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FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5303
INFO RHEHNSC/NSC WASHDC IMMEDIATE
RUEHAC/AMEMBASSY ASUNCION PRIORITY 5399
RUEHBO/AMEMBASSY BOGOTA PRIORITY 3723
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 3983
RUEHCV/AMEMBASSY CARACAS PRIORITY 3226
RUEHLP/AMEMBASSY LA PAZ PRIORITY 4545
RUEHPE/AMEMBASSY LIMA PRIORITY 2969
RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 6217
RUEHQT/AMEMBASSY QUITO PRIORITY 1798
RUEHRG/AMCONSUL RECIFE PRIORITY 4714
RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 2009
RUEHSO/AMCONSUL SAO PAULO PRIORITY 6887
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 02 BRASILIA 000882 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR F. PARODI 
 
E.O. 12958: DECL: 05/05/2016 
TAGS: PREL EINV EPET XM BR
SUBJECT: BRAZIL: ADDITIONAL DEVELOPMENTS ON BOLIVIAN 
NATIONALIZATION OF ENERGY INSTALLATIONS 
 
REF: BRASILIA 861 AND PREVIOUS 
 
Classified By: CHARGE PHILLIP CHICOLA. REASONS: 1.4 (B)(D) 
 
¶1. (C) Summary. Senior Brazilian Government (GOB) officials 
told emboffs that they viewed the 4 May meeting in Puerto 
Iguazu, Argentina as a "successful symbolic event" that 
demonstrated Presidents Lula, Morales, Chavez and Kirchner 
remain commited to regional cooperation and can talk 
productively about energy issues, in the wake of Bolivia's 
sudden nationalization of foreign-owned energy installations 
on May Day.  But the gap between the GOB's official spin and 
public reactions appears wide.  The tone of reporting in much 
of Brazil's media remains highly critical of the GOB's 
handling of the situation, and continues to depict an 
emerging Morales-Chavez axis that is pursuing an agenda at 
Lula's expense. End summary. 
 
A POLITICAL GESTURE... 
---------------------- 
 
¶2. (C) Raimundo Magno, diplomatic advisor to Civil Household 
Minister Dilma Rousseff, told Charge on 5 May that the 
Argentina meeting was viewed by the GOB as a "successful 
symbolic event."  The GOB's intention was not to engage in 
hard bargaining or concrete policy negotiations, but "to send 
a message" that the presidents are still united in seeking 
the goal of regional integration, and would be able to work 
together on the gas issues. 
 
¶3. (C) In an earlier conversation on 4 May with PolCouns, 
Marcel Biato, deputy foreign affairs advisor to President 
Lula, had conveyed a similar message.  Biato had not received 
a briefing on the meeting, but made a few observations: 
 
-- The Argentina meeting is &a political gesture8 that Lula 
and Kirchner conceived on 2 May.  The Brazilians wanted to 
use the summit to reinforce their continued political 
commitment to regional integration and comity, despite the 
events of recent days.  At the same time, Lula intended to 
make it clear that the issues with Bolivia and Petrobras are 
strictly bilateral in nature.  Biato said that Lula,s 
&soft8 position in the past two days is intentional, to 
leave him room for maneuver.  Petrobras President Gabrielli 
is providing the hard line in public, i.e., no price 
increase, no more investment in this climate, ready to go to 
arbitration. This is choreographed, a deliberate tactic, 
Biato said. (Comment: But it should be noted that Lula seemed 
to publicly undercut Gabrielli's hard line at the Argentina 
meeting, saying there is still the possibility of new 
Brazilian investment.  End comment.) 
 
-- Asked whether Planalto is not concerned about the harsh 
media reaction depicting Lula,s response as weak, Biato said 
Lula and the GOB see no profit in &engaging in megaphone 
diplomacy8  with Morales, and that the Brazilian media and 
public will come around to seeing the merit in a circumspect 
approach, &as the markets are already recognizing.8 
Results are what count:  if the GOB keeps the gas flowing at 
stable prices while Petrobras pursues its legal options, the 
wisdom of Lula,s approach will be vindicated. Keeping a 
dialogue going is useful, Biato said, because Morales is 
going to realize sooner or later that Bolivia is not 
Venezuela -- i.e., foreign companies will, in fact, walk away 
if they must, so he needs to deal.  Biato said the GOB is 
looking for this realization and perhaps political changes 
that come in Bolivia with the constituent assembly as factors 
that may affect Morales, position. 
 
-- Challenged about the growing public perception in Brazil 
that Morales and Chavez are in cahoots at Lula,s expense, 
and whether this does not undermine Brazil,s regional unity 
vision, Biato was laconic.  &What are we supposed to do?  We 
can,t choose our neighbors.  We don,t like Chavez,s modus 
operandi or Morales, surprises, but we have to manage these 
 
BRASILIA 00000882  002 OF 002 
 
 
guys somehow, and keep the regional integration idea alive.8 
 
... THAT MAY HAVE BEEN A DUD 
---------------------------- 
 
¶4. (U) But looking at Brazilian media coverage of the 
Argentina meeting, it is far from clear that the symbolism 
was as successful as the GOB hoped.  Most Brazilian press 
following the meeting focused on Lula's failure to achieve 
any breakthroughs, and commentators continued to criticize 
the GOB response as weak and inadequate.  Respected columnist 
Miriam Leitao stated on TV Globo that "President Lula has 
been inept throughout this crisis.  The trip and joint 
interview were a disaster.  It is obvious that it was not the 
moment to show solidarity with Morales...This was a 
disastrous week."  Leading daily "Estado de Sao Paulo" 
carried comments by former Brazilian ambassador and Brazilian 
Petroleum Agency CEO Sebastiao de Rego Barros Netto 
expressing his bewilderment at the passivity with which Lula 
has reacted to events in Bolivia.  And former Brazilian 
Ambassador to the U.S. Rubens Barbosa noted in "Folha de Sao 
Paulo" that Brazil's "national interest should come ahead of 
anything.  The government is minimizing the expropriation." 
Brazilian media also highlighted a report in "The Economist" 
-- widely respected in Brazil's policy and finance 
communities -- saying the events in Bolivia are a victory for 
Chavez and his proxy, Morales, and a defeat for Lula.  The 
optics were hardly kinder than the editorials.  A large photo 
on the front page of "Estado de Sao Paulo" shows an awkward 
Lula standing between Kircher, Morales and Chavez -- the 
three of whom appear to be laughing at some joke told at 
Lula's expense. 
 
COMMENT 
------- 
 
¶5. (C) Ineptitude and mixed signals continue to characterize 
the GOB's response to Morales' fait accompli. And the 
Brazilian public and media remain riled up in an unusually 
vociferous way, voicing frustration with the GOB and growing 
suspicion -- if not outright animosity -- toward Chavez and 
Morales.  It remains to be seen whether the public ire 
continues. (Brazilians can forget such things quickly when 
the World Cup is on the horizon.)  The real story of Brazil's 
response is probably just starting now, and will likely play 
out in the hard-headed world of corporate board rooms and 
arbitration court, with Petrobras -- which has legal 
obligations and share holder demands that may ultimately 
trump Lula's faltering dream of regional leadership -- doing 
the talking that matters for the Brazilian side.  We will 
touch base with key political and energy sector contacts in 
the next days and report new developments. 
 
CHICOLA