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DE RUEHBR #0958/01 1461918
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P 261918Z MAY 07
FM AMEMBASSY BRASILIA
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RUEHCV/AMEMBASSY CARACAS 3687
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RUEHME/AMEMBASSY MEXICO 2064
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RUEHBS/USEU BRUSSELS
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UNCLAS SECTION 01 OF 02 BRASILIA 000958 
 
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SENSITIVE 
SIPDIS 
 
DEPT PLEASE PASS TO USTR SCRONIN/KLEZNY 
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GENEVA FOR USTR 
 
E.O. 12958: N/A 
TAGS: ETRD ECON BR
SUBJECT:  BRAZIL: NEXT STEPS ON FREE TRADE AGREEMENTS 
 
 
¶1. (SBU)  Summary.   On May 24, in a joint "NAFTA" approach to the 
Ministry of External Relations, the Econ Counselors from the U.S. 
and Canadian Embassies, along with the Commercial Counselor from the 
Mexican Embassy, met with Evandro Didonet, the Ministry's 
recently-appointed Chief of its International Trade Negotiations 
Division.  Didonet, who is responsible for the negotiations of FTAs 
- but not for the WTO Doha Round talks - said that the most serious 
FTA discussions currently on Mercosul's plate were with Israel and 
the Gulf Council countries (GCC).  As for the ongoing EU-Mercosul 
FTA talks,  he noted that while the EU saw these negotiations as a 
fall-back plan in case the Doha Round failed, Mercosul hoped for an 
agreement regardless of the outcome of Doha.  He did not see much 
significance to the EU's planned designation of Brazil as a 
"strategic partner" at the upcoming July 4 EU-Brazil summit in 
Brussels, calling it more show than substance.  End Summary. 
 
¶2.  (SBU)  Didonet, formerly the Deputy Chief of Mission at the 
Brazilian Embassy in Washington, took charge of the International 
Trade Negotiations Division in February.  While under his 
predecessor - Ambassador Regis Arslanian 
-- the unit reported to the MRE U/S for South American Affairs, an 
internal reorganization now has the division reporting to the U/S 
for Economic Affairs.  Thus, responsibility for the Doha Round, 
FTAA, EU-Mercosul, and other trade talks now lies with the 
Secretariat for Economic Affairs. 
 
SIPDIS 
 
¶3.  (SBU)  With respect to the substantive negotiations Brazil (and 
Mercosul) were currently engaged in, Didonet made the following 
comments: 
 
--  On agriculture, the principal roadblock to conclusion of the 
decade-long EU-Mercosul FTA negotiations, the EU has offered much 
more on market access in the context of the Doha Round that it has 
in the Mercosul talks.  The EU would only get serious, he felt, if 
the Doha Round were to stall - then it would aggressively seek to 
conclude FTAs with Mercosul and other partners.  For Brazil, he 
said, the difficulty was not dealing with the EU, but coming to a 
common position with its Mercosul allies -- Argentina, Uruguay, and 
Paraguay.  (As Venezuela had not implemented the Mercosul Common 
External tariff, it is only an observer, and not a participant, in 
the EU talks.) 
 
--  Brazil is committed to the success of the Doha Round.  There is 
no "Plan B."  Indeed, Didonet admitted, should the Doha Round fail, 
the GOB would be left without a forum for pursuing the agricultural 
subsidy cuts it wants so desperately from the USG. 
 
--  China, not the U.S. or the EU, is Brazil's number one worry on 
trade.  The flood of low-cost Chinese imports into the country, 
principally in the footwear, textile, and toy sectors, combined with 
the rising exchange rate, meant that Brazil was not only in danger 
of losing competitiveness overseas but vulnerable to "attack" in its 
home market.  Within a few years, it was possible that Chinese auto 
imports could displace domestic Brazilian vehicle production.  For 
these reasons, he opined, Brazil was reluctant to agree to steep 
cuts in non-agriculture tariffs in the Doha Round.  Indeed, due to 
the rising exchange rate, imports had already risen 20 percent this 
year even in the absence of any tariff cuts. 
 
-- Mercosul was closest to inking FTAs with Israel and the GCC 
countries.  The Israel pact was likely to be signed this year, while 
the GCC agreement was "a little more difficult" because of the issue 
of how to deal with the petrochemical sector, the source of much of 
the GCC's exports to the bloc.  For Brazil, he added, the most 
important GCC countries were Saudi Arabia and the UAE, with Qatar, 
Bahrain, Kuwait, and Oman being of much less significance. 
 
--  While negotiations were ongoing with India and the Southern 
African countries, these talks were more discussions of tariff 
 
BRASILIA 00000958  002 OF 002 
 
 
preferences as opposed to full-fledged FTAs. 
 
Chicola