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FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 4778
INFO RUEHRG/AMCONSUL RECIFE 9777
RUEHRI/AMCONSUL RIO DE JANEIRO 8033
RUEHSO/AMCONSUL SAO PAULO 4360

UNCLAS SECTION 01 OF 05 BRASILIA 000946 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SENV KGHG ENRG ECON ETRD EINV EFIN PREL BR
SUBJECT: BRAZIL SCENESETTER: DR. TODD STERN, SPECIAL ENVOY FOR 
CLIMATE CHANGE, AUGUST 4-6 
 
(U) This message is sensitive but unclassified, please treat 
accordingly. 
 
¶1.  (SBU) SUMMARY:  In spite of its relatively clean energy matrix, 
Brazil is a major greenhouse gas emitter primarily due to massive, 
ongoing deforestation.  The Ministry of Exterior Relations (MRE) has 
pursued a cautious, defensive approach in international climate 
change negotiations, steering clear of any explicit or implicit 
obligations to control or reduce emissions.  In the international 
climate negotiations, Brazil is a major player with outsized 
influence on many issues, particularly on offset mechanisms.  In 
June, President Lula suggested in a Reuters interview that Brazil 
might be willing to take on targets.  This more ambitious stance is 
something that Environment Minister Carlos Minc has been advocating 
for months and the MRE has been reluctant to embrace.  Your visit 
comes at an opportune time as Brazil considers what it should do in 
the negotiations leading up to the summit in Copenhagen. 
 
¶2.  (SBU) Overall, the relationship between the United States and 
Brazil is productive and broad-based, with growing economic ties. 
Through the financial crisis, Brazil has played a constructive role 
in the G20 and has also prioritized concluding the Doha round of 
World Trade Organization negotiations.  The country has the 
potential to play a major role in promoting global energy security. 
The Brazilian government seeks to develop a global market for 
biofuels and also to bring into production its vast, new off-shore 
oil and gas discoveries.  END SUMMARY. 
 
THE ENVIRONMENT AND CLIMATE CHANGE 
 
¶3.  (SBU) Domestically, Brazil pursues two sometimes conflicting 
goals with regard to the Amazon region.  On the one hand, it seeks 
to preserve the natural resources and biodiversity found there.  To 
that end, the law stipulates that landowners in the Amazon region 
are supposed to preserve eighty percent of forest on their lands, 
and the government has placed large amounts of the forest into 
protected areas, such as national parks and indigenous reserves.  At 
the same time, the national government, states and municipalities 
seek economic growth and employment for the approximately 25 million 
inhabitants of the region.  Since the 1970s the national government 
has built a network of roads through the Amazon, which has opened 
the region to timber and agriculture (mainly cattle and soybean) 
interests. 
 
¶4.  (SBU) Massive and ongoing clearing of the Amazon Forest releases 
large quantities of carbon dioxide into the atmosphere.  The 
Brazilian government's only greenhouse gas emissions inventory for 
1994 (a new one based on date from 2000 is in the works) estimated 
that about 75% of the country's green house gas emissions come from 
changes in land use and deforestation.  That percentage is dropping 
as the deforestation rate has declined and during the same period 
industry and the rest of the economy have been growing.  Post 
estimates that by 2015 other sources of greenhouse gas emissions 
will surpass the quantities released due to deforestation.  From 
1970-2000, Brazil's ranked 6th in the world for cumulative carbon 
dioxide (CO2) emissions - the country emitted 51,000 metric tons of 
CO2 (including land use), about six percent of the global total. 
During the same time period, the United States emitted 137,000 
metric tons of CO2 (including land use), about sixteen percent of 
the global total, and was ranked number one.  For 2000, the most 
recent year for which landuse data are available, Brazil's emissions 
including land use were 2,325.1 Mton CO2-equivalent, or 13.4 
tons/person.  This made them the 5th largest emitting country, or 
38th in per capita terms. 
 
¶5.  (SBU) The Brazilian government has stepped up efforts to combat 
deforestation, most of which is illegal and takes place primarily on 
public lands.  The government still has not been able to establish 
an effective presence in the vast Amazon, leaving ranchers and 
farmers free to clear government land with relative impunity.  The 
national government, some state and local governments, 
non-governmental organizations (NGOs), and the business community 
have developed various initiatives to try to curb the deforestation 
rate.  In October 2008, the national Amazon Fund received a pledge 
of up to one billion dollars from Norway through 2015 and since then 
Germany has agreed to contribute several million dollars.  To date, 
this fund has not approved any projects nor disbursed any funds. 
The State of Amazonas, which includes roughly half the Amazon 
forest, created the Foundation Sustainable Amazonas (FAS) to reduce 
deforestation by providing regular payments to residents in state 
reserves for protecting the forest.  The FAS has received pledges of 
nearly USD 30 million, including from Marriott Hotels and Coca-Cola. 
 Various NGOs, such as the Moore Foundation and The Nature 
Conservancy, have programs to encourage conservation and to prevent 
more of the Amazon from being turned into pastures and soybean 
fields. 
 
¶6.  (SBU) The government has stepped up enforcement efforts to stop 
 
BRASILIA 00000946  002 OF 005 
 
 
illegal clearing and to deny financial credits to farmers and 
ranchers operating illegally in the Amazon.  These efforts, combined 
with a drop in agriculture commodity prices, are expected to result 
in a significant decrease in the deforestation rate this year.  The 
rate of deforestation has fallen from its peak in 2004 of about 
24,000 square kilometers to 12,000 square kilometers last year.  It 
is estimated to come in under 10,000 square kilometers this year. 
In December 2008, the Brazilian government announced as part of its 
national climate change plan the domestic goal of reducing the 
deforestation rate to under 7,000 square kilometers by 2017, which 
would be nearly a two-thirds reduction from the average before 
¶2005. 
 
¶7.  (SBU) Brazil is a relatively "green" country.  Hydropower 
provides around 85% of Brazil's electricity, and passenger cars now 
use more ethanol than gasoline.  However, in order to meet growing 
demands for electricity that cannot currently be met through 
hydropower, the Brazilian government may resort more often to fossil 
fuels (which currently provide less than nine percent of Brazil's 
electricity), though they are actively seeking ways to further 
diversify their energy matrix. 
 
¶8.  (SBU) In international climate change negotiations, Brazil has 
been far less bold and innovative, along with China and India, 
contending that only developed countries should be required to 
assume emission reduction targets.  In the negotiations, in addition 
to the overall architecture of an international climate agreement, 
Brazil has traditionally been very focused on issues like historical 
responsibility, burden-sharing, and how best to address offsets. 
Recently Brazil offered that it and other developing countries will 
register their Nationally Appropriate Mitigation Actions (NAMAs), 
which for Brazil could include projects to Reduce Deforestation and 
forest Degradation (REDD) and reforestation projects.  While NAMAs 
would be monitored and verified, there would be no binding 
commitments about implementing them or what results they will 
produce. 
 
¶9.  (SBU) Some within the Brazilian government want Brazil to take a 
position of leadership on climate change.  Although he has yet to 
persuade the Ministry of Exterior Relations (the lead on climate 
change negotiations), Environment Minister Carlos Minc has said 
Brazil and other developing countries should take on emissions 
reductions targets in return for financial assistance and technology 
transfer.  In early June, President Lula suggested in a Reuters 
interview that Brazil might be willing to take on emissions targets. 
  His predecessor, former President Fernando Henrique Cardoso, wrote 
an editorial in mid-June calling on Brazil to do just that.  While 
Minister Minc may have limited influence over shaping Brazil's 
negotiating position, President Lula and his closest advisor and 
presidential candidate, Minister Dilma Rousseff have much more. 
They could steer Brazil's international negotiating policy toward a 
more pro-active, ambitious course and away from the current cautious 
and defensive tack pursued by the Ministry of Exterior Relations. 
 
POLITICAL OVERVIEW 
 
¶10.  (SBU) With democracy re-established in 1988 after decades of 
military dictatorship, Brazil's democratic institutions are 
generally strong and stable.  President Luiz Inacio Lula da Silva 
remains a popular president - one of the most popular in Brazil's 
history and indeed in the world today, with recent approval ratings 
as high as 68% - as a result of his orthodox economic policies and 
expanded social programs.  In the Congress, ongoing public scandals 
involving the leadership of the Senate and various members of 
congress have led to low ratings for the institution among the 
Brazilian public.  Increasingly, the court system has taken steps to 
curb impunity among public officials.  These steps have been well 
received by a public accustomed to abuses by authorities.  Much of 
the Brazilian political elite is already looking forward to the 
October 2010 federal elections (president, senators and deputies). 
Lula is constitutionally barred from seeking a third term as 
President and has designated his Chief of Staff, Minister Dilma 
Rousseff as his successor.  Lula's personal popularity has thus far 
not transferred, and at this point the race remains unpredictable. 
The current leading candidate to be the next president is Governor 
of the State of Sao Paulo Jose Serra, though Rousseff has been 
closing the popularity gap.  Brazilian politicians increasingly have 
an eye on the elections in their public statements and actions. 
 
¶11.  (SBU) The United States and Brazil share many common goals, 
including fostering hemispheric stability and drug transit activity. 
 The attainment of a permanent seat on the UN Security Council has 
been a central goal of Brazil's foreign policy under President 
Lula's government.  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 Venezuela and Cuba, has 
worked to foster good relations with Bolivia, has given its 
 
BRASILIA 00000946  003 OF 005 
 
 
assistance in resolving the FARC hostage crisis in Colombia, and has 
stood firmly on the principle of respect for sovereignty in the 
region. 
 
ECONOMIC OVERVIEW 
 
¶12.  (SBU) Brazil is the tenth largest economy in the world and 
received investment grade from Standard and Poor's and Fitch in 
¶2008.  Annual Gross Domestic Product (GDP) grew 5.1 percent in 2008, 
and inflation was 5.8%. Prospects for 2009 have been dimmed by the 
global economic crisis, taking previous predictions for annual GDP 
growth from four per cent to an essentially flat or slight recession 
scenario for 2009.  Brazil has thus far weathered the crisis better 
than most major economies, due in large part to its conservative 
macroeconomic policies.  In fact, the economy is now showing early 
signs of recovery and the government is predicting positive growth 
in the last part of the year. 
 
¶13.  (SBU) Brazil is a major producer and exporter.  Agriculture 
makes up 36 percent of exports, and the agribusiness sector accounts 
for 25% of Brazil's GDP.  Brazil is a leading exporter of soybeans, 
beef, sugar, coffee, and orange juice.  Brazil also distinguishes 
itself as a major exporter of civilian aircraft, steel, and 
petrochemicals.  The United States is Brazil's top trading partner 
overall, and China has moved into first position as Brazil's primary 
export destination. 
 
¶14.  (SBU) Foreign direct investment in Brazil is increasing, with 
inflows of USD 44 billion in 2008; USD 6.9 billion came from the 
United States.  Brazilian investment in the United States almost 
tripled between 2001 (USD 1.4 billion) and 2006 (USD 3.9 billion). 
President Lula has been actively selling Brazil (including at a Wall 
Street Journal sponsored investment conference in Brazil earlier 
this year) as a solid investment destination during the financial 
crisis due to its sound macroeconomic policies and relatively strong 
economy. 
 
¶15.  (SBU) Despite progress in recent years, income distribution in 
Brazil remains grossly unequal, with 10 percent of the population 
holding over 50 percent of the nation's wealth.  Brazil is home to 
50 percent of the people who live in extreme poverty in Latin 
America.  President Lula's social programs, combined with formal 
sector job growth and real increases in the minimum wage, have 
reduced income inequalities each year since 2004. 
 
¶16.  (SBU) Millions of Brazilians have moved into the middle class 
over the last few years.  Nevertheless, roughly forty percent of the 
population lives in poverty, a problem that can only be addressed by 
sustained long-term growth.  Unfortunately, major structural 
challenges to long-term growth include a complicated and onerous tax 
structure, high interest rates, and cumbersome labor and business 
regulations.  As a result of its regulatory structure, Brazil ranks 
125th in the World Bank Group's Doing Business assessment of 
regulatory climate in 181 countries.  The informal sector (one of 
the largest among large developing economies) constitutes an 
estimated 40 percent of Brazil's economy, in large part in response 
to the onerous tax and regulatory requirements to participate in the 
formal economy.  President Lula has vigorously pursued a national 
Growth Acceleration Program (PAC) to increase infrastructure 
investment in energy, transportation, and sanitation/housing, a 
program that has received increased funding as a countercyclical 
measure in the face of the economic crisis. 
 
¶17.  (SBU) The global financial crisis has affected Brazilian 
companies' exports and access to credit. Brazil's Finance Minister 
continues to assert that Brazil is well-positioned to weather the 
crisis while he and Central Bank contacts confirm moves to try to 
mitigate the effects of the crisis.  President Lula, taking a 
leading role in the debt over how to handle the economic crisis 
including through the G20 process, has criticized actors in 
developed countries for sparking a crisis that affects developing 
countries. He has called for increased regulation of the global 
financial system, increased global access to trade finance, and an 
expanded role for large emerging countries like Brazil in 
international financial institutions such as the International 
Monetary Fund.  The government has reacted to the economic downturn 
thus far with a series of actions aimed at increasing liquidity in 
the banking system, stimulating growth through a series of targeted 
tax cuts, and seeking to shore up exports. 
 
ENERGY - BIOFUELS AND LARGE OFF-SHORE OIL AND GAS DISCOVERIES 
 
¶18.  (SBU) For Brazil, turning ethanol into a world commodity is a 
key aspect of increasing energy security.  Though Brazilian ethanol 
is produced from sugar cane, Brazil sees expansion of the global 
ethanol market, regardless of feed stock, as a key interest.  In 
March 2007, the United States and Brazil signed a Memorandum of 
Understanding (MOU) on biofuels cooperation.  As a result, 
 
BRASILIA 00000946  004 OF 005 
 
 
scientists and laboratories from the two countries are 
collaboratively researching next generation biofuels technologies. 
We are also working together in various multilateral fora to develop 
international biofuels standards and sustainability criteria.  By 
making it easier to treat biofuels as a tradable commodity, these 
standards should foster the emergence of a vibrant global biofuels 
market. 
 
¶19.  (SBU) The United States and Brazil are jointly assisting a 
group of developing countries in creating their own biofuels 
markets, with the goal of reducing their dependence on imported oil. 
 The joint cooperative effort initially targeted four countries: 
Haiti, St. Kitts, El Salvador, and the Dominican Republic.  In 
November 2008, five new countries joined the group:  Guatemala, 
Guinea-Bissau, Honduras, Jamaica, and Senegal.  Brazil would like to 
see the United States aggressively expand these cooperation efforts 
to include developing countries in Africa and Southeast Asia, both 
as a development tool and as a way to increase the commodity market 
for ethanol. 
 
¶20.  (SBU) Modest tax breaks have stimulated the Brazilian domestic 
ethanol market and have led new car purchasers to opt overwhelmingly 
for "flex-fuel" cars that can run on gasoline, ethanol, or any 
combination of the two.  In 2008, ethanol surpassed gasoline as the 
dominant automotive fuel.  Domestic demand consumes 85 percent of 
all production.  The other 15 percent is exported, primarily to the 
United States, making our ethanol import surcharge a continuing 
irritant in bilateral relations.  The Brazilian government also uses 
mandates to promote greater use of biodiesel. 
 
¶21.  (SBU) The discovery in 2007 of potentially massive offshore 
("pre-salt") reserves of oil and gas estimated to contain between 
30-80 billion barrels of oil equivalent could put Brazil within the 
top ten oil countries by reserves.  Though the discoveries have 
generated a great deal of excitement, industry observers caution 
that developments will probably be slow in coming due to the 
expensive technological challenges involved with ultra-deepwater 
drilling, including a worldwide shortage of equipment such as 
drilling rigs. 
 
¶22.  (SBU) Brazil and the United States have many other common areas 
of interest in the energy sector.  The convergence of our interests 
offers opportunities to enhance both countries' national energy 
security.  Building on the success of the biofuels relationship, 
Brazil and the United States have recently undertaken a series of 
dialogues to identify the promising areas of energy cooperation 
between our two countries.  An existing Memorandum of Understanding 
between the U.S. Department of Energy and Brazil's Ministry of Mines 
and Energy provides the legal framework for an ambitious list of 
possible projects which could include cooperation on wind and solar, 
clean coal, energy efficiency, nuclear, hydroelectricity, and deep 
sea oil and gas exploration.  While many of these have implications 
for climate change, the possible cooperation on clean energy sources 
such as wind and solar are particularly of interest, as is a new 
model for hydro that Brazil is advocating which reduces the 
environmental impact of large scale hydro projects (i.e. eliminates 
the need for flooding) and which they would like to use a model for 
developmental assistance in developing countries such as Haiti.  An 
area of concern is how Brazil will choose to handle the attendant 
gas in its deep sea (or pre-salt) oil finds.  Without a means of 
processing or transporting the gas, which is too far from land to 
commercially exploitable using currently available techniques, there 
is the possibility that Brazil will choose to flare the gas.  We are 
looking for ways to partner with them to identify other means 
through which they might make use of this resource. 
 
¶23.  (SBU) The United States also has commercial interests, 
particularly in nuclear energy, as Brazil looks to expand its 
civilian nuclear energy program.  For example, Westinghouse is in 
the running to build four to eight new nuclear reactors in Brazil 
over the next ten years.  The USG would like to parlay these and 
other shared interests into support for a hemispheric energy 
cooperation.  There are many opportunities for joint cooperation 
including research and development, energy efficiency, and green 
technologies.  Brazil has expressed particular interest in exploring 
energy efficient housing for low-income citizens under the Energy 
and Climate Change Partnership of the Americas. 
 
OVERVIEW ON BRAZILIAN MEDIA AND PUBLIC ATTITUDES TOWARDS THE USA 
 
¶24.  (SBU) Public opinion polling shows the election of President 
Barack Obama has influenced views of the United States in a positive 
way.  An Office of Research Opinion Analysis released in March 2009 
found that seven-in-10 Brazilians believe the Obama presidency will 
be positive for Brazil and the world.  Economically, Brazilians say 
their future lies with the United States and China.  The July 23 Pew 
Global Attitudes Survey found that a majority of Brazilians hold a 
favorable view of the United States (61%) and  believe President 
 
BRASILIA 00000946  005 OF 005 
 
 
Obama will "do the right thing in world affairs (76%)," with 74% 
expecting that he will follow a multilateral approach to foreign 
policy.  Nevertheless, while 59% of Brazilians think of the U.S. as 
more of a partner, 49% currently say that U.S. economic influence on 
their country is negative.  The report also indicates that by a wide 
margin over other survey countries, Brazilians (90%) believe that 
global warming is a very serious problem.  Roughly eight-in-ten 
(79%) of Brazilians agree that the environment should be protected 
even if it slows economic growth and costs jobs.  Less consensus 
exists as to whether people should be willing to pay higher prices 
to address climate change, with only 48% supporting higher prices 
and 41% disagreeing with such an approach. 
 
¶25.  (SBU) Brazilian journalists, generally speaking, cannot be 
described as "pro-U.S."  Some may be favorably disposed toward the 
U.S. position on particular issues, such as free trade, and many are 
professional and evenhanded in their treatment of the United States, 
even if they do not personally agree with U.S. policies.  Some 
mainstream Brazilian opinion writers demonstrate biases against U.S. 
policies, though the trend has started to change with the election 
of President Obama.  A small segment of the Brazilian public, 
including the elite, accepts the notion that the United States has a 
campaign to subjugate Brazil economically, undermine it culturally, 
and militarily occupy the Amazon.  Such attitudes and beliefs have 
influenced Brazilian reporting and commentary on issues such as the 
reestablishment of the U.S. Navy's Fourth Fleet (which has been 
characterized as a threat to Brazil's offshore pre-salt finds) and 
U.S. activities in the Amazon.  That said, the Brazilian media have 
reported favorably on U.S. efforts at this year's meeting of the 
General Assembly of the Organization of American States and the 
Summit of the Americas, and the Obama Administration overall, 
signaling a change in perspective with regards to U.S. intentions in 
Brazil and the region at large. 
 
PERSONAL SECURITY SITUATION IN BRAZIL 
 
¶26.  (SBU) Political and labor strikes and demonstrations occur 
sporadically in urban areas and may cause temporary disruption to 
public transportation.  Naturally, protests anywhere in the world 
have the potential to become violent.  In addition, criminal 
organizations, during 2006, staged several violent campaigns against 
public institutions in the Sao Paulo State leading to a large number 
of deaths.  While it is unlikely that U.S. citizens would be 
targeted during such events, U.S. citizens traveling or residing in 
Brazil are advised to take common-sense precautions and avoid any 
large gatherings or any other event where crowds have congregated to 
demonstrate or protest. 
 
¶27.  (SBU) Crime throughout Brazil (especially Rio de Janeiro) has 
reached very high levels.  The Brazilian police and the Brazilian 
press report that the rate of crime continues to rise, especially in 
the major urban centers - though it is also spreading in rural 
areas.  Brazil's murder rate is more than four times higher than 
that of the United States.  Rates for other crimes are similarly 
high.  The majority of crimes are not solved. 
 
¶28.  (SBU) Street crime remains a problem for visitors and local 
residents alike, especially in the evenings and late at night. 
Foreign tourists are often targets of crime and Americans are not 
exempt.  The incidence of crime against tourists is greater in areas 
surrounding beaches, hotels, discotheques, bars, nightclubs, and 
other similar establishments that cater to visitors.  This type of 
crime is especially prevalent during Carnaval (Brazilian Mardi 
Gras), but takes place throughout the year.  While the risk is 
greater at dusk and during the evening hours, street crime can occur 
both day and night, and even safer areas of cities are not immune. 
 
¶29.  (SBU) At airports, hotel lobbies, bus stations and other public 
places, incidents of pick pocketing, theft of hand carried luggage, 
and laptop computers are common.  Travelers should "dress down" when 
outside and avoid carrying valuables or wearing jewelry or expensive 
watches.  "Good Samaritan" scams are common.  If a tourist looks 
lost or seems to be having trouble communicating, a seemingly 
innocent bystander offering help may victimize them.  Care should be 
taken at and around banks and internationally connected automatic 
teller machines that take U.S. credit or debit cards. 
 
¶30.  (SBU) Travelers using personal ATMs or credit cards sometimes 
receive billing statements with non-authorized charges after 
returning from a visit to Brazil.  The Embassy and Consulates have 
received numerous reports from both official Americans and tourists 
who have had their cards cloned or duplicated without their 
knowledge.  Those using such payment methods should carefully 
monitor their banking online for the duration of their visit. 
 
SOBEL