This record is a partial extract of the original cable. The full text of the original cable is not available.

161435Z Dec 05

UNCLAS SECTION 01 OF 03 BRASILIA 003278 
 
SIPDIS 
 
SENSITIVE 
 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DDEVITO/DANDERSON/EOL SON 
STATE FOR EB/CBA AND EB/CIP 
 
E.O. 12958: N/A 
TAGS: ECPS ECON EINV BR
SUBJECT: BRAZIL - ATSC DTV ADVOCACY AND SPECIAL 
REPRESENTATIVE MERMOUD MEETINGS 
 
REF: STATE 221409 
 
¶1. (SBU) Summary: The Charge delivered reftel letter from 
Secretaries Rice and Gutierrez to Communications Minister 
 
SIPDIS 
Costa in a December 13 meeting.  Costa stated his principal 
concern with the ATSC standard was the expense of repeater 
stations to enhance broadcast coverage.  The letter was a 
well timed follow-on to the December 7-9 visit to Brasilia 
and Sao Paulo of Special Representative for Business Affairs 
Frank Mermoud, who also advocated strongly for Brazilian 
adoption of the ATSC digital television standard, including 
in an interview with economic daily Valor.  Mermoud met with 
U.S. business representatives in both cities, pressed for 
improvements to the business climate and advocated with 
telecommunications regulator ANATEL on behalf of U.S. 
company Qualcomm.  In addition, he heard views on trade, 
investment and the economy from Sao Paulo's federation of 
industries (FIESP).  End Summary. 
 
 
ATSC Letter 
----------- 
 
¶2. (SBU) The Charge used a previously scheduled meeting (on 
U.S. non-immigrant visa issues) with Costa on December 13 to 
deliver a copy of reftel letter from Secretaries Rice and 
Gutierrez and pressed for Brazilian adoption of the ATSC 
Digital Television (DTV) standard.  Costa said his biggest 
concern was a technical one, i.e. that ATSC's (alleged) poor 
broadcast coverage would force Brazilian broadcasters to go 
to substantial expense to put in additional repeaters to 
reach the majority of Brazilians who do not have access to 
cable.  Unlike in the U.S., he said, where television 
programming principally arrives via cable or satellite, 
Brazil relies on "terrestrial" broadcasting.  He asked that 
the ATSC forum send an "engineer, not a salesman" to discuss 
the issue with his ministry, principally to explore whether 
all the added repeater stations would be able to operate on 
the same channel.  Costa further claimed that the Japanese 
and Europeans had put more on the table in terms of joint 
research projects and other incentives, while the U.S. offer 
of up to $150 million in possible OPIC financing for joint 
projects had never been formalized in writing.  Post is 
following up with ATSC forum representatives on Costa's 
request and meeting offer. 
 
Mermoud ATSC Advocacy 
--------------------- 
 
¶3. (SBU) As Communications Vice Minister Tito Cardoso was 
forced to cancel his scheduled December 9 meeting on ATSC 
with Mermoud because of a family emergency, post has 
delivered Mermoud's follow-up ATSC advocacy letter to 
Cardoso.  While in Brasilia, Mermoud advocated for Brazilian 
adoption of the ATSC standard with Public Services 
Superintendent Marcos Bafutto of telecommunications 
regulator ANATEL and with Investment Director Ingo Ploger of 
the Ministry of Development, Industry and Trade (MDIC). 
ANATEL has a seat on the interagency committee that is 
reviewing the DTV decision, Bafutto said.  While not on the 
interagency DTV committee, Ploger said his ministry has 
involved itself in the debate on a DTV standard to ensure 
that Brazil pursues an option that does not isolate it 
(comment: an implied criticism of Brazil's previous decision 
to create its own version of the PAL analog color TV system, 
currently used only in Brazil and Laos) and which maximizes 
opportunities for Brazilian business in both production and 
research.  Ploger welcomed greater detail on ATSC proposals 
and on the possibility of OPIC financing for research and 
development work in Brazil. 
 
QUALCOMM 
-------- 
 
¶4. (SBU) Mermoud urged ANATEL to find a way, in a 
commercially relevant timeframe, for cellular operator Vivo 
to obtain bandwidth nationwide.  Vivo is the leading 
Brazilian user of Qualcomm's CDMA cellular phone technology 
but has been losing market share to GSM operators that have 
been able to obtain a nationwide footprint.  Bafutto said 
ANATEL would likely move to allow Vivo to use the 1.9 
megahertz band in states where it does not currently have 
bandwidth.  However, since these frequencies are currently 
dedicated to wireless local loop (WLL) services there would 
be limits on Vivo's use of the frequencies.  In particular, 
Vivo would only be able to provide roaming access for 
existing customers from other states, and not sign up new 
customers in the states where it currently has no bandwidth. 
Also, since existing regulations limit the number of mobile 
phone services in a single state to four, Bafutto said, 
ANATEL would have to hold public hearings on the change.  He 
expected the existing operators in those states would 
express significant opposition.  Bafutto nevertheless 
expected to move forward with the change by mid-2006. 
ANATEL was planning, Bafutto said, to tender licenses for 
third generation cellular services by the end of 2006.  Vivo 
also would be welcome to bid for nationwide bandwidth in 
those auctions. 
 
Impediments to Business 
----------------------- 
 
¶5. (SBU) In a December 8 meeting with Mermoud, Philippe 
Prufer of Eli Lilly explained to Mermoud the Sao Paulo 
Amcham's focus on creating a better business climate in 
Brazil.  Prufer acknowledged the Chamber's advocacy efforts 
had seen mixed results.  On the macroeconomic level things 
have greatly improved, while on the microeconomic level, 
Prufer believed, things have actually worsened.  Currently, 
the Amcham is focusing on five areas for improving the 
business environment in Brazil: regulatory agencies; IPR and 
Innovation; fiscal reform (i.e. tax reform); piracy; and, 
job creation. 
 
¶6. (SBU) International Affairs Director Roberto Gianetti of 
the Sao Paulo State Industry Federation (FIESP) enumerated 
similar concerns when asked about his organization's view of 
the principal impediments to doing business in Brazil. 
FIESP's list includes:  taxation; bureaucracy; a judicial 
system where judge's interpretations of laws and contracts 
are arbitrary and subject to frequent change; and, market 
uncertainty caused by the political scandals.  FIESP, 
Gianetti said, will lobby the next government to change the 
system of appointing judges for life without confirmation 
hearings.  FIESP supports having Congress choose from a list 
of three candidates nominated by the President, according to 
Gianetti. 
 
IPR/Piracy and Pharmaceutical Patents 
------------------------------------- 
 
¶7. (SBU) In a roundtable session in Sao Paulo, Isabel Franco 
of the IPR-focused law firm Demarest & Almeida discussed 
recent efforts made to combat pirated goods, including 
intensified law enforcement activity and public awareness 
campaigns to emphasize the loss of jobs that have resulted 
from the sale of pirated goods.  She said progress has been 
made in the legislative area and that draft language under 
consideration for new legislation against piracy includes an 
arbitration clause which bodes well for resolving future 
cases more expediently.  Steve Solot of the Motion Picture 
Association stated the GoB is making progress in its efforts 
to protect IPR and a National Council has formulated a 
comprehensive 99 point plan to attack the problem.  Solot 
further opined that a decrease in value added taxes could 
help provide incentives to encourage the sale of legal 
products.  On a separate issue, Solot expressed worry 
regarding pending legislation, promoted by the Brazilian 
media giant GLOBO, which would restrict foreign direct 
investment in areas such as the provision of internet 
service (i.e., activities that might compete with GLOBO's 
lucrative cable pay television programming). 
 
¶8. (SBU) Both Mario Grieco of Bristol-Myers and Prufer 
discussed the challenges faced by the pharmaceutical 
industry in Brazil.   The GOB's recent threat to compulsory 
license several anti-AIDs drugs produced by U.S. 
manufacturers, Prufer and Grieco said, represented a short- 
sighted solution to the current financial problems in the 
country's health system.  The bigger problem, they argued, 
was that a sizable portion of the population lacks access to 
affordable healthcare.  This has resulted in a 3 tiered 
distribution system for pharmaceuticals in Brazil - 1) 
patented drugs, 2) generic drugs, and 3) similar drugs, with 
medicines in this last category sometimes lacking in 
quality, effectiveness, and safety.  This system, they 
declared, encourages the use of substandard medicines and 
perpetuates a disjointed pricing reality in which patented 
drugs that would typically sell for a cost of $100 in the 
U.S. might cost approximately $220 in Brazil. 
 
¶9. (SBU) Meanwhile, during their December 9 meeting in 
Brasilia, Mermoud told MDIC Investment Director Ingo Ploger 
that the importance of intellectual property to tech firms, 
which were significant sources of economic and technological 
development, argued for strong IPR protections.  These firms 
created significant local supply chain linkages, Mermoud 
said, that helped spread technology and innovation through 
the economy.  Ploger replied that improving IPR protection 
was a goal MDIC took seriously, particularly since his 
ministry oversees the Brazilian patent institute. 
 
Energy Sector 
------------- 
 
¶10. (SBU) Mickey Peters of Duke Energy observed that the 
Lula government is implementing a new electricity sector 
model in Brazil which, in effect, is reversing the trend of 
privatization in an attempt to deliver lower prices to 
consumers.  The new law acts as a disincentive for potential 
investors to build new power stations and many interested 
parties, mainly from the European Union are walking away, he 
said.  This could result in electricity shortages in 3-5 
years as the demand fueled by new growth will likely outpace 
new energy supplies. 
 
¶11. (SBU) In his meeting with Isaac Averbruch, a director of 
electricity sector regulator ANEEL, Mermoud urged him to do 
what he could as a regulator to mitigate the worst aspects 
of the new energy model in their December 9 meeting. 
Averbruch acknowledged that there would be a potential 
shortfall in generation capacity beginning in 2009 or 2010. 
In addition to the concerns raised by companies such as 
Duke, Brazil's tortuous environmental licensing process was 
also an important problem, he said. 
 
¶12. (U) This joint Sao Paulo/Brasilia cable was cleared by 
EB/CBA. 
 
CHICOLA