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DE RUEHBR #1193/01 1651840
ZNR UUUUU ZZH
R 141840Z JUN 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 5774
INFO RHEBAAA/USDOE WASHDC
RUCPDO/USDOC WASHDC
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHSO/AMCONSUL SAO PAULO 7200
RUEHRI/AMCONSUL RIO DE JANEIRO 2283
RUEHRG/AMCONSUL RECIFE 4969
RUEHAC/AMEMBASSY ASUNCION 5499
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RUEHMN/AMEMBASSY MONTEVIDEO 6317
RUEHSG/AMEMBASSY SANTIAGO 5577
RUEHME/AMEMBASSY MEXICO 1988
RUEHQT/AMEMBASSY QUITO 1873
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RUEHCV/AMEMBASSY CARACAS 3303
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UNCLAS SECTION 01 OF 04 BRASILIA 001193 
 
SIPDIS 
 
STATE PASS USTR:MSULLIVAN 
DOE FOR GWARD/SLADISLAW 
NSC FOR FEARS 
USDOC FOR 3134/USFCS/OIO/WH/SHUPKA 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
STATE PASS OPIC FOR MORONESE, RIVERA, MERVENNE 
STATE PASS EXIM FOR NATALIE WEISS, COCONNER 
STATE PASS USTDA FOR AMCKINNEY 
TREASURY FOR OASIA:DDOUGLASS 
AID/W FOR LAC/AA 
 
SENSITIVE 
SIPDIS 
 
CORRECTED COPY (TAGS/PARAS 5, 13, 14) 
 
E.O. 12958: N/A 
TAGS: ETRD ECON KIPR EINV EPET KTFN BEXP BR
SUBJECT: COMMERCE SECRETARY GUTIERREZ MEETS WITH BRAZILIAN 
POLICYMAKERS 
 
 
¶1. (SBU) Summary.  After Secretary Gutierrez's June 5-6 discussions 
in Rio de Janeiro at the Association of American Chambers of 
Commerce of Latin America (AACLA) annual meeting and the bilateral 
U.S.-Brazil Commercial  Dialogue (septels), he traveled to Brasilia 
for sessions with government policymakers on June 7.  Inter alia, 
OPIC President Robert Mosbacher Jr., USDOC A/S David Bohigian, State 
DAS Patrick Duddy, US Patent and Trademark Office Deputy Director 
Steve Pinkos, USDOC Office Director for Latin America John Andersen, 
and the Charge d'Affaires accompanied the Secretary on his calls in 
Brasilia.  In his meetings with Lula Chief of Staff Dilma Rousseff, 
Vice-Minister of External Relations Samuel Pinheiro Guimaraes, and 
Justice Minister Marcio Thomaz Bastos, the Secretary discussed 
themes such as the need to reinvigorate Brazil-U.S. two-way trade, 
the threat to Occidental Petroleum's interests in Ecuador, the 
situation in Bolivia, peacekeeping in Haiti, Venezuela, American 
industry's desire to help Brazil prepare for the 2007 Pan-American 
Games, ethanol, GSP renewal, and protection of intellectual property 
rights. 
 
¶2.  (SBU) Meanwhile, Brazilian Ambassador to the U.S. Abdenur 
requested that the USG upgrade Brazil from its current Special 301 
Priority Watch List status and maintain Brazil's GSP eligibility 
when Congress renews that program.  Finally, in a separate session 
with resident Latin American Ambassadors, the Secretary reiterated 
the President's commitment to promoting democracy and social justice 
within the hemisphere.  End Summary. 
 
----------------------- 
Chief of Staff Rousseff 
----------------------- 
 
¶3.  (SBU)  In a friendly 40 minute meeting with Lula Chief of Staff 
Dilma Rousseff, the Secretary underscored the USG's desire to deepen 
trade trade relations with Brazil.  The goal of the bilateral 
Commercial Dialogue inaugurated in Rio de Janeiro the day before, he 
explained, was to help both U.S. and Brazilian business take better 
advantage of existing commercial opportunities.  Both Rousseff and 
the Secretary agreed on the need for a positive result in the 
ongoing WTO Doha Round negotiations, with Rousseff emphasizing the 
particular importance to Brazil of a breakthrough on agriculture. 
 
¶4.  (SBU)  On energy issues, the Secretary observed that in the wake 
of the Ecuadorian government's seizure of its assets, the American 
company Occidental Petroluem faces a difficult situation in that 
country.  He stated that he hoped that the Brazilian government and 
industry did not act in a way that divided our two nations. 
Rousseff replied that while the Ecuadorians contemplated that a 
state-run petroleum company (like Brazil's Petrobras) might be 
recruited to develop Occidental's field, neither the GOB nor 
Petrobras had any such intent to do so.  Rousseff noted that while 
it would continue to operate its other assets in Ecuador, Petrobras 
(a respected player on the international scene) had no interest in 
usurping Occidental's position.  Should the GOB's position on this 
issue change in any way, she added, Petrobras would consult first 
with Occidental Petroleum to protect that company's interests. 
Finally, in response to the Secretary's offer as to whether the USG 
could help regarding the threat to Petrobras assets in Bolivia, 
Rousseff stated that although difficult negotiations were still 
ahead the situation in Bolivia appeared to have stabilized. 
 
¶5. (SBU) OPIC President Mosbacher thanked Rousseff for the positive 
 
BRASILIA 00001193  002 OF 004 
 
 
role she played in resolving the investment dispute between 
Petrobras and El Paso regarding the Macae thermoelectric plant. 
Rousseff acknowledged the importance of attracting continued foreign 
direct investment to Brazil.  Switching gears, Mosbacher outlined 
OPIC's plans to increase its support to overseas financial 
institutions which provide residential mortgage lending.  Rousseff 
stated that strengthening access to housing was one of the GOB's 
principal priorities and said that she would encourage Demian 
Fiocca, the head of Brazil's National Development Bank (BNDES), to 
meet with Mosbacher during Fiocca's trip to Washington the week of 
June 12. (Note:  this meeting subsequently occurred on Monday, June 
12.) 
 
------------------------------- 
Vice-Foreign Minister Guimaraes 
------------------------------- 
 
¶6.  (SBU)  Accompanied by Ministry U/S for Political Affairs Antonio 
Patriota, Acting U/S for Economic Affairs Antonino Porto e Santos, 
and the Ministry's aides for North American Affairs and Intellectual 
Property rights, Guimaraes welcomed the Gutierrez delegation.  The 
Secretary began by explaining that the Commercial Dialogue sprang 
 
SIPDIS 
from the desire to capitalize on the positive report between the 
President and Lula, adding that both the Secretary and Trade 
Minister Furlan were pushing for tangible results in the short-term. 
 Guimaraes (who is not noted for his pro-American stances) stated 
that Lula values his excellent relationship with President Bush, and 
that our two countries enjoy an excellent dialogue, notwithstanding 
our differences. 
 
¶7.  (SBU)  Both Guimaraes and the Secretary agreed on the importance 
of coming to an agreement within the Doha Round on agricultural 
subsidies, although the Secretary pointed out that whatever accord 
reached would have to contain gains on NAMA and services if it were 
to pass muster with the Administration and the U.S. Congress. 
Ambassador Abdenur stated that Brazil was worried about statements 
made by influential members of Congress to the effect that pending 
legislation reauthorizing GSP benefits might not include Brazil 
within that program.  Abdenur noted that such a move would 
negatively affect both the bilateral relationship and the image of 
the U.S. in Brazil.  The Secretary replied that within the U.S. 
Congress, some had indeed begun to question whether Brazil should 
continue to receive GSP but that debate on this issue was in a very 
preliminary stage. 
 
¶8.  (SBU)  The discussion on regional issues touched upon Haiti, 
Bolivia, Venezuela, and Ecuador.  The Secretary thanked Brazil for 
the leadership it had shown on peacekeeping in Haiti and stated that 
with respect to Bolivia, friends should help friends wherever 
possible.  Guimaraes said that Brazil's efforts on Bolivia were 
proving effective as that issue was disappearing from the local 
press.  He observed that Brazil was not without leverage on Bolivia 
as from 50,000 to 70,000 Bolivians lived in Brazil (versus 2,000 to 
10,000 Brazilians in Bolivia), and gas represented a mere 4% of 
Brazil national energy matrix (although 50% of that amount came from 
Bolivia).  In the context of comments on democratization within the 
region, the Secretary noted that one country - i.e., Venezuela - 
should not divide us.  (Guimaraes, however, appeared to take this as 
a reference to Bolivia.)  Finally, the Secretary reiterated the 
points he made to Chief of Staff Rousseff about protecting 
Occidental Petroleum in Ecuador.  Guimaraes' response was similar to 
 
BRASILIA 00001193  003 OF 004 
 
 
that of Rousseff - i.e., that Petrobras would not usurp 
Occidental's position. 
 
¶9.  (SBU)  On the subject of ethanol, the Secretary stated that in 
his meetings with Minister Furlan in Rio de Janeiro, he had urged 
Brazil to attend a scheduled June 26-27 IDB meeting in Trinidad and 
Tobago on ethanol-related issues.  Discussions at the ICE talks 
demonstrated that the U.S. and Brazil might be able to usefully 
engage on ethanol at the technical level, he said.  In closing, 
Guimaraes stated that at the annual 3+1 (Brazil, Argentina, Paraguay 
+ U.S.) talks on counter-terrorism all sides consistently agreed 
that there was no evidence that terrorists had any footprint in 
Brazil.  Yet, he complained, in public remarks USG officials 
sometimes stated otherwise, without offering any evidence to back 
their claims up.  Show us the names and the evidence, he declared, 
and Brazil will take follow up action.  Charge explained that in the 
area of terrorist financing, often it was a question of the ultimate 
destination of funds that were flowing out of the tri-border region 
and the adjacent Sao Paulo area. 
 
----------------------- 
Justice Minister Bastos 
----------------------- 
 
¶10.  (SBU)  Bastos opened the meeting by noting the progress that 
Brazil has made on copyright piracy from late 2004 to the present. 
He stated that the government had put in place a National 
Anti-piracy Council which was coordinating, in conjunction with 
Brazilian law enforcement, tax, and customs authorities, the 
country-wide campaign to stamp out piracy.  Apprehensions of pirate 
goods had increased dramatically, he continued, particularly along 
the infamous tri-border (Brazil, Paraguay, and Argentina) area. 
 
¶11. (SBU)  CNCP Executive Secretary Marcio Goncalves (a Ministry of 
Justice employee) added that the positive results the Council had 
achieved would help reduce organized crime as the trade in pirate 
goods had strong links to criminal elements.  Given the danger posed 
to the public by items such as counterfeit medical devices, auto 
parts, and other safety-related products, he stated, the GOB's 
crackdown had helped increase public security.  Finally, Goncalves 
stated that in addition to its law enforcement efforts, the GOB had 
worked hard to educate the public about the human cost of piracy. 
He hoped that affected industry would work more vigorously to do the 
same. 
 
¶12. (SBU)  Secretary Gutierrez expressed his appreciation for the 
GOB's efforts and noted that through ongoing dialogue with USG law 
enforcement agencies the United States was being supportive.  USPTO 
Deputy Director Pinkos outlined his agency's plans to assist its 
Brazilian counterpart through training and technical assistance. 
Thereafter, the Brazilian Ambassador to the U.S., Roberto Abdenur, 
asked that the USG do what it could to upgrade the Brazilian 
government from its current Priority Watch List status. 
 
------------------------------------------ 
OPIC's Mosbacher Discusses Housing Finance 
------------------------------------------ 
 
¶13. (SBU) Finally, in separate June 7 meetings, OPIC President 
Mosbacher Jr. discussed prospects for development of Brazil's 
housing finance market with Finance Ministry Economic Policy 
 
BRASILIA 00001193  004 OF 004 
 
 
Secretary Sergio de Almeida and officials of Caixa Economica Federal 
 
SIPDIS 
(CEF), the parastatal bank that administers a fund dedicated to 
financing housing for low income borrowers.  While Brazil still has 
a significant housing deficit, Almeida noted that the private 
mortgage market, aided by reforms of the legal framework, was taking 
off.  A secondary market also was developing, with over Reals 7 
billion (USD 3.2 billion) in mortgage-backed securities issued. 
While construction and mortgage lending are booming, builders and 
banks are targeting upper and middle income consumers given the 
greater profitability of this market segment.  The CEF officials 
explained their bank uses a fund financed by payroll taxes to 
finance low income housing but nevertheless has trouble reaching the 
poorest.  Moreover, its resources are modest in comparison to the 
size of the housing deficit, which is concentrated among the poor. 
 
¶14. (SBU) Mosbacher advocated for streamlined licensing and 
permitting requirements for housing projects.  Such measures, he 
argued, could help niche builders turn a profit in lower-income 
housing projects.   The problem of licensing that many builders have 
noted is exacerbated by the larger scale necessary for builders to 
achieve profitability on low-margin low-cost housing projects. 
There are also new cost-saving technologies that can help, Mosbacher 
said.  Almeida and the CEF officials expressed interest in the new 
technologies and in the approach to financing low-income housing 
taken in other countries; they welcomed the OPIC role in catalyzing 
U.S. private investment in these markets in Brazil. 
 
¶15. (U)  This cable was cleared by the Gutierrez delegation prior to 
transmission. 
 
Chicola