VZCZCXRO5814
PP RUEHRG
DE RUEHSO #1082/01 2841253
ZNR UUUUU ZZH
P 111253Z OCT 06
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 5889
INFO RUEHBR/AMEMBASSY BRASILIA 6940
RUEHRG/AMCONSUL RECIFE 3165
RUEHRI/AMCONSUL RIO DE JANEIRO 7499
RUEHMN/AMEMBASSY MONTEVIDEO 2173
RUEHBU/AMEMBASSY BUENOS AIRES 2486
RUEHSG/AMEMBASSY SANTIAGO 1880
RUEHLP/AMEMBASSY LA PAZ 3056
RUEHCV/AMEMBASSY CARACAS 0392
RUEHAC/AMEMBASSY ASUNCION 2799
RHEHNSC/NSC WASHDC
RUCPDOC/USDOC WASHDC 2591
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC

UNCLAS SECTION 01 OF 03 SAO PAULO 001082 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/BSC, WHA/EPSC, EB 
STATE PASS TO USTR FOR SCRONIN/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 
AID/W FOR LAC/AA 
 
E.O. 12958:  N/A 
TAGS: ECON ETRD EINV EFIN EAGR EAID BR
SUBJECT:  AMBASSADOR SOBEL MEETS WITH PRIVATE SECTOR IN SAO PAULO 
 
 
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SUMMARY 
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¶1.  (U) Ambassador Sobel met with various business leaders and 
organizations during his September 26-28 visit to Sao Paulo. 
Septels report on Ambassador Sobel's meetings on education during 
this visit and his inauguration of a USAID-sponsored development 
project.  The leader of an important industrial think tank (IEDI) 
told him that the GoB was listening more to industry's concern than 
in the past.  On the margins of this meeting, the Ambassador met 
briefly with the Finance Minister.  At an informal dinner, the 
leaders of many U.S. companies reported that business has been good, 
but a few reported a difficult year.  The head of Cargill told him 
that Brazil's competitive advantage in ethanol production is 
disappearing.  Council members of the Brazil Competitiveness 
Movement (MBC) stressed the need to improve government efficiency in 
Brazil to address institutional weaknesses and reduce bureaucracy. 
In all his meetings, the Ambassador stressed the importance of 
partnerships and advocated closer engagement and cooperation.  END 
SUMMARY. 
 
-------------------- 
JOSUE GOMES DA SILVA 
-------------------- 
 
¶2.  (U) Ambassador Sobel, accompanied by Econoff, met September 26 
with Josue Gomes da Silva, President of Coteminas, one of the 
largest textile manufacturing companies in Brazil, and son of Vice 
President Jose Alencar.  Coteminas is one of the world's lowest-cost 
textile producers (thread, semi-finished and finished fabrics, home 
textiles, clothing) with reported 2005 sales of USD 500 million and 
a work force of 12,000.  The group owns 13 manufacturing mills 
located mostly in northern Brazil.  This year, Coteminas merged with 
US-based Springs Industries to create Springs Global, the world's 
largest manufacturer and supplier of home furnishings. 
 
¶3.  (U) Da Silva is also the president of several economic and 
industry-related research institutes, among them the Institute for 
Studies of Industrial Development (IEDI). IEDI is composed of 45 
presidents, owners and majority shareholders of various companies. 
IEDI confers with similar organizations such as the Sao Paulo state 
Federation of Industries (FIESP) on industrial issues.  The 
Ambassador questioned several of the board members present on the 
response of the Brazilian Government to their industrial needs and 
concerns.  The initial response was that there was no major change; 
however, Da Silva added that at least the government is now 
listening to them seriously.  The general consensus was that 
international trading is a recent phenomenon of the last 20 years, 
and it is now the role of government to create the appropriate 
infrastructure for continued growth and expansion. 
 
¶4.  (U) The IEDI board had a prior meeting with the Minister of 
Finance, Mr. Guido Mantega.  Upon the Ambassador's arrival, he had 
the opportunity to exchange a few words informally with the Finance 
Minister as well.  Da Silva is of the opinion that Minister Mantega 
is completely aligned with the philosophy of IEDI, supporting 
production, more growth, better trade practices, and "common sense" 
for industry. 
 
¶5.  (U) In further conversation with Da Silva, the Ambassador 
discussed the Brazilian Competitiveness Movement (MBC - see paras 
16-17) and the need for both U.S. and Brazilian companies to meet, 
engage and strategize on corporate responsibility programs.  Da 
Silva concurred and agreed to produce shortly a list of 
approximately 10 company leaders for a future dinner party to be 
hosted by the Ambassador. 
 
 
SAO PAULO 00001082  002 OF 003 
 
 
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PAULISTA DINNER GROUP 
--------------------- 
 
¶6.  (U) The Ambassador had dinner September 26 with members of the 
Paulista dinner group.  This is an informal association of Sao Paulo 
businessmen heading American companies "organized for social and 
business information purposes."  Many of the members have regional 
responsibilities as well.  In contrast with Amcham, this group does 
not have working groups and does not take formal positions on 
issues, preferring to keep a low profile.  However, many members 
exchange ideas on how to approach the GoB on issues that affect 
their companies' interests.  There are 15 members, including the 
Consul General.  While the Group informally selects its members 
(normally on a two-year rotational basis), it tries to maintain a 
balance among different sectors. 
 
¶7.  (U) The members present were generally upbeat in their 
assessment of the current situation and future growth prospects, 
despite the difficult business climate that they face in Brazil. 
Colgate Palmolive's representative said 2006 would likely be the 
company's best year ever in Brazil.  Similarly, 3M reported that 
2005 was a record year for the company and predicted another good 
year in 2006.  GE Brazil reported 40% growth in 2005 and 24% growth 
during the first half of this year.  While GE expects solid growth 
for the next several years, there is concern beyond that due to 
Brazil's serious infrastructure problems. 
 
¶8.  (U) Ford noted that 2005 was the company's best year in Brazil 
since starting operations in 1919.  Much of this growth is due to 
the popularity of Ford's flex-fuel models, which now account for 70% 
of sales volume.  Caterpillar reported that 2005 was also its best 
year in Brazil and that this year looks even better, mostly due to 
booming exports to the U.S., Europe and the Middle East.  Citibank's 
chief said the bank is in the midst of a major expansion that will 
double the number of branch offices in Brazil.  This reflects 
Brazil's growing consumer finance market. 
 
¶9.  (SBU) On the other hand, Eli Lilly indicated that the 
pharmaceutical sector has been flat, in part due to government price 
controls.  Prisma Energy (recently bought by Ashmore Energy) also 
sounded a sour note, expressing concern about possible energy 
shortages in Brazil in 2009-10.  Much will hinge on government 
improvements in the regulatory environment, along with weather; if 
there is a prolonged drought, the country could face a serious 
energy crisis. 
 
¶10.  (U) The Ambassador stressed the importance of corporate social 
responsibility (CSR), adding that Mission Brazil could help U.S. 
companies showcase their CSR programs.  He also noted that the 
Embassy and Consulate Sao Paulo planned to host a CSR roundtable in 
Sao Paulo on October 18, which would explore ways in which the 
Embassy and Consulates could work together on CSR issues. (NOTE: 
Most of the companies represented in the Paulista dinner group have 
been invited to participate in the CSR roundtable.  END NOTE.) 
 
 
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CARGILL 
------- 
 
¶11.  (U) Ambassador Sobel, accompanied by Agricultural Trade Office 
Director, met with Sergio Barroso on September 27.   Barroso has 
been President of Cargill Agricola, S.A. for eight years. 
Discussion focused on the keys to Brazil's competitiveness in 
agriculture and prospects for national and regional growth in 
ethanol production. 
 
 
SAO PAULO 00001082  003 OF 003 
 
 
¶12.  (U) Ambassador Sobel began by asking Barroso what the keys are 
to Brazilian agricultural competitiveness.  Barroso responded that 
they include land, climate and production know-how.  He noted that 
low labor costs and social conditions were also important.  Barroso 
went on at some length to stress that Brazilian know-how and 
technology are extremely advanced for sectors such as soy and sugar 
production, but lag behind for production of other crops, such as 
corn. 
 
¶13.  (U) On the subject of sugarcane production and ethanol, Barroso 
credited recent production gains to better cultivation techniques 
and fertilizer applications.  He also reminded the Ambassador not to 
discount the importance of sugar to cane producers, noting that 
sugar is currently more remunerative than ethanol, and that with 
increased land prices in Brazil and more efficient production 
practices in the U.S., Brazil's competitive advantage in ethanol 
production is disappearing. 
 
¶14.  (SBU) In response to inquiries from the Ambassador, Barroso 
expressed skepticism about the entry of Petrobras into ethanol 
production and marketing, while acknowledging that the industry has 
built a reputation for itself as an unreliable supplier.  Barroso 
further noted that outside of Brazil and the U.S., he has seen few 
solid opportunities for investment in the biofuels sector.  He 
promised to recommend participants for a roundtable on ethanol that 
the Ambassador plans to convene. 
 
--------------------------------------------- ------ 
BRAZILIAN COMPETITIVENESS MOVEMENT COUNCIL MEETING 
--------------------------------------------- ------ 
 
¶15.  (SBU) Ambassador Sobel also attended a meeting September 27 
with the Brazilian Competitiveness Movement Council (MBC).  Founded 
in 2001, MBC is a Brazilian non-profit organization that aims to 
improve the competitiveness of the private and public sectors. 
Among the meeting participants were Jorge Gerdau Johannpeter, 
founder of MBC and President of Brazil's largest steel company 
(Note: Gerdau has been invited to participate in a second term Lula 
administration.  End Note), and the directors from General Electric, 
Merck Sharp and Dohme, Beckton Dickenson, American Express, 
Petrobras, Odebrech, and Suzano.  Ambassador Sobel, in his remarks, 
stressed the importance of partnerships as a means of sharing 
experiences and ideas.  In particular, Ambassador Sobel expressed 
the Embassy's interest in furthering its cooperation with MBC. 
 
¶16.  (U) Following the Ambassador's remarks, several MBC Council 
members commented on the need to improve government efficiency in 
Brazil. They referred to the World Economic Forum Global 
Competitiveness Report launched earlier that day, in which Brazil 
dropped nine positions mainly as a result of its weak institutional 
environment, bureaucracy, red tape, and corruption.  They also 
discussed, education, particularly the need to further cooperation 
between businesses and universities.  Several ideas came to the 
fore, including an MBC-U.S. Council on Competitiveness joint 
conference in 2007, and the possibility of connecting the MBC to the 
U.S. President's Council of Advisors on Science and Technology 
(PCAST).  The Ambassador asked the MBC Council members to reflect on 
these ideas and proposed to continue discussion in a meeting - yet 
to be scheduled - in Brasilia. 
 
¶17.  (U) This cable was coordinated with Embassy Brasilia, and was 
cleared by Ambassador Sobel. 
 
MCMULLEN