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C O N F I D E N T I A L TOKYO 002008 
 
SIPDIS 
 
SIPDIS 
 
DEPT PLEASE PASS USTR FOR NEUFFER, CUTLER 
 
E.O. 12958: DECL: 04/12/2026 
TAGS: PREL ECON ETRD EINV APECO ENRG XR XK LA CH
JA 
SUBJECT: WHA A/S SHANNON'S APRIL 10 CONSULTATIONS WITH MOFA 
LATIN AFFAIRS DG SAKABA: AFTERNOON SESSION 
 
REF: A. TOKYO 1959 
 
     ¶B. TOKYO 1960 
 
Classified By: Deputy Chief of Mission Joe Donovan.  Reason:1.4 (b) (d) 
. 
 
¶1. (C) SUMMARY.  Continuing April 10 consultations, MOFA 
Latin American DG Sakaba told visiting WHA A/S Thomas Shannon 
that Japan was waiting for a positive response from Bolivian 
President Morales.  Its three "issues" with Brazil were the 
status of Japanese-Brazilians in Japan, ethanol imports and 
Brazil's possible adoption of Japan's digital television 
standard.  A/S Shannon and Sakaba exchanged views on upcoming 
elections; Sakaba said Japan had no preference in Brazil's 
upcoming presidential election.  A/S Shannon explained the 
U.S. role in Paraguay and debunked rumors of a planned U.S. 
military base there.  Sakaba assured that Japan views APEC as 
an American-Asian organization, and described the role of the 
Forum for East Asia Latin America Cooperation.  Both men 
shared views on China's role in the LAC, with Sakaba pointing 
out that Japan benefited indirectly.  He also noted upcoming 
Japan-China-ROK consultations on Latin America.  End summary. 
 
Bolivia 
------- 
 
¶2.  (C) Resuming discussions in the afternoon on April 10, 
MOFA Latin America and Caribbean Affair Director General 
Mitsuo Sakaba told WHA A/S Thomas A. Shannon that the big 
issue in Bolivia is new President Evo Morales.  Bolivia is a 
top recipient of Japanese development cooperation programs 
because of its poor economic conditions.  Japan cancelled USD 
500 million of Bolivian public debt in 2004.  Japan's Special 
Envoy Tatsuo Arima to met with Morales during his January 22 
inauguration (a meeting which was scheduled for 5 a.m., 
Sakaba noted wryly) and conveyed that Japan had canceled its 
remaining debt as a gesture of Tokyo's willingness to work 
with the new government.  Japan is now waiting for Morales to 
respond with political and economic gestures.  A particular 
focus is Japan's investment in Bolivian mining.  Japan wants 
to see how the new government will handle its natural 
resources, including royalties and joint ventures.  Sakaba 
also said Japan is watching how Morales handles illegal 
narcotics. 
 
¶3.  (C)  A/S Shannon agreed with Sakaba that Morales would 
have difficulty tackling the coca issue.  Morales has told 
the United States he wants a counter-drug alliance; 
Washington will make every effort to assist him.  Morales' 
core constituency, however, are cocaleros, who grow coca leaf 
and harbor resentment against the U.S. for our eradication 
programs.  The U.S. recognizes that some coca production is 
legal under Bolivian law, but it is important that Bolivia 
continue counternarcotics efforts based on interdiction, 
 
eradication and alternative development.  The U.S. believes 
it is important not to make Morales feel cornered; but he 
needs to understand international realities.  The U.S. 
expects the United Nations to reject Morales' request to 
remove coca from its list of illegal substances, which will 
send a message to Morales on the seriousness with which the 
international community views the issue.  A/S Shannon 
welcomed Sakaba's note that Morales has told the Japanese he 
favors interdiction as the way to fight narcotrafficking, but 
commented that in reality Bolivia has little capacity to 
conduct interdictions without U.S. cooperation and assistance. 
 
Colombia 
-------- 
 
¶4.  (C) Japan expects the re-election of incumbent president 
Alvaro Uribe in the upcoming Colombian presidential election, 
Sakaba said.  Uribe looks set for a second term, giving him 
more time to make progress in combating narcoterrorism and 
strengthening state institutions.  Japan appreciates Uribe's 
anti-insurgent stance and in particular his strong policies 
toward the Revolutionary Armed Forces of Colombia (FARC). 
Prime Minister Koizumi, he stressed, has made clear Japan's 
support for counter-insurgency and business cooperation with 
Colombia.  Japan has a wide range of development cooperation 
programs with Colombia, Sakaba added, in particular focusing 
on re-integration programs for former insurgents.  Japan does 
not know, however, how closely the Uribe government 
communicates with FARC. 
 
¶5. (C) A/S Shannon explained there is not much contact 
between the government and the FARC.  The main interaction 
with FARC is on a proposed humanitarian exchange of 
FARC-kidnapped hostages for FARC prisoners, a process largely 
driven by European countries because of interest in selected 
hostages.  FARC has shown it is not yet ready to enter 
broader peace negotiations with the government because, while 
it faces some pressure, its position in the field is still 
tenable.  Uribe's current priorities are to deal with the 
paramilitaries, and then with the Army of National Liberation 
(ELN).  The FARC will come later.  Sakaba asked about 
extradition of FARC leaders to the U.S. A/S Shannon confirmed 
that the U.S. currently holds several FARC members, that all 
the major FARC leaders are under U.S. indictment, and the 
U.S. will continue to ask for extradition of any captured 
FARC leaders. 
 
Brazil 
------ 
 
¶6. (C) Japan is currently hosting a large Brazilian 
delegation, Sakaba remarked, including Foreign Minister Celso 
Amorim, Development, Industry, and Foreign Trade Minister 
Luiz Fernando Furlan, and Communications Minister Helio 
 
Costa.  The visit has three main topics: 1) the status of 
Japanese-Brazilians in Japan (education is an problem because 
of language barriers); 2) ethanol exports to Japan; and 3) 
Brazil's possible adoption of the Japanese digital television 
broadcast standard.  Overall, relations with Brazil are very 
active and business ties are developing well.  Japan does not 
believe a Free Trade Agreement (FTA) is possible with Brazil 
in the near term, however, because of Japanese difficulties 
in accepting Brazilian agricultural exports and the 
protectionist nature of the Brazilian market. 
 
¶7.  (C) Turning to Brazil's presidential election campaign, 
Sakaba offered that Japan works well with the administration 
of incumbent President Luiz Inacio Lula da Silva, but 
believes it can also work with Brazilian Social Democracy 
Party candidate Geraldo Alckmin who impressed Japanese 
officials when he visited Japan last year.  Japan, therefore, 
has no particular preferences regarding the election outcome. 
 A/S Shannon commented that neither candidate will control 
the Brazilian congress, making it difficult for either to 
implement his legislative agenda. 
 
¶8.  (C) Regarding the U.S. free trade agenda, Shannon noted 
that the U.S. has free trade agreements stretching from 
Canada to Chile, but leaving out the Mercosur countries, as 
well as Ecuador and Bolivia.  Brazil is focused on the Doha 
round rather than the FTAA, because of its concerns about 
agricultural subsidies.  Sakaba commented that Japan is now 
watching closely Mercosur's FTA talks with Europe, because 
this is Brazil's first FTA negotiation with a developed 
rather than developing partner.  Japan has also noted the 
complaints of some smaller Mercosur members, such as Uruguay 
and Paraguay, and their desires for separate FTAs with the 
United States.  A/S Shannon clarified that this idea is not 
currently workable, particularly because Uruguayan beef and 
dairy exports to the U.S. would be too sensitive.  Uruguay 
also uses the threat of seeking a separate U.S. FTA to exert 
pressure on Mercosur, trying to show it does not need to work 
inside the group.  The U.S., however, has not ruled out an 
eventual negotiation with Uruguay. 
 
Mexico 
------ 
 
¶9.  (C) After reviewing the top three candidates for the 
Mexican election, A/S Shannon commented that the race was 
between PAN candidate Calderon and the PRD candidate Lopez 
Cbrador.  Sakaba noted the political controversy over illegal 
immigration to the U.S., speculating that if incumbent 
president Vincente Fox handles this issue well, he can 
strengthen Calderon's chances in the race.  Asked where 
immigration  stands in U.S.-Mexico relations, A/S Shannon 
relied that U.S. immigration policy is a domestic rather than 
foreign policy issue.  The Department's role is to stress to 
 
Mexico the importance of keeping a low profile on the issue. 
The immigration debate in the U.S. is very sensitive, and a 
too-strong Mexican voice could hurt progress toward 
reasonable and effective immigration policies. 
 
Paraguay 
-------- 
 
¶10. (C) Paraguay is unique in the LAC region because of its 
diplomatic relations with Taiwan, its military relations with 
the U.S. and its recent influx of immigrants from the Middle 
East, Sakaba observed.  He asked if the U.S. plans to 
establish a U.S. military base in the region.  While the U.S. 
is coordinating with Paraguay on counterterrorism measures 
and some military training, it has no plans to establish a 
U.S. military base there, assured Shannon.  The U.S. is party 
to the "3 1" talks, along with Brazil, Argentina and 
Paraguay.  The group's focus is on the tri-border area, a 
region known for contraband, money laundering and Islamic 
groups, with some connections to Hezbollah sending money back 
to the Middle East.  President Duarte is eager to cultivate 
better relations with the U.S. to gain leverage with Brazil 
and prevent drug trafficking in the region from spreading to 
Paraguay, Shannon explained. 
 
ODA 
--- 
 
¶11. (C) Japan's developmental assistance to LAC reached its 
peak with the disbursement of USD 1.2 billion in 1997-1998, 
but has since been slowly declining, according to Sakaba. 
This is in large part due to many Latin American countries 
"graduating" from the assistance program when their GDP rises 
above a certain level.  Japan's budget pressure also has led 
to cuts in ODA.  The most recent statistics available show a 
low of USD 3 million disbursed in 2004.  However, Sakaba 
explained, the repayment of soft loans by LAC countries is 
subtracted against the net disbursement, so the actual net 
program amount is greater.  Furthermore, he expects the 
figures for 2005 to increase because Japan recently begun 
extending soft loans again after a period of inactivity. 
Sakaba expressed interest in U.S. reliance on NGOs for 
development assistance.  Shannon explained that U.S. use of 
NGOs varies from country to country.  In Colombia, the 
assistance goes largely to the government, but in Haiti the 
U.S. relies exclusively on NGOs. 
 
APEC and FEALAC 
--------------- 
 
¶12. (C) Shannon expressed his concern that Japan views APEC 
as solely an Asian organization, even though Mexico, Peru and 
Chile are current members and Panama, Colombia and Ecuador 
are angling for membership.  APEC can play an important role 
 
in LAC by linking it to dynamic countries in Asia.  This 
could encourage LAC governments, especially new governments, 
to make the right decisions and maintain a global focus, 
Shannon noted.  Japan views APEC as an American-Asian 
organization and not just an Asian organization, assured 
Sakaba.  He added that Peru will be hosting the 2008 APEC 
meeting.  Since the moratorium for new members is up in 2007, 
Colombia's membership bid should also come on the agenda. 
 
¶13. (C) Sakaba also referred to the Forum for East Asia Latin 
America Cooperation (FEALAC) as another important cooperative 
forum between East Asia and LAC.  To date, there have been 
two Foreign Ministerial-level meetings, with Brazil set to 
host the third.  Brazil and Korea hold the current 
Coordinator positions; Deputy Coordinators Japan and 
Argentina will become the Coordinators after the Brazil 
meeting.  The framework of this forum aids in structuring 
cooperation between East Asia and Latin America in three 
specific areas: economic and social, political, and science 
and technology.  Still, Sakaba admitted it was a slow, 
step-by-step process. 
 
China 
----- 
 
¶14. (C) Turning to China's presence in Latin and Central 
America, Sakaba explained that Beijing's increased business 
interests in the region were a recent development.  China was 
not simply competing with Taiwan and promoting its 
businesses, but was also procuring natural resources 
including food and energy supplies.  Beijing is giving 
priority to countries that can export natural resources to 
China, such as Brazil, Argentina, Chile, Ecuador, Venezuela, 
and to a certain degree, Colombia.  In addition, Mexico is 
now a large market for Chinese exports.  Sakaba said that 
China's volume of trade in the LAC reached USD 50 billion in 
2005, for the first time surpassing Japan's at USD 41 
billion.  He felt China's level of trade would soon surpass 
that of the European Union. 
 
¶15. (C) China did not think about energy and natural 
resources within the context of competing with the United 
States, Sakaba opined.  Instead, he said Japan was competing 
with China.  The sheer volume of Chinese trade in the region 
affects the prices of products such as soybeans.  Tokyo did 
not view this acquisition of resources as a "negative," 
because Japan's investments in China were to a certain degree 
dependent on the PRC's ability to procure resources.  In 
addition, Japanese shipping and trading companies were 
currently involved in the Chinese trade to the LAC.  As a 
result, Sakaba said it is important for Tokyo to pay close 
attention to how Beijing's relationship with Latin and 
Central America further develops. 
 
¶16. (C) Regarding the non-economic aspects of Chinese 
engagement in the area, Sakaba said China's exports of 
weapons to Latin America might be a "point of interest" for 
both Japan and the United States to follow.  Beijing is also 
focusing on those Caribbean and Central America countries 
that have established ties with Taiwan.  China is pressuring 
Central American countries to establish formal diplomatic 
relations with the PRC.  Sakaba cited China's decision to 
refuse Panama's request to establish a trade office in 
Beijing, wanting instead an Embassy. 
 
¶17. (C) Top PRC leaders announced a USD 10 billion investment 
program in Latin America, Sakaba continued, but many in the 
region are disappointed because these commitments have not 
materialized as quickly as they had hoped.  Japan was working 
through FEALAC and wanted to encourage the development of a 
positive relationship between China and Latin America.  The 
U.S. largely shared Japan's assessment of China's role in 
Latin America, A/S Shannon responded.  Washington is keeping 
an eye on how Beijing's political influence is growing with 
increased economic engagement, noting that some in Latin 
America may see an increased Chinese role as a counterbalance 
to the United States in the region. 
 
¶18. (C) Many Latin Americans did not have a clear 
understanding of China or the Chinese people, Sakaba 
asserted.  Beijing could exploit this "innocence."  Many 
Latins do not understand that in dealing with Chinese 
corporations, they are dealing with state-owned enterprises 
rather than with private firms. 
 
¶19. (C) Wrapping up the meeting, Sakaba said that Japan, 
China and South Korea would hold trilateral consultations on 
Latin America towards the end of April.  The goal of the 
meeting was for the three countries to better understand 
their respective positions on the region.  Shannon thanked 
Sakaba for providing his assessment of Latin and Central 
American affairs that, he said, largely parallels that of the 
United States.  He hoped to continue their discussion and to 
explore how the United States and Japan could work together 
in the region.  Sakaba responded that USAID and JICA have a 
good history of cooperation in the area, and that Tokyo would 
like to continue working closely with Washington in the 
future.  Shannon concluded by saying that such joint 
cooperation would send a strong message to Latin America. 
 
¶20. (U) Assistant Secretary Shannon cleared this message. 
SCHIEFFER