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INFO RUEHRI/AMCONSUL RIO DE JANEIRO 2847
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RUEHRG/AMCONSUL RECIFE 5425
RUEHBJ/AMEMBASSY BEIJING 0313
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RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUCPDO/USDOC WASHDC
RHEBAAA/USDOE WASHDC

UNCLAS SECTION 01 OF 02 BRASILIA 001935 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR GMANUEL AND JMIOTKE 
PLEASE PASS TO DOE SLADISLAW AND KFREDRIKSEN 
 
E.O. 12958: N/A 
TAGS: TRGY SENV ENRG KSCA ETRD EAGR BR
SUBJECT: USG TALKS ETHANOL WITH THE BRAZILIAN PRESIDENCY 
 
 
BRASILIA 00001935  001.2 OF 002 
 
 
¶1. (SBU) Summary.  Greg Manuel of the Department of State (DoS) and 
Sarah Ladislaw of the Department of Energy (DoE) accompanied by 
Morgan Perkins and Matthew Golden of Mission Brazil met with 
Alessandro Teixeira, President of the Brazilian Agency for 
Industrial Development (ABDI) on September 5.  The meeting aimed to 
bridge the gap between the MFA and Presidency with the understanding 
that Dilma Rousseff, Lula's Chief of Staff, will take the lead role 
in fomenting Brazil's biofuel policy.  Teixeira underscored this 
sentiment, repeatedly professing that Rousseff was in charge of 
overall biofuel coordination in Brazil, followed by her Deputy, 
Tereza Campello, and then himself.  He explained that any proposed 
cooperation should go through him or Campello.  This meetings was 
held on the margins of the September 5 Ethanol Forum meetings 
(reported septel).  End Summary. 
 
¶2. (U) In opening, Teixeira acknowledged that Rousseff had received 
a paper from Ambassador Sobel outlining the USG's biofuel strategy 
and noted the GoB's interest in exploring third-markets.  He 
continued to explain that a meeting earlier with Secretary Gutierrez 
had focused on Caribbean development and that Brazil's Finance 
Minister Furlan would raise the third-market issue with Gutierrez 
during their planned October meeting in Washington.  Ladislaw 
responded positively expressing the USG's appreciation for Furlan's 
assistance in securing Brazilian participation at the DoE-hosted 
Trinidad and Tobago energy conference. 
 
¶3. (U) Manuel proceeded to detail the USG's three-pillared strategy 
for biofuels, beginning with the Ethanol/Biofuel Forum which had 
just concluded earlier that day.  Teixeira responded that Brazil 
maintains a definitive strategy where ethanol and biodiesel 
represent two distinct and separate policies, although he failed to 
elaborate further.  Manuel responded that the two were not 
incompatible, explaining that both themes could simultaneously 
promote effective cooperation.  He also related the Ethanol Forum's 
consensus to expand the threshold of discussions to include biofuels 
as a whole and posited that the Forum provided an outlet to move 
forward in a concrete, energized fashion. 
 
¶4. (U) Ladislaw continued, detailing the USG's strategy for S&T 
cooperation, the second pillar.  She expressed interest in 
understanding Brazil's research strategy and how it allocates it 
funding, while highlighting the potential utility of the DoE-MME 
(Ministry of Mines and Energy) working group as a vehicle to explore 
potential areas for mutually beneficial cooperation.  Presenting the 
example of the NIST-INMETRO conference on standards, she stressed 
the value of putting scientists together to share ideas.  In 
response, Teixeira highlighted his awareness of the United States' 
ethanol production problems due to the relative inefficiency of 
corn.  That said, he clarified the GoB's desire to invest heavily in 
cellulosic research, even if ethanol produced from sugarcane will 
dominate the market for the next fifty years.  He also expressed a 
wish to know what USG institutions dominated biofuel research, 
presenting Embrapa's newly formed Agroenergia and a public private 
partnership involving CTC as prime Brazilian examples.  Manuel 
explained that NREL and Berkeley National Labs led the U.S. in 
biofuel research, but clarified that private industry was 
responsible for a majority of investment.  He also echoed the USG's 
readiness to send a team of experts to Brazil to meet with 
colleagues, identify unknowns and determine potential spheres of 
cooperation. 
 
¶5. (SBU) Discussion digressed into a variety of private sector 
initiatives including the relationship between the Chicago 
Mercantile Exchange and the NYSE, and the role of private investment 
in the form of hedge funds, venture capitalists and investment 
banks.  Teixeira, meanwhile, commented that Ambassador Sobel would 
like to set up a joint program between the U.S. and Brazil (Teixeira 
clarified neither the provenance of his information nor specific 
details to what this meant).  Expanding on private sector interest 
in the field, Manuel noted the 40% growth in private investment into 
biofuels (in the U.S.) over the last year totaling more that USD 1 
billion. 
 
¶6. (SBU) The conversation then segued into third-market development 
and the role that biofuels can play in catalyzing economic 
development in weak states to provide economic and geopolitical 
stability.  Manuel noted that the USG and Brazil are the Western 
Hemispheres gorillas and, therefore, natural allies to build up the 
hemisphere; Brazil through cane, the U.S. through cellulosic 
processes.  Manuel then laid out the USG's target countries in the 
region, explaining the rationale of splitting up the targets 
 
BRASILIA 00001935  002.2 OF 002 
 
 
regionally to circumvent an over-reliance on one country or region 
and thereby decreasing the chances for failure.  Teixeira responded 
by changing the focus to India and China, those countries' regional 
development interests and the EU's desire to develop Africa.  Manuel 
argued the need to focus or face failure.  While developing markets 
in China and India are obviously the best choices for quickly 
increasing the volume of ethanol in the marketplace, the USG he 
stated, believes that working with Brazil to set up regional 
models/successful pilots would both facilitate and expedite 
replication outside of each country's sphere of influence. 
 
¶7. (U) Teixeira explained that Brazil could be interested in the 7 
countries Manuel suggested but noted that each would require 
feasibility studies.  He also asserted that any conversation about 
the commoditization of Ethanol should take into account India and 
China.  He explained that Brazil wants to be an international player 
and, therefore, would be more likely to choose high-profile 
countries with a degree of international impact.  He declared that 
many of the countries the U.S. presented are important from a social 
but not from an economic perspective.  In response, Manuel noted the 
importance of thinking globally while clarifying that impacts must 
be viewed from many levels.  An area where each country can act 
quickly and maintains a comparative advantage provides lessons 
learned.  It is also, he explained, easier to act in a region where 
the political leverage exists to motivate a country to adopt an 
ethanol standard.  That said, Manuel also conveyed the USG's 
willingness to explore other options. 
 
¶8. (SBU) In closing, Teixeira explained that the GoB is 
"reorganizing their house".  Rousseff and the Casa Civil are 
centralizing biofuel politics and trying to determine where each GoB 
entity fits into the equation.  Manuel here expressed the USG's 
desire for a quick decision from the GoB.  Teixeira replied that he 
would pass along the information at a policy coordination meeting 
the next week. 
 
¶9. (SBU) Comment: This meeting reaffirmed that Brazil's Presidency, 
much like its MFA, is extremely engaged in the cooperative process. 
It is clear, however, that the GoB is in the middle of an internal 
shake-up and not in a position to immediately respond to the USG's 
proposal.  One certainty to come out of the meeting is the need for 
future contact on the subject to include the Casa Civil.  There also 
appears to be an overarching, international emphasis to Rousseff's 
biofuel policy.  While Teixeira responded positively to the USG 
proposal, it is very likely that the Casa Civil will suggest 
expanding bilateral efforts to include projects outside of the 
Western Hemisphere.  Whether or not Brazil has the means to fund 
such activities remains to be seen. 
 
SOBEL