VZCZCXRO3291
RR RUEHRG
DE RUEHBR #0289/01 0631401
ZNR UUUUU ZZH
R 031401Z MAR 08
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 1118
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 5857
RUEHSO/AMCONSUL SAO PAULO 1688
RUEHRG/AMCONSUL RECIFE 7757
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 03 BRASILIA 000289 
 
SIPDIS 
 
DEPT PASS USTR FOR KATE DUCKWORTH 
DEPT PASS DOC/ITA/MAC/WH/OLAC ANNE DRISCOLL 
DEPT PASS TREASURY IA LUYEN TRAN 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:N/A 
TAGS: EINV ETRD ECON EFIN BR
SUBJECT: Brazil: Investment Agreement Principles - consolidated GOB 
feedback 
 
REF:  A) State 6424 B) Brasilia 89 C) 07 Brasilia 2206 D) 07 
 
Brasilia 2177 E) e-mails Erath/DOS/DOC/TREAS/NSC 11/07-01/08 
 
¶1. (SBU) SUMMARY: This message provides consolidated input to 
Washington agencies regarding the status of intra-GOB discussions on 
bilateral investment treaty principles.  While no treaty "text" 
comparable to the US model BIT exists, CAMEX (the Brazilian External 
Trade Chamber) member ministries have developed "principles" for 
investment treaty/investment FTA chapter negotiations.  MRE, MDIC, 
and Planning Ministry as well as CAMEX Secretariat contacts 
characterize these "principles" as the final GOB position going 
forward in negotiations with other countries, while Finance Ministry 
indicates the internal battle is not over and that it continues to 
push for more ambitious principles than MRE desires.  Ministries 
confirm the principles include only state to state dispute 
resolution, and in a recent meeting with CEO Forum co-chair Tim 
Solso and Brazilian CEO Forum members (septel), Casa Civil Dilma 
Rousseff indicated it would be difficult for GOB to consider 
arbitration mechanisms beyond those included in specific contract 
provisions.  Most interlocutors note that GOB wishes to negotiate 
first 1) with an "easy" low economic impact country and/or 2) within 
the region in order to gauge Brazilian Congressional reaction before 
tackling more ambitious negotiations.  END SUMMARY. 
 
¶2.  (SBU) Post has explored over the past months with member 
Ministries of CAMEX (the External Trade Chamber) the GOB's position 
on bilateral investment treaties, including specifically on 
potential mechanisms for international arbitration of investor 
disputes.  Interlocutors have included Casa Civil Dilma Rousseff, 
MDIC Minister Jorge and staff, Finance Ministry Chief of Staff 
Melin, the Planning Ministry's chief economist Alex Pereira, MRE's 
head of investment and services Costa and U/S Azevedo, and CAMEX 
Executive Secretary Lytha Spinola. 
 
¶3. (U) NOTE:  CAMEX is in some ways comparable to the USG 
TPSC/TPRG/Econ Deputies/Econ Principals process. Membership is 
composed of MDIC (Commerce Ministry), Casa Civil (President's 
staff), MRE (Foreign Relations Ministry), Finance, Agriculture, 
Planning, and Agriculture Development Ministries.  CAMEX has an 
Executive Secretariat, and Lytha Spindola is the Executive 
Secretary.  CAMEX work is done in working groups progressively up 
 
SIPDIS 
through a Council of Ministers that takes decisions.  While TPRG 
process is a good comparison, CAMEX actually has a broader mandate 
since it is responsible for decisions on:  trade defense measures; 
trade facilitation; common external tariff changes decisions; export 
guarantees; international negotiations; and trade security.  That 
is, CAMEX does everything from approving anti-dumping cases to 
green-lighting MRE's proposed WTO negotiating positions to setting 
tariff rates.  Like our system, some issues are "easy" and never 
rise to political level for debate while others receive high-level 
engagement.  END NOTE 
 
¶4. (SBU) Reftel C reports in detail Congressional political, rather 
than Constitutional, concerns regarding BITs, as well as MRE's 
interpretation of its mandate from CAMEX going forward.  Contacts in 
the CAMEX Secretariat as well as Planning, Finance and MDIC 
ministries have declined to share any written record of the CAMEX 
investment negotiation principles - MRE, Planning and MDIC on the 
grounds that these "final" principles are internal use only and 
Finance also on the grounds that Ministries continue to debate 
internally the principles' ambition level and with what countries 
GOB should be negotiating.  Ministry and CAMEX contacts all confirm 
that the principles currently address only state to state 
arbitration; investor-state international arbitration is not 
included as an investment treaty principle. 
 
¶5. (SBU) Ministries/CAMEX secretariat are consistent in their 
understanding that GOB currently intends to focus investment 
negotiations based on these principles on countries where FTA 
negotiations are already underway or where the level of ambition is 
low and where the country is close by (eg, small Latin American 
neighbors).  Ref C notes that MRE interprets the mandate to 
prioritize negotiating investment agreements as part of FTAs rather 
than as free-standing agreements.  No interlocutor believed that 
Brazil realistically would be ready or desire to negotiate with the 
United States anytime soon on either a bilateral investment treaty 
or on a discrete international arbitration mechanism, citing as 
reasons the political difficulties with the Brazilian congress and 
the high-profile, ambitious nature of any negotiation with a high 
economic value investment partner such as the United States.  In a 
February 20 meeting with CEO Forum Co-Chair Tim Solso and several 
Brazilian CEO Forum representatives, MDIC Minister Miguel Jorge 
acknowledged that at some point GOB should discuss and consider 
further the possibilities for international arbitration, while Casa 
 
BRASILIA 00000289  002 OF 003 
 
 
Civil Dilma Rousseff believed existing mechanisms for resolving 
disputes through specific contract provisions were sufficient, had 
been successful in her Petrobras experience, and that anything 
further would be difficult to achieve (septel). 
 
¶6. (SBU) Only Finance Ministry discussions indicated a firm desire 
for more ambition at this point.  The Chief of staff, noting that 
"everyone is very concerned about putting a foot wrong on the first 
"model"" investment agreement and recalling that a "vague reference" 
to dispute settlement had created a furor that had risked holding up 
the Mercosul/Chile FTA, nonetheless expressed impatience at least to 
begin negotiations with Argentina on investment protections within 
MERCOSUL.  He estimated there would be no actual draft GOB 
investment chapter/agreement "text" before August.  He claimed 
Finance is pushing hard for an explicit reference to an 
investor-state dispute resolution mechanism in the principles and to 
induce other CAMEX members (with a strong implied reference to MRE) 
to accept that a "one-size fits all" negotiating approach will not 
work as Brazil evolves into a country with offensive as well as 
defensive interests.  He underlined that Argentina is Finance's top 
priority for an investment agreement, due to the perception of 
Brazilian investors that GOA actively devises ways to disadvantage 
them. 
 
¶7. (U) Further to information provided reftels, MRE's Investment and 
Services office, led by Ronaldo Costa Filho, provided post with the 
following informational text on February 15th: 
 
BEGIN QUOTE: Foreign Arbitrage (sic - arbitration) Awards 
Recognition 
 
Article 34 of the Brazilian Law 9.307 of 1996 defines a foreign 
arbitrage (sic - arbitration) sentence as the sentence proffered 
outside national territory. Before that Law, foreign sentences had 
to be recognized twice by the judicial system, first in the foreign 
Country where it had been issued and later in Brazil. The Law 
established that it sufficed the recognition in Brazil. The 
Constitutional Amendment No 45, in 1994, attributed the competence 
to recognize foreign sentences, previously held by the Superior 
Court of Justice (STJ), to the Federal Supreme Court (STF). 
 
Law 9.307 also stipulates that the foreign sentence will [b]e 
recognized or executed in Brazil in conformity with the 
international agreements ratified by the Country and, in their 
absence, with domestic law. Since the promulgation of that Law, 
Brazil has ratified the three main multilateral agreements on the 
subject: 1958 UN Convention on the Recognition and Enforcement of 
Foreign Arbitrage Awards (New York Convention), ratified in 2002; 
1975 Inter-American Convention on International Commercial 
Arbitration (Panama Convention), ratified in 1996; 1979 
Inter-American Convention on Extraterritorial Efficacy of Foreign 
Sentences and Arbitration Awards (Montevideo Convention), ratified 
in 1997. 
 
According to a recent research elaborated by a Brazilian Law Firm 
mentioned in the May 20, 2007 edition of Valor [note - a Brazilian 
newspaper - end note], during the last 10 years 408 arbitrage awards 
were taken to the Brazilian judicial system. Only 15 of those were 
foreign arbitrage awards, 5 of which were not recognized by the 
Brazilian tribunals. 
 
Arbitrage awards, once submitted to the STJ, are subject to the 
Brazilian process laws, as any other juridical action analyzed by 
that Tribunal. 
 
It should be noted that the vast majority of the countries, 
including France, UK, USA and Italy, also demand that their judicial 
system recognize the foreign sentence in order to execute them in 
their territory.  END QUOTE 
 
¶8. (SBU) COMMENT: As previously noted refs, given Brazil's history 
with investment agreements, GOB is extremely cautious and overall 
appears disinclined to ambition in discussion with the United States 
in the short-term.  Post encourages further Washington/GOB technical 
discussions on possible cooperative approaches to increase mutual 
understanding of goals in concluding investment agreements and 
mechanisms.  Post believes intense Brazilian investor lobbying on 
the Brazilian congress and executive for negotiations would be a 
crucial component in any strategy to foster achievement of an 
ambitious result in the short-term. (NOTE:  While CNI, for example, 
has told the Ambassador again recently that it is "studying" 
investment protection this year in a working group and is 
considering its strategy, they too express caution on ambition level 
given court and congressional challenges (see also ref D)).  END 
 
BRASILIA 00000289  003 OF 003 
 
 
COMMENT 
 
SOBEL