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DE RUEHSO #0965/01 2481657
ZNR UUUUU ZZH
R 051657Z SEP 06
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 5728
INFO RUEHBR/AMEMBASSY BRASILIA 6791
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RUCPDOC/USDOC WASHDC 2560
RUEHMN/AMEMBASSY MONTEVIDEO 2145
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RUEHRG/AMCONSUL RECIFE 3118
RUEHRI/AMCONSUL RIO DE JANEIRO 7410
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RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC

UNCLAS SECTION 01 OF 03 SAO PAULO 000965 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/BSC, EB/CBA, and EB/IPE 
STATE PASS TO USTR FOR MSULLIVAN 
STATE PASS EXIMBANK 
STATE PASS OPIC FOR MORONESE, RIVERA, MERVENNE 
NSC FOR FEARS 
USDOC FOR 4332/ITA/MAC/OLAC 
USDOC FOR 3134/USFCS/OIO 
USDOC ALSO PASS PTO/OLIA 
TREASURY FOR OASIA, DAS LEE AND JHOEK 
DOL FOR ILAB MMITTELHAUSER 
 
E.O. 12958:  N/A 
TAGS: ECON EINV ETRD BEXP KIPR BR
SUBJECT:  AMBASSADOR'S AUGUST 23-24 VISIT TO SAO PAULO 
 
 
SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY 
 
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SUMMARY 
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¶1.  (SBU) Ambassador Clifford Sobel passed two eventful days in Sao 
Paulo August 23-24, beginning his visit with an appearance at the 
opening of a Calder exhibit at the Pinacoteca, one of the major art 
museums in Sao Paulo.  The following day he met separately with the 
heads of the Brazilian subsidiaries of two major U.S. companies as 
well as the Vice President for Latin America of the Motion Picture 
Association.  He also attended a lunch at the American Chamber of 
Commerce and made remarks with the AMCHAM board and other 
influential private sector leaders in attendance.  The Ambassador 
exchanged views on a range of economic and political issues, 
discussed possible strategies for expanding trade and investment, 
and explored the possibilities for corporate responsibility 
activities in the private sector.  End Summary. 
 
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GM OF BRASIL 
------------ 
 
¶2.  (SBU) Ambassador Sobel met privately with Ray G. Young, 
President and Managing director of GM of Brasil since January, 2004, 
who also sits on GM's Latin America, Africa and Middle East Strategy 
Board.  Young expressed enthusiasm for the current Brazilian 
economy, the outlook for GM's operations in the country, and the 
adaptability of the Brazilian worker.  According to Young, the 
outlook for GM in Brazil is excellent.  If the current GDP growth 
levels of the last 3-4 years are maintained, or, better yet, if the 
economy can grow 5 percent annually while remaining stable, GM will 
be able to continue to operate profitably.  His three 
recommendations to the GoB would be:  (1) establish growth targets 
(of 5 percent annually) and then prepare a business plan to achieve 
this goal; (2) implement tax reform and reduce government 
inefficiency in order to help achieve the goal; and (3) make 
education a high priority to help continue to develop a qualified, 
skilled work force to meet the challenges of globalization and a 
continually changing economy. 
 
¶3.  (SBU) GM of Brasil has 21,000 employees.  Seventy percent of its 
market is domestic, with foreign sales accounting for the other 30 
percent.  The company plans to double its engineering staff in order 
to export engineering services.  Young believes that if GM had 
access to Asian markets it would be competitive there.  He stressed 
the importance of competitiveness and of "opening one's eyes" to 
market opportunities.  In his opinion, Brazil should be a global 
player and should begin to use new business models.  GM is well 
respected in the community and has not encountered any 
anti-Americanism in Brazil.  The night prior to his meeting with the 
Ambassador, Young and CEOs of other major companies attended a 
dinner with President Lula, who was seeking feedback on issues of 
concern to the business community and ideas on opportunities for the 
next administration. 
 
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GE BRASIL 
--------- 
 
¶4.  (SBU) The Ambassador also met privately with Alexandre G. Silva, 
President and CEO of GE Brasil since October 2001 as well as Vice 
President of the AMCHAM Board.  GE is a thriving company in Brazil 
with 6,000 employees, and expects 20 percent growth by the year 
¶2010.  In Latin America, GE predicts growth of more than 30 percent 
by 2010, compared to 25 percent in China and 20 in India.  GE's 
aircraft overhaul business is very profitable in Brazil, due to the 
 
SAO PAULO 00000965  002 OF 003 
 
 
cost-efficient facilities, talented labor force, and growing number 
of contracts with U.S. air carriers (Southwest, UPS, and others). 
 
 
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DIFFERING EXPERIENCES IN VENEZUELA 
---------------------------------- 
 
¶5.  (SBU) Both GM and GE operate in Venezuela and have had different 
experiences dealing with the GoV.  GM has offices and factories 
located in Venezuela, whereas GE only ships products to the country 
and has little staff or facilities there.  GM President Young said 
GM believes it is discriminated against in Venezuela, resulting in a 
reducing market share compared to Japanese auto makers.  Venezuela 
is still a profitable market for GM, but if continued exhaustive 
perusal of documentation, imposition of further regulations, and 
other obstacles persist, doing business may become increasingly 
difficult.  GE, which has no manufacturing operations in Venezuela, 
has experienced no problems.  GE is profitable in Venezuela and 
plans to do more business there, particularly in the area of 
equipment used by the oil industry. 
 
¶6.  (U) The Ambassador asked both Young and Silva about their 
companies' corporate responsibility programs and activities.  Young 
stated GM has several social responsibility programs, focusing on 
the local communities where GM facilities are located, and promised 
to provide more detailed information.  Silva said that of GE's 6,000 
employees, 3,000 are active in social responsibility programs.  Both 
executives were also enthusiastic about the possibility of creating 
a Brazilian "Council on Competitiveness" agenda, in addition to a 
speaker's programs with local universities. 
 
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AMCHAM LUNCH 
------------ 
 
¶7.  (U) AMCHAM Brazil sponsored a lunch for the Ambassador, with 
approximately 50 members and private sector leaders in attendance. 
The Sao Paulo AMCHAM is the largest American Chamber of Commerce in 
the world outside the United States, bringing together over 6,000 
small, medium, and large enterprises.  There are affiliate offices 
in Belo Horizonte, Brasilia, Campinas (Sao Paulo state), Curitiba, 
Goiania, Porto Alegre and Recife.  80 percent of the members are 
Brazilian companies, 13 percent are American companies, and the rest 
are of other nationalities.  The Ambassador delivered brief remarks 
on USG's interest in promoting investment and trade, and corporate 
responsibility.  During the discussion period, some major issues of 
concern raised by the business leaders were the renewal of GSP 
benefits, the benefits to be derived from a closer bilateral trade 
relationship, cooperation on biofuels, the importance of the 
agricultural sector to U.S. and Brazilian commercial interests, 
concern over Venezuela's being part of Mercosul, and prospects for 
the Doha Round.  The Ambassador stressed the important role that the 
AMCHAM played in these issues. 
 
-------------------------- 
MOTION PICTURE ASSOCIATION 
-------------------------- 
 
¶8.  (SBU) The Ambassador later met with Steve Solot, Senior Vice 
President for Latin American Operations for the Motion Picture 
Association (MPA).  Brazil is the Latin American region's most 
important market, with 40 percent of regional media revenue, of 
which half is in video.  The MPA has a very good relationship with 
the Brazilian film industry.  Approximately 60 films were 
co-produced or co-distributed in the past two years, including the 
top five Brazilian films for 2005.  MPA continues to have major 
concerns about IPR piracy.  In recognition of the GoB's growing 
 
SAO PAULO 00000965  003 OF 003 
 
 
efforts and accomplishments in combating piracy, MPA plans to give 
an award to the head of the National Anti-Piracy Council.  Other 
issues of concern are: (1) the transition to digital TV and its 
effect on protection of content, (2) Brazil's Development Agenda in 
WIPO, which seeks to provide more flexible copyright protection for 
developing countries (the MPA believes it should be the opposite), 
and (3) the USG's Special 301 process.  Solot explained that the 
copyright industries advocated upgrading Brazil on the Watch List 
this year. Brazil remained on the Priority Watch List largely due to 
the GoB's policies on pharmaceutical patents; nonetheless, most 
Brazilians believe MPA was responsible for the ranking due to its 
energetic advocacy for copyright protection.  The Ambassador 
expressed interest in Solot's offer to host film screenings, perhaps 
in coordination with Foreign Minister Celso Amorim, a former 
executive of Brazil's largest film company. 
 
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COMMENT 
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¶9.  (SBU) This was a successful visit that enabled the Ambassador to 
make further progress in the key areas of promoting trade and 
investment, underscoring the importance that the business community 
played in Brazilian policy decisions. It also allowed the Ambassador 
to stress the importance of corporate responsibility.  END COMMENT. 
 
 
¶10.  (U) Ambassador Sobel has approved this cable. 
 
McMullen