VZCZCXRO6043
RR RUEHRG
DE RUEHSO #0917/01 3181447
ZNR UUUUU ZZH
R 141447Z NOV 07
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 7674
INFO RUEHBR/AMEMBASSY BRASILIA 8795
RUEHRI/AMCONSUL RIO DE JANEIRO 8439
RUEHRG/AMCONSUL RECIFE 3879
RUEHAC/AMEMBASSY ASUNCION 3175
RUEHBU/AMEMBASSY BUENOS AIRES 2939
RUEHCV/AMEMBASSY CARACAS 0601
RUEHMN/AMEMBASSY MONTEVIDEO 2498
RUEHLP/AMEMBASSY LA PAZ 3565
RUEHSG/AMEMBASSY SANTIAGO 2202
RUCPDOC/USDOC WASHDC 2952
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUCPDOC/USDOC WASHDC 2953

UNCLAS SECTION 01 OF 02 SAO PAULO 000917 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/EPSC, WHA/BSC, EEB/CBA 
STATE PASS USTR FOR KATE SUCKWORTH 
TREASURY FOR JHOEK 
USDOC FOR 4332/ITA/MAC/WH/OLAC 
USDOC ALSO FOR 3134/USFCS/OIO 
 
E.O. 12958: N/A 
TAGS: ECIN ETRD EINV ECON BTIO CVIS AR BR
SUBJECT: Brazil-U.S. CEO Forum Follow-Up 
 
REF: Brasilia 002087 
 
¶1. (U) SUMMARY: In a November 7 meeting with Josu Gomes da Silva, 
the Brazilian Chairman of the U.S.-Brazil CEO Forum and President 
and CEO of Coteminas, Ambassador Sobel and FCS Officer discussed 
follow-up activities to the October 2007 CEO Forum.  All 
participants agreed that a positive conclusion of a bilateral tax 
treaty, and forward movement on an investment grievance procedure 
between the U.S. and Brazil, would be key indicators of a successful 
CEO Forum follow-up.  In order to maintain the positive momentum 
started by the CEO Forum, all supported the need to establish 
benchmarks for various activities.  As a start, Gomes da Silva 
reiterated his intention to engage the Government of Brazil (GOB) at 
the highest levels to advance the CEO Forum recommendations and 
promised feedback by the middle of December on his efforts.  END 
SUMMARY 
 
-------------------- 
Bilateral Tax Treaty 
-------------------- 
 
¶2. (U) Ambassador Sobel and Gomes da Silva discussed the hurdles 
that remain in getting a bilateral tax treaty passed.  Lingering GOB 
concerns about lost tax revenue and the difficulty in bringing the 
Brazilian tax system into compliance with requisite standards for a 
tax treaty with the U.S. figured prominently in the discussion.  In 
order to seize the momentum generated by the CEO Forum on this 
issue, Gomes da Silva agreed to meet many of the key decision makers 
in the GOB within the next two weeks to discuss this issue 
including:  Dilma Roussef (President's Chief-of-Staff); Miguel Jorge 
(Minister of Development, Industry and Trade); Guido Mantega 
(Minister of Finance); and Jorge Rachid (Secretary General of the 
revenues and customs agency, Receita Federal).  Gomes da Silva will 
encourage the GOB to provide by mid-December a formal written 
overview on the GOB's key pending concerns regarding the tax treaty. 
 The Ambassador also stated that he understood that the Sao Paulo 
industrial federation, FIESP, Brazil's largest business lobby, has 
agreed to support a bilateral tax treaty when it comes up on the 
legislative calendar. 
 
------------------- 
Investment Disputes 
------------------- 
 
¶3. (U) Gomes da Silva further emphasized that Brazil needs to move 
forward on an investment grievance procedure with the U.S.  During 
this discussion, he stated the GOB's concerns regarding dispute 
settlement procedures in a potential BIT with the U.S., and whether 
acceptance of any grievance procedures would require changes in 
Brazilian law.  Gomes da Silva agreed to look into this more closely 
and discuss these concerns directly with Dilma Roussef.  Ambassador 
Sobel underscored that the USG cannot diverge substantially from the 
framework of the model BIT text to meet Brazilian needs (for 
example, by not including dispute settlement procedures). 
 
--------------------------- 
Benchmarks and other issues 
--------------------------- 
 
¶4. (U) Ambassador Sobel and Gomes da Silva agreed on the need for 
benchmarks in order to measure progress of the CEO Forum.  Gomes da 
Silva reported that he and Tim Solso (CEO of Cummins Inc. and Chair 
of the U.S. Section of the CEO Forum) have agreed to develop two 
benchmarks for each Forum recommendation.  Leaders within the 
Brazilian and U.S. sectors of the Forum have been identified for 
each recommendation. 
 
¶5. (U) Regarding the omnipresent issue of visas, Ambassador Sobel 
recalled the long-standing U.S. proposal to restore the 10-year visa 
which to date has gone unanswered by Itamaraty.  Ambassador Sobel 
also highlighted that the visa situation for Argentine nationals was 
misstated at the Forum, as Argentine travelers do in fact require 
B-1 visas for business travel. 
 
SAO PAULO 00000917  002 OF 002 
 
 
 
¶6.  (U) The discussion turned to the Forum commitment to promote 
contact between venture capital funds and promote infrastructure 
investment.  Ambassador Sobel outlined Embassy initiatives to link 
up U.S. investment banks to Brazilian innovators and development 
officials in order to increase the amount of venture capital 
entering Brazil, especially initial start-up capital.  Ambassador 
Sobel noted his continued emphasis on the CEO Forum in recent press 
encounters with all of Brazil's major news outlets, and encouraged 
Gomes da Silva to look for public opportunities to reiterate the 
Forum's message.  They discussed a possible joint press conference 
(with the two CEO Form Chairs) after the benchmarking exercise is 
completed. 
 
¶7. (SBU) COMMENT:  Ambassador Sobel and Gomes da Silva agreed that 
the GOB's attention right now is focused on legislative passage of 
the Provisional Contribution on Financial Transactions (CPMF), a tax 
on financial transactions for which the Lula Administration has 
dedicated significant political capital.  At the same time, 
President Lula has been making overtures to the business community, 
and seems increasingly at ease engaging on issues of interest to the 
business community.  This has been evidenced not only in recent 
federal highway concessions, but also in a gathering President Lula 
had with 100 Brazilian CEOs that took place in October shortly after 
the CEO Forum.  While Brazil's political and economic environment is 
as conducive as ever to making progress on the recommendations of 
the CEO Forum, there are still technical and political hurdles to 
overcome on some key issues including international arbitration and 
a Bilateral Tax Treaty.  END COMMENT 
 
¶7. (U) This cable was cleared by FCS Sao Paulo, Embassy Brasilia and 
approved by Ambassador Sobel.