VZCZCXRO0321
PP RUEHRG
DE RUEHBR #0282 0471503
ZNR UUUUU ZZH
P 161503Z FEB 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 8130
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 3875
RUEHSO/AMCONSUL SAO PAULO 9234
RUEHRG/AMCONSUL RECIFE 6251
RUEHLP/AMEMBASSY LA PAZ 5166
RUEHBU/AMEMBASSY BUENOS AIRES 4589
RUEHSG/AMEMBASSY SANTIAGO 6091
RUEHMN/AMEMBASSY MONTEVIDEO 6750
RUEHAC/AMEMBASSY ASUNCION 5942
RUEHPE/AMEMBASSY LIMA 3358
RUEHBO/AMEMBASSY BOGOTA 4106
RUEHCV/AMEMBASSY CARACAS 3602
RUEHQT/AMEMBASSY QUITO 2131
RUEHPO/AMEMBASSY PARAMARIBO 1243
RUCPDOC/USDOC WASHDC
RHEBAAA/USDOE WASHDC

UNCLAS BRASILIA 000282 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOE FOR GWARD, CGILLESPIE 
STATE PASS TO USTR:SCRONIN 
AID/W FOR LAC/AA 
 
E.O. 12958: N/A 
TAGS: EPET ENRG ECON BR BL
SUBJECT: BRAZIL TO PAY MORE FOR BOLIVIAN GAS 
 
 
¶1.  (SBU) An agreement reached February 15 between Brazil and 
Bolivia created a formula that could oblige the parastatal Brazilian 
energy company, Petrobras, to pay up to four percent more each year 
for the Bolivian natural gas that primarily supplies the state of 
Sao Paulo.  The increase--although less than what had been asked for 
by Bolivia, which had sought an adjustment of 25 percent--is being 
viewed by local analysts as a victory for Bolivian President Evo 
Morales and could constitute an extra $100 million per year for 
Bolivia.  Morales indicated his intention to continue being a 
trusted supplier to the Brazilian marketplace.  "We will comply with 
all the contracts that we have with Petrobras.  There will never be 
a lack of gas for Brazil," he promised.  Bolivia sells 27 million 
cubic meters of gas daily to Brazil. 
 
¶2.  (SBU) Silas Rondeau, Brazilian Mines and Energy Minister, 
confirmed that the new formula, according to Petrobras's analysis 
and based on the volume of gas received in 2006, will represent an 
increase of three to four percent per year.  Rondeau stated that 
only half of one percent of the cost would be passed to the 
individual consumer.  Bolivia had wanted Brazil to pay the same 
price as Argentna, a price of US$5 BTU.  Petrobras President Sergio 
Gabrielli said that price could not happen, noting that Bolivia was 
not taking into account the investments made by Brazil, nor the 
larger volume of gas that Brazil purchases.  Gabrielli indicated 
that the agreement will build on and respect the terms of the 
current contract between Petrobras and Bolivia.  Still, Gabrielli 
was cautious when discussing the eventual impact to the consumer: 
"The price of gas will depend on the state distributors," he said. 
The Brazilian state of Mato Grosso is an example:  the two countries 
announced on Wednesday an agreement that will increase the price of 
Bolivian gas sold to Mato Grosso by 285 percent.  Mato Grosso's 
governor told Reuters that the federal government will bankroll the 
increase in price by the thermoelectric plant in Bolivia. 
 
¶3. (SBU) Morales's visit, which almost didn't happen due to the 
possibility of a breakdown in the discussion, ended up being 
extended for a second day due to the complexity of the negotiations. 
 To help close the deal, Brazil apparently pledged to help Bolivia 
construct hydroelectric plants near the border with Brazil. 
 
¶4. (SBU) Post will continue to follow this issue and report as 
warranted. 
 
SOBEL