VZCZCXRO9909
PP RUEHRG
DE RUEHSO #0036/01 0171018
ZNR UUUUU ZZH
P 171018Z JAN 07
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 6280
INFO RUEHBR/AMEMBASSY BRASILIA 7363
RUEHAC/AMEMBASSY ASUNCION 2896
RUEHBU/AMEMBASSY BUENOS AIRES 2588
RUEHMN/AMEMBASSY MONTEVIDEO 2249
RUEHLP/AMEMBASSY LA PAZ 3179
RUEHSG/AMEMBASSY SANTIAGO 1958
RUEHRG/AMCONSUL RECIFE 3312
RUEHRI/AMCONSUL RIO DE JANEIRO 7709
RHEHNSC/NSC WASHDC
RUCPDOC/USDOC WASHDC 2681
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJC/DEPT OF JUSTICE WASHDC
RUEAHLC/HOMELAND SECURITY CENTER WASHINGTON DC
RUEABND/DRUG ENFORCEMENT ADMIN HQ WASHDC
RHMFISS/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 04 SAO PAULO 000036 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/FO, WHA/BSC, P, INL, EB/CBA 
STATE ALSO FOR DS/IP/WHA, DS/DSS/ITA, DS/DSS/OSAC 
STATE PASS USTR FOR SULLIVAN/CRONIN 
STATE PASS EXIMBANK 
STATE PASS OPIC FOR DMORONESE, NRIVERA, CVERVENNE 
STATE ALSO PASS TDA FOR ANGULO AND MCKINNEY 
NSC FOR FEARS 
DOJ FOR BRUCE SWARTZ 
TREASURY FOR OASIA, DAS LEE AND JHOEK 
DHS HQ FOR PLCY/OIA - KEVIN O'REILLY 
DHS ALSO FOR TSA 
USDOC FOR 4332/ITA/MAC/WH/OLAC 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD 
SOUTHCOM ALSO FOR POLAD 
USAID FOR LAC/AA 
 
E.O. 12958:  N/A 
TAGS: PGOV SNAR EINV ASEC PREL BR
SUBJECT: AMBASSADOR AND SAO PAULO GOVERNOR DISCUSS CRIME, PUBLIC 
SECURITY, INVESTMENT ISSUES 
 
REF: (A) SAO PAULO 6; (B) 06 SAO PAULO 899; 
 
     (C) 06 SAO PAULO 1131; (D) 06 SAO PAULO 355 
 
SENSITIVE BUT UNCLASSIFIED - PROTECT ACCORDINGLY 
 
------- 
SUMMARY 
------- 
 
¶1.  (SBU) During an hour-long meeting with the Ambassador, Jose 
Serra, Governor of Sao Paulo state, said that his most immediate 
priority upon taking office was public security, especially in the 
metropolitan public transportation system, which is the state 
government's responsibility.  Though statistics show a steady 
decline in crimes of violence, the state and the metropolitan area 
continue to be plagued by common street crime, and concerns about 
the organized criminal organization First Capital Command (PCC) 
continue unabated.  Serra stressed that to fight crime, the state 
does not need money so much as technology, training, and technical 
expertise, and asked if DHS and U.S. metropolitan transit 
authorities could help Sao Paulo subway and commuter rail personnel 
learn to deal with bomb threats and other threats to public safety. 
Serra indicated he was extremely interested in meeting with Attorney 
General Gonzales in February but that he did not know if he would be 
able to travel to Brasilia for that purpose, though he will try. 
The Ambassador raised with Serra a complicated tax credit problem 
affecting U.S. telecommunications manufacturers. Serra said he is 
prepared to implement a quick fix but that a durable, long-term 
solution will be more difficult to achieve.  End Summary. 
 
¶2.  (U) Ambassador Sobel, accompanied by Consul General (CG) and 
poloff, met January 10 with Sao Paulo Governor Jose Serra.  The 
Governor was accompanied by Civil Household Chief Aloysio Nunes 
Ferreira; Public Security Secretary Ronaldo Marzagao; Transportation 
Secretary Mauro Arce; Metropolitan Transport Secretary Jose Luiz 
 
SIPDIS 
Portella; Colonel Marco Antonio Moises, Security Coordinator, 
Metropolitan Transport Secretariat; Conrado Garva, Director of 
Operations for the Metro system; and foreign affairs advisors Helena 
Gasparian and Jose Roberto de Andrade.  Everyone on the Brazilian 
side was new to the state government, since Serra was inaugurated on 
January 2; however, some have served in previous administrations. 
 
SECURITY IS THE TOP PRIORITY... 
------------------------------- 
 
¶3.  (SBU) Governor Serra asked about the upcoming visit to Brazil of 
Attorney General Gonzales.  Ambassador replied that AG is currently 
planning to visit Brazil but would not have time to visit Sao Paulo. 
Thus, the Ambassador expressed hope that Serra and other 
reform-minded governors could meet with him in Brasilia.  Serra 
replied that this would be difficult for him to travel to Brasilia 
but he would try.  Ambassador added that U/S Burns will be visiting 
at around the same time in early February, and that Serra should 
also meet with him to discuss his priorities and ways the U.S. could 
work with the state government.  In addition, Ambassador is 
expecting a visit to Brazil by DEA Administrator Tandy in late 
February.  The Ambassador noted that the U.S. has extensive 
experience and expertise to share in the areas of public security 
and prison administration and currently provides Brazil with 
 
SAO PAULO 00000036  002 OF 004 
 
 
equipment and training. 
 
¶4.  (SBU) Foreign affairs advisor Gasparian pointed out that the USG 
has a strong cooperative relationship with Brazil's federal 
government but that Sao Paulo state would like to have direct 
collaboration with USG.  The Ambassador replied that this question 
is under discussion.  Governor Serra said money is not the problem; 
the state has money.  Rather, it needs equipment, technology, 
training and technical expertise.  It needs experts to show how 
things are done in various areas of security. 
 
...ESPECIALLY IN PUBLIC TRANSPORTATION 
-------------------------------------- 
 
¶5.  (SBU) Nunes Ferreira raised the issue of security in 
metropolitan Sao Paulo's subway system, which has recently 
experienced several bomb scares.  Several weeks ago, a real bomb was 
found one real bomb in a station.  In addition, a recent explosion 
at a military police station (ref A) was caused by a technician 
trying and failing to defuse an explosive device that had been found 
in a metro station.  The metro area's commuter rail system is also 
subject to possible attack.  (Note: Though nobody mentioned them, 
metropolitan buses are also at significant risk for violent crime, 
including bombs.  End Note.)  State officials believe the First 
Capital Command (PCC) may be responsible for recent incidents.  The 
state government has 5,000 people working on transportation 
security, but they are poorly trained and don't know how to respond 
to bomb threats.  Serra mentioned that the New York subway system 
has a sophisticated security apparatus, which has no doubt been 
greatly strengthened since the terrorist attacks of 9/11.  Secretary 
Portella (Metropolitan Transit) said his office was eager to learn 
about operational routines of the New York and Washington public 
transit systems in the event of bomb threats and other security 
incidents.  He shared a list of questions his staff had developed. 
(List has been faxed to DHS/O'Reilly and WHA/BSC.)  The Ambassador 
and CG suggested that we might be able to arrange for experts from 
major U.S. cities' transit systems and/or USG agencies (e.g., FBI, 
DHS, ATF) to visit Sao Paulo and share their experiences, or for 
Secretary Portella and some of his security personnel to visit U.S. 
 
SIPDIS 
cities and meet with public transportation authorities.  The 
Ambassador also stressed the importance of developing effective 
communications between agencies - federal, state, and local - in 
addressing security problems. 
 
¶6.  (SBU) Gasparian said state officials would like to develop a 
cooperative relationship with DHS.  The Governor was not familiar 
with the agency, but after the Ambassador described its and history, 
mission, and functions, agreed that he would greatly appreciate any 
help DHS could provide.  CG suggested the Governor familiarize 
himself with the Container Security Initiative DHS has been 
operating in the Port of Santos for the past year and a half. 
Ambassador added that he expects DHS Secretary Chertoff to visit 
Brazil later this year, and that the Governor should meet with him. 
 
 
¶7.  (SBU) The Ambassador noted that when he met in August with then 
Governor Claudio Lembo (ref B), Lembo was extremely concerned about 
narcotics and drug trafficking.  Serra concurred that drugs are the 
big problem and that trafficking in weapons is also a major concern, 
 
SAO PAULO 00000036  003 OF 004 
 
 
as is illegal trade (contraband and pirated and counterfeit 
merchandise).  The Ambassador suggested that the U.S. and Brazil 
could cooperate more on combating money laundering. 
 
SERRA HAS SHORT-TERM FIX FOR INVESTMENT ISSUE 
--------------------------------------------- 
 
¶8.  (SBU) Turning to another subject, the Ambassador expressed 
concern about a tax credit problem that affects certain U.S. 
businesses operating in Brazil.  A lawsuit between the states of 
Parana and Sao Paulo could result in the abolition of Sao Paulo's 
ICMS (equivalent of value added tax) credits to manufacturers of 
telecommunications technology.  Post was approached recently by 
Motorola executives, who said an adverse ruling could cost them 
hundreds of millions of dollars and might force them to withdraw 
from Brazil.  Deputy PO and Commercial Attache met with then 
Governor Lembo in December, and the Ambassador spoke to Lembo as 
well.  The Sao Paulo state government succeeded in having the case 
continued until at least February, when the Supreme Court returns 
from leave.  Serra was familiar with the problem and agreed it was 
in the state's interest, and Brazil's as well, to find a solution. 
There is an unfortunate history of "fiscal wars" between Brazil's 
states; Sao Paulo is usually the victim, he said, but has on 
occasion been the instigator, which complicates the issue.  Serra 
plans to implement a short-term solution: to revoke the decree 
governing the ICMS credit system, essentially vacating the lawsuit, 
and then issue a new decree restoring ICMS credits.  It may be a 
crude work-around, but it will solve the immediate problem.  He 
suggested post and Motorola contact Lieutenant Governor (and 
Secretary of Development) Alberto Goldman to discuss possible 
 
SIPDIS 
longer-term solutions. (Note: CG has requested a meeting with 
Goldman to follow up.  End Note.) 
 
¶9.  (U) In response to a question by Ambassador Sobel, Serra said he 
may travel to the U.S. in March.  He visited Washington and New York 
in November and met with World Bank and IDB officials to discuss 
assistance in expanding the Sao Paulo subway system and completing 
the "beltway" around metropolitan Sao Paulo. 
 
¶10.  (U) In closing, Ambassador and CG expressed appreciation for 
Serra's assistance in combating IPR piracy when he was Mayor, and 
said we would continue to work closely with the state government on 
anti-piracy initiatives. 
 
COMMENT 
------- 
 
¶11.  (SBU) Jose Serra (see refs C-D) ran for President in 2002 and 
lost to Lula in the second round.  He had hoped to be the opposition 
Brazilian Party of Social Democracy's (PSDB) nominee again in 2006, 
but was out-maneuvered by former Sao Paulo Governor Geraldo Alckmin 
and opted to run for Governor instead.  He handily defeated Aloizio 
Mercadante of Lula's Workers' Party (PT), the government's leader in 
the Senate.  Serra remains a figure of national stature; he and 
Aecio Neves, newly re-elected Governor of Minas Gerais, are already 
competing for the PSDB's 2010 presidential nomination.  He clearly 
has his work cut out for him in Sao Paulo and needs to show results 
quickly if he hopes to run for president again. 
 
 
SAO PAULO 00000036  004 OF 004 
 
 
¶12.  (SBU) This week's meeting among security officials of Brazil's 
four southeastern states - Rio de Janeiro, Espirito Santo, Minas 
Gerais, and Sao Paulo - to discuss cooperation and 
information-sharing in the battle against crime represents a new 
approach for Brazil that may offer opportunities for the United 
States.  Mission Brazil believes that USG should seek ways to assist 
the state government in the area of transportation security as 
requested, and in other priority areas as they are identified.  End 
Comment. 
 
¶13.  (U) This cable was coordinated with Embassy Brasilia and 
cleared by Ambassador Sobel. 
 
MCMULLEN