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R 311915Z MAY 06
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UNCLAS SECTION 01 OF 02 BRASILIA 001056 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR 
DEPARTMENT FOR EB/ESC SUE SAARNIO 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/SHUPKA 
DOE FOR SLADISLAW 
 
E.O. 12958: N/A 
TAGS: EMIN EPET PREL BR CH VE
SUBJECT: BRAZIL - CVRD ON CHAVEZ AND CHINA 
 
¶1. (SBU) Charge, CG and Econoff spoke to Brazilian mining giant 
Companhia Vale Rio Doce (CVRD) Director of Foreign Affairs, Renato 
Amorim, on May 26 about the company's stake in the current turmoil 
in the Latin American business climate and the increasing influence, 
often to Brazil's detriment, of Venezuelan petrodollars in the 
region.  Amorim stated that Chavez's tactics ultimately would 
backfire, as had his criticism of Alan Garcia in the Peruvian 
elections.  He criticized Chavez's attempt to strong-arm Brazilian 
companies active in Venezuela, including CVRD, into participating in 
a "trade mission" to Bolivia.  With respect to China, Amorim argued 
that although CVRD is growing rich off of the huge China market, 
Beijing had over-promised and not lived up to the extravagant 
investment commitments made during the 2004 Hu Jintao visit.  End 
Summary. 
 
ON CHAVEZ's NEW CAUDILLISMO 
--------------------------- 
 
¶2. (SBU) Charge opened the meeting noting US concerns with 
Venezuela's unhelpful attempts to introduce issues into Latin 
America that are unconnected with the region, such as relations 
towards Iran and Iraq.  Amorim declared that Caracas' tactics would 
backfire, mostly due to Chavez's new "Caudillismo," pointing out 
that the Venezuelan leader's recent call to CVRD's president 
requesting that he accompany him on a trade mission to Bolivia was 
an example of how Chavez gets it wrong or simply does not get it. 
 
¶3. (SBU) Amorim observed that the irony of the Venezuelan president 
asking a Brazilian company to participate in a trade mission to 
Bolivia, a country that had just kicked out one Brazilian company 
(EBX) and threatened another with nationalization, was not lost on 
CVRD.  While CVRD got the message that if companies wanted to stay 
in the game in Venezuela, they would have to play ball with Chavez 
in Bolivia, CVRD's response speaks for itself, he said.  "We are a 
60 billion dollar company with interests all over the world (18 
countries on all continents except Antarctica); we have no interest 
in Bolivia, an unstable investment climate," Amorim stated.  He 
pointedly added that had CVRD gone on the trade mission with Chavez, 
the company would have drawn significant criticism in Brazil.  While 
CVRD is following the Bolivia situation for clues to how other 
countries' leaders might deal with foreign investors, Bolivia is a 
non-issue for CVRD. 
 
¶4. (SBU) With respect to Peru-Venezuela relations, Amorim said that 
Chavez's openly harsh criticism of Peruvian presidential candidate 
Alan Garcia would do nothing but ensure his victory in the June 
run-off elections.  Chavez, he felt, has only heightened Peruvians' 
resolve to go against Chavez's influence (and therefore elect 
Garcia). 
 
CHINA'S CLUMSINESS 
------------------ 
 
¶4. (SBU) Amorim sees no real Chinese threat to U.S. interests in 
Latin America and does not see Brazil as a future Chinese outpost, 
as it only supplies primary exports to China. (Note: CVRD is one of 
Brazil's principal exporters to China and company President Roger 
Agnelli is head of the Brazil-China Business Council.)  The Charge 
reminded Amorim that while playing the role of commodity supplier to 
China can be lucrative in the short-run, it is problematical in the 
long-term.  Latin America and Asia were once at the same level of 
development, but Latin American countries had fallen back when they 
became relegated to role of primary materials suppliers, providing 
very little value added to their products. 
 
¶5. (SBU) Amorim, a former Brazilian diplomat (10 years in the 
service) who spent the bulk of his career in China, opined that the 
Chinese are too clumsy in Latin America (and in Brazil).  They are 
 
BRASILIA 00001056  002 OF 002 
 
 
not living up to the promise of what he called the bluster and 
heightened expectations created from Chinese President Hu Jintao's 
2004 visit.  Amorim noted that the promised investments levels in 
Latin America have not been realized and probably wouldn't be.  He 
could count only two new Chinese investment projects in Brazil since 
the Jintao visit, and pointed to China's practice of tied-aid and 
lack of transparency as not endearing it to Latin America. 
 
¶6. (SBU) Finally, Amorim felt that China needed to recognize that 
Latin America was much more sophisticated than Africa and could not 
be treated in the high-handed manner that Beijing dealt with that 
continent.  Indeed, he said, the Chinese are now suffering a 
backlash to its attempts at "colonizing" Africa, pointing to recent 
car bombs in Nigeria as a warning against the expansion of Chinese 
interests in Nigerian oil and the increasing resistance to Chinese 
interests in Mozambique and Tunisia. 
 
COMMENT 
------- 
 
¶7. (SBU) While Amorim was sanguine about the ability of the U.S. and 
China to avoid conflict over Latin America, real questions are 
starting to emerge whether, at least on trade issues, Brazil and 
China will be able to do the same.  GOB export figures show that 
after several years of healthy trade surpluses with China, over the 
first four months of 2006 Brazil registered a US$90 million trade 
deficit with Beijing.  Indeed, Chinese imports registered a 56% 
increase compared to the corresponding time period in 2005.  With 
its ability to produce low-cost items such as electronic goods, 
textiles, and footwear, China has now displaced Argentina as the 
second largest exporter to Brazil -- behind only the United States. 
 
 
¶8. (U) This cable was coordinated with AmEmbassy Brasilia. 
 
ATKINS