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C O N F I D E N T I A L SECTION 01 OF 10 BRASILIA 001356 
 
SIPDIS 
 
E.O. 12958: DECL: 10/10/2018 
TAGS: PREL BR
SUBJECT: BRAZIL: SCENESETTER FOR OCTOBER 16-17 VISIT OF 
UNDER SECRETARY OF STATE FOR POLITICAL AFFAIRS WILLIAM J. 
BURNS 
 
REF: A. BRASILIA 1265 
     ¶B. BRASILIA 1267 
     ¶C. BRASILIA 1301 
     ¶D. BRASILIA 572 
     ¶E. BRASILIA 645 
     ¶F. BRASILIA 1314 
     ¶G. BRASILIA 1315 
 
Classified By: Ambassador Clifford M. Sobel, reasons 1.4(b) and (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, the CEO Forum, racial 
integration, and economic matters, and our shared goals of 
fostering hemispheric stability, promoting democracy, and 
achieving a mutually satisfactory conclusion to the Doha 
round of WTO negotiations in the near term.  Your visit comes 
in the midst of an intense time of bilateral activity, with 
senior-level visits occurring during October across the range 
of our mutual interests.  Although this activity is evidence 
of the success we have achieved in strengthening U.S.-Brazil 
cooperation, it continues to be uneven, limited by resistance 
to closer U.S. ties in some areas of the Ministry of External 
Relations (MRE, or Itamaraty) and among some senior GoB 
officials.  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 counterterrorism concerns, and 
expand its international leadership in meaningful ways also 
reduces the effectiveness of our relationship. 
 
¶2. (C) Senior Brazilian officials are watching the U.S. 
election and transition to a new administration with concern 
that the momentum built over the last several years continue 
(see refs A and B on recent meetings with Senator Chuck 
Hagel).  Your visit will be welcomed as an opportunity to 
review key bilateral matters (including energy and security 
cooperation), regional issues (the crisis in Bolivia, 
transition in Cuba, Haiti peacekeeping, regional integration, 
and the upcoming Summit of the Americas), and global concerns 
(the global financial crisis, Iran, the Middle East Peace 
Process, energy security, and United Nations reform) with an 
eye toward maintaining and expanding the bilateral 
relationship following U.S. elections.  End Summary. 
 
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Lula Popular, But What Comes Next? 
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¶3. (C) With a nearly 80 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. 
 
¶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, and persistent public worries 
about chronic unaddressed domestic problems such as public 
safety, 
health care, and unemployment could defeat Lula's goal of 
installing his chosen successor; the 
opposition governor of Sao Paulo state and former 
presidential candidate, Jose Serra, currently leads the pack 
of possible presidential candidates.  His position appears to 
have been strengthened in the first round of country-wide 
 
BRASILIA 00001356  002 OF 010 
 
 
municipal elections held on October 5, and will be 
strengthened further if the candidate he is backing for Sao 
Paulo mayor wins in the second round election on October 26. 
 
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An Emerging Global Economic and Energy Power House 
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¶5. (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  credit rating.  Annual 
GDP growth was 5.4 percent for 2007, and inflation 
approximately 4 percent.  Buoyed by exports 
and investment inflows, Brazil's currency, the real, has been 
strong, although it has recently 
been weakened by the global financial crisis.  The United 
States is Brazil's top trading 
partner and China has just moved in position as number two. 
Brazil is both an investor 
overseas and a destination for foreign direct investment, as 
well as being both an assistance 
donor and recipient.  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 (approximately 37 percent 
of GDP), 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. 
 
¶6. (SBU) Brazil's leadership in development and use of 
biofuels and the recent discovery of potentially massive 
offshore reserves of oil and gas have made Brazil, in a 
relatively short period of time, into a potentially major 
player on the global energy scene.  Brazil's newfound energy 
prowess, along with the success thus far of its economic 
policies, is contributing to its growing confidence as a 
global player.  President Lula has invited President Bush to 
attend an international biofuels conference that he will host 
in Sao Paulo November 17-21 as a means to further enhance 
leadership in that field.  The new off-shore deepwater oil 
reserves (known as pre-salt) are publicly estimated to 
contain between 50-100 billion barrels of oil equivalent, 
though some highly-placed insiders tell us they believe these 
estimates may be the lower limit of the newly discovered 
resources.  The Lula government has great expectations for 
the revenue that will eventually be gained through exploiting 
these new areas, talking of a "Marshall Fund8 for education 
and social projects, while other commentators advocate 
military investment or infrastructure development.  The GOB 
is also planning major investments to support the industry 
including development of ports and refineries ) all of which 
represent opportunities for U.S. commercial interests. 
Although industry observers caution that the technological 
challenges involved with ultra-deepwater drilling are 
extensive, meaning that developments will probably be slow in 
coming, the oil discoveries could put Brazil within the top 
ten oil countries by reserves. 
 
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Foreign Policy: Not Seeing Eye to Eye 
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¶7. (C) Although in many ways pragmatic, the Lula 
administration harbors a strong leftist ideology on foreign 
policy that has resulted in actively favoring South-South 
relationships over those with the United States and Europe. 
Coupled with Itamaraty's historic reticence to take 
controversial positions and almost obsessive concern with 
"even-handedness," this often leads Brazil to take positions 
on key issues that we find disappointing.   Continuing, 
specific areas of disagreement, some of them significant, 
will not be easily resolved in the short term. 
 
BRASILIA 00001356  003 OF 010 
 
 
 
-- Iran:  Although careful to comply with UNSC sanctions, 
Brazil does not seem to see Iran as as a serious threat. 
Instead, the GoB is determined to maintain and even increase 
ties with Iran, both for commercial reasons and because it 
sees Iran as an independent, up-and-coming power in the 
Middle East.   GoB officials insist that Brazil is a friend 
of both the United States and Iran, and they have been 
reluctant to criticize Iran for flouting the international 
community in its nuclear pursuits.  President Lula has made 
clear that he intends to visit Iran, probably in early 2009. 
 
-- Middle East Peace: 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 has suggested that Iran, Syria, Hamas, 
and Hizbollah should be included in the negotiations, and GoB 
officials are seeking to increase their engagement on the 
issue.  FM Amorim traveled to Israel and Palestine earlier 
this year in preparation for a visit by President Lula, 
probably around the Arab States-South America (ASSA) Summit 
being hosted by Qatar in early 2009. 
 
-- Cuba transition: Brazil continues to take a soft line on 
the Cuba transition, refusing to raise in any significant way 
the abuses that continue to occur.  We have been told 
repeatedly by senior GOB officials that they believe Cuban 
leadership will opt for a "Vietnam" model of 
transition, loosening economic control while maintaining 
tight political control, rather than an "Eastern European" 
model.  The GoB has invited Cuba to participate in the 
first-ever Latin America-Caribbean Summit that Brazil will 
host in December (see para 9). 
 
-- UNSC Reform: Attaining a permanent seat on the UN Security 
Council has been a central tenet of Brazil's foreign policy 
under Lula, and most of Brazil's actions on the international 
stage are taken with that goal in mind.  Brazil desperately 
seeks U.S. support for its aspirations, and has been pleased 
by comments by senior USG officials indicating that we see 
Brazil as a viable candidate.  However, Brazil has so far 
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 not yet used 
its significant contribution to stability in Haiti as a step 
along the road to becoming a champion of international peace 
and security.  Moreover, Brazil's single-minded focus has yet 
to take into our broader interest in UN reform, an interest 
which we need to discuss more fully with them. 
 
-- Global Democracy, Peacekeeping, and Assistance 
Initiatives: Brazil has joined the Partnership for Democratic 
Governance and Community of Democracies, but has yet to take 
action under these initiatives.  Requests for assistance on 
key global issues--peacekeeping in Darfur and assistance to 
Afghanistan's army are two recent examples--have almost 
without exception gone unanswered.  Brazil often attends 
donor conferences when asked, but generally does not respond 
to requests to "cooperate" with countries outside the region 
and the small group of Lusophone countries.  (Note: Brazil 
refuses to be classified officially as a "donor" that 
provides "assistance," instead identifying such efforts as 
"cooperation."  End note.)  Brazil has, however, warmed to 
what it calls "trilateral cooperation," working together with 
the United States and, separately, other donor countries on 
discrete projects in third countries, especially other 
Lusophone countries, as well as a few others in Africa, 
Central America, and the Caribbean. 
 
-- Trade and Climate Change: A significant exception to 
Brazil's reticence has been in WTO Doha Round negotiations, 
where Brazil has been a significant leader, and has opted to 
focus on its own national interest in supporting a compromise 
solution, despite the resistance of its Mercosul (Argentina) 
and G-20 developing country partners (India and China). 
Likewise, Brazil's significant interests in the climate 
 
BRASILIA 00001356  004 OF 010 
 
 
change arena have led it to take a leadership role in 
negotiations. 
 
¶8. (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 and maintain relations with 
Bolivia and Ecuador, even at the expense of its own economic 
interests, and stood firmly on the principle of respect for 
sovereignty, with no official mention of counterterrorism 
concerns, in responding to the dispute between Colombia and 
Ecuador.  Brazilian interlocutors have made clear that 
lobbying to secure Venezuelan entry into Mercosul is based on 
political interest in containing Chavez, in full recognition 
that Venezuela's membership will complicate internal and 
external Mercosul trade negotiations. 
 
¶9. (C) Brazil is driving the creation of new regional 
integration processes, including the Union of South American 
Nations (UNASUL), the South American Defense Council (SADC) 
and, most recently, the summit of Latin American and 
Caribbean nations that Brazil will host in Salvador, Bahia in 
December (ref C).  Although Brazil insists that these 
groupings are not exclusionary, President Lula and other 
senior officials have made statements suggesting that, at 
least to some extent, they are intended to diminish U.S. 
influence in the region.  Cuba has been invited to 
participate in the December LAC summit, while the United 
States and Canada were not.  The other 32 countries invited 
are identical to those participating in the 2009 Summit of 
the Americas.  Brazil remains lukewarm regarding the Summit 
of the Americas process. 
 
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Improving Relationship, But Cooperation Remains Uneven 
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¶10. (C) In general, Brazil's foreign policy is dominated by 
symbolic steps to burnish its South-South and global 
credentials rather than by resolute attention to core 
political and economic interests, including strengthening 
bilateral political and trade relations with its principal 
trading partner, the United States.  Nonetheless, although 
the GOB continues to favor building ties with developing 
nations over closer relations with the United States and 
other developed nations, it pursues friendly relations with 
us and considers the bilateral relationship to be a good and 
improving one.  The result has been uneven in terms of 
concrete cooperation.  While seeking to expand our bilateral 
dialogue, the GoB has studiously avoided working closely with 
us on broad strategic issues important to us.  Itamaraty, in 
particular, continues to be problematic, both because of its 
insistence on controlling as much of the relationship as 
possible, and because of nationalist and leftist elements 
scattered throughout the bureaucracy, including some at high 
levels who remain opposed to strengthening the relationship 
with the United States. 
 
¶11. (C) Those issues on which it has been willing to work 
with us--biofuels, for example--are areas where the GoB 
considers itself a visibly equal partner.  The appointment of 
Nelson Jobim as Defense Minister has brought new interest in 
security cooperation, but it appears that in this area, as 
with our efforts on counternarcotics, environmental 
protection, counterterrorism, and other issues, MRE is 
seeking to maintain its historic dominance over relations 
between the USG and other Brazilian agencies.  Itamaraty does 
this by controlling the agenda and throwing up barriers that 
delay and sometimes scuttle bilateral efforts that other 
ministries support.  Despite the challenges, we have had some 
important successes in establishing greater cooperation, and 
continue to seek new areas where the GOB is amenable to joint 
action (refs D and E). 
 
¶12. (SBU) Economic cooperation is the principal driver of our 
cooperative agenda.  We continue to seek opportunities for 
positive bilateral cooperation through the mechanisms 
 
BRASILIA 00001356  005 OF 010 
 
 
including the Economic Policy Dialogue (EPD), with the third 
session planned in for October 30 in Brasilia.  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. 
 This past summer we succeeded in reaching an agreement to 
significantly civil aviation opportunities between our two 
countries.  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. 
¶13. (C) The bilateral CEO Forum, which met most recently on 
October 9-10 in Sao Paulo, is proving to be a valuable 
mechanism for addressing issues of common interest to our 
business communities.  The Forum has worked with the GoB and 
USG to increase airline flights, including establishing new 
connections direct from the United States to Northeast 
Brazil; has helped reinvigorate the Bilateral Tax Treaty 
talks; and has encouraged the two governments to find 
solutions to long waiting periods for visas.  At a lunch with 
CEOs on Oct 10, President Lula was extremely supportive of 
the forum and discussed the possibility of adding energy to 
the agenda, which the CEOs were already planning. 
 
¶14. (C) USAID has been reduced to a small program, especially 
in comparison with the scale of assistance activities in the 
1960,s.  USAID has sought to leverage its limited funds to 
promoting sustainable livelihoods through working on issues 
such as health, the environment, and small and medium-sized 
enterprises.  Most recently, as a means of better leveraging 
these scarce funds, USAID has initiated a public-private 
partnership, Mais Unidos, to coordinate efforts of over 100 
U.S. companies in Brazil in addressing the pressing needs in 
Brazil's impoverished Northeast.  As in other areas, 
development cooperation faces significant hurdles.  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, out of concerns over regionalization of Amazon 
management.  The program has been transformed into a 
bilateral activity. 
 
¶15. (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.  Resentment over the long wait times 
for U.S. visa applications, a product of a spike in demand 
without commensurate increases in staffing, has been 
mitigated in the last six weeks by a country-wide consular 
surge initiative.  Brazilians have a high degree of interest 
in the U.S. presidential election, which has generated almost 
as much press coverage in Brazil as the municipal elections. 
 
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Shared Interests: Regional and Global Security 
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¶16. (C) Brazil established a Ministry of Defense (MOD) for 
the first time in June 1999, uniting the three services 
(Army, Navy, and Air Force) under a single minister.  Nelson 
Jobim became Minister last year when the disastrous crash of 
a Brazilian airliner highlighted weaknesses in the civil 
aviation system, which comes under MOD purview.   At 
President Lula,s direction, Jobim and Strategic Planning 
Minister Roberto Unger spearheaded are spearheading a new 
 
BRASILIA 00001356  006 OF 010 
 
 
defense strategy document to set an overall course on 
security issues.  While not yet published (due to interagency 
disagreements on several points), it is widely reported that 
the strategy will have three main elements: modernization of 
the armed forces, revitalization of defense industries and 
implementation of a new regime of national service.  We 
expect that an important result of the new strategy will be 
an increase in funding devoted to national defense, which has 
been under-resourced since the end of the military government 
over twenty years ago.  However, there are also certain to be 
nationalist elements to the strategy, including a commitment 
to build a nuclear submarine, which is difficult to justify 
on strictly security grounds.  Nonetheless, the resurgence of 
importance of the Brazilian military presents a unique 
opportunity to increase our bilateral cooperation and defense 
partnership. 
 
¶17. (C) The first potential watershed in achieving a more 
robust defense relationship with Brazil will be the decision 
on a next generation fighter aircraft.  Boeing,s F18 Super 
Hornet is a finalist along with the French Rafale and Swedish 
Gripen.  A decision will be made in March 2009, with a final 
contract award in October of next year.  It would be 
difficult to overstate the significance of Brazil,s Air 
Force committing to a U.S. aircraft as its primary fighter 
for the next generation.  Boeing,s proposal combines cutting 
edge technology with a strong package of industrial 
cooperation.  While the Super Hornet is clearly Brazil,s 
best option both because of its capabilities and the 
advantages that interoperability with the U.S. military will 
bring, it is currently perceived as an underdog in the 
competition.  This is because of effective disinformation 
that has led most Brazilian decision makers to believe that 
the U.S. will not transfer superior military technology to 
Brazil.  Several Cold War era denials of military items (e.g. 
Harpoon missiles), recent headaches with commercial exporters 
of military items (Honeywell gyros), and in particular 
Brazil's inability to transfer the Super Tucano, a 
Brazil-produced plane, to Venzuela all seem to reinforce this 
perception.  Your visit offers an opportunity to drive home 
the point that the U.S. is offering the best product, the 
best prospects for long term cooperation and support and is 
committed to transfer of the applicable technologies. 
 
¶18. (C) There are a number of areas with prospects for 
cooperation, but progress has been slow.  The bilateral 
defense working group will meet for the first time in six 
years in early.  Although the Brazilians initially We are in 
the process of pursuing information sharing agreements with 
Brazilian military services -- potentially leading to a 
GSOIA, although bureaucratic concerns have repeatedly caused 
delays.  We have been stalled on our Defense Cooperation 
Agreement (DCA) for almost a year because of Itamaraty's 
failure to take action and the MOD,s unwillingness to burn 
political capital to push this.  While this situation is 
unlikely to change, the DCA is important for future 
partnership, especially as it can shorten the process of 
approval for various future cooperative activities.  Brazil 
has signed a large number of similar agreements this year, so 
ours will not be a precedent and could be seen in the context 
of normal friendly relations. 
 
¶19. (SBU) The April announcement of the reactivation of the 
Fourth Fleet caught Brazil by surprise and provoked much 
negative commentary.  Even some normally rational Brazilians 
believe that the announcement, coming as it did almost 
simultaneously with the discovery of more oil off the 
Brazilian coast, could not have been a coincidence but was 
somehow mysteriously related to the security of Brazil,s 
oil.  While Brazilian military leaders have said they 
understand the reasons for the Fourth Fleet,s standup, 
President Lula has recently stated again that it poses some 
threat to Brazil.  While Lula,s statement was pure domestic 
politics and his advisors have assured us that he understands 
the true nature and purpose of the Fourth Fleet, we need to 
continue to remind Brazilian leaders that spreading such 
inaccuracies is counter productive in terms of the 
cooperative relationship we are trying to build.  In a 
similar vein, discoveries of oil off Brazil,s coast have 
 
BRASILIA 00001356  007 OF 010 
 
 
been cited as justifications for increasing Brazil,s navy. 
While the oil finds will almost certainly increase Brazil,s 
future prosperity, we should seek to turn the strategic 
dialogue in Brazil away from fantasies that another 
country--potentially the United States--would try to seize 
the oil fields to a productive discussion of energy security 
and the importance of maintaining freedom of the seas. 
Brazil,s more sensationalist press routinely covers 
statements from environmentalists on preserving the 
rainforest as though they were calls for invasion (presumably 
by the United States). 
 
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Shared Interests: Law Enforcement Cooperation 
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¶20. (SBU) Bilateral work on law enforcement issues is a 
highlight of the relationship, and a potential area for 
increased cooperation, as public security is frequently cited 
in opinion polls as the most pressing concern for Brazilians. 
 This concern reflects distressing crime statistics, 
including a murder rate on the order of 25 per 100,000 
people, over four times the murder rate in the United States 
(5.7 per 100,000 in 2006).  Newspapers earlier this year 
trumpeted the headline that total homicides during the last 
30 years are approaching the staggering figure of 1 million 
(compared with a little over 500,000 for the U.S. in the same 
time period).  Since 1991, homicide trends in Brazil and the 
United States have taken opposite courses: through 2006 the 
number of homicides in the U.S. had dropped 31 percent, while 
Brazil's rate increased 51 percent. 
 
¶21. (SBU) The Resident Legal Advisor who arrived this year 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.  The Narcotics Affairs Section (NAS) recently 
signed a new Letter of Agreement, which has allowed us to 
move forward to expand cooperation on counternarcotics and 
countercrime issues.  New initiatives under this agreement 
will seek to expand our Brazilian law enforcement 
capabilities to stop the drug trade at air and seaports.  The 
new LOA will also expand our cooperation at the state level. 
We plan to provide training and equipment to increase the 
capabilities of local law enforcement to combat the growth of 
organized crime in Brazil's major cities, as the same gangs 
that are creating public security problems also control 
trafficking and distribution of drugs. 
 
¶22. (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 recently re-structured its intelligence 
apparatus to beef up their counterterrorism focus, although 
this has been stalled by a recent wiretapping scandal 
involving Brazil's intelligence agency (refs F and G).  The 
senior policy levels of the GoB, however, have refused to 
publicly endorse U.S. counterterrorism initiatives and, wary 
of offending 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. 
 
¶23. (C) In the 1990s the governments of Argentina, Brazil, 
and Paraguay established a mechanism, which the US joined in 
2002 at their invitation, to address 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.  The 
 
BRASILIA 00001356  008 OF 010 
 
 
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.  The 
effectiveness of this group is hampered by GoB denials of any 
potential terrorist activity taking place in their territory. 
 Last year, the GOB rejected a USG suggestion to broaden the 
scope of the 3 Plus 1 meeting beyond counterterrorism 
cooperation in the TBA.  The United States will host the next 
meeting of the 3 Plus 1 group in spring 2009, giving us an 
opportunity to reinvigorate this process. 
 
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Shared Interests: Fighting Discrimination 
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¶24. (SBU) During her visit in April, Secretary Rice signed a 
bilateral Joint Action Plan to Eliminate Racial and Ethnic 
Discrimination and Promote Equality (JAPER) with Brazilian 
Minister of Racial Equality Edson Santos.  On October 31, WHA 
Assistant Secretary Shannon will lead the U.S. delegation to 
the first meeting of the bilateral steering committee created 
to supervise the JAPER.  Comprising close to half of 
Brazil,s population, over 90 million people, Afro-Brazilians 
are widely discriminated against by the broader society. 
Brazilians often 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). 
 
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Shared Interests: Nuclear Non-Proliferation 
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¶25. (C) Brazil has recently announced its intentions to 
resurrect its long dormant civilian nuclear program.  Brazil 
does not currently have an active nuclear weapons program, 
having voluntarily closed their program decades ago. 
Although Brazil currently only has 2 plants operating in Rio 
State, contributing just 2 percent to the electrical supply, 
it has recently announced its intention to complete the third 
planned reactor and build 4-8 new ones by 2014.  The GOB has 
expressed interest in working with the United States as they 
move toward developing their nuclear sector.  Brazil would 
like to master uranium enrichment technology so that it can 
convert its large uranium reserves into nuclear fuel.  For 
the time being, Brazil is looking at providing fuel for its 
own reactors and building up a strategic reserve, though 
sometime in the future it may be interested in exporting 
nuclear fuel.  Currently, Brazil turns to Canada and Europe 
to process uranium into fuel. 
 
¶26. (C) Brazil has not signed an IAEA Additional Protocol, 
despite our continued urging that they do so, but neither 
have they officially refused.  The GoB is cautious about 
taking an active role on non-proliferation and has 
consistently refused to take a strong position against Iran's 
nuclear efforts.  Although the GoB has been careful to comply 
fully with UN sanctions against Iran and has asserted the 
importance of Iranian compliance with UN resolutions, the GOB 
has also stressed Iran's right to develop nuclear energy for 
peaceful purposes.  Citing efforts with North Korea, the GoB 
has made clear that it believes dialogue is the best option 
to ensure Iran is not a threat to the global community.  In 
discussions on non-proliferation, GOB officials generally 
stress the importance of pursuing disarmament at the same 
time. 
 
 
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Shared Interests: Biofuels Cooperation 
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¶27. (SBU) Under Secretary for Economic Affairs Jeffery met 
with his counterpart in Brasilia on October 3 for a meeting 
of the bilateral Biofuels Steering Committee created by our 
March 2007 Biofuels MOU.  The 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 October meeting achieved agreement to expand 
third country cooperation to a new tranche of countries 
(Guatemala, Guinea-Bissau, Honduras, Jamaica, and Senegal), 
to be announced at the upcoming international biofuels 
conference. The National Renewable Energy Laboratory and 
Petrobras' CENPES lab have agreed to a MOU to coordinate 
research on next generation technologies to be announced at 
the November biofuels conference. 
 
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Shared Interests: Global Financial Crisis 
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¶28. (U) The fact that your trip coincides with the escalating 
financial crisis means this will be an inescapable topic in 
some of your meetings.  In response to the financial crisis, 
Brazil's Central Bank has partially reversed its hawkish 
anti-inflationary policies by adding 13.2 billion reais to 
the financial system in hopes of freeing up credit and has 
indicated that future interest rate hikes are unlikely given 
the diminishing threat of inflation due to a global slowdown 
and falling commodity prices, though most observers expect to 
see one last hike in interest rates at the end of October. 
Brazil's Finance Minister continues to assert that Brazil is 
well-positioned to weather the crisis.  President Lula 
continues to criticize the 
United States publiclyfor a lack of financial regulation, 
calling for a global regulatory body is needed to address the 
situation.  Lula has finally admitted that the Brazilian 
economy may be adversely impacted by the crisis, drawing 
widespread criticism for not having a real grasp on the 
potential of the crisis.  Although Brazilian markets have 
taken a beating in recent days and the real has seen an 
erosion of its strength from earlier this year, large 
Brazilian companies are confident that they will weather the 
storm, though there are worries about the effect of a 
tightened credit market for smaller enterprises. 
 
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Shared Interests: Reducing Visa Wait Times 
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¶29. (U) The State Department has been working with the GoB to 
resolve a growing problem caused by a near tripling in 
non-immigrant visa loads over the last several years.  With 
support from CA and WHA, the Mission is in the midst of a 
visa "surge" that has already brought wait times down 
significantly from well over 100 days to more reasonable wait 
times.  The surge has garnered positive press and, with the 
addition of six new consular positions, we expect to be able 
to maintain wait periods at the new levels.  In addition, we 
have now reached agreement with Itamaraty on language for an 
agreement that will allow us move toward a ten-year visa, one 
of the top priorities for companies participating in the 
bilateral CEO forum. 
 
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Conclusion: A Partner in Need of Attention 
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¶30. (C) The breadth and depth of relations between the United 
States and Brazil have grown enormously in the past few 
years, and Brazilian officials from the President down are 
genuinely concerned that the next administration continue and 
 
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build on the achievements we have made.  Although cooperation 
with Brazil is rarely easy to achieve, our successes 
demonstrate what is possible, and Brazil's growing economic 
and political clout on the global stage have increased the 
value to U.S. interests of cultivating this partnership. 
Your visit offers an opportunity to point Brazil in 
directions that will make our relationship even more 
productive, and will allow the senior Brazilian policymakers 
and thinkers you meet an opportunity to brief us on what they 
believe to be the most promising areas for cooperation in the 
coming years. 
SOBEL