VZCZCXRO2115
RR RUEHRG
DE RUEHBR #1702/01 2281613
ZNR UUUUU ZZH
R 161613Z AUG 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 6385
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 2689
RUEHRG/AMCONSUL RECIFE 5297
RUEHSO/AMCONSUL SAO PAULO 7759
RUEHBU/AMEMBASSY BUENOS AIRES 4200
RUEHAC/AMEMBASSY ASUNCION 5591
RUEHMN/AMEMBASSY MONTEVIDEO 6405
RUEHSG/AMEMBASSY SANTIAGO 5685
RUEHPE/AMEMBASSY LIMA 3125
RUEHCV/AMEMBASSY CARACAS 3389
RUEHQT/AMEMBASSY QUITO 1936
RUEHLP/AMEMBASSY LA PAZ 4781
RUEHBO/AMEMBASSY BOGOTA 3885
RUCPDO/USDOC WASHDC

UNCLAS SECTION 01 OF 03 BRASILIA 001702 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR:MSULLIVAN 
STATE PASS USPTO 
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/SHUPKA 
 
E.O. 12958:  N/A 
TAGS: ETRD BEXP KIPR EFIN SENV BR
SUBJECT:  BRAZIL:  AMBASSADOR MEETS WITH MINISTER OF DEVELOPMENT, 
INDUSTRY, AND COMMERCE 
 
REF:   State 128359 
 
¶1.  (SBU) Summary.  On August 8, Ambassador paid an initial courtesy 
call on Brazilian Minister of Development, Industry, and Commerce 
Luiz Furlan.  The wide-ranging session touched upon a variety of 
topics, including the upcoming Commercial Dialogue meeting in 
Washington during the fall between USDOC Secretary Gutierrez and the 
Minister, the progress Brazil has made in stemming copyright piracy, 
the GOB's agenda on bio-fuels, and Brazil's desire to retain access 
to GSP benefits.  In particular, the Ambassador emphasized his 
desire to promote greater bilateral trade and investment between the 
U.S. and Brazil, leveraging the private sector to the maximum extent 
possible.  Finally, Minister Furlan stated that while he supported 
conclusion of a bilateral Brazil-U.S. tax treaty, the Finance 
Ministry had the lead on that issue.  End Summary. 
 
Commercial Dialogue 
------------------- 
¶2.  (SBU)  Noting that the rate of growth in trade between Brazil 
and the U.S. has trailed that recorded between Brazil and other 
continents (Asia, Africa, and South America), Furlan declared that 
the bilateral Commercial Dialogue inaugurated in June 2006 was the 
way to get business relations with the U.S. back on track.  He 
stated that he wanted to see concrete results coming from the 
requested October meeting with Secretary Gutierrez in Washington. 
(In a subsequent conversation with Emboffs, Pompeu Andreucci Neto, 
Furlan's International Affairs advisor, said that Brazil urgently 
needed both confirmation of the proposed October dates and a 
suggested format/agenda for the meeting.)  The Ambassador suggested 
that each of the 4 Working Groups within the Dialogue identify one 
to two issues which could be resolved either in the run-up to the 
October meeting or at that session.  This way, he noted, both sides 
could maintain momentum at the working level, and high-level issues 
could be addressed during the bilateral meeting.  Andreucci added 
that one of Brazil's Working Group Chairs planned to travel to 
Washington in late August for consultations with his U.S. 
counterparts, while another planned to make a similar trip in 
September. 
 
Bio-Fuels 
--------- 
¶3.  (SBU) Furlan observed that Brazil stood ready to cooperate with 
the U.S. on bio-fuels (i.e., ethanol and related products), noting 
that he had previously spoken with Energy Secretary Bodman, Commerce 
Secretary Gutierrez, and former USTR Portman on this point and that 
 
SIPDIS 
President Lula, enamored with the idea of "planting energy," has 
frequently raised the issue in his conversations with President 
Bush.  U.S. companies were now beginning to show interest in 
ethanol, he said.  Archer, Daniels, Midland and four other U.S. 
investors had entered the market, while Bill Gates had acquired 25% 
of the firm Pacific Ethanol.  Furlan stated that Brazil was actively 
seeking partners overseas and that he personally had traveled to 
Japan, Central America and Africa to pursue potential cooperative 
efforts.  Furlan mentioned that President Lula had appointed him as 
the overall coordinator of a bilateral alternative fuels panel with 
Japan, and noted that Japan had been easier to engage on biofuels 
than the U.S. 
 
¶4.  (SBU)  The Minister remarked that Brazilian producers were 
ramping up 100 new sugar cultivation projects, not using Amazon 
forest but land that had previously been devoted to pasture.  The 
percentage of new cars sold in Brazil that sported flex-fuel 
technology had now reached 76 percent - versus 22 percent at the 
beginning of 2005 -- while the price difference between flex-fuel 
and traditional cars had dropped to zero.  In closing, Furlan 
pointed out that Brazil's biofuel effort went beyond ethanol and 
included biodiesel (a blend of regular diesel and vegetable oil) and 
H-Bio (a locally designed product in which vegetable oil and diesel 
are refined into a new substance.) 
 
¶5.  (SBU)  Ambassador Sobel noted that in the area of biofuels the 
USG was working hard on new technologies such as producing more 
efficient seeds and manufacturing ethanol from cellulosic matter. 
 
BRASILIA 00001702  002 OF 003 
 
 
Central America and the Caribbean could particularly benefit from 
greater use of ethanol production, he noted, given the relatively 
high proportion of income to GDP that a number of countries in those 
regions spend on fuel imports. 
 
Intellectual Property 
--------------------- 
¶6.  (SBU)   Turning to the issue of IPR, the Brazilians noted that 
they had substantially improved their record on intellectual 
property rights.  Enforcement aimed at copyright piracy had been 
strengthened, with the number of pirate goods confiscated at border 
inspections registering a marked increase.  With respect to patents, 
Furlan noted that the Brazilian patent institute (INPI) was working 
to improve its review process. On trademarks, he said, INPI was even 
further advanced, as automation of the process would soon reduce the 
time required to obtain a trademark by 80 percent.  Furlan invited 
the Ambassador to tour INPI facilities in Rio de Janeiro once that 
agency had completed its move to its new headquarters.  The combined 
effects of the new building, the implementation of new hardware and 
software products, and additional personnel, he said, would result 
in a real change in the way INPI does business.  For his part, the 
Ambassador thanked Furlan for his help in ensuring that two of the 
three U.S. pharmaceutical firms threatened with compulsory licensing 
came to an equitable settlement with the GOB and urged Brazil to 
rapidly agree to terms with the third company. 
 
GSP 
--- 
¶7.  (SBU) The Minister felt that U.S. multinationals were doing 
relatively well in Brazil, stating that sales for Dell, Microsoft, 
ADM, and Intel all had grown 40 percent as compared to last year. 
Indeed, he noted, Dell planned to open a new assembly plant in Sao 
Paulo, as lower taxes on computers and greater credit opportunities 
for low-income families had resulted in increased demand for PC's 
and laptops.  He also noted that a decrease in grey-market computers 
has increased the sales of legitimate products.  The early 2006 
termination of the U.S. copyright industry's petition to revoke 
Brazil's GSP benefits reflected an implicit bargain, he declared: 
i.e., Brasilia would continue to improve its performance on IPR 
enforcement while Washington would maintain Brazil within GSP. 
 
¶8.  (SBU) If in renewing the GSP the U.S. were now to exclude 
Brazil, he said, officials here would view this as "hitting below 
the belt" and not in keeping with the positive tone of current 
bilateral relations.   The Ambassador stated that the Administration 
was currently formulating its options on GSP, though the U.S. 
Congress would ultimately decide whether it wanted to include Brazil 
within any renewal of the program or renew the program at all.  The 
Ambassador took the opportunity to pass to Furlan reftel demarche. 
(Econ Counselor subsequently passed demarche points to the Ministry 
of External Relations.) 
 
Investment and Engagement 
------------------------- 
¶9.  (SBU)  The Ambassador stated that in a prior meeting with one of 
President Lula's high-level policymakers, that interlocutor had 
noted that it was key to bring the benefits of democracy and 
economic growth to all within the hemisphere.  The way to do this, 
he continued, was through greater investment in economic and human 
capital.  The Ambassador stated that he planned to do his part by 
bringing players in U.S. capital markets to Brazil.  Minister Furlan 
welcomed the Ambassador's remarks, noting that some movement was 
already afoot in the Sao Paulo Stock Exchange as that entity was 
engaged in merger talks with its Argentine counterpart.  The 
Ambassador observed that Brazil could attract greater foreign 
investment - and assist its own private sector in the process - by 
concluding a bilateral tax treaty with the U.S.  Minister Furlan 
agreed that such an accord would be desirable, but admitted that the 
lead on this issue was with the Finance Ministry. 
 
Comment 
------- 
¶10. (SBU)  In Minister Furlan we have a very useful and practical 
 
BRASILIA 00001702  003 OF 003 
 
 
interlocutor, who has been particularly helpful to us in bringing 
about positive solutions on such hot-button issues as compulsory 
licensing of pharmaceuticals.  While on many of the items on our 
trade agenda he is not the ultimate decision-maker, he has been 
influential in making our dialogue with the GOB friendlier to the 
interests of U.S. businesses. 
 
Sobel