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 001018 
 
SIPDIS 
 
FOR PM A/S BLOOMFIELD 
 
E.O. 12958: DECL: 04/27/2009 
TAGS: MARR MASS MOPS PGOV PREL BR POL MIL
SUBJECT: BRAZIL: SCENESETTER FOR BILATERAL POL-MIL 
MEETINGS, MAY 14, 2004 
 
Classified By: DCM Richard Virden, Reasons 1.4 b & d 
 
¶1.  (C) Summary:  Mission warmly welcomes your visit to 
Brazil.  Much is changing in Brazil.  Under President Lula 
there has been renewed focus on social issues and structural 
reform; economic performance, meanwhile, has been mixed. 
Urban crime poses an increasing threat to public security. 
The military budget is severely constrained and this is 
having a negative impact on military readiness.  Brazil is 
poised to lead the UN peacekeeping effort in Haiti with the 
deployment within two months of a contingent of about 1400 
soldiers.  At such a level, this would be the largest PKO 
deployment by Brazil since Angola in the 1970s.  The USG 
imposed ASPA sanctions July 1, 2003, when Brazil declined to 
sign an Article 98 agreement; we see no prospect that the GOB 
will alter its decision.  The USG and GOB remain engaged in 
seeking a solution to the airbridge denial (shootdown) issue. 
 Despite these challenges, many Brazilian officers want a 
strong relationship with the U.S. military and are looking 
for ideas and programs that reinforce our continued 
commitment to the partnership.  END SUMMARY 
 
OVERVIEW 
-------- 
 
¶2. (SBU)  Since January 1, 2003, when President Lula assumed 
office, much has changed in Brazil.  By making deals with 
many of Brazil,s political parties, Lula and his PT party 
crafted a working majority in the legislature.  Led by 
Finance Minister Antonio Palocci, the Lula government 
continued the prudent macroeconomic policies of former 
President Cardoso; financial markets and the IMF have 
generally reacted positively.  Since early 2003, the &Real8 
has remained stable against the dollar and the country's 
market risk factor declined to its lowest level in years. 
Interest rates have declined almost 40% since their peak in 
late 2003 but in real terms they still remain high due to 
inflationary fears.  High interest rates continue to depress 
investment and growth.  During 2003 GDP growth was slightly 
negative, although some rebound is expected for 2004. Job 
creation remains moribund and foreign investment stagnant. 
Meanwhile, in early 2004 a political scandal hit the PT party 
and cost the government political support.  Despite problems 
within his party, Lula personally remains popular among 
Brazilians.  But it will be his ability to deliver economic 
results for the masses that will determine whether he can 
retain his high popularity until the 2006 presidential 
elections. 
 
¶3. (C)  Under President Lula, Brazil has become more involved 
on the world stage, including leadership of the Friends of 
Venezuela Group, greater engagement with Colombia, renewed 
ties with Africa and other "New Agenda8 countries, co-chair 
of the FTAA, and possible leadership of the follow-on force 
in Haiti. The President travels extensively and in the last 
year, in addition to South America, has been to the Middle 
East, South Asia, and Africa.  He will travel in mid-May to 
China as Brazil extends its foreign policy reach to 
non-traditional regions.  Yet, despite the administration's 
increased focus on bilateral foreign policy, the government 
strongly favors support for multilateral responses to world 
events.  Brazilian President Lula opposed U.S. policy in 
Iraq, a position that broadly reflected Brazilian public 
opinion, although he later muted his public comments.  Brazil 
reacted with shock to the 19 August 2003 attack on the UN 
headquarters in Baghdad, in which respected Brazilian 
diplomat and UN Iraq chief Sergio Vieira de Mello was killed. 
 On January 1, 2004, Brazil assumed a two-year rotating seat 
on the UN Security Council.  Brazil continues to lobby to 
obtain a permanent UNSC seat and this topic is a key point 
raised by President Lula during his travels.  The GOB remains 
reluctant to criticize the Castro regime and recently 
abstained on a critical Cuba resolution at the UN Human 
Rights Commission. 
 
SECURITY ISSUES 
 
¶4. (C)  On counter-terrorism operational issues, cooperation 
between the USG and Brazilian law enforcement and security 
services is good.  Unfortunately, recent media reports 
following published interviews with the disgruntled former 
Embassy Brasilia Legatt have led to political queries in 
Congress.  The GOB is hypersensitive to &unsubstantiated8 
allegations that terrorist groups are active on Brazilian 
territory, particularly in the Tri-border region.  Senior GOB 
officials maintain that there is no evidence to support 
claims that terrorists operate on Brazilian territory and the 
GOB has repeatedly asked us for specific information to 
support such allegations.  GOB police and security officials 
acknowledge that fundraising, money laundering, and related 
criminal activities are likely ongoing, but again, they 
request solid intelligence that would link funding with 
terrorist groups.  Brazil has a sizable population with 
ethnic origins in the Middle East, including many Brazilians 
who are economically and politically influential.  The USG is 
concerned that these communities contain persons who 
financially support terrorist organizations. 
 
¶5. (C)  Crime remains a severe problem in Brazil,s large 
cities.  In Rio, where violence has become endemic, a gang 
war in Rocinha, a favela notorious for crime and drugs, 
culminated with bloodshed and revealed the depth of criminal 
druglord control over the favelas. The police reacted by 
launching a highly publicized incursion into Rocinha.  In the 
countryside, the Landless Movement (MST) illegally occupies 
land, causing confrontations with landowners and the GOB.  In 
April the MST accelerated its occupations throughout Brazil, 
worsening an already tense situation in rural areas. A role 
for the Brazilian military in dealing with crime and public 
security is being reviewed, and President Lula appears to 
favor some increased military role. Many field-grade officers 
regard some armed forces involvement as inevitable; however, 
most senior officers are strongly opposed.  The military 
establishment is sensitive to the legal ramifications that 
could result from civilian casualties, increased corruption, 
and the residual legacy of 21 years of military rule.  Hence, 
it prefers not to take on police functions without prior 
adjustments in legislation and increased budgetary support. 
 
¶6. (C) Brazil has found itself in an uncomfortable spotlight 
regarding its non-proliferation credentials of late.  IAEA 
officials expressed disappointment with the Brazilians over 
the institution of a suitable inspection regime for the new 
enrichment facility at Resende.  In addition, the IAEA, the 
U.S., and many other countries have asked Brazil to sign an 
Additional Protocol to the NPT, a measure the GOB has 
resisted so far.  Brazil,s main argument is that the nuclear 
weapons states need to accelerate their disarmament even as 
the nonweapons states consider additional compliance 
measures.  Meanwhile, Brazil is considering signing onto the 
International Code of Conduct for missile technology but 
remains unenthusiastic about the Proliferation Security 
Initiative and the Australia Group. 
 
THE ARMED FORCES IN BRAZIL 
-------------------------- 
 
¶7. (C)  Since the end of military rule in 1985, the armed 
services have steadfastly supported Brazil,s civilian 
leadership and adapted to their new apolitical status. 
Brazil,s military has subordinated itself to civilian rule, 
under a civilian Ministry of Defense.  The officer corps is 
professional and dedicated to defending Brazil,s 
constitution. In recent public opinion surveys the military 
tops all institutions in the level of public trust, even 
surpassing the Catholic Church. 
 
¶8. (C)  Public esteem does not translate, however, into 
funds.  Military budgets have decreased steadily for 15 
years, with the severest cuts introduced over the last four 
years.  This has naturally had a negative impact on the 
readiness of the armed forces.  As President Lula stresses 
social priorities while working within tight fiscal 
constraints, the prognosis for the military's budget is for 
more of the same. The military grumbles that it is entitled 
to pay raises.  The lack of money dampens the force 
projection capability.  Procurement programs for new weapons 
systems to replace outmoded equipment are also starved for 
funds, while programs such as the development of a Brazilian 
nuclear-powered submarine and maintenance of antiquated 
vessels drain resources that could be better directed 
elsewhere.  One of President Lula,s first acts as president 
was to postpone a decision on the F-X jet fighter 
competition.  Minister of Defense Jose Viegas claims a 
decision on the F-X will be made &this year.8  Other key 
procurement decisions are also being held up. 
 
¶9. (C)  A major internal issue is the relationship between 
the armed services and the Ministry of Defense.  Defense 
Minister Viegas, an experienced diplomat with extensive 
service in political-military affairs, commands the respect 
of senior military leadership. However, as Viegas 
consolidated power within the Ministry, stress with the 
services was inevitable. The Minister created, for example, a 
four-star level secretariat of cooperative studies headed by 
a diplomat.  Many officers felt such senior civilian 
placements within the Ministry diminished the military's 
access and rendered it less effective in fighting important 
bureaucratic battles.  In addition, within the Ministry there 
are problems in the chain of command.  Although the Chief of 
Defense and the Secretary for Strategy, Policy and 
International Affairs are four-star generals with direct 
advisory roles to the Minister, their positions are 
unofficially subordinate to the service commanders.  Their 
ability to impose &jointness8 is compromised.  Morale among 
the senior military grades has been negatively affected, 
leading to transfers and some retirements. 
 
¶10. (C)  The services maintain close ties with counterparts 
in neighboring countries and there are no identifiable 
trouble spots in these relations.  Each service conducts 
annual or more frequent dialogue at various levels of command 
with neighboring militaries.  Army-to-army relations with 
Brazil,s neighbors, for example, are conducted at the chief 
of staff, regional command, brigade, and battalion levels. 
Despite a troubled history, relations between the Argentine 
and Brazilian militaries have never been closer.  Brazil is 
also doing some regional intelligence sharing, and there is 
steady improvement in this field with Colombia and Peru. 
 
SPECIFIC ISSUES 
--------------- 
 
¶11. (C)  Army Issues:  Brazil,s army has the lead in 
preparations for the 1400 man follow-on force for Haiti. 
While army leadership is confident in the ability of their 
taskforces to conduct such PKO missions, actual funding is a 
concern.  The army is attentive to Brazil,s borders, 
particularly in the Amazon Basin where it has relocated 5,000 
troops and established several new frontier platoons.  There 
is increased concern with the spillover effects of Plan 
Colombia and some skirmishes with the FARC have been 
reported.  While the army does not anticipate a direct 
confrontation with the FARC, there is recognition that FARC 
gunrunning and narcotics smuggling activities will eventually 
have to be challenged.  DAO has visited a number of frontier 
platoons throughout the Amazon.  They report that while the 
various commands may lack hardware and support, they are 
keenly aware of their mission and seem prepared to carry it 
out. 
 
¶12. (C)  Navy Issues: In recent years, the navy procured 23 
A-4 Skyhawk attack aircraft from Kuwait and bought the former 
French aircraft carrier Foch, renamed the Sao Paulo.  Several 
pilots have already become carrier qualified in the U.S.  The 
Navy is sending on average two officers a year for flight 
training.  In March 2004, the navy signed an LOA for the FMS 
LINK 11 case to upgrade their secure communications.  In a 
program plagued by technological and design flaws, the 
navy,s nuclear submarine program has swallowed about $1 
billion in R&D costs.  The navy claims it is still 20 years, 
and $500 million, away from final development and delivery of 
a nuclear sub.  (We believe it would be much longer and cost 
much more.)   Meanwhile, the navy is in dire need of escort 
vessels, and is hard pressed to maintain its aging fleet. 
Navy command is interested in submarine rescue, diesel 
submarine, and UNITAS training and exercises. 
 
¶13. (C)  Air Force Issues:  The air force desperately wants 
to replace its aging Mirages.  Upon taking office in January 
2003, President Lula postponed a decision on a new generation 
fighter (F-X), an understandable decision given the cost 
involved, approximately $700 million. New Lockheed F-16 Block 
50 aircraft were previously offered in the competition. 
However, recognizing that other competitors might be 
preferred by FAB, Lockheed-Martin also decided to offer used 
F-16s in a deal that would provide the air force with capable 
aircraft at a fraction of the cost of new planes.  Recent 
soundings from the GOB suggest that in order to avoid the 
significant budgetary outlay, consideration is also being 
given to upgrade of the current Mirage fleet. However, FAB 
continues to focus on the procurement of new, not used, 
aircraft.  Regardless of the decision, GOB funding of the F-X 
will be difficult. FAB is also looking to replace its aging 
UH-1 helicopter fleet.  In February 2004, the FAB sent a 
delegation to Alabama to discuss possible modifications 
needed on the 6-10 Black Hawks they are interested in 
purchasing. 
 
¶14. (C)  SIVAM (Amazon Surveillance System):  Now almost 
complete, the SIVAM system being built by Raytheon consists 
of ground, aerial, and space-based sensors, communications 
and patrol aircraft.  Raytheon has had contract differences 
with the GOB and has threatened to stop its support unless it 
receives payments the company insists are due. Brazil has 
indicated its willingness to share data with neighboring 
countries under certain conditions. 
 
¶15. (C)  Article 98:  Brazil has not signed an Article 98 
agreement and is now subject to ASPA sanctions.  The GOB, in 
keeping with its long-standing &multilateralism,8 insisted 
it was committed to the International Criminal Court and that 
signing our Article 98 waiver would weaken this commitment. 
The Government also asserted that it could conceive of no 
circumstances under which it would subject U.S. citizens to 
extradition to The Hague. The GOB calculated that the 
projected loss under ASPA sanctions of $500,000 of IMET funds 
was tolerable.  However, the imposition of full FMS pricing 
for training, an unforeseen consequence of ASPA, caught the 
GOB by surprise and has caused additional frustration and 
friction.  Despite this additional blow, the loss of access 
to EDA grant funds, the withdrawal of the Spruance destroyer 
offer (combination sale and grant transfer), and the 
financial impact on the training portion of procurement 
offers such as the F-16, we do not expect Brazil to reverse 
its position on Article 98.  In fact, the MOD has indicated 
that it will continue training at the same level as pre-ASPA 
sanctions, just with other countries.  The armed services 
have already shifted training to Great Britain and France and 
may expand programs with Russia, China, and even Vietnam. 
 
¶16. (C)  Airbridge Denial/Shootdown:  Due to international 
treaty obligations and USG laws threatening possible economic 
sanctions, Brazil has not implemented its law permitting the 
shootdown/forcedown of civil aircraft suspected of illicit 
trafficking. In the last few months, President Lula has 
become personally energized in seeking a way to challenge 
suspected narcotraffickers who flagrantly violate Brazilian 
airspace.  The GOB has had confidential contacts with the USG 
on the issue in search of a solution. 
 
¶17. (SBU)  Despite Article 98 and other irritants in the 
relationship, we consider ties between the U.S. and Brazilian 
militaries good.  Brazil and the U.S. will continue to 
participate in joint exercises such as Cabanas and UNITAS. 
In June, the aircraft carrier Ronald Reagan is slated to make 
a port visit to Rio. The MOD still views the U.S. military 
relationship as important and the U.S. a dependable partner. 
Brazil, as a strategic partner, remains important to the U.S. 
 Beyond ASPA, there remain many areas of defense cooperation 
and interaction, as well as areas of cooperation that remain 
untapped.  Many in the Brazilian Armed Forces recognize that 
they must expand their role in counter narcotics and counter 
terrorism.  As the MOD proceeds with the development of a 
National Military Strategy for Brazil, the U.S. can offer its 
perspectives on the process. 
 
¶18. (C)  Maintaining the U.S.-Brazil pol-mil relationship 
requires constant attention and, perhaps, more effort than 
with any other bilateral relationship in the hemisphere. 
Within Brazil, there is no institutional propensity to curry 
favor with the U.S.  Given its size, Brazil views itself as a 
regional leader and global player, even if it sometimes 
appears to fall short of what is expected from a world power. 
 The GOB will be eager for ways to enhance the bilateral 
relationship, overcoming the obstacles created by ASPA and 
Brazil,s rejection of an Article 98 agreement.  But the GOB 
will also remain sensitive that it not appear too eager to 
consummate deals with us that could backfire politically. 
 
Hrinak