VZCZCXRO6533
RR RUEHRG
DE RUEHSO #0599/01 2821019
ZNR UUUUU ZZH
R 091019Z OCT 09
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 9677
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RUEHBR/AMEMBASSY BRASILIA 0810
RUEHRG/AMCONSUL RECIFE 4435
RUEHRI/AMCONSUL RIO DE JANEIRO 9276
RUEHBU/AMEMBASSY BUENOS AIRES 3661
RUEHAC/AMEMBASSY ASUNCION 0046
RUEHMN/AMEMBASSY MONTEVIDEO 2973
RUEHSG/AMEMBASSY SANTIAGO 0044
RUEHLP/AMEMBASSY LA PAZ 4153
RUEHPU/AMEMBASSY PORT AU PRINCE 0052

UNCLAS SECTION 01 OF 02 SAO PAULO 000599 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR FOR EISSENSTAT AND ROHDE 
NSC PASS FROMAN AND RESTREPO 
NEC SUMMERS 
COMMERCE FOR ITA DRISCOLL AND FUSSELL 
TREASURY FOR MMUDACA AND HLOUIE 
 
E.O. 12958: N/A 
TAGS: ECON BEXP ETRD EFIN PREL PGOV BR
SUBJECT: CHARGE MEETING WITH BRAZILIAN PRIVATE SECTOR CO-CHAIR OF 
CEO FORUM 
 
REF: (A) SAO PAULO 367; (B) BRASILIA 1201 
 
¶1. (SBU) SUMMARY: Charge d'Affaires, Sao Paulo Consul General and 
Senior Commercial Officer met October 1 with Josue Gomes da Silva, 
President of leading textile maker Coteminas and the Brazilian 
private sector co-chair for the U.S.-Brazil CEO Forum.  In a long 
informal meeting, Gomes da Silva said the Forum was making progress 
on priority issues, expressed hope for a bilateral tax treaty, 
encouraged a 'pro-trade' alternative to cross retaliation on cotton 
subsidies, and proposed a U.S.-Brazil bilateral trade preferences 
program for Haiti and other low-income countries.  Gomes da Silva 
said he was working with the GoB to schedule the next Forum meeting 
in Brazil for March 8-9, 2010.  END SUMMARY. 
 
Great Potential Following July Meeting 
-------------------------------------- 
 
¶2. (SBU) Da Silva commended the last CEO Forum meeting held in 
Washington July 20-21 and the new administration's efforts. He 
specifically thanked Commerce Secretary Locke, Deputy National 
Security Council (NSC) Director Froman and National Economic Council 
(NEC) Director Summers for their time and said that President 
Obama's drop-by with General Jones demonstrated the Forum has the 
interest at the highest levels in both governments.  He applauded 
the engagement for giving the Forum a "good restart and opportunity 
to re-engage on certain issues."  Nevertheless, Gomes da Silva 
warned of difficulty moving ahead with a bilateral tax treaty (BTT) 
and a bilateral investment treaty (BIT).  He was optimistic, 
however, that the Forum could make quick progress on other issues 
such as transportation cooperation, increased frequency of flights, 
and reform of visa regulations. 
 
Holding Out Hope on BTT 
----------------------- 
 
¶3. (SBU) Specifically on the BTT, Gomes da Silva remained 
optimistic, and said he will try to restart the process toward a BTT 
in the next two months by encouraging the GOB to bring back into the 
process certain key personnel, such as Marcos Vinicius Pontes who 
had led the international tax affairs division at Receita Federal 
and was previously the lead on the tax treaty negotiations.  Gomes 
da Silva told Charge he would also try to bring Lytha Spindola into 
the process.  Spindola currently is the executive secretary for the 
interagency Chamber of External Trade (CAMEX) and reports to the 
Minister of Development, Industry and Trade (MDIC), but previously 
worked in Receita Federal and is widely respected within the 
government and private sector.  He felt that "under the old team" 
both governments had gotten near an agreement on the remaining key 
issues.  However, he blamed massive changes in Receita Federal after 
former head Jorge Rachid left for a loss in momentum. 
 
¶4. (SBU) Gomes da Silva added that ex-Minister of Finance and 
current Chamber Deputy Palocci had recently mentioned some possible 
solutions without elaborating.  [COMMENT: He was likely referring to 
tax sparing and Receita Federal support of a Tax Information 
Exchange Agreement (TIEA).]  He then noted Brazilian private sector 
concerns that if a TIEA is passed, the GOB would not complete a BTT. 
 He added that this "misperception" is even more prevalent now, 
given the "lame duck" nature of the current government. 
 
WTO Cotton Dispute-Look for a Pro-Trade Way Forward 
--------------------------------------------- ------ 
 
¶5. (SBU) Gomes da Silva told the Charge that constructive proposals 
on a WTO cotton resolution are needed as good faith gesture to move 
the Foreign Ministry away from their focus on "retaliation."   While 
admitting that Brazilian diplomacy has a bias toward retaliation, he 
proposed the GOB focus instead on ideas that open the U.S. market to 
Brazilian goods.  Specifically, he suggested an offset in import 
duties for an amount equal to the WTO authorized retaliation.  Gomes 
da Silva informed the Charge that he and U.S. private sector 
co-chair Tim Solso have sent a letter to United States Trade 
Representative (USTR) Kirk and Foreign Minister Amorim advocating 
 
SAO PAULO 00000599  002 OF 002 
 
 
this approach to the cotton dispute.  Moreover, Gomes da Silva said 
Brazil should focus on duty free access for goods that do not hurt 
U.S. domestic producers, but instead displace goods coming from 
third countries.  He told the Charge he is pressing the GOB for this 
"pro-trade" response as a mechanism for the two countries to "send a 
message to the world" that they are serious about trade cooperation. 
 [NOTE: Sao Paulo Federation of Industries (FIESP) International 
Relations Director Mario Marconini made a similar third country 
pro-trade suggestion to NSC Director Froman during his June visit to 
Brazil (ref A) and FIESP International Trade Director Roberto 
Gianetti da Fonseca echoed the concept to USTR Kirk in September 
(ref B).  END NOTE.] 
 
 
¶6. (SBU) In the vein of potential third country trade cooperation as 
another alternative to retaliation, Gomes da Silva suggested the 
United States and Brazil create a  two-way trade preference program 
modeled on HOPE II for Haiti or nations in Sub-Sahara Africa.  Under 
his vision, Brazil would open its market for certain goods (e.g., 
U.S. tennis shoes assembled in Haiti with U.S. synthetic materials) 
for sale in Brazil, and the United States would open its market for 
certain goods (e.g., apparel, which he pointed out his company 
Coteminas does not make) assembled in Haiti from Brazilian cotton. 
Gomes da Silva, who made a similar suggestion during NSC Director 
Froman's visit, argued such a program would create jobs in Haiti and 
market opportunities for U.S. and Brazilian companies and 
potentially serve as mechanism for establishing offsets to cotton 
retaliation.  In addition to sidestepping a market-closing 
retaliation, a proposal based on cooperating on trade benefits to 
third countries could appeal to GOB interests in development 
cooperation in Africa and Haiti, Gomes da Silva suggested.  He was 
optimistic that the GOB would approve this concept and asked for 
U.S. Government support. 
 
Next CEO Forum Meeting 
---------------------- 
 
¶7. (SBU) As for the next CEO Forum, Gomes da Silva said he is 
checking to make sure GOB leadership is available March 8-9, 2010. 
He said his U.S. counterpart, Tim Solso, is also checking with the 
U.S. CEOs and government leaders to confirm the March 8-9 date. 
Gomes da Silva was unaware of any other potential dates being 
considered by the GOB or the CEOs. 
 
Comment 
------- 
 
¶8. (SBU) Gomes da Silva's confidence in the CEO Forum process along 
with his and the various other recent private sector suggestions for 
a pro-trade solution, whether compensation or assistance in 
third-country developing markets, to the WTO cotton dispute 
underscores a broad desire among Brazilian business to avoid a 
bilateral trade conflict with the United States.  Brazilian industry 
voices pressing for alternatives to retaliation in the cotton 
dispute will be one of the factors GOB considers in determining how 
it will proceed in addressing next steps. 
 
WHITE