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RUEHC/SECSTATE WASHDC PRIORITY 1882
INFO RUEHRG/AMCONSUL RECIFE PRIORITY 8141
RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 6266
RUEHSO/AMCONSUL SAO PAULO PRIORITY 2236

C O N F I D E N T I A L SECTION 01 OF 06 BRASILIA 000823 
 
SIPDIS 
 
E.O. 12958: DECL: 06/05/2018 
TAGS: PGOV PREL PTER KHLS OVIP ECON BR
SUBJECT: SCENESETTER FOR THE JUNE 18-22 VISIT OF SECRETARY 
CHERTOFF 
 
REF: A. BRASILIA 000043 
     ¶B. BRASILIA 001664 
 
Classified By: Ambassador Clifford Sobel.  Reasons: 1.4 (B and D). 
 
¶1. (U) 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.  Cooperation on law enforcement 
issues, such as counternarcotics, container security, and 
intelligence sharing, are highlights of the bilateral 
relationship.  Brazilian officials at the policy level, 
however, are always keen to underplay the range of organized 
criminal activities, including arms and narcotics trafficking 
and money laundering that takes place in the 
Argentina/Brazil/Paraguay tri-border area (TBA).  U.S.-Brazil 
cooperation on foreign policy issues 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.  Brazil's 
ethanol program has made it a global model for alternative 
energy and offers potential for bilateral cooperation on an 
important strategic issue.  On the environment, Brazil has 
long been on the defensive about the ongoing, extensive 
deforestation of the Amazon, which has made Brazil one of the 
leading producers of greenhouse gases. The Brazilian labor 
movement is strong, well-organized, and very influential in 
many key industrial sectors.  Lula came out of the organized 
labor movement and labor and social issues have always been 
among his top priorities. Trafficking in Persons is present 
in all of its forms in Brazil, but the GoB is making a 
serious effort to combat it.  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) 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. 
 
----------------------------------- 
Latin America's Economic Powerhouse 
----------------------------------- 
 
¶4. (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, just this year, achievement of a BBB-minus (lowest 
investment grade) credit rating.  Annual GDP growth was 
approximately 5.4 percent for 2007, with inflation within its 
target range at 4 percent.  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 
 
BRASILIA 00000823  002 OF 006 
 
 
other infrastructure, continue to constrain growth. 
 
------------------------------------------- 
Friendly Cooperation, Not Strong Friendship 
------------------------------------------- 
 
¶5. (C) Bilaterally, the GoB has pursued generally friendly 
relations with the United States  and we continue to seek 
opportunities for positive bilateral cooperation.  Following 
the signing of the biofuels MOU in March 2007, Brazil and the 
United States have been seeking ways to increase our 
collaboration toward the next generation of biofuels, as well 
as in developing international standards on biofuels which 
should facilitate greater international acceptance and use of 
biofuels.  The Economic Policy Dialogue (EPD) launched last 
year provides an important opportunity to reinforce our view 
of Brazil as partner.  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 scheduled for the week of 
June 23rd.  There are also continuing efforts under the 
auspices of the bilateral CEO Forum to address issues of 
common interest. 
 
¶6. (C) Nonetheless, the GoB 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. 
 
¶7. (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. 
 
-------------------------------------- 
Hesitant Globally; Cautious Regionally 
-------------------------------------- 
 
¶8. (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'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. 
 
¶9. (C) Brazil's general desire not to be too closely 
identified with the U.S. is borne out in non-proliferation. 
 
BRASILIA 00000823  003 OF 006 
 
 
The GoB has expressed approval of the Proliferation Security 
Initiative (PSI), but has not yet endorsed the PSI statement 
of principles.  Brazil has also not yet signed the NPT 
Additional Protocol, although it has not ruled out signing it 
in the near future.  The GoB consistently refused to take a 
strong position against Iran's nuclear efforts, questioning 
the effort to refer Iran to the Security Council until the 
vote in the IAEA had become a foregone conclusion.  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 recently that Iran, Syria, Hamas, and 
Hizbollah should be included in the negotiations suggest 
continuing naivete regarding the peace process and Middle 
East 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. 
 
¶10. (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 
recent dispute between Colombia and Ecuador. 
 
--------------------------- 
Law Enforcement Cooperation 
--------------------------- 
 
¶11. (SBU) Cooperation on security and law enforcement issues 
is a highlight of the bilateral relationship, and a potential 
area for increased cooperation as public security is 
frequently cited in opinion polls as the most pressing 
concern for Brazilians.  The newly arrived Resident Legal 
Advisor is working in support of USG law enforcement agencies 
and the political and economic sections to expand and 
intensify our relations with the judiciary, prosecutors, and 
Brazilian law enforcement.  We hope this year to seat another 
Brazilian observer at JIATF-S.  Also, the GoB has expressed 
interest in negotiating a General Security of Information 
Agreement (GSOIA).  The Narcotics Affairs Section (NAS) 
expects to sign a new Letter of Agreement shorly,  which 
will allow us to move forward to expad cooperation on 
counternarcotics and countercrie issues, including at the 
state level.  The GoBcooperates with the USG on the 
operational level in the fight against terrorism, document 
fraud, ad drug trafficking.  Information sharing at the 
orking level between Brazilian and US law enforcemnt and 
intelligence agencies is productive.  Brail has been a 
valuable partner in the efforts to secure our own borders 
against terrorism through ts support for DHS's Container 
Security Initiatie (CSI), its implementation of enhanced 
passenge screening at airports and its fulfillment of the 
International Maritime Organization (IMO) ISPS code on port 
and ship security.  Immigration and Cusoms Enforcement (ICE) 
is also currently working ith the Brazilian authorities to 
detect financia and smuggling violations, financial crimes 
and commercial fraud with the assistance of the Trade 
Transparency Unit (TTU) initiative. 
 
--------------------------- 
Cooperation on Cybercrimes 
--------------------------- 
 
¶12. (U) Assisting Brazil in creating legislation to counter 
cybercrimes, including online child pornography and tracking 
of sex offenders, represents another potential area of 
cooperation on law enforcement matters.  Brazil lacks 
cybercrime laws and the Congress has opened a Parliamentary 
Committee of Inquiry (CPI) to look at the issue and come up 
with draft legislation.  As part of the CPI's work, the CPI 
was able to obtain over 3,000 Google records of identified 
child pornography that had been distributed on the Internet 
from Brazil.  The chairman of the CPI has voiced his concern 
about, in his view, inadequate cooperation from Google and 
its subsidiary Orkut, a relationship site.  Google, Orkut, 
Microsoft, and all other Internet service providers are 
required to report the discovery of child pornography on the 
Internet and DHS/ICE has established a mechanism to have 
access to this information which has been reported. DHS/ICE 
has already initiated the practice of sharing this 
information with Brazilian Federal Police.  Related to the 
CPI, its Chairman has made inquiries to the Mission on the 
 
BRASILIA 00000823  004 OF 006 
 
 
case of DHS/ICE Deportation officer accused of child 
exploitation at a hotel in Brazil.  The U.S. is seeking the 
toughest penalty possible, whether in Brazil or the U.S., and 
is fully cooperating with Brazilian authorities. 
 
--------------------------------------------- ---------------- 
Counterterrorism: Operational Cooperation; Policy-Level 
Equivocation 
--------------------------------------------- ---------------- 
 
¶13. (C) Cooperation on counterterrorism matters remains good 
at the operational level, and we regularly obtain valuable 
information from GoB sources on terrorism.  The Lula 
administration just re-structured its intelligence apparatus 
to beef up their counterterrorism focus.  The senior policy 
levels of the GoB, however, have refused to publicly endorse 
U.S. counterterrorism initiatives and, wary of Brazil's 
large, prosperous and influential Arab population, make every 
effort to downplay in public even the possibility of 
terrorist fund-raising going on inside Brazil, a situation 
exacerbated by their refusal to consider Hizballah or HAMAS 
as terrorist organizations.  The Lula administration failed 
to introduce long-delayed draft legislation outlawing 
terrorist-related activity, including its financing. 
 
¶14. (U) The governments of Argentina, Brazil, and Paraguay 
have long been concerned over illicit activities in the 
tri-border area (TBA) joining Foz de Iguacu in Brazil, Ciudad 
del Este in Paraguay, and Puerto Iguazu in Argentina.  The 
TBA concentrates a range of organized criminal  activities, 
including arms and narcotics trafficking, document fraud, 
money laundering, as well as the manufacture and movement of 
contraband goods. A wide variety of counterfeit goods, 
including cigarettes, CDs, DVDs, and computer software, are 
moved from Asia into Paraguay and transported primarily 
across the border into Brazil. This inflow of illicit goods 
stands to be increased with the potential passage of 
legislation that purports to ease customs procedures for 
small-scale importers but, due to a lack of enforcement 
provisions, would likely serve to abet traffickers.  The 
United States remains concerned that Hizballah and HAMAS are 
raising funds in the TBA by participating in illicit 
activities and soliciting donations from extremists within 
the sizable Muslim communities in the region. 
 
¶15. (U) In the 1990s the three governments established a 
mechanism, which the US joined in 2002 at their invitation, 
to address illicit activities in the TBA.  The "3 1 Group on 
Tri-border Area Security" is intended to improve the 
capabilities of the three TBA states to thwart cross-border 
criminal activity and potential terrorist fundraising 
activity.  Brazil is an active partner within this mechanism, 
but the effectiveness of this group is hampered by GoB 
denials of any potential terrorist activity taking place in 
their territory (see reftels).  The suggestion that planning 
for the 1994 bombing of AMIA, an Argentine Jewish center, 
might have taken place in Brazil caused the GoB to abstain in 
an international vote over whether to issue Interpol warrants 
for Iranian officials accused in the case, an action that 
disappointed and irritated Argentina.  Nonetheless, Brazil 
has established and hosts a Joint Intelligence Center (JIC) 
in Foz de Iguacu to combat transnational criminal activity, 
although staffing issues on the part of Argentina and 
Paraguay continue to impede its full functioning. 
 
--------------------------------------------- -------- 
Labor and Trafficking in Persons: An Improving Record 
--------------------------------------------- -------- 
 
¶16. (SBU)  The labor movement in Brazil is strong, 
well-organized, and very influential in many key industrial 
sectors.  President Lula comes from the labor movement.  He 
worked his way up through the powerful metal workers union, 
was one of the founders of the largest Brazilian labor 
confederations -- the Unified Workers Confederation of Brazil 
(CUT) -- and of the ruling Workers Party (PT).  Labor and 
related social issues, such as combating Trafficking in 
Persons (TIP), and forced labor, are important priorities of 
the Lula Administration.  The Lula Government's commitment to 
social issues is exemplified by its popular Bolsa Familia 
(Family Stipend) program which involves direct cash pay outs 
to over 11 million families as an incentive for low-income 
Brazilians to keep their children in school and up-to-date 
with their immunizations.  Most economists and policymakers 
agree that labor reform is necessary for the Brazilian 
economy to grow at a faster rate and to reduce the large 
informal sector, which employees close to 45 percent of all 
Brazilian workers.  However, comprehensive labor reform is 
politically unpopular and unlikely to happen during the Lula 
 
BRASILIA 00000823  005 OF 006 
 
 
Administration. 
 
¶17. (SBU)  The use of child labor and the exploitation of 
children for sexual purposes is widespread in Brazil.  NGOs 
estimate that there are at least 240,000 children working 
illegally, although the number may be much higher.  The 
Federal Police estimate that at least 250,000 children are 
involved in prostitution, while some NGO's put the number as 
high as 500,000.  Many work in the poor northeastern sector 
of Brazil where there is a booming sex tourism industry 
catering mostly to Europeans, and to a lesser extent, 
Americans. 
 
¶18. (U) Trafficking in Persons is present in all of its forms 
in Brazil, including the trafficking of women and children 
internally and internationally for purposes of sexual 
exploitation, the internal trafficking of men for use in 
slave or forced labor in the cattle-raising and agricultural 
sectors, and in the production of charcoal, some of which is 
used to produce pig iron.  There are an undocumented number 
of foreign laborers working in slave-like conditions in 
factories in the city and state of Sao Paulo. However, the 
GoB is making a serious effort to combat TIP and forced/slave 
labor. It signed the Palermo Protocol in 2004 and is now 
working to get implementing legislation passed by the 
Congress. President Lula signed a decree in October 2006 
establishing a national anti-TIP policy. A binding work plan 
to implement that policy was publicly in January 2008. 
Ministry of Labor mobile inspection teams have freed over 
29,000 laborers from slave-like working conditions since 
starting work in 1993.  The inspection teams freed over 5,900 
forced labor victims last year (2007) alone. 
 
¶19. (SBU) As a result of reports of slave or forced labor in 
the production of charcoal used to produce pig iron, in 
September of last year the Mission requested the GoB's 
concurrence in having DHS/ICE personnel work with the 
appropriate ministries and agencies in the Brazilian 
government to investigate allegations that American companies 
may have received products produced in Brazil with the 
possible use of forced labor.  So far, the Brazilian 
government has not responded to our requests. 
 
--------------------------------------------- -------------- 
Protecting Brazil's Borders: Extreme Sensitivity on 
Sovereignty 
--------------------------------------------- -------------- 
 
¶20. (U) There is long-standing and widespread fear among 
Brazilians that the United States or other foreigners want to 
take over or internationalize the Amazon.  Although 
demonstrably unfounded, it surfaces regularly in official and 
media circles, as with President Lula's recent assertions 
that "The Amazon has an owner."  More recently, the prospect 
of enormous oil reserves off Brazil's coast have added new 
fears that the United States or others might have designs on 
these, as well.  Some Brazilians have linked the 
just-announced re-establishment of the U.S. Fourth Fleet to 
these Brazilian oil discoveries.  However, most Brazilians do 
not realize that the Fourth Fleet consists solely of a 
planning staff of approximately 80 people based in Florida, 
and that it has no permanently assigned ships.  Its main 
missions will be support of peacekeeping operations, such as 
in Haiti, respond to natural disasters, such as Hurricane 
Felix in Nicaragua, organize humanitarian relief, typically 
of a medical nature, and assist counternarcotics efforts. 
Standing up the Fourth Fleet intends to demonstrate the 
priority the United States places on its partnerships in 
Latin America and will help ensure that Latin America remains 
a high priority for U.S. engagement. 
 
¶21. (U) There have also been some rumors about the permanent 
stationing of a ship in Brazilian waters by the US Navy in 
light of the recent the port visit of the USS George 
Washington CVN-73.  The U.S. Navy has no vessels in Brazilian 
waters and has not had any since the USS George Washington 
departed Brazilian territorial waters in early May.  By 
policy, the U.S. Navy will not enter territorial waters of 
any national without diplomatic clearance and the cooperation 
of the host nation. 
 
¶22. (U) Defense Minister Nelson Jobim stated publicly in 
early June that Brazil needed to improve security for its 
off-shore oil resources and that, as permitted by the UN 
Convention on the Law of the Sea (UNCLOS), Brazil was 
planning to increase the 200-mile exclusive economic zone to 
350 miles to include the Santos basin and other oil deposits 
located on Brazil's continental shelf..  Although there were 
suggestions in the press that the United States might not 
 
BRASILIA 00000823  006 OF 006 
 
 
respect such an extension because we have not ratified 
UNCLOS, the U.S. does fully respect exclusive economic zones 
established pursuant to customary international law as 
reflected in UNCLOS.  Furthermore, the US has established its 
own exclusive economic zone according to the same customary 
international law.  UNCLOS recognizes the sovereign rights of 
a coastal State over its continental shelf, which extends out 
to 200 nautical miles--and beyond, if it meets specific 
criteria.  These rights include sovereign rights for the 
purpose of exploring the continental shelf and exploiting its 
natural resources, including oil, gas, and other energy 
resources. 
 
 
 
 
SOBEL