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O 170732Z APR 06
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UNCLAS SECTION 01 OF 04 TOKYO 002059 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT PLEASE PASS USTR FOR CUTLER, NEUFFER 
 
E.O. 12958: N/A 
TAGS: PREL ETRD ECON EINV APECO XR XK LA CH JA
SUBJECT: WHA A/S SHANNON'S APRIL 11 MEETING WITH JAPANESE 
BUSINESS LEADERS 
 
REF: A. TOKYO 2008 
 
     ¶B. TOKYO 1960 
     ¶C. TOKYO 1959 
 
¶1.  (SBU)  Summary:  Japanese companies see potential for 
investment in Latin America, particularly in the areas of 
minerals, energy, and food, Japanese business representative 
told WHA A/S Shannon on April 11.  Noting the success of the 
Japan-Mexico free trade agreement, they hoped the Japanese 
Government would accelerate its free trade FTA negotiations 
with other major Latin American countries.  The business 
representatives also indicated their desire for good 
relations between the United States and Latin American 
countries because they see strong relations with the United 
States as a bellwether of political stability.  End summary. 
 
Japanese Firms Have Cautious Interest in Latin America 
--------------------------------------------- --------- 
 
¶2.  (SBU)  Japanese business representatives meeting over 
lunch on April 11 with Western Hemisphere Affairs Assistant 
Secretary Thomas Shannon were generally positive about the 
 
SIPDIS 
current trend in Japan's economic relations with Latin 
America.  Still, they noted that top managers remained 
cautious about expanding in the region.  According to 
Mitsubishi Corporation Advisor for Latin America and the 
Caribbean Koji Uchida, Japan lost two decades of business 
growth in Latin America, first due to political instability 
in the region during the 1980s and then as a result of 
Japan's economic woes in the 1990s.  Uchida, who was involved 
with Japan's free trade agreement negotiations with Mexico 
and is also engaged in the current negotiations with Chile, 
emphasized that the expanding global demand for commodities 
driven by Asia's rapidly growing economies meant that Latin 
America has a great potential as a supplier to the Asian 
market.  Noboru Watanabe, a former Mitsubishi executive and 
Inter-American Development Bank official, seconded Uchida's 
comments but added that the younger generation of Japanese 
business leaders might have a more positive attitude toward 
Latin America. 
 
¶3.  (SBU)  Yoshihiro Kawamoto, General Manager of the Latin 
America Division of Matsushita Electric (aka Panasonic), 
noted that a number of Japanese firms took serious losses on 
investments in Latin America in the 1980s.  This historical 
fact continued to color the thinking of many top executives. 
Even though the business climate in the region had improved 
markedly, Latin America still accounted for only 1.6% percent 
of Matsushita's global business, a figure the company was 
looking to double in the foreseeable future.  Nevertheless, 
Kawamoto stressed that Japanese companies remain challenged 
by both the geographical and psychological distance from 
their Latin American partners.  The comfort level of Japanese 
companies in dealing with Latin America was far lower than 
 
TOKYO 00002059  002 OF 004 
 
 
with the United States, Europe, or other parts of Asia. 
Kawamoto indicated that, at least in the case of Brazil, 
Japanese companies took a short-term view regarding their 
investments in comparison to their European and American 
counterparts.  They were unwilling to tolerate current losses 
in the hope of future gains.  For their part, the Brazilians 
remained wedded to a self-sufficiency mentality that 
inhibited the country's economic ties with the rest of the 
world, Kawamoto asserted. 
 
FTA Benefits Clear but Other Obstacles Linger 
--------------------------------------------- 
 
¶4.  (SBU)  Mitsubishi's Uchida called the Japan-Mexico FTA a 
great success and expressed confidence that the agreement 
with Chile would bring similar strong growth in bilateral 
trade.  Although FTAs among third parties always held the 
potential of becoming a threat to Japanese exporters, Uchida 
noted, in the Latin American case, the relatively small size 
of most individual national economies meant that a regional 
FTA create the economies of scale needed to attract Japanese 
investment.  A free trade agreement could also help to curb 
the phenomenon in Latin America of "capricious economic 
policymaking," which had been a problem for many Japanese 
firms, Uchida noted.  He cited institutional instability, 
crime, and corruption as ongoing concerns, but indicated that 
in the case of Mexico the existence of an FTA with a 
consultative mechanism had proven beneficial in conveying 
companies' concerns to the authorities. 
 
¶5.  (SBU)  Tomizo Nagafuchi, Deputy General Manager of Mitsui 
Corporation's Business Planning and Coordination Department, 
said that his company -- now chairing the Brazil Committee of 
the Japanese Business Federation (Keidanren) -- had pushed 
forward a Keidanren recommendation to the Japanese government 
to explore a free trade agreement with Brazil and the 
MERCOSUR countries.  According to Nagafuchi, however, the 
South American countries remained more focused on 
strengthening their trade ties with the United States and 
Europe. 
 
¶6.  (SBU)  Matsushita's Kawamoto added that, while an FTA 
might reduce import tariffs in the case of Brazil or other 
countries, it would not necessarily overcome other problems 
such as those related to the protection of intellectual 
property rights or the unavoidable mismatch between what the 
Japanese want to sell and what local consumers are able to 
buy.  Kawamoto cited the example of Matsushita's desire to 
sell more high-quality flat-screen plasma televisions in 
Latin America.  It was nonetheless still producing 
conventional sets in its local operations because most 
consumers in Latin America could not afford the more advanced 
product. 
 
 
TOKYO 00002059  003 OF 004 
 
 
East Asian Architecture and The China Factor 
-------------------------------------------- 
 
¶7.  (SBU)  Brazil and China have been growing closer 
politically, Kawamoto noted, and asked A/S Shannon whether 
the United States had any concerns about China's increased 
engagement in Latin America.  Shannon responded that Latin 
American countries, which had been thinking that China might 
act as a counterweight to U.S. influence in the region, had 
been disappointed by China.  The Chinese, Shannon stressed, 
appeared to see Latin America as a source of energy, 
commodities, and food, and were not interested in challenging 
the United States politically in the region or in providing 
the countries of Latin America with the long-term, 
employment-generating investment they hoped for. 
 
¶8.  (SBU)  Nagafuchi asked A/S Shannon for his views on 
proposals to develop a new regional architecture for East 
Asia based on the East Asian Summit and the ASEAN plus 3 
process.  Shannon stressed that, from his perspective, APEC 
was the more important forum because it linked the Western 
Hemisphere countries for which he was responsible to the 
dynamic economies of East Asia.  That linkage, Shannon hoped, 
would convince the often parochial countries of Central and 
South America of the importance of interacting with the wider 
world.  Nagafuchi indicated that, from his perspective, Japan 
would like both to sustain APEC and to develop a new, 
stronger entity rooted in the East Asian region.  EMIN 
Zumwalt commented that APEC would inevitably lose its 
relevance if the East Asian Summit began to address the same 
set of issues as APEC. 
 
U.S. Role in Latin America Good for Japan 
----------------------------------------- 
 
¶9.  (SBU)  Uchida expressed concern that a new trend of 
anti-Americanism had emerged in parts of Latin America and 
stressed that Japan, which had good relations with both the 
United States and Latin America, hoped for positive U.S. ties 
with the region.  A/S Shannon emphasized that the United 
States also wanted good relations with all countries in Latin 
America.  The United States, Shannon said, had put aside old 
ideological considerations in its thinking on Latin America 
and had centered its policy on support for fundamental 
democratic values.  What drives our engagement in the region, 
Shannon said, was a commitment to democracy, free markets, 
and economic integration. We could fashion a positive 
relationship with countries that shared this commitment. 
Unfortunately, some countries -- notably Venezuela -- were 
looking to "pick a fight" with the United States and were 
acting in ways that ran counter both to the development of 
democracy domestically and to the maintenance of the overall 
political stability Latin America needed to foster economic 
development.  The Japanese businessmen said they considered 
 
TOKYO 00002059  004 OF 004 
 
 
good U.S.-Latin relations to be key indicators of the 
region's business climate. 
 
¶10. (U) Assistant Secretary Shannon cleared this message. 
SCHIEFFER