaging the Brazil-USA 
parliamentary caucus in the Brazilian Congress, which the AMCHAM 
believes can play a crucial role in pushing the Lula administration 
towards approving a BTT.  Following a joint AMCHAM and 
caucus-hosted tax policy seminar in Brasilia October 27 (ref A), 
Rico said he now anticipates the Brazilian Senate will approve the 
pending Tax Information Exchange Agreement (TIEA) as a step to an 
eventual BTT.  AMCHAM is also planning to deliver a joint statement 
from the caucus and U.S. Senator Lugar to the Brazilian Executive 
Branch in support of a TIEA and BTT. 
 
 
 
¶4. (SBU) Rico told the CDA, however, that resistance from some 
private sector representatives persisted due to fear of 
international investment disclosure requirements, and could slow 
approval. (COMMENT: This issue also impacts support for the broader 
information exchange requirements required under a BTT.  END 
COMMENT).  Rico asserted the Foreign Ministry, Finance Ministry and 
Brazil's tax authority, Receita Federal all support the TIEA and 
BTT. Receita Federal, however, is less enthusiastic about a BTT, as 
they are concerned about minimizing loss of revenue collected. 
Nonetheless, they are willing to support a BTT, according to Rico. 
(COMMENT: This optimistic assertion does not track with feedback 
received from Fazenda and Receita in Brasilia, who have only gone 
so far in recent conversations as to assert that a BTT "may some 
day be possible." END COMMENT) He expressed confidence that the 
Brazilian Congress will approve the TIEA by June 2010.  According 
to Rico, both Dilma Rousseff (PT) and Jos???? Serra (PSDB) support 
the 
concept of a BTT. Rico emphasized that a Serra government would be 
more pro-U.S., due to its more pragmatic pro-business approach - 
PSDB has historically been more supportive of close ties with the 
United States. 
 
SAO PAULO 00000702  002 OF 002 
 
 
Way Forward on Cotton Dispute 
 
----------------------------- 
 
 
 
¶5. (SBU) Rico said AMCHAM agrees with the GOB's right to retaliate 
against the USG under the WTO cotton subsidy dispute, but is 
seeking ways to amplify dialogue between the U.S. and GOB to avoid 
an escalation of trade tensions or cross-retaliation in unrelated 
sectors.  Rico echoed U.S. Trade Representative Kirk's September 16 
speech at the AMCHAM, stressing that the issue is specifically 
trade-related and should not become a broader political issue. 
Rico said the cotton issue is not exclusively in the hands of the 
Foreign Ministry for the time being, but rather being addressed 
through a robust interagency process (CAMEX), which is beneficial, 
in his view, for the United States.  He said Brazilian industry 
sees this issue as a purely agricultural one and hopes that the GOB 
will not retaliate against intellectual property rights.  Rico 
expressed a high regard for CAMEX and its executive secretary Lytha 
Spindola for the handling of the issue to date and said AMCHAM is 
providing info and assistance to CAMEX.  Rico suggested that 
positive movement from the USG on the dispute would be conducive to 
expanding dialogue for a resolution.  CDA Kubiske noted Brazilian 
companies operating in the USA could play a constructive role with 
the GOB in urging dialogue and an amicable solution. 
 
 
 
Supporting Innovation 
 
--------------------- 
 
 
 
¶6.  (SBU) Looking ahead, the CDA and Rico discussed the future of 
innovation in Brazil and an apparent missing link between academics 
and business opportunities.   Rico noted that most business 
innovation still originates from the S????o Paulo area, but said that 
bureaucracy in patent approval and a lack of integration between 
academic researchers and industry are the main obstacles to 
stimulating greater innovation across Brazil.  Specifically, Rico 
lamented the lack of staff at INPE and complexity of Brazilian 
patent law which have led to an average wait time of 10 years for 
patent approval.  Rico suggested the need for further exchange of 
ideas between Brazil and the United States on innovation policy, 
citing training for Brazilians in U.S. innovation clusters as one 
way to bridge this gap. 
 
 
 
¶7. (U) This cable was coordinated/cleared by Embassy Brasilia. 
White