VZCZCXRO0189
PP RUEHRG
DE RUEHBR #1784/01 2361711
ZNR UUUUU ZZH
P 241711Z AUG 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 6463
INFO RUEHAC/AMEMBASSY ASUNCION 5609
RUEHBU/AMEMBASSY BUENOS AIRES 4216
RUEHCV/AMEMBASSY CARACAS 3397
RUEHLP/AMEMBASSY LA PAZ 4806
RUEHPE/AMEMBASSY LIMA 3136
RUEHMN/AMEMBASSY MONTEVIDEO 6417
RUEHRG/AMCONSUL RECIFE 5334
RUEHRI/AMCONSUL RIO DE JANEIRO 2737
RUEHSO/AMCONSUL SAO PAULO 7849
RHEHNSC/NSC WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RHMFIUU/DEPT OF JUSTICE WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 BRASILIA 001784 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO USTR, STATE PASS TO ICITAP 
 
E.O. 12958: N/A 
TAGS: PREL ENRG KSCA KCRM EINN BR
SUBJECT: BRAZIL: AMBASSADOR'S MEETING WITH CIVIL HOUSEHOLD 
MINISTER DILMA ROUSSEFF, 23 AUGUST 2006 
 
 
 ¶1. (SBU) Summary.  Ambassador Sobel, accompanied by DCM and 
PolCouns, met 23 August with Civil Household Minister Dilma 
Rousseff, for an incisive discussion focused heavily on 
planning for strategic U.S.-Brazil cooperation in bio-fuels. 
Rousseff, whose position equates to Presidential Chief of 
Staff for policy, is also a former minister of mines and 
energy, chairperson of Petrobras' board, and has overall 
responsibility in the GOB for interagency coordination on 
bio-fuels.  Rousseff provided an overview of the status of 
Brazilian R and D in ethanol and bio-diesel, opined that 
Brazil will have increased capacity for ethanol exports as 
demand expands, and focused on Brazil's interest in working 
with the U.S. to use the new technologies for development and 
poverty-alleviation in third countries.  On this point, she 
noted that President Lula had raised with a receptive 
Bolivian President Evo Morales the possibility of coca crop 
substitution with bio-fuel projects, and that the GOB remains 
interested in discussing USG-GOB collaboration on a specific 
proposal for Bolivia.  Ambassador and Rousseff also discussed 
high-level cooperation in law enforcement and new initiatives 
to stimulate investment in Brazil.  End summary. 
 
BIO-FUELS 
--------- 
 
¶2. (SBU) Ambassador Sobel explained that formulation of a 
U.S. national strategy on bio-fuels is at a relatively early 
stage, and decisions are now being made on interagency 
organization and leadership on the issue.  He said the USG 
recognizes already, however, that the bio-fuel technology is 
transformational, and has strategic implications, especially 
in development programs in energy-poor third countries.  The 
U.S. will be seeking cooperation in multi-lateral fora, but 
is now keenly focused on bilateral partnerships, and 
cooperation with Brazil is seen as a top U.S. priority, he 
said. The Ambassador said the USG is eager to engage with the 
GOB on both strategic planning and technical cooperation, and 
offered future meetings of U.S. officials with Brazilian 
counterparts.  He said he would be taking Rousseff's comments 
with him for policy discussions in Washington in coming days, 
and Rousseff and Ambassador agreed that he would brief her 
upon his return to Brazil. 
 
¶3. (SBU) Rousseff confirmed the GOB is extremely interested 
in cooperation with the U.S., and noted she was present at 
the St. Petersburg G-8 bilateral between Presidents Lula and 
Bush where Lula provided President Bush an information 
package on bio-fuels.  Rousseff said that she warmly welcomes 
high-level engagement with USG counterparts, noting that she 
has overall interagency management responsibility for the 
issue.  Rousseff said she coordinates work of several GOB 
ministries, including Industry, Agriculture, Mines and 
Energy, Science and Technology. and External Relations; She 
also chairs the board of Petrobras, the country's petroleum 
sector parastatal. 
 
¶4. (SBU) Rousseff said Brazil's strategic vision centers on 
the premise that bio-fuels are, indeed, transformational, 
that "we are only in the first generation of a technology 
that will eventually form a new sector of the economy." She 
said Brazilian research, development and policy planning 
proceeds at present mainly on two axes:  one for bio-ethanol, 
the other for bio-diesel, including Brazil's evolving "H-bio" 
fuel (though Brazil is also investing heavily in R/D in 
cellulosic materials, she noted). 
 
¶5. (SBU) In ethanol, Brazil uses its well-developed 
industrial base, its wide distribution of ethanol at gas 
stations, and its rapidly expanding fleet of cars with 
flex-fuel engines to create a model where market 
circumstances work to the country's benefit.  When ethanol 
prices rise, Brazil increases exports and domestic consumers 
opt for gas.  When global gas prices go up, Brazilian 
consumers fall back on ethanol or blends.  The GOB maintains 
 
BRASILIA 00001784  002 OF 003 
 
 
ethanol stocks and regulates a small percentage of 
production, but mostly relies on natural market dynamics, she 
added.  Ambassador asked whether Brazil can increase its 
ethanol production to meet expanding export potential. 
Rousseff said ample capacity for new agriculture and 
successful development by Brazilian researchers of new sugar 
cane hybrids that can grow in vast areas of Brazil previously 
unsuitable for the crop (e.g., plantations in southern 
Brazil) make the GOB optimistic about increasing its ethanol 
production dramatically in coming years. 
 
¶6. (SBU) In the area of bio-diesel fuels, Rousseff says 
Brazil's program is only three years old, but already 
bio-diesel is being offered at 4,000 gas stations nationwide. 
 She also sees high potential for use of the technology for 
social development, both within Brazil and abroad.  In 
Brazil's case, small family farms are already important 
contributors in the process, with Petrobras and others 
obligated to buy material that is certified by the GOB to 
have a substantial input from small farmers.  In the case of 
Petrobras' developing new H-bio fuel (which, unlike 
bio-diesel mix, is a refined product), both industrial and 
small farm sources will be needed, she added.  In the area of 
H-bio, Rousseff looks for substantial U.S.-Brazil 
collaboration, in light of the large number of U.S. 
refineries suitable for the process, and the advanced 
capabilities of U.S. bio-chemical research labs. 
 
THIRD COUNTRY DEVELOPMENT AND BOLIVIA 
------------------------------------- 
 
¶7. (SBU) Focusing further on use of bio-fuels in third 
country development and poverty alleviation, Ambassador 
shared with Rousseff a chart showing the extremely high 
levels of GDP expended on energy by many poor countries. 
Rousseff opined that the Caribbean and Central America seem 
most likely to benefit from ethanol production, at least in 
the early stage, while bio-diesel technologies could offer 
the most immediate promise in Africa and other areas.  She 
reiterated that Brazil shares with the U.S. the desire to see 
the new technologies incorporated into development and 
foreign assistance policies, and wants to work together with 
the USG on such projects. 
 
¶8. (SBU) Ambassador asked Rousseff specifically about an idea 
she had discussed in a meeting earlier in the year with WHA 
A/S Tom Shannon, in which Rousseff proposed U.S.-Brazil 
collaboration in offering bio-fuel capacity and guaranteed 
U.S. and Brazilian markets to Bolivia as a substitution 
commodity for coca planted in the Chapare region.  Rousseff 
indicated that President Lula has since raised the general 
possibility of bio-fuel substitution for coca crops directly 
on two occasions with Bolivian President Evo Morales, who 
appeared receptive and requested a specific proposal. 
Ambassador indicated there is interest within the USG in this 
concept, and undertook to discuss a way ahead with Washington 
agencies and report back to Rousseff. 
 
COOPERATION IN LAW ENFORCEMENT AND INVESTMENT 
--------------------------------------------- 
 
¶9. (SBU) Continuing on the issues of narcotics and crime, 
Ambassador noted his recent meetings with Justice Minister 
Bastos and with senior state officials in Sao Paulo and Rio, 
in which USG assistance in dealing with Brazil's organized 
crime crisis and narcotics problem was warmly welcomed. 
Rousseff concurred emphatically, saying "we need your help 
now, this cannot wait until after our elections."  (Note: 
Brazil has general elections in October. End note.) 
Ambassador specifically offered U.S. information on "lessons 
learned" in investigation of organized crime groups within 
the prison system, which Rousseff agreed is of urgent 
relevance to Brazil in confronting the PCC organized crime 
groups violent attacks in Sao Paulo.  Rousseff echoed Justice 
 
BRASILIA 00001784  003 OF 003 
 
 
Minister Bastos' receptivity to visits to Brazil by the U.S. 
Attorney General and DEA Administrator, and committed to use 
her office to assure "top-down" momentum for enhanced 
bilateral strategic cooperation on law enforcement. 
 
¶10. (SBU) In closing, Ambassador underscored his strong 
interest in bringing increased and socially responsible U.S. 
investment to Brazil, and offered to bring investor groups 
and the Council on Competitiveness to Brazil for meetings 
with Rousseff and GOB and industry leaders.  Rousseff said 
she would enthusiastically work with the Embassy on this, and 
warmly welcomed the fact that the United States "has an 
energetic Ambassador" in Brasilia. 
 
¶11. (SBU)  Comment.  This initial meeting between Ambassador 
and Rousseff was warm, positively-charged and substantively 
dense.  We have in Rousseff, we believe, an enthusiastic and 
highly influential senior GOB interlocutor on these key 
issues, and we intend to cultivate our relationship with her. 
 If Lula wins re-election, we think it likely she will 
continue in her current post, and in the event of a Lula 
victory in October, it would be highly productive to arrange 
a visit soon thereafter to Washington for Rousseff for 
top-level consultations. 
 
Sobel