VZCZCXRO2432
RR RUEHRG
DE RUEHBR #1813/01 2671317
ZNR UUUUU ZZH
R 241317Z SEP 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 0017
INFO RUEHRG/AMCONSUL RECIFE 7155
RUEHSO/AMCONSUL SAO PAULO 0845
RUEHRI/AMCONSUL RIO DE JANEIRO 5140
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS SECTION 01 OF 03 BRASILIA 001813 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO E FOR TOM PIERCE 
STATE FOR WHA/EPSC LISA KUBISKE 
STATE FOR S/P WILLIAM MCILHENNY 
STATE FOR S/P GREG MANUEL 
DOE FOR CGILLESPIE, GWARD 
 
E.0. 12958: N/A 
TAGS: ECON ENGR ETRD ECIN EAIR ECPS TSPA SENV BR
SUBJECT:  BRAZIL: UNDER SECRETARY JEFFERY'S MEETINGS WITH GoB 
OFFICIALS 
 
 
BRASILIA 00001813  001.2 OF 003 
 
 
¶1.  (SBU) Summary: Under Secretary Reuben Jeffery and delegation met 
with Acting Minister of Mines and Energy, Nelson Hubner; Vice 
President Jose Alencar; and senior Ministry of Finance officials 
during his August 20 visit to Brasilia.  Hubner said he saw an 
immediate need to showcase a biofuels production success story to 
refute the claim that biofuel production would lead to food 
shortages.  GoB officials at the meeting noted the importance of the 
USG climate change initiative.  The meeting with Vice President 
Alencar focused on Brazil's infrastructure needs and proposed a 
U.S.-Brazil public-private partnership to improve one airport as a 
model for foreign investment in infrastructure development.  He also 
pointed to the need for foreign investment in the country's 
waterways, railways and ports, and suggested that some energy 
sectors, such as hydroelectric and nuclear, might be receptive to 
external investors.  Ministry of Finance officials showcased 
Brazil's strong macroeconomic progress and told the Under Secretary 
that the GoB was progressing towards eventual acceptance of 
bilateral investment treaties (BITs).  They also emphasized the need 
to build the biofuels market and develop related financial 
instruments.  The Ministry of Finance officials noted that Brazil 
had only recently emerged as a donor nation and acknowledged that 
the GOB needed to make decisions on assistance issues, such as 
contributing towards relieving the Liberian IMF arrears.  End 
Summary. 
 
--------------------------------------------- --- 
Meeting with Acting Minister of Mines and Energy 
--------------------------------------------- --- 
 
¶2.  (U) Under Secretary Reuben Jeffery and delegation met with 
Acting Minister of Mines and Energy, Nelson Hubner, Ambassador 
Antonio Simoes of the Ministry of Exterior Relations, and various 
other GoB officials.  The discussion centered on biofuels and the 
USG climate change initiative. 
 
-- Biofuels 
 
¶3.  (SBU) Hubner said the U.S. and Brazil should use their 
collective advantages in biofuel technology and auto production to 
promote industry standardization.  He noted that although biodiesel 
standardization might take longer, he believed ethanol 
standardization was well on its way.  Simoes reported that experts 
from the Brazilian standardization agency (INMETRO) were working 
with NIST and other institutions with a goal of establishing, by 
year-end, criteria to move the standardization discussion to the 
International Biofuels Forum (IBF). 
 
¶4.  (SBU) Hubner suggested that the MOU wording was too general and, 
as a result, might preclude a concrete plan of action.  He also said 
that it was crucial to showcase a success story to refute the claim 
that biofuel production would lead to food shortages - a claim that 
he said was ideologically driven.  To combat this perception, he 
suggested using the experiences of small farms in Nicaragua that 
produce sustainable biodiesel without sacrificing food supply. 
 
-- Climate Change Initiative 
 
¶5.  (SBU) Simoes underscored the importance of the USG climate 
change initiative to the GoB and affirmed his government's 
participation in the initiative.  Simoes highlighted Brazil's view 
that the U.S., as a non-signatory to the Kyoto Protocol, placed more 
emphasis on energy efficiency and expense than the environment.  He 
added that both countries should focus on underlining their 
partnership in promoting alternative energy such as biofuels. 
 
¶6.  (SBU) The Under Secretary said the September Major Economies 
Meeting (MEM) on climate change was a beginning that he hoped, over 
the next 18 months, would lead to the achievement of a global 
greenhouse emissions goal involving the creation of national plans 
and intermediate benchmarks.  He observed that several important 
meetings on climate change would follow the MEM and build on the 
dialogue established there. 
 
---------------------------------------- 
Meeting with Vice President Jose Alencar 
---------------------------------------- 
 
¶7.  (SBU) Under Secretary Jeffery, along with Ambassador Sobel and 
State Department officers, discussed advancing U.S. - Brazilian 
infrastructure investment partnerships, promiting foreign direct 
investment, and biofuels with Brazilian Vice President Jose Alencar. 
 
 
BRASILIA 00001813  002.2 OF 003 
 
 
 
-- Energy 
 
¶8.  (SBU) The Vice President told the Under Secretary that there was 
opportunity for a public-private partnership in non-strategic areas 
of the energy sector, particularly in hydroelectricity and nuclear 
energy.  He pointed to the country's "urgent" need for vastly 
improved infrastructure to support its growing biofuels industry and 
observed that most transportation in Brazil was by road.  He said 
the country needed to develop and improve its waterways, railways 
and ports to improve transport.  There was, he said, the possibility 
of private industry involvement in these types of projects. 
 
-- Promoting Private Investment 
 
¶9.  (SBU) The Under Secretary asked about the opportunity for 
private sector involvement in President Lula's Program to Accelerate 
Growth (PAC) and emphasized the importance of the upcoming October 
CEO forum in Brasilia to attracting private sector investment.  As 
an example, Ambassador Sobel pointed out that the U.S. - Brail forum 
was modeled on a similar program held in India that brought in USD 5 
billion in investments to India one year later. 
 
¶10.  (SBU) Alencar appeared receptive to the possibility of 
increased private investment in Brazilian infrastructure projects. 
He suggested connecting interested U.S. companies with the 
appropriate ministries and Brazilian companies for further 
discussions. 
 
-- A First Step?  An Airport Infrastructure Partnership 
 
¶11.  (SBU) According to Alencar, the GoB saw a particular opening 
for private capital in its airport infrastructure plans.  As a 
start, he suggested the participation of a U.S. company in 
partnership with a Brazilian firm and the GoB in the capital 
improvement project at one airport as a possible model for other 
airport development.  (He did not specify which airport would be the 
model.) 
 
---------------------------------- 
Meeting at the Ministry of Finance 
---------------------------------- 
 
¶12.  (SBU) Under Secretary Jeffery, Ambassador Sobel and delegation 
met at the Ministry of Finance with Secretary for Economic Policy 
Bernard Appy and Secretary for International Affairs Luiz Melin. 
 
-- Macro Overview 
 
¶13.  (SBU) Appy showcased Brazil's strong macroeconomic progress. 
He pointed out the sharp rise in exports over the last five years, 
with a corresponding increase in trade surplus and foreign reserves. 
 Appy also noted that Brazil had gone from a negative current 
account as a percentage of GDP, to a positive position since 2003. 
Appy noted that Brazil had become the fifth largest creditor of the 
United States.  He said the GoB was focused on improving conditions 
to increase growth, enhancing the credit market, advancing long term 
fiscal policy, and expanding investment. 
 
-- Biofuels Market 
 
¶14.  (SBU) On biofuels, Melin discussed the need for International 
Biofuels Forum (IBF) agreement on compatible market standards. 
Calling for a "new market for a new century" with no enclaves of 
protectionism, he emphasized the need to build the market and 
develop related financial instruments. 
 
-- Tax and Investment Treaties 
 
¶15.  (SBU) Melin said the proposed bilateral tax treaty was a 
political matter that the GoB was not ready to move forward.  In 
contrast, he felt the bilateral investment treaty (BIT) was further 
along.  He pointed to internal GoB discussions as evidence and said 
the next meeting of Brazil's Foreign Council would address the BIT 
format. 
 
-- Liberian Arrears 
 
¶16.  (SBU) On the issue of Liberian arrears, Melin said that Brazil 
had to become accustomed to its new role as a donor country.  He 
said that he expected the GoB to determine soon how much of a 
contribution it would make. 
 
BRASILIA 00001813  003.2 OF 003 
 
 
 
¶17.  (U) This cable was cleared by Tom Pierce in E. 
 
Sobel