VZCZCXRO1700
RR RUEHRG
DE RUEHSO #0443/01 2281034
ZNR UUUUU ZZH
R 151034Z AUG 08
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 8464
INFO RUEHBR/AMEMBASSY BRASILIA 9602
RUEHRG/AMCONSUL RECIFE 4175
RUEHRI/AMCONSUL RIO DE JANEIRO 8816
RUEHBU/AMEMBASSY BUENOS AIRES 3234
RUEHAC/AMEMBASSY ASUNCION 3481
RUEHMN/AMEMBASSY MONTEVIDEO 2759
RUEHSG/AMEMBASSY SANTIAGO 2481
RUEHLP/AMEMBASSY LA PAZ 3893
RUCPDOC/USDOC WASHDC 3150
RUEATRS/DEPT OF TREASURY WASHDC
RHMFIUU/DEPT OF ENERGY WASHDC
RUEHRC/USDA FAS WASHDC 0741
RHEHNSC/NATIONAL SECURITY COUNCIL WASHDC

UNCLAS SECTION 01 OF 02 SAO PAULO 000443 
 
SIPDIS 
SENSITIVE 
 
STATE FOR WHA/BSC, WHA/EPSC FOR FCORNEILLE, E FOR GMANUEL 
STATE PASS USTR FOR KDUCKWORTH 
STATE PASS DOE/NREL FOR HCHUM 
DEPT OF TREASURY FOR JHOEK, BONEILL 
DEPT OF ENERGY FOR AMIRANDA, GWARD, CGILLESPIE 
 
E.O. 12958: N/A 
TAGS: ENRG EAGR ETRD ECON EINV TRGY BR
SUBJECT: ETHANOL, THE WTO, AND THE PRIVATE SECTOR: ROOM TO TALK? 
 
SENSITIVE BUT UNCLASSIFIED--PLEASE PROTECT ACCORDINGLY 
 
Ref: 08 Sao Paulo 0423 
 
SUMMARY 
------- 
 
¶1.  (SBU) In the event of a WTO dispute over US tariffs on ethanol 
imports from Brazil, Brazil's largest association of sugar and 
ethanol producers (UNICA) would likely be asked to pay for the 
litigation.  Conversations with high-ranking UNICA representatives 
show an organization ready for litigation, but hopeful for a 
negotiated settlement.  Mission is ready to support a strategy of 
engagement with UNICA and Government of Brazil interlocutors to 
forestall any possible WTO action.  END SUMMARY. 
 
UNICA WANTS TO SETTLE 
--------------------- 
 
¶2.  (SBU) During a reception for visiting Deputy Secretary of 
Energy, Jeffrey Kupfer on August 6, Econoff discussed the potential 
for WTO action over ethanol with UNICA President Marcos Jank.  Jank 
stated emphatically that a suit in the WTO that resulted in an 
abolition of the tariff was in the interest of its constituents who 
stand to gain not only from exports to the US, but also from rising 
prices in the domestic market (reftel).  However, Jank did state 
that he understands the political sensitivity of any WTO dispute, 
and is seeking interlocutors in the US with whom he can discuss 
these issues during a planned trip to the US in October.  While Jank 
knows this is a Congressional mandate that goes to 2010, he believes 
there are mechanisms for reducing the tariff from 54 to 45 cents per 
gallon that would match the reduction in the blender's tax credit in 
the US.  He is also hopeful of negotiating a long-term strategy for 
removing the tariff that he could sell to his member companies 
instead of going straight to litigation in the WTO.  (NOTE:  Not 
only did UNICA pay for the WTO case against the EU sugar regime, but 
Jank is a well-known expert in these cases and did the economic 
analysis behind the cotton case and the sugar regime case while 
working at ICONE-Institute for Commercial and International 
Relations Studies.  END NOTE.) 
 
¶3.  (SBU) Director for Corporate Communications, Adhemar Altieri, 
similarly stated that while UNICA stands prepared to seek formal 
redress at the WTO, the organization is first seeking a negotiated 
settlement that would avoid disruptions in the domestic market and 
allow for producers in Brazil to ramp up production to meet 
increased demand from the US.  While UNICA seems to believe that 
they may receive pressure to file a suit at the WTO, Altieri stated 
that a system of quotas or a graduated reduction in the tariff would 
be preferable to an immediate withdrawal of the tariff for the 
Brazilian economy.  When questioned whether the removal of the 
tariff could lead to GOB export controls to maintain the domestic 
supply of ethanol, Altieri responded that UNICA has approached Chief 
of Staff equivalent, Dilma Rousseff, regarding the very negative 
consequences of any export controls by the GOB.  (NOTE:  Altieri did 
not indicate what Rousseff's response had been.  END NOTE.) 
 
COMMENT 
------- 
 
¶4.  (SBU) Domestic industry will have to decide how hard to advocate 
for taking the ethanol tariff to the WTO.  While the GOB may wish to 
lay down a marker that it is ready to consider a case in the wake of 
the stalled Doha process, there is little chance for a case to go 
forward if the industry is not firmly supportive.  Jank genuinely 
understands the political repercussions of taking on a new US 
administration as it comes into office as well as the potential 
impact this case could have in our bilateral efforts on biofuels 
through our MOU.  Jank and UNICA have been active players in the 
biofuels MOU process and will likely participate in the upcoming 
private sector advisory committee meeting being convened by 
conference call August 20, as part of U/S Reuben Jeffery's visit to 
Brazil. 
 
SAO PAULO 00000443  002 OF 002 
 
 
 
¶5.  (SBU) Mission suggests we engage proactively with Jank and 
support him in meeting with a series of relevant US interlocutors 
during his next visit to the United States in October.  Considering 
that the industry would be required to pay for any WTO case, 
proactive discussions with Jank could forestall the industry's 
support for this litigation.  These meetings could include, for 
example, key interlocutors at USTR and other USG agencies as well as 
in Congress.  END COMMENT. 
 
¶6.  This cable was coordinated with and cleared by the Embassy in 
Brasilia. 
 
WHITE