VZCZCXRO6414
PP RUEHRG
DE RUEHBR #1971/01 2611732
ZNR UUUUU ZZH
P 181732Z SEP 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 6684
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 2889
RUEHRG/AMCONSUL RECIFE 5457
RUEHSO/AMCONSUL SAO PAULO 8060
RUEHBU/AMEMBASSY BUENOS AIRES 4272
RUEHSG/AMEMBASSY SANTIAGO 5784
RUEHAC/AMEMBASSY ASUNCION 5667
RUEHMN/AMEMBASSY MONTEVIDEO 6468
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDO/USDOC WASHDC
RHEHNSC/NSC WASHDC
RUEAHLC/DHS WASHDC

UNCLAS SECTION 01 OF 02 BRASILIA 001971 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USAID FOR LAC 
NSC FOR FEARS 
TREASURY FOR OASIA - J.HOEK AND TAX OFFICE - P.BROWN 
STATE PASS TO FED BOARD OF GOVERNORS FOR ROBITAILLE 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/SHUPKA 
DHS FOR ICE 
 
E.O. 12958: N/A 
TAGS: EFIN ETTC PGOV PREL EINV BR
SUBJECT: BRAZIL: AMBASSADOR'S MEETING WITH TAX AND CUSTOMS CHIEF 
RACHID 
 
 
(U) This cable is Sensitive but Unclassified, please protect 
accordingly. 
 
¶1. (SBU) Jorge Rachid, Secretary of Brazil's Receita Federal, the 
finance ministry agency which oversees both tax collection and 
customs, assured the Ambassador in a September 14 meeting of the 
GoB's continued intent to work closely with the USG on security and 
law enforcement, including through the Container Security Initiative 
(CSI).  Rachid said he would welcome a visit by DHS Secretary 
Chertoff.  Rachid raised ongoing informal discussions between 
Receita and Treasury on a potential tax treaty, noting that there 
were large hurdles to be overcome.  The Ambassador urged that 
Receita participate actively in the Commercial Dialogue that 
Commerce Secretary Gutierrez and Minister of Development, Industry 
and Trade Furlan had launched.  In a follow-up conversation 
September 15, Rachid's international affairs advisor told Econoff 
that Receita would be pleased to send representatives to visit U.S. 
Customs operations and view express delivery service operations. 
End Summary. 
 
Security/Law Enforcement 
------------------------ 
 
¶2. (SBU) The Ambassador thanked Rachid for Receita's close 
cooperation on law enforcement and security.  Rachid, a career 
official who started out as an auditor, said that Receita's goal is 
to facilitate commerce while maintaining appropriate security and 
enforcement measures in place.  Rachid noted Brazil's participation 
in CSI and said he would welcome a visit to Brazil by DHS Secretary 
Chertoff.  The Ambassador suggested that it would be useful for 
Rachid to send a senior representative to Washington DC ahead of any 
such a visit in order to more sharply focus the agenda.  Rachid 
agreed. 
 
Tax Treaty 
---------- 
 
¶3. (SBU) Rachid raised ongoing informal discussions over the 
potential for a bilateral tax treaty.  He cautioned, despite the 
enormous interest in a treaty by Brazilian and U.S. businesses, that 
neither party allow expectations to get ahead of reality, for there 
are serious differences to overcome.  The GoB's two primary 
concerns, he said, were the potential for revenue loss given the 
mismatch in investment stocks and flows between the two countries, 
as well as what he called an "adjustment mechanism," which if not 
granted by the U.S., would create a problematic precedent for other 
Brazilian tax treaties.  (Comment: Rachid appeared to be referring 
to the issue of "tax sparing," which Brazil has in the past insisted 
on including in its tax treaties.)  Despite these two major points, 
Rachid expressed confidence in the professionalism of the 
negotiating teams and their ability to bridge the gaps.  The teams 
were systematically tackling and resolving all other issues, 
including that of information sharing, Rachid said.  The Ambassador 
urged that the teams not let the process grind to a halt once the 
easy agreements had been achieved. 
 
Business Facilitation/Customs Issues 
------------------------------------ 
 
¶4. (SBU) The Ambassador briefed Rachid on the Commercial Dialogue 
launched by Secretary Gutierrez and Minister Furlan.  One of the 
main areas of discussion in the business facilitation working group, 
he noted, was to identify ways to give greater celerity to trade 
flows.  U.S. Customs, the Ambassador said, had invited Receita 
representatives to visit their operations on the border with Canada, 
where quick large-scale cargo clearing was key to the integrated 
functioning of the automotive industry in both countries.  The visit 
also would include a stop at the operations center of a large 
express delivery company, to view how Customs worked hand in hand 
with industry to facilitate their operations.  Rachid professed to 
be unaware of the invitation, but welcomed the idea.  In a follow-up 
conversation September 15, Rachid's International Affairs Advisor, 
 
BRASILIA 00001971  002 OF 002 
 
 
Zayda Bastos, told Econoff that Receita would be pleased to accept 
the invitation. 
 
¶5. (SBU) Rachid reaffirmed his willingness to work with the USG to 
facilitate trade flows.  Although there are many agencies involved 
in the process of clearing imports and exports, he stated, "if you 
have a problem with customs, bring it to me".  Rachid noted that 
Receita already is working on methods to address some of the 
bottlenecks that hinder express delivery services in Brazil.  They 
currently are working on getting Receita's computer system to 
communicate directly with the companies' systems, a key step to 
reducing clearance times. 
 
¶6. (SBU) Comment:  Given Rachid's apparently genuine willingness to 
hear our issues, this direct channel of communication at a senior 
level would seem to be a useful way to advance the Commercial 
Dialogue. 
 
SOBEL