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C O N F I D E N T I A L SECTION 01 OF 09 BRASILIA 000469 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA AND WHA/BSC 
 
E.O. 12958: DECL: 04/04/2018 
TAGS: PREL PGOV ECON BR
SUBJECT: SCENESETTER FOR POLICY PLANNING DIRECTOR GORDON 
 
REF: BRASILIA 00369 
 
Classified By: Ambassador Clifford M. Sobel. Reasons: 1.4 (B) & (D) 
 
¶1. (C) Summary:  The relationship between the United States 
and Brazil is as productive and broad-based as it as ever 
been, the result of the excellent relationship between 
President Bush and President Luiz Inacio Lula da Silva, new 
cooperation mechanisms on biofuels, business issues, and 
economic matters, and our shared goals of fostering 
hemispheric stability, promoting democracy, developing a 
consensus on next steps regarding climate change, and 
achieving a mutually satisfactory conclusion to the Doha 
round of WTO negotiations.  At the same time, U.S.-Brazil 
cooperation is often limited by the GoB's unwillingness to 
speak out against anti-democratic actions in the hemisphere 
(Venezuela and Cuba), take proactive steps to address key 
issues such as nuclear proliferation and counterterrorist 
concerns, and expand its international leadership in 
meaningful ways.  End Summary. 
 
---------------------------------- 
Lula Popular, But What Comes Next? 
---------------------------------- 
 
¶2. (C) With a 67 percent approval rating, President Lula is 
more popular than at any other point since he took office in 
¶2003.  Continuity and legacy are the guiding lights of Lula's 
second term.  Lula continues to shape his legacy as a friend 
of the poor and builder of a foundation for prosperity for 
the lower and middle classes through broad social welfare 
programs and a vast, new economic growth program of public 
works and growth incentives.  At the same time, Lula has 
failed to promote needed reforms to abolish a political 
culture of corruption, clientelism, and spoils.  Although a 
seemingly endless series of corruption scandals has not 
dented his personal popularity or that of his government, 
these scandals have felled political allies, including 
cabinet ministers, in recent years. 
 
¶3. (U) President Lula and his economic team,s prudent fiscal 
and monetary policies and reform efforts are a major reason 
for his popularity, and have resulted in Brazil,s position 
as the tenth largest economy in the world, with a trade 
surplus and BB-plus credit rating.  Annual GDP growth was 
approximately 4.5 for 2007, as was inflation.  Buoyed by 
exports and investment inflows, Brazil's currency, the Real, 
has remained strong, and the government has succeeded in 
paying down its external debt.  However, there are major 
structural challenges to long term growth.  Real interest 
rates are among the highest in the world.  The informal 
sector constitutes an estimated 40 percent of the economy, in 
part due to the tax burden (34.2 percent of GDP in 2006), one 
of the highest among large developing economies.  Brazil,s 
opaque and onerous regulatory and legal system, as well as 
poor transport and other infrastructure, continue to 
constrain growth. 
 
¶4. (C) Lula is concerned with finding an electable successor 
for 2010, and appears to be grooming his top domestic policy 
adviser, Minister Dilma Rousseff, while keeping other options 
open.  Attention in the media and among the political elite 
is already focused on the race; the opposition governor of 
Sao Paulo state and former presidential candidate, Jose 
Serra, currently leads the pack of possible candidates. 
 
¶5. (U) Despite a healthy economy and a slight drop in 
homicides registered over the past several years, public 
opinion polls consistently show that the top concerns for 
Brazilians continue to remain public security and lack of 
jobs.  These are normally followed by quality of health care 
and education, corruption, low wages, and lack of 
opportunities for youth.  These will likely remain issues 
heading into the municipal elections later this year, and 
into the 2010 presidential elections. 
 
--------------------------------------------- -------- 
Foreign Policy: Hesitant Globally; Cautious Regionally 
 
BRASILIA 00000469  002 OF 009 
 
 
--------------------------------------------- -------- 
 
¶6. (C) Brazil's foreign policy is dominated by symbolic steps 
to burnish its South-South credentials and status as an 
emerging leader, rather than by resolute attention to core 
political and economic interests, including strengthening 
bilateral political and trade relations with the United 
States.  The attainment of a permanent seat on the UN 
Security Council has been a central tenet of Brazil's foreign 
policy under President Lula da Silva's government, and most 
of its actions on the international stage are geared toward 
that goal.  However, Brazil has largely failed to assume the 
international leadership role that would make it a strong 
candidate for such a position.  Brazil's latest two-year 
stint on the UNSC, which ended in January 2006, was 
characterized by caution and equivocation rather than vision 
and leadership.  The GoB has so far not used its significant 
contribution to stability in Haiti as a step along the road 
to becoming a champion of international peace and security. 
For example, the GoB has yet to respond to repeated requests 
for assistance with peacekeeping in Darfur. 
 
¶7. (C) Regionally, Lula has maintained Brazil's historic 
focus on stability, seeing dialogue and good relations with 
all parties as the best way to achieve this goal.  As a 
result, Brazil maintains an active dialogue with and refuses 
to criticize human rights violations in Venezuela and Cuba, 
has worked hard to restore relations with Bolivia even at the 
expense of its own economic interests, and stood firmly on 
the principle of respect for sovereignty, with only minimal 
mention of counterterrorism concerns, in responding to the 
dispute between Colombia and Ecuador (ref A). 
 
--------------------------------------------- - 
Foreign Policy: Leader in Regional Integration 
--------------------------------------------- - 
 
¶8. (C) In the end, Brazil,s actions during the recent crisis 
between Ecuador and Colombia showed that it values regional 
integration and sovereignty above all else, where it played 
an active but low-key role.  In keeping with the basic 
precepts on which it bases its foreign policy ) 
non-intervention in the internal affairs of other nations, 
working within regional and international organizations to 
resolve problems through consensus, and an almost obsessive 
preoccupation with evenhandedness ) Brazil worked behind the 
scenes at the OAS special session and the subsequent Rio 
Group Summit in Santo Domingo to help diffuse the crisis. 
Brazil refrained from making any strong public statements 
admonishing Venezuela for interfering in what Brazil saw as a 
bilateral issue between Ecuador and Colombia, or condemning 
the FARC for its terrorist activities that precipitated the 
crisis.  Lula made calls to Presidents Correa (who he also 
met with in Brasilia) and Uribe to discuss the situation 
between the two countries and to Argentine President Kirchner 
to coordinate diplomatic strategy.  Overall, GOB actions 
during the crisis provided some insight into how it prefers 
to exercise what it sees as Brazil,s natural role as a 
regional leader.   It does not prefer to lead from the front, 
but rather from within the pack.  Brazil sees regional 
integration as a highly desirable goal to be obtained through 
consensus and suasion rather than direct confrontation with 
potential destabilizing influences such as Chavez and his 
Bolivarian Republic of Venezuela. 
 
¶9. (C) During the two Bush/Lula meetings in March 2007, 
President Lula stated that the U.S. and Brazil should work 
together to promote regional integration in South America. 
Since then, however, certain elements within the GOB, 
Itamaraty in particular, appear to be trying to walk back 
initiatives aimed at increasing U.S./Brazil cooperation on 
bilateral and regional issues.  This opposition to an 
increased U.S. role in the region is on the one hand based on 
a traditional mistrust of the U.S. especially among the 
Brazilian elite, of which Itamaraty is a part, and on the 
other hand the perception that Brazil,s position as regional 
leader would be diminished by a strong and active U.S. 
presence in the region.  Those who adhere to the latter 
 
BRASILIA 00000469  003 OF 009 
 
 
position see increased cooperation with the U.S. as a zero 
sum game and may believe that proposed regional organizations 
such as the South American Defense Council, and to a lesser 
extent, the Bank of the South, would serve to exclude the 
U.S. from playing a greater role in regional integration 
initiatives and as a counterbalance to U.S. influence. 
Others in the GOB and Congress believe that Brazilian 
participation in the new regional organizations would provide 
the means by which Brazil can influence and moderate the 
potentially destabilizing behavior and activities of Hugo 
Chavez and his allies such as Evo Morales. 
 
--------------------------------------------- ---- 
Foreign Policy: Cooperative Relations with China 
--------------------------------------------- ---- 
 
¶10. (C) Sino-Brazilian relations are officially excellent, 
characterized by a booming economic relationship and a 
political relationship that has become increasingly closer, 
especially since the exchange of visits by Presidents Hu and 
Lula in 2004.  The economic relationship is based on 
"complementarity," not competition: Brazil exports to China 
low value added commodities such as iron ore, soy, and 
petroleum, with these three commodities representing about 
70% of the export value, while China exports high value added 
goods such as electronics and industrial equipment.  There is 
some discontentment in the Brazilian private sector over the 
unbalanced trade relationship and low level of Chinese 
investment in Brazil, but both governments are taking a 
long-term view and believe a patiently constructed 
relationship will increasingly yield political fruits. 
Brazil and China have designated each other a Strategic 
Partner. In 2006, they inaugurated the High Level Committee 
on Consultation and Cooperation (COSBAN), which meets 
biennially, and they agree to support each other in 
international organizations, work toward a successful 
conclusion of the Doha Round, and cooperate in many political 
areas to strengthen south-south relations and the voice of 
the developing world globally.  Yet China does not support 
Brazil's top foreign policy goal: a seat on the UN Security 
Council.  The Sino-Brazilian relationship is both competitive 
and cooperative, and they have much to offer each other, but 
it is not clear whether over time the two sides will manage 
the relationship to maximize its potential for each side. 
 
-------------------------------------------- 
Foreign Policy: "Balanced" Mid-East Approach 
-------------------------------------------- 
 
¶11. (C) As part of its efforts to burnish its global 
leadership credentials, Brazil has a very active Middle East 
agenda.  Already this year Foreign Minister Amorim has 
undertaken a five-country Middle East (ref B), followed by an 
Arab-South American foreign ministers meeting in Buenos Aires 
also in February, and bilateral talks with Iran in March. 
Still on deck for the year: possible state visits by Syrian 
president Asad and the King of Jordan; a probable trip to the 
Middle East by President Lula; opening of new embassies in 
Oman and Qatar; potential trade accords with Egypt, Jordan 
and Morocco and the hope of finishing the long-delayed trade 
accord with the Gulf Cooperation Council; and capping off the 
year, the Arab-South American Summit in Qatar.  Itamaraty 
also intends to follow up on Lula's August 2007 letter to 
Palestinian leader Mahmoud Abbas offering to form a Friends 
of Peace group with other interested countries, such as those 
in IBSA (India and South Africa), to seek further engagement 
in the peace process. 
 
¶12. (C) The GoB is cautious about taking an active role in 
non-proliferation efforts, and has consistently refused to 
take a strong position against Iran's nuclear efforts. 
Brazilian officials consider their seat at the table in 
Annapolis as a foreign policy success and see themselves as 
balanced in their dealings with Israel and the Palestinians, 
but they have yet to define a substantive role for Brazil. FM 
Amorim's suggestion that Iran, Syria, Hamas, and Hizbollah 
should be included in the negotiations suggest continuing 
naivete regarding the peace process and Middle East 
 
BRASILIA 00000469  004 OF 009 
 
 
relations, as does his recent remark to a U.S. official that 
Brazil's growing "friendship" with Iran will prove useful 
should the United States, in the future, decide to engage 
Iran. 
 
¶13. (C) Brazil likes to characterize its relationship with 
Iran as correct and balanced, one cognizant of Iran's 
troubled status within the international community, but one 
that does not repudiate Tehran either.  Iran, for its part, 
is looking to drum up increased Brazilian investment in Iran, 
develop closer bilateral ties, and secure a long-delayed 
meeting between Iranian President Ahmadi-Nejad and President 
Lula.  Iran is also seeking for increased opportunities to 
balance its trade, which currently overwhelmingly favors 
Brazil.  Exports to Iran account for about 30% of total 
Brazilian exports to the Middle East, or about US$1.8 
billion, which accounts for about 99% of trade volume between 
the two countries.   With regard to Iran's nuclear program, 
Tehran seeks out Brazil in order to draw parallels between 
Brazil's peaceful nuclear energy program and Iran's nuclear 
activities. although Brazil voted in favor of referring Iran 
to the UN Security Council in February 2006, from the onset, 
the GOB opposed the effort until the vote in the IAEA had 
become a foregone conclusion, when the PRC and Russia agreed 
to a western compromise proposal.  Brazil did not vote to 
condemn Iran's nuclear activities until Iran missed the 
UN-mandated deadline for allowing international inspectors to 
visit suspicious nuclear facilities. As is often the case 
with its Mideast diplomacy, Brazil's pursuit of a "correct" 
relationship likely will continue to produce decidedly mixed 
results which at times will be at odds with the policy 
objectives of most Western countries. 
 
--------------------------------------------- 
Friendly Cooperation, Not Strong Friendship 
--------------------------------------------- 
 
¶14. (C) Bilaterally, the GoB has pursued generally friendly 
relations with the United States, but continues to favor 
building ties with developing nations over closer relations 
with the United States and other developed nations.  While 
seeking to expand our bilateral dialogue, the GoB has 
studiously avoided working closely with us on broad strategic 
issues important to us.  Those issues on which it has been 
willing to work with us--biofuels, investment, and climate 
change, for example--are areas where the GoB considers itself 
a visibly equal partner.  The exception may be 
security-related issues, where the appointment of Nelson 
Jobim as Defense Minister has brought new interest in 
cooperation.  But it appears that in this area, as with our 
efforts on counternarcotics, environmental protection, 
counterterrorism, and other issues, the Foreign Ministry is 
seeking to maintain its historic dominance and distance from 
the United States, which it does by controlling the agenda 
and throwing up barriers that delay and sometimes scuttle 
bilateral efforts that other ministries support. 
 
¶15. (SBU) We continue to seek opportunities for positive 
bilateral cooperation through the mechanisms including the 
Economic Policy Dialogue (EPD), the second session of which 
was held March 6 in Washington.  The EPD provides an 
important opportunity to reinforce our view of Brazil as 
partner in areas of mutual interest.  Cooperation to foster 
innovation and agricultural coordination, to possibly include 
assistance to African countries, are new topics of 
conversation bilaterally.  Additionally, we have been working 
to develop a regional infrastructure initiative.  We have 
been exploring one another,s regulatory frameworks in hopes 
of addressing barriers and achieving a Bilateral Tax Treaty 
and a Bilateral Investment Treaty.  Civil aviation is an area 
of renewed focus with the next round of talks expected in 
¶2008.  There are also continuing efforts under the auspices 
of the bilateral CEO Forum to address issues of common 
interest. 
 
¶16. (U) The growing bilateral relationship is reflected in 
the number of high-level officials who have visited Brazil. 
Most recently, Secretary Rice A/S Shannon (who has visited 
 
BRASILIA 00000469  005 OF 009 
 
 
twice in the past 4 months), and A/S Lowery had productive 
meetings with Foreign Minister Amorim and other high-level 
Brazilian officials.  During the last several months others 
have made stops in Brazil, including Commerce A/S David 
Bohigian, Treasury DAS Brian O'Neill, Deputy Assistant USTR 
Chris Wilson, A/S Sullivan, U.S. Army Chief of Staff General 
George Casey, FTC Chairman Deborah Platt Majoras, Commerce 
Secretary Gutierrez, National Economic Council Director, Al 
 
SIPDIS 
Hubbard, Treasury Secretary Paulson, U/S for Democracy and 
Global Affairs Dobriansky.  At least six CODELs have visited 
Brazil in the past six months. 
 
¶17. (C) USAID has sought to target its efforts in Brazil 
towards promoting sustainable livelihoods through working on 
issues such as health, the environment, and small and 
medium-sized enterprises.  Our bilateral dialogue with the 
GoB on development assistance to Brazil and in third 
countries contains positive elements, including promising 
potential in biofuels, but is constrained by differences in 
approach to anti-poverty efforts, with the GoB focusing on 
cash transfers, while the USG prefers more finely targeted 
assistance.  The Brazilian Government's multi-billion dollar 
poverty alleviation program -- Bolsa Familia -- receives 
technical assistance from the World Bank and IDB, but USG 
budget constraints and the fact that it is a cash transfer 
program (albeit with conditions) keep us from actively 
cooperating with the initiative.  The GoB also rejected our 
flagship regional environmental program, the Amazon Basin 
Cooperation Initiative, which will now be pursued on a 
bilateral basis.  Cuts in USAID's budget may severely impact 
our ability to continue these programs. 
 
¶18. (SBU) The Brazilian public has a mixed view of the United 
States.  Seventy-five percent say relations between Brazil 
and the U.S. are very good or fairly good, and Brazilians by 
a wide margin consider the U.S. the most important country in 
the region for Brazil.  Those who follow the news know that 
U.S.-Brazil cooperation on trade issues has global importance 
and new areas of cooperation such as biofuels are potentially 
significant.  There has been a much more positive view of 
U.S.-Brazil cooperation since the signing of the biofuels MOU 
last year.  On the other hand, there is a good deal of 
skepticism about U.S. foreign policy, particularly on issues 
such as Iraq and Cuba.  There is resentment over the long 
wait times for U.S. visa applications, a product of a spike 
in demand without commensurate increases in staffing.  There 
is also an unfounded fear that the U.S. or other foreigners 
want to take over or internationalize the Amazon. 
 
--------------------------------------------- -------- 
Areas of Cooperation: Mixed Bag on Mil-Mil Relations 
--------------------------------------------- -------- 
 
¶19. (C) While mil-mil cooperation on the forces level 
continues to grow, the policy level of the Brazilian 
government, particularly the MRE, continues to hold back the 
relationship.  As long as the current government remains in 
power, this situation is unlikely to change.  We can, 
however, pursue initiatives with Brazil that Brazil perceives 
to be in its interest-- a General Security of Information 
Agreement, for example -- while we enhance existing ties 
between militaries.  As a stable multi-ethnic democracy, 
Brazil is a key partner for the U.S. in helping maintain 
stability in Latin America, as evidenced by its role in 
managing the Columbia-Ecuador confrontation.  Brazil has 
recently made much of its proposal for a South American 
Defense Council (SADC), although the idea appears to have 
little traction among Brazil's neighbors (excepting 
Venezuela).  The SADC could be useful in coordinating 
peacekeeping, along the lines of the African Union, but the 
Brazilians see its value more in terms of reinforcing 
Brazilian leadership, moderating Venezuela President Chavez 
and facilitating common military production (primarily in 
Brazil).  Should the Brazilian proposal lead to formation of 
such a Council, the U.S. should encourage a focus on 
practical matters such as maximizing the effectiveness of 
peacekeeping, and avoiding duplication of activities 
currently carried out by the OAS or Inter-American Defense 
 
BRASILIA 00000469  006 OF 009 
 
 
Board. 
 
¶20. (C) Brazil's apparent determination to look at real 
restructuring of its military offers important opportunities 
for U.S. engagement to build a partnership to export 
stability throughout the hemisphere.  Brazil would like 
access to U.S. technology and expertise, although any 
appearance of dictating Brazil's future military structure 
will have negative results.  An open exchange of ideas and 
willingness to provide advanced U.S. military technology 
(subject to appropriate export control regulations) will have 
far reaching benefits to the bilateral relationship and could 
begin to undermine some of the reflexive anti-Americanism 
among Brazil's policy elite.  As a first step, we should 
indicate we would be willing to discuss sale of non-nuclear 
U.S. technology to Brazil's submarine program, even if Brazil 
plans to build a nuclear powered submarine.  By doing so, we 
will be treating Brazil as an important, responsible partner 
and will be supporting their most prestigious defense program 
without violating nonproliferation standards. 
 
--------------------------------------------- 
Areas of Cooperation: Science and Environment 
--------------------------------------------- 
 
¶21. (C) Brazil has first class scientists and facilities in a 
number of areas.  The U.S. Government (USG) has 
well-developed scientific cooperative arrangements in two 
areas with Brazilian counterparts:  the Agriculture Research 
Service of the U.S. Department of Agriculture (USDA/ARS) with 
EMBRAPA of the Ministry of Agriculture (this includes 
long-term exchanges of researchers); and the National 
Institutes of Health with the Ministry of Health, FIOCRUZ (an 
institution that works with vaccines), and other health 
institutions.  The National Science Foundation (NSF) and a 
variety of other U.S. agencies have modest or limited 
collaborative scientific activities with Brazilian 
counterparts.  Many elements of the U.S. private sector, 
academia and non-governmental organizations (NGOs) have 
established scientific ties with Brazilian counterparts. 
Brazil has demonstrated remarkable scientific and 
technological prowess in a number of areas, most notably with 
deep sea oil and gas exploration by PETROBRAS, aviation 
technology with EMBRAER, and information technology. 
 
¶22. (C) Brazil is a key player in the ongoing negotiations 
for a new international climate change agreement to succeed 
the Kyoto Protocol.  It has become an active participant in 
the Major Economies process.  While a fierce defender of the 
principle of "common, but differentiated responsibilities," 
the GoB sees a need for an appropriate balancing of 
environmental and economic concerns when addressing the 
problem.  Brazil is home to the largest remaining tropical 
forest ) the Amazon ) and any agreement will need to 
address the problem of large-scale deforestation there.  For 
its part, the GoB recognizes the importance of reducing 
deforestation, but is fearful of accepting binding goals 
which might be used to justify trade sanctions or other 
punitive measures.  Despite the increasing interest in 
climate change, the USG has sharply cut-back its support for 
climate change research in the Amazon and winding down its 
environmental cooperation.  The decade long, multi-million 
dollar environmental research project (LBA), which had been 
run by NASA and which had studied the Amazon, is closing 
down.  Further, the LANDSAT satellites that used to assist 
Brazil on monitoring the Amazon are reaching the end of their 
useful lifespans with no substitute in sight, and thus Brazil 
has turned to China for assistance with satellite monitoring. 
 
 
¶23. (C) There are a variety of small environmental 
cooperative efforts.  The U.S. Forest Service is helping the 
newly created Brazilian Forest Service.  The U.S. Geological 
Survey, the Smithsonian Institution, the National Oceanic and 
Atmospheric Administration, the U.S. Army Corps of Engineers, 
and the Department of Energy have in recent years had limited 
environmental activities in Brazil.  Interestingly, U.S. NGOs 
and academia have become quite active in Brazil and frankly 
 
BRASILIA 00000469  007 OF 009 
 
 
bring far more resources to the table.  NGOs such as the 
Moore Foundation, the Packard Foundation, the World Wildlife 
Fund, The Nature Conservancy and others provide many times 
more the assistance that the USG provides. 
 
------------------------------ 
Areas of Cooperation: Biofuels 
------------------------------ 
 
¶24. (C) Your visit comes just after the one year anniversary 
of your signing the Biofuels MOU and the March 3 meeting of 
the Biofuels Steering Group.  This initiative has provided 
the groundwork for increasingly positive bilateral relations 
and has produced some notable results, including a model for 
biofuels standard regimes internationally, cooperative 
efforts to aid Haiti, El Salvador, St. Kitts and Nevis, and 
the Dominican Republic in developing their own ethanol 
capacity.  The GoB and USG are pursuing cooperative 
scientific activities to develop the next generation of 
biofuels.  The more numerous and often better-funded U.S. 
scientists and laboratories can benefit greatly from this 
cooperation with Brazil,s world-class cadre of scientists 
and laboratories, which have established an impressive record 
over the last 30 years.  We anticipate a visit by Energy 
Secretary Bodman in the coming months and hope to use the 
 
SIPDIS 
opportunity to broaden our energy cooperation beyond biofuels 
to other areas for expanded collaboration.  In spite of 
President Lula's enthusiasm for closer biofuels cooperation 
and apparent GoB readiness to cooperate, the Foreign 
Ministry, though, appears to be trying to delay 
implementation of some of the provisions in the MOU. 
 
------------------------------------ 
Proud to be Energy Self-Sufficient 
------------------------------------ 
 
¶25. (C) Brazil is very proud of the fact that it recently 
became, at least on the books, self sufficient in petroleum. 
They export some of their production but due to the level of 
their crude, they are still obliged to import other grades of 
fuel.  Brazil hopes to become a leading oil exporter with the 
development of the recently discovered deep water reserves in 
the Santos basin, near Sao Paolo.  Petrobras, which has been 
working in the Gulf of Mexico as the world,s leader in deep 
water technology, hopes to capitalize on this find; an 
interest that has led to worries on the part of U.S. and 
international oil companies that the government may be trying 
to set up the parastatal Petrobras to have, if not exclusive, 
at least primary rights to these new finds.  This concern was 
amplified by the withdrawal of the auction blocks for 
exploration rights related to this area just before the 
auction was to take place.  Brazil, which has one of the 
world,s greatest reserves of uranium but has only a small 
civilian nuclear operation, also has ambitions of becoming a 
world yellow cake exporter.  Brazil has been a gas importer 
from Bolivia, a relationship was has been complicated by 
Morales, unilateral renegotiating of contracts with 
Petrobras.  Brazil also has an unfulfilled contract for gas 
imports from Argentina, shares its largest hydroelectric dam 
with Paraguay, and has ongoing conversations with 
Venezuela,s Chavez over a possible gas pipeline and a 
cooperative oil refinery near Recife, for which despite 
rhetoric, Petrobras continues to bear the financial costs. 
Judging by recent talks with GoB officials, more energy 
cooperation with the U.S. is welcome.  We anticipate a visit 
by Secretary Bodman in mid-May to broaden our energy 
cooperation beyond biofuels to other areas for expanded 
collaboration. 
 
-------------------------- 
Areas of Cooperation: Fighting Discrimination 
-------------------------- 
 
¶26. (SBU) Comprising close to half of Brazil,s population, 
over 90 million people, Afro-Brazilians are widely 
discriminated against not only by the broader society, but 
also by &lighter-skinned8 people of African descent who 
often do not identify themselves as black.  Brazilians often 
 
BRASILIA 00000469  008 OF 009 
 
 
reject the notion that discrimination is widespread, both as 
a result of differing conceptions of race from that generally 
accepted in the U.S.--officially, only seven percent of 
Brazilians are considered Afro-Brazilian--and because of the 
overlap of racial discrimination with poverty.  Nonetheless, 
there is increasing recognition that discrimination is 
tarnishing Brazil,s image as a modern, multi-racial, 
multi-ethnic democracy.  President Lula is personally 
committed to tackling Brazil,s racism issue.  He has 
appointed more Afro-Brazilian members to his cabinet than any 
previous president, named the first black justice to the 
Supreme Federal Tribunal, and created the Cabinet-level 
position of Special Secretariat for Policies to Promote 
Racial Equality (SEPPIR).  His Worker,s Party (PT) is 
pressing the Chamber of Deputies to pass a bill that would 
create Brazil,s first Racial Equality Statute (which the 
Senate approved in November 2007).  The statute would mandate 
racial/ethnic quotas at federal universities, although the 
private sector and some state and federal universities 
already implement them.  The effort is nonetheless 
controversial, with critics claiming that quotas only create 
a conscious divide between races. 
 
-------------------------------------------- 
Engaging with Brazilians: Public Diplomacy 
-------------------------------------------- 
 
¶27. (U) The total public diplomacy budget for Brazil is 
roughly four million dollars, excluding salaries.  Major 
programs include our highly successful Youth Ambassador 
program, English Immersion USA, an active speakers program, 
and about 50 International Visitors per year.  Other 
exchanges include community college students and 
administrators, high school administrators, and university 
student leaders.  We are increasing support for English 
language programs with more money for English Access Micro 
Scholarships and for student advising through Opportunity 
Initiative Grants.  Both programs are funded by ECA.  We work 
closely with Binational Centers whenever we can to leverage 
our resources. 
 
¶28. (U) Brazil,s growing economic development and 
increasingly affluent population will increase demand for 
English and overseas study in the U.S.  While we are 
increasing resources in both those areas, we lack the staff 
to handle the growing demand. 
 
--------------------------------------------- -------- 
Engaging with Brazilians: Expanding Academic Outreach 
--------------------------------------------- -------- 
 
¶29. (U) Although there is no degree-granting American Studies 
program in Brazil, several academic centers that focus on US 
topics are starting to emerge.  The eight ECA sponsored Study 
of the U.S. Summer Institutes for university professors 
receive many Brazilian applicants, although only three were 
chosen this year.  ECA,s excellent initiative to create a 
university student leaders seminar on U.S. studies received 
over a thousand applicants from Brazil for 18 slots.  The 
program was a great success, with many of the participants 
changing the focus of their academic research to the U.S. as 
a direct result of the experience. 
 
¶30. (U) The post has a large and active Fulbright program 
which currently has 183 Brazilians in the U.S. and 57 U.S. 
students and scholars in Brazil.  The program receives 
approximately $5.1 million form the U.S. side, a figure that 
includes tuition waivers from U.S. universities.  The USG 
directly supports the program with about $1.5 million.  The 
Brazilian contribution, through CAPES, is approximately $6.3 
million in support of Brazilians in U.S. universities and a 
more limited number of U.S. citizens in Brazil.  A separate 
program, the CAPES-FIPSE annual grant competition, funds ten 
new academic partnership projects each year.  These programs 
are co-funded by the U.S. and Brazilian governments at the 
rate of USD 50,000 per year per side for a period of four 
years.  To date over 50 partnerships involving over 200 
universities have been established. 
 
BRASILIA 00000469  009 OF 009 
 
 
 
SOBEL 
 
 
HENSHAW