VZCZCXRO4168
RR RUEHRG
DE RUEHBR #2176 3271904
ZNR UUUUU ZZH
R 231904Z NOV 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 0511
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 5476
RUEHSO/AMCONSUL SAO PAULO 1213
RUEHRG/AMCONSUL RECIFE 7410
RUCPDOC/USDOC WASHDC

UNCLAS BRASILIA 002176 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:N/A 
TAGS: ENRG ECON ENIV BR
SUBJECT: BRAZIL: ACTING MINES AND ENERGY MINISTER HUBNER 
 
¶1. (U) In a meeting with EconCouns, Acting Minister of Mines and 
Energy Jose Hubner Moreira described his agency's role in energy 
supply contracting, discussed mining concession processes, and 
touched on the challenges of environmental legislation and working 
with the states at the federal level. 
 
¶2. (U) Hubner noted his ministry lets all contracts for thermal (15 
year term) and hydroelectric (30 year term) supply projects.  He 
noted a 2004 law guides planning for future electricity needs 
(following the 2001 electricity supply crisis).  Supply is through 
two models - regulated, through distribution companies that do 
market projections for five-year supply needs, then the ministry 
contracts for needed supply; and free, where a certain amount is 
reserved for the private market to distribute.  Contracts contain a 
range of two to three percent flexibility in prices that may be 
charged to account for market movements.   Hubner asserted that, due 
to better five-year planning (within the current Ten-Year Plan 
2007-2016) under the requirements of the 2004 law, aversion of a 
future crisis was assured.  Planning is based primarily on 
hydroelectric power and expanding existing facilities.  He noted a 
major drought could affect projections, but the Ministry attempts to 
plan toward multiple scenarios.  (2007 plan is on-line).  (NOTE - 
other experts widely predict a serious energy crisis, including 
blackouts, somewhere between 2009 and 2016 in Brazil). 
 
¶3. (U) On biofuels, Hubner noted his Ministry plays a role, along 
with the Ministries of Agriculture, Science and Technology, and 
others, but that the issue is actually centralized and organized in 
the Casa Civil, who coordinates work of the ministries and organizes 
the network of research efforts. 
 
¶4. (U) On mining, the federal government owns all resources and does 
not share revenues with the states.  However, companies that win 
mining concessions have to pay royalties (e.g. Petrobras pays the RJ 
Government for oil exploration in the Campos basin) directly to the 
state and/or municipality where the resource is located.  Specific 
rates are determined by the resource mined, rather than contract by 
contract.  Hubner noted that Congress is currently analyzing the 
rates paid to states.  Australia and Canada pay more to states; 
Congress is interested in considering these models according to 
Hubner.  Hubner noted he had a meeting with the Congo (Kinshasha) 
Mining Minister, who was seeking advice how to organize the mining 
sector more effectively in Congo.  Hubner was not enthusiastic about 
Brazilian participation in the Extractive Industry Transparency 
Initiative (EITI), saying too few countries are implementing to make 
intensive Brazilian participation worthwhile. 
 
¶5. (U) Hubner noted that unpredictable environmental legislation, 
and the politics of energy and the environment, were challenges for 
his agency.  He mentioned a upcoming meeting with the governor of 
Parana State, who had given and rescinded permission for the Tibagi 
river hydroelectric project.  Hubner hoped to convince him to let 
the project go forward, but noted that the ability of many levels of 
federal, state and municipal governments to block projects 
previously approved at a higher level was a continuing challenge. 
 
¶6. (SBU) COMMENT:  Jose Hubner Moreira was previously the deputy 
minister and before that was the chief of staff.  He has been Acting 
Energy Minister since May 2007 but is expected to be replaced 
eventually by a Lula political appointee.  He has a great deal of 
technical expertise and also realizes fully the political need to 
assert all is well in the sector in terms of future energy needs, 
despite researchers and press analysis revealing a crisis remains a 
possibility in the next several years.  The Ministry's 10-year plan 
states that the Ministry will contract sufficiently to cover energy 
needs, but this does not guarantee that the infrastructure to 
deliver these MWh will actually be in place if PAC power plants 
projects are delayed.  END COMMENT