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C O N F I D E N T I A L BRASILIA 001261 
 
SIPDIS 
 
E.O. 12958: DECL: 10/23/2019 
TAGS: PREL KNNP IAEA ENRG ETTC BR
SUBJECT: BRAZIL: SCENESETTER FOR OCTOBER 27-30 VISIT OF SPECIAL REP 
OF THE PRESIDENT FOR NON-PROLIFERATION-AMB BURK 
 
Classified by: Political Counselor Stephen Liston, Reasons 1.4 (b) 
and (d). 
 
¶1.  (C) SUMMARY.  The visit of the Special Representative of the 
President for Nuclear Non-Proliferation, Ambassador Susan Burk, comes 
at an important time.  Brazil is reviving its long dormant civilian 
and military nuclear energy programs.  It closed down its nuclear 
weapons program in 1990 and joined the Nuclear Non-Proliferation 
Treaty (NPT) in 1998, but of late Brazil has often not joined in 
supporting, and on occasion has opposed, USG non-proliferation 
efforts.  President Obama's Prague speech created new interest in 
Brazil in U.S. initiatives and positions related to 
non-proliferation, but two trends in the nuclear field are cause for 
concern.  First, Brazil seeks to rapidly expand its nuclear 
activities, in particular developing enrichment and reprocessing 
(ENR) technologies and building up an unsafeguarded Naval nuclear 
research facility.  Second, Ministry of External Relations (MRE) and 
other GoB officials are becoming less helpful in the 
non-proliferation world, using the excuse that the nuclear weapon 
states should do more on disarming first, despite all evidence of 
U.S. progress in this area.  If these trends continue, it could 
complicate our global non-proliferation initiatives and at the same 
time increase temptations for some future government to think about 
possibly developing weapons technology, if not weapons themselves. 
 
¶2. (U) With Brazil emerging rapidly from the global economic 
downturn, President Lula's high popularity ratings, the country's new 
stature in the G20, international trade and financial architecture 
discussions, a tenth term on the UN Security Council set to begin in 
January, and Rio de Janeiro's successful bid to host the 2016 
Olympics on the heels of the 2014 Soccer World Cup, Brazil is rapidly 
gaining international confidence and clout.  The relationship between 
the United States and Brazil is as productive and broad-based as it 
has ever been, and the election of President Obama brought prospects 
for additional improvements.  At the same time, although Brazil and 
the United States share many broad goals, it is often still a 
challenge to develop concrete areas for cooperation.  These 
difficulties are likely to increase as the country gears up for 
elections in October 2010 to determine Lula's successor.  END 
SUMMARY. 
 
NUCLEAR NON-PROLIFERATION AND NUCLEAR ENERGY ISSUES 
 
¶3.  (C) With the return of democracy in both Brazil and Argentina, 
the two countries abandoned their nuclear weapons programs in 1990. 
Later in 1998, Brazil joined the NPT.  As late as mid-2008, despite 
growing resistance from the Ministry of Defense (MOD) some within the 
GoB were considering the possibility of signing an International 
Atomic Energy Agency (IAEA) Additional Protocol.  In December 2008 
the GoB adopted a new Defense Strategy that rejects accepting any new 
non-proliferation measures unless the nuclear powers "disarm."  This 
hardening of position by Brazil undercut USG efforts to have the 
Nuclear Suppliers Group (NSG) adopt a new rule regarding a criteria 
based procedure for transferring enrichment and reprocessing (ENR) 
technology, including the requirement that the recipient have an IAEA 
Additional Protocol in place.  Brazil's opposition to an IAEA 
Additional Protocol has had the collateral effect of preventing 
Argentina from signing one, both for legal reasons (Brazil and 
Argentina are linked with the IAEA by the Quadpartite Agreement) and 
political grounds, not wanting to upset its large neighbor. 
 
¶4.  (C) The GoB has not clearly articulated its rationale for 
opposing an Additional Protocol; several reasons have been offered 
from time to time.  GoB officials have said that an Additional 
Protocol would mean that the IAEA is suspicious of Brazil's 
intentions regarding its future nuclear program.  The MRE's Director 
of the Division for Disarmament and Sensitive Technologies, Santiago 
Mourao, opined that this would be treating Brazil "as if it were Iraq 
or Iran."  At the same time, Mourao and civilian officials from 
National Commission on Nuclear Energy (CNEN) have indicated that 
technically there is not a problem with complying with an Additional 
Protocol.  The obstacle is a political one, and Mourao and others 
have consistently pointed to the MOD, particularly the Navy, as the 
primary source of opposition.  Admiral Othon Pinheiro, now the 
President of Eletronuclear (the operator of Brazil's nuclear power 
plants), commented that the Navy was very concerned about obtrusive 
inspections, which could reveal to outsiders Brazil's most sensitive 
technology.  There is also a faction of the Brazilian leadership that 
believes joining the NPT was a mistake because it meant accepting a 
sort of second class status for Brazil.  This group believes an 
Additional Protocol would compound this mistake.  Whatever the 
reasons, the GoB has moved from a position of leaning toward signing 
an IAEA Additional Protocol just a year ago to stiff opposition.  It 
 
is generally supposed that Brazilian enrichment technology may have 
been illegally obtained from Germany, and Brazil may want to hide 
evidence of this. 
 
¶5.  (C) Multilaterally, 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.  Brazil strives not 
to break ranks with the G-77.  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 and occasionally cast doubts on IAEA findings that certain 
Iranian activities were inconsistent with a peaceful nuclear program. 
 The GoB is looking to improve political and economic ties with Iran. 
 President Lula met with Iran's President Ahmadinejad in New York in 
September, and Ahmadinejad is planning to visit Brazil in the near 
future.  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, and has commended P5+1 efforts to 
engage Iran.  North Korea's testing of a nuclear device earlier this 
year only delayed Brazil's opening of an Embassy there temporarily. 
In discussions on non-proliferation, GoB officials frequently avoid 
supporting non-proliferation efforts by resorting to oft-repeated 
protestations that the nuclear powers are not doing enough on 
disarmament ignoring progress being made in this area. 
 
¶6.  (U) Brazil has decided to revive its civilian nuclear energy 
program.  Government-owned entities control over aspect of nuclear 
energy, from mining uranium, to building nuclear reactors, to owning, 
operating, and overseeing those reactors.  Currently, two reactors at 
Angra dos Reis, south of Rio de Janeiro, are completed and operating. 
 Westinghouse built Angra I, and Siemens constructed Angra II. 
Siemens stopped work on a third reactor (Angra III) in 1986, but work 
resumed in September after a 23-year lapse.  For the mid-term, Brazil 
plans to build 4-8 new reactors by 2030.  The GoB has expressed 
interest in working with the United States as they move toward 
developing its nuclear sector.  GoB officials would like U.S. firms 
to compete for work on these new reactors, and Westinghouse has been 
actively pursuing opportunities here.  Further, GoB officials have 
expressed interest in collaborating with the USG to improve nuclear 
safety and security and its nuclear facilities and to help in 
training the next generation of technicians and experts.  In 
addition, Brazil is struggling with a long-term solution to handling 
nuclear wastes, which are currently stored on site.  They are 
interested in advice on this sensitive issue.  Moreover, the GoB is 
thinking of reorganizing CNEN, which currently oversees the nuclear 
energy sector, into a new agency for regulation, along the lines of 
the U.S. Nuclear Regulatory Commission and another entity for 
promoting and developing nuclear energy.  They are interested in 
discussing this reorganization with the USG. 
 
¶7.  (C) In addition to building more reactors, Brazil is seeking to 
complete the nuclear fuel cycle and master enrichment and 
reprocessing (ENR) technologies.  Brazil is installing cascades of 
centrifuges to enrich uranium.  While rich in uranium, with the sixth 
largest reserves in the world, Brazil ships yellowcake to Canada and 
then to Europe (URENCO) for processing into fuel.  President Lula has 
directed the GoB to develop the skills to do the processing itself 
and become self-sufficient.  This is estimated to take through 2030, 
after which Brazil may become a supplier within South America and 
possibly elsewhere of nuclear fuel.  The Presidents of Brazil and 
Argentina have announced that they will form a joint entity to 
process nuclear fuel, but there has been little progress.  While 
Brazil uses centrifuges for enrichment, Argentina uses gas 
technology.  Brazilians sometimes regard efforts to urge them to join 
the Additional Protocol with concern that such efforts could be part 
of an agenda to deny Brazilian mastery of the full fuel cycle. 
 
¶8.  (C) Internationally, Brazil participates in the IAEA and the NSG. 
 It is an observer at the Global Nuclear Energy Partnership (GNEP), 
though it may decide to join at some later date.  During a visit to 
Washington this summer, Minister of Mines and Energy Edison Lobao 
expressed his openness to a suggestion from Department of Energy 
Deputy Secretary Poneman that Brazil help lead an effort to encourage 
nuclear responsibility among nations considering developing civilian 
nuclear programs.  The GoB has shown signs of interest in joining the 
nuclear fusion research consortium (ITER).  While it is not convinced 
about the merits of the proposals to create a nuclear fuel bank, the 
GoB seems open to discussing the idea further.  Brazil supported the 
G-77 candidate for Director General of the IAEA (South African Minty) 
to the end, though it has not voiced public opposition to the winner 
(Japanese Amano).  Brazil is interested in renewing exchanges of 
nuclear technology with India, but it still needs to change its laws 
 
to permit this cooperation.  Both India and Brazil are rich in 
thorium, though the GoB has downplayed interest in developing a 
reactor using thorium. 
 
¶9.  (C) The Brazilian Navy has revived its program to build a nuclear 
powered submarine.  This would be based on the hull of a French 
conventional submarine.  It is not clear whether the Navy will 
receive sufficient funding for this project.  Further, the GoB will 
need to overcome the significant technological hurdles involved in 
this project.  However, Brazilian leaders perceive a nuclear powered 
sub as an essential trapping of great power status and are unlikely 
to abandon the program -- even if its completion is remote. 
 
POLITICAL OVERVIEW 
 
¶10.  (U) With democracy re-established in 1988 after decades of 
military dictatorship, Brazil's democratic institutions are generally 
strong and stable.  President Lula 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 disciplined economic policies and expanded social programs.  Most 
recently he is basking in the glow from Rio de Janeiro winning the 
rights to the 2016 Olympics, which even tops Rio gaining the 2014 
World Cup.  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. 
 
¶11.  (U) The campaign to replace Lula in the October 2010 elections 
is well under way, unofficially, affecting most major decisions. 
Lula is constitutionally barred from seeking a third term and has 
designated his Chief of Staff, Dilma Rouseff as his successor. 
Lula's personal popularity has thus far not transferred, and at this 
point the race remains unpredictable.  The opposition governor of Sao 
Paulo state, Jose Serra, currently has a lead in the polls, only ten 
percent of voters have a party affiliation and most are not yet 
following the race.  As a result, Rousseff, with the strong backing 
of Lula, will almost certainly gain ground.  Whoever wins is likely 
to continue the sound economic management and aggressive 
international outreach that have characterized Lula's presidency. 
 
FOREIGN POLICY 
 
¶12. (U) Under Lula, Brazil's priority has been to solidify its 
regional leadership while reaching beyond traditional partners like 
the United States and Europe to a broad range of players.  Despite a 
great deal of criticism from those in Brazil who question the value 
of this so-called South-South strategy, the GoB has expanded its 
diplomatic presence in Africa, Asia, the Middle East, and the 
Caribbean and has promoted cross-regional meetings such as the Arab 
States-South America Summit, the Africa-South America Summit, the 
BRICs (Brazil, Russia, India, China) meetings, and the IBSA (India, 
Brazil, South Africa) forum.  At the same time, Brazil has sought to 
create new regional mechanisms, such as the Union of South American 
Nations (UNASUL), the South American Defense Council, and the Summit 
of Latin America and the Caribbean (CALC) that serve to strengthen 
its leadership in South America and the Western Hemisphere more 
broadly.  The attainment of a permanent seat on the UN Security 
Council (UNSC) has been a central goal of Brazil's foreign policy 
under President Lula's government, and Brazil has just been elected 
to a tenth UNSC term, a record matched only by Japan.  Brazil has 
also taken a more visible role on major international negotiations, 
including the Doha trade round, G20 discussions on the global 
economic crisis, and post-Kyoto climate change talks, taken the lead 
on peacekeeping in Haiti, and is seeking a role in the Middle East 
peace process. 
 
¶13.  (U) The United States and Brazil share many interests in the 
region, such as fostering hemispheric stability and preventing drug 
transit activity.  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 assistance in 
resolving the FARC hostage crisis in Colombia, and has stood firmly 
on the principle of respect for sovereignty in the region. 
 
SECURITY ISSUES AND FIGHTER PURCHASE 
 
¶14.  (C) Brazil announced in December 2008 a new defense strategy, 
which has three main elements: modernization of the armed forces; 
 
revitalization of defense industries; and implementation of a new 
regime of national service.  For the Brazilian military, the key 
result of the strategy process has been the reintegration of defense 
goals into the country's overall development strategy and political 
dialogue.  The Defense Strategy notes that Brazil is prohibited from 
having nuclear weapons, both by the NPT and its own constitution, but 
identifies nuclear power instead as a key strategic interest. 
 
¶15.  (C) An important watershed in achieving a more robust defense 
relationship with Brazil will be the US$4 billion decision on a next 
generation fighter aircraft.  Boeing's F-18 Super Hornet is a 
finalist along with the French Rafale and Swedish Gripen.  After 
hosting French President Sarkozy in Brasilia for Brazilian 
Independence Day celebrations, President Lula announced on September 
7 that Brazil is entering advanced negotiations to purchase 36 
French-made Rafale fighters.  The following day Brazil's Defense 
Ministry confirmed that the selection process was not closed and the 
U.S. contender is still under consideration.  With a lower cost and 
stronger offset program, Boeing is well-positioned to win on the 
merits of its bid, but faces a presumption in the Brazilian political 
community that doing business with the United States is negative for 
Brazil. 
 
ECONOMIC OVERVIEW 
 
¶16.  (U) Brazil is the tenth largest economy in the world and 
received investment grade status from Standard and Poor's and Fitch 
in 2008, and from Moody's in 2009.  Annual Gross Domestic Product 
(GDP) grew 5.1 percent in 2008, and annual inflation was 5.8 percent. 
 The global economic crisis eroded previous predictions for annual 
GDP growth for 2009 from four per cent to essentially flat or 
slightly negative.  Despite this decline in immediate prospects, 
Brazil has thus far weathered the crisis better than most major 
economies and appears to be entering into a solid recovery position, 
led by strong domestic demand.  Conservative macroeconomic policies 
in the years prior to the crisis, and targeted responses during the 
crisis -- including credit injections in the financial system, a 
reduction in interest rates, and tax cuts on automobiles and consumer 
durables -- played a role in lessening the impact of the global 
crisis on Brazil.  Brazil is projected to return to a 4 to 5 percent 
GDP growth rate in 2010. 
 
¶17.  (U) Brazil's relatively successful management of the crisis has 
encouraged the GoB to engage proactively and constructively in the 
debate over how to handle the economic crisis including through the 
G20 process.  Brazil has called for increased regulation of the 
global financial system, increased global access to trade finance, 
and an expanded voice and vote for large emerging countries like 
Brazil in the international financial institutions. 
 
¶18.  (U) Brazil is a major producer and exporter.  Agriculture makes 
up 36 percent of exports, and the agribusiness sector accounts for 25 
percent 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 as of March of this year moved into first position 
as Brazil's primary export destination.  Prior to the current 
financial crisis, U.S.-Brazil trade experienced significant annual 
growth surpassing USD 50 billion in 2008 -- Brazil typically 
experiences a slight positive balance in the trade relationship. 
 
¶19.  (U) Foreign direct investment (FDI) 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 as a solid investment 
destination during the financial crisis due to its sound 
macroeconomic policies and relatively strong economy.  Brazil is 
Latin America's biggest recipient of FDI, and in 2008 received 
roughly twice the volume of inflow that Mexico received. 
 
¶20.  (U) 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.  With a total 
population near 200 million, Brazil is also 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. 
 
BRAZILIAN MEDIA AND PUBLIC ATTITUDES TOWARDS THE USA 
 
¶21.  (U) In terms of general public opinion, the election of Barack 
Obama as president seems to have 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.  Majorities held a favorable view of the United States (57 
percent) and saw bilateral relations as being good (65 percent). 
However, Brazilians have often seen the United States as an 
impediment to Brazil's aspirations for regional leadership. 
Pluralities said last year that politically and economically, the 
United States was as much a competitor as it was an ally and partner. 
 As of January, half lack confidence in the United States' ability to 
deal responsibly with world problems. 
 
¶22.  (U) Brazilian journalists, generally speaking, are professional, 
balanced, and strive for objectivity.  Many are 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 accepts the notion that the United 
States has a campaign to subjugate Brazil economically, undermine it 
culturally, and occupy with troops at least part of its territory. 
Such attitudes and beliefs have occasionally 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), supposed U.S. nefarious intentions toward the Amazon, and 
most recently, the announcement on U.S. access to Colombian military 
bases.  That said, the Brazilian media have reported favorably on 
U.S. efforts at the recent meeting of the General Assembly of the 
Organization of American States and the Summit of the Americas, and 
the Obama Administration overall, portending a change in perspective 
with regards to U.S. intentions in Brazil and the region at large. 
Non-proliferation issues have a low profile with the Brazilian media 
and raise little interest among the public. 
 
CLIMATE CHANGE 
 
¶23.  (U) After intensive lobbying from senior USG officials and 
pressure from other countries and domestic constituencies, President 
Lula announced a major shift in Brazil's position in the 
international climate change negotiations.  He has said Brazil will 
offer in Copenhagen a target of reducing the rate of deforestation of 
the Amazon Forest by 80% by 2020, which would amount to about 20% 
reduction in country-wide emissions.  This represents a significant 
advance over Brazil's previous position, which was that only the 
developed countries should have emissions reductions targets and the 
developing ones needed to preserve room for growth.  Brazil, however, 
insists that developed countries provide substantial technology 
transfer and financial assistance to developing countries so that 
they can take mitigation and adaptation measures. 
 
ENERGY 
 
¶24.  (U) Brazil is the world's leading exporter of biofuels, which 
now have surpassed petroleum as the largest component of the domestic 
transportation fuel sector.  The GoB is proud of its energy matrix 
which is largely made up of renewable sources of energy, over 80 
percent of which is hydro-reliant.  To further diversify the matrix 
and help Brazil meet its goal of doubling its energy supply in the 
next 20 years, the GoB is looking to increase its civilian nuclear 
energy sector.  Brazil also stands to become a world player in the 
supply of oil with 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 in terms of reserves.  The depth of 
the area will make recovery challenging and expensive.  The eventual 
exploitation and investment in the attendant infrastructure could 
provide rich opportunities for U.S. companies but recently proposed 
legislation by the GoB to regulate the area has brought the extent of 
that potential into doubt. 
 
¶25.  (U) The USG and the GoB have built a close and productive energy 
relationship through the 2007 Biofuels Memorandum of Understanding in 
which we agreed to work together to promote biofuels as a global 
commodity, research and development in next generation biofuels, and 
development of biofuels capacities in third countries.  Building on 
the success of this initiative, the United States and Brazil are 
currently exploring other avenues for cooperation, such as a possible 
Binational Commission on Energy, which could include cooperation on 
commercial nuclear energy. 
 
SECURITY SITUATION IN BRAZIL 
 
¶26.  (U) 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. 
 
¶27.  (U) 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.  This targeting occurs in all tourist areas but is especially 
problematic in Rio de Janeiro, Salvador and Recife. 
 
¶28.  (U) 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. 
 
¶29.  (U) 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. 
 
KUBISKE