VZCZCXYZ0399
RR RUEHWEB

DE RUEHBR #1498/01 3551853
ZNR UUUUU ZZH
R 211852Z DEC 09
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 0187
INFO RUEHBR/AMEMBASSY BRASILIA
RUEHRG/AMCONSUL RECIFE
RUEHRI/AMCONSUL RIO DE JANEIRO
RUEHSO/AMCONSUL SAO PAULO

UNCLAS BRASILIA 001498 
 
SENSITIVE 
SIPDIS 
STATE PASS USTR FOR EVERETT EISSENSTAT, KATE KALUTKIEWICZ 
STATE FOR WHA AND EEB 
USDA FOR FAS RIEMENSCHNEIDER, BLUM, HIGGISTON 
 
E.O. 12958: N/A 
TAGS: ETRD KIPR ECON EFIN EINV EAGR BR
SUBJECT: BRAZIL: USTR/MRE BCM POSITIVE AND PRODUCTIVE 
 
REF: 2009 BRASILIA 1129; 2009 BRASILIA 1385; 2009 BRASILIA 1042 
2009 BRASILIA 1175; 2009 BRASILIA 1338 
 
¶1.  (SBU) SUMMARY:  On December 9, Assistant United States Trade 
Representative (AUSTR) for the Americas Everett Eissenstat, 
accompanied by Director for Brazil and Southern Cone Katherine 
Kalutkiewicz, led the U.S. delegation during a positive and 
productive meeting of the Bilateral Consultative Mechanism (BCM). 
Carlos Marcio Cozendey, Director of the Ministry of Exterior 
Relations' (MRE) Economic Department, led the Brazilian delegation. 
Throughout a wide-ranging agenda, both sides expressed eagerness to 
engage on tangible bilateral cooperation and agreed to exchange 
drafts of a framework agreement for trade and investment by the end 
of January 2010.  In discussing difficult issues, the U.S. and 
Brazilian delegations exchanged viewpoints constructively and 
emphasized that areas of disagreement should not define the overall 
bilateral relationship.  END SUMMARY. 
 
 
 
--------------------------------------------- ---- 
 
BCM: POSITIVE AND PRODUCTIVE 
 
--------------------------------------------- ---- 
 
 
 
¶2.  (SBU) In a private meeting before the start of the BCM, Under 
Secretary for Economic and Technological Affairs Pedro Mendonca 
told AUSTR Eissenstat that Brazil is glad for the opportunity 
presented by the BCM to discuss issues frankly.  AUSTR Eissenstat 
emphasized the U.S. commitment to the BCM and repeated the desire 
of U.S. Trade Representative (USTR) Ambassador Ron Kirk (expressed 
in a September 2009 visit to Brazil - ref A) that all bilateral 
trade dialogues become more goal-oriented, concrete, and robust. 
 
 
 
¶3.  (SBU) Ambassador Mendonca said Brazil bears "no hard feelings" 
toward the United States on the issue of the WTO cotton dispute and 
is "looking for a way out."  AUSTR Eissenstat urged U/S Mendonca to 
communicate frankly as Brazil goes through its internal process of 
deciding on retaliation measures and to consider the dangers of 
inflexibility.  Both agreed that the United States and Brazil 
should manage the cotton dispute in the context of the overall 
bilateral relationship. 
 
 
 
Agenda Item: Institutional Framework of Trade Relations 
 
--------------------------------------------- ---------------------- 
----- 
 
 
 
¶4.                  (SBU) Following up on a suggestion made by 
Ambassador Kirk in his September 2009 visit to Brazil, the 
Brazilian delegation expressed interest in establishing a more 
stable framework for trade relations with the United States. 
Minister Cozendey said that Brazil had examined some similar U.S. 
agreements, some of which were general in tone, while others 
included specific programs of work.  He asked what characteristics 
and level of detail the United States envisioned for a U.S.-Brazil 
framework. 
 
 
 
¶5.                  (SBU) AUSTR Eissenstat said that he would 
consult with others in the USG but that he thinks the framework 
should be broad, allowing the specific workplan to develop in line 
with changing political and economic objectives.  He cited similar 
Brazilian agreements with Turkey and Switzerland and the United 
States' agreement with Uruguay as examples where the agreements 
have broad objectives and work plans that can meet changing needs 
and priorities. 
 
¶6.                  (SBU) Minister Cozendey explained that anything 
called an "agreement" must be approved by the Brazilian Congress 
and indicated that an executive branch mechanism without the term 
"agreement" would not require Congressional approval.  AUSTR 
Eissenstat explained that Trade and Investment Framework Agreements 
(TIFAs) do not require approval by the United States Congress and 
said the United States can be flexible on the name and terms for 
developing a framework, as well as on the timeframe. 
 
 
 
¶7.                  (SBU) Minister Cozendey said he would seek 
approval from the Brazilian External Trade Chamber (CAMEX) at a 
meeting during the week of December 14 and forward a draft 
framework to USTR by the end of January or beginning of February 
¶2010.  AUSTR Eissenstat committed that USTR would also work to 
develop ideas and would be available for further technical 
discussions if desired.  He later explained that the USG would be 
developing a proposed draft text during this period as well. 
 
 
 
Agenda Item: Investment Policy 
 
---------------------------------------- 
 
 
 
¶8.                  (SBU)  AUSTR Eissenstat expressed the United 
States' continued interest in a Bilateral Investment Treaty (BIT) 
with Brazil. Minister Cozendey observed that interest in a BIT is 
growing as Brazilian investment overseas grows.  He cautioned, 
however, that the Brazilian government's view is that a BIT with 
the United States continues to have policy difficulties, 
specifically mentioning a difference of opinion on international 
arbitration.  He recalled that in the 1990s, Brazil signed some 
agreements which had difficulty gaining Congressional approval. 
MRE decided not to pursue those agreements because they found the 
existing Brazilian legal framework very stable and sufficiently 
safe for investors.  More recently, he said, there had been some 
discussion about a new BIT model, and Brazil has begun discussions 
with Chile utilizing the new model. Minister Cozendey said that any 
future Brazil BIT would not be based on the tradition Organization 
for Economic Cooperation and Development (OECD) model, since Brazil 
sees problems with that model including an absence of guarantees 
that measures such as direct expropriation would not be misused. 
 
 
 
¶9.                  (SBU) In response to Minister Cozendey's 
question about the progress of the U.S. BIT review, AUSTR 
Eissenstat said that an internal U.S. review of investment policy 
principles may be done by the end of the year.  Minister Cozendey 
and AUSTR Eissentat noted that other bilateral dialogues such as 
the CEO Forum have endorsed the concept of an investment treaty, 
and agreed that it was worthwhile to continue discussing the issue 
at a technical level, noting that experts were scheduled to meet 
alongside the December 14 meeting of the Economic Partnership 
Dialogue (EPD) in Washington. 
 
 
 
¶10.              (SBU) Minister Cozendey indicated his interest in 
investment promotion.  AUSTR Eissenstat suggested looking for ways 
to include invest promotion in existing mechanisms.  He committed 
to coordinate with the Department of Commerce to investigate 
whether this would fit into the CEO Forum dialogue. 
 
 
 
Agenda Item: Bilateral Trade and Investments 
 
--------------------------------------------- ------------- 
 
 
 
¶11.              (SBU) Minister Cozendey expressed Brazil's 
disappointment in the diminishing overall volume of trade between 
the United States and Brazil.  He said exports up to November 2009 
had decreased 45% and imports decreased 29% compared to 2008.  He 
said Brazil understands that the overall volume of trade and 
Brazil's current trade deficit with the United States is likely a 
consequence of the international financial crisis and strong 
 
currency and is not expected to be permanent.  However, he said, it 
is concerning that these effects seem to be different from those in 
other countries, and the role of the U.S. as a trading partner had 
decreased in relation to others.  Marcela Carvalho, International 
Affairs Advisor for the Ministry of Development, Industry, and 
Commerce (MDIC), explained that overall Brazilian trade has 
decreased 30%, but trade with the United States has decreased 45%. 
 
 
 
 
¶12.              (SBU) Minister Cozendey said the Brazilian 
short-hand for describing trade categorizes trading partners into 
"the United States, the European Union, Latin America, China, and 
all the others."  He said that Brazil worries when U.S. trade 
decreases because it is mostly trade in manufactured goods which 
results in Brazil's overall composition of exports heavy on raw 
material (traded, for example, with China). He emphasized that the 
concern is not with the country's current trade deficit but rather 
with the overall reduction in trade. 
 
 
 
¶13.              (SBU) AUSTR Eissenstat, noting that there seems to 
be a shift in the U.S. economy toward more saving and less 
consumption, indicated that there seems to be the potential for 
substantial growth in bilateral trade for both economies and said 
it could be valuable to examine the data more in depth to 
potentially identify regions and products that are underdeveloped 
in the bilateral trade relationship.  According to AUSTR Eissenstat 
it may be possible to build on significant advances in trade 
between Brazil and the United States, for example by determining if 
any sectors are under-represented. 
 
 
 
Agenda Item: WTO and Doha 
 
-------------------------------------- 
 
 
 
¶14.              (SBU) Minister Cozendey said Brazil is not 
optimistic about the prospects for the Doha Round.  While many 
countries say they are engaged and invested in reaching a positive 
conclusion, he said, there has been little progress.  He said the 
United States is the only country that objects to the text agreed 
on in November 2008 and that Brazil is in a difficult position 
since the United States is asking for more concessions from Brazil, 
Russia, India, and China.    He asked the United States to narrow 
its list of priorities, though he admitted Brazil has a general 
idea of the U.S. goals and simply finds the priorities 
unacceptable.  Minister Cozendey also said that delays in 
concluding the round have already undermined the credibility of the 
World Trade Organization (WTO) and have led to loss of interest 
among some Brazilian ministries and private sector representatives. 
He pointed out that attention to the Round will be even more 
difficult to sustain as the country heads into the 2010 election 
cycle. 
 
 
 
¶15.              (SBU) While AUSTR Eissenstat is not the primary 
spokesperson on this issue, he said he would convey the Brazilian 
concerns to the appropriate representative.  He said the United 
States appreciates the effort so far on the Doha round but that the 
USG requires more meaningful market access guarantees.  Without 
that, he said, an agreement could actually be detrimental.  He said 
he does not know what would be required to reach consensus but that 
he understands the potential impact of the Brazilian election cycle 
and would take that message back to Washington. 
 
 
 
Agenda Item: WTO Dispute Settlement 
 
--------------------------------------------- ---- 
 
 
 
¶16.              (SBU) On orange juice, Minister Cozendey said that 
Brazil is now in the phase of trying to constitute a dispute panel. 
Both sides refused each others' nominations for panel members, and 
 
Brazil now expects arbitration on panelists to begin early next 
year.  AUSTR Eissenstat expressed disappointment that a panel was 
requested.  He said that Ambassador Kirk and the USTR General 
Counsel are very interested in working to resolve the issue and do 
not want continued irritants in the relationship.  However, he 
said, the current decision by Brazil to seek the panel actually 
makes it more difficult for the United States to address the 
underlying question of zeroing.  Minister Cozendey said Brazil was 
not at liberty to withhold the case in the face of private sector 
interest but would also prefer and would be happy to discuss a more 
general solution, rather than continuing with arbitration on a 
case-by-case basis. 
 
 
 
¶17.              (SBU) On cotton, Minister Cozendey explained that 
CAMEX published for public comment an initial list of goods that 
could possibly be subject to increased tariffs (a decision that 
does not require Congressional approval, since the Brazilian 
executive branch has the authority to define tariffs) and is 
currently analyzing approximately 450 comments received.  CAMEX 
expects to finish its technical analysis (which Minister Cozendey 
said will not be publicly available) and present a refined list for 
ministerial decision by the end of January. (Note: CAMEX has now 
said publicly that its next meeting will be scheduled for early 
February, so no decision is expected before then.  End note.) 
 
 
 
¶18.              (SBU) On a parallel track, CAMEX also drafted and 
forwarded to the Office of the President legislation authorizing 
cross-retaliation on intellectual property (which Minister Cozendey 
said will not be submitted for public comment).  Minister Cozendey 
said that technically the WTO decision has the weight of law in 
Brazil, so legislation authorizing cross-retaliation is not 
strictly required.  However, CAMEX decided to draft the legislation 
in order to ensure judicial clarity on this very delicate issue. 
MRE recommends that the President's office send the draft 
legislation to Congress as a provisional measure (which would take 
effect immediately and then be subject to Congressional review) by 
the end of January so that Brazil could implement both the tariffs 
and the cross-retaliation portion simultaneously (the exact 
effective date would have to be decided by CAMEX ministers) and 
"minimize uncertainty for business." 
 
 
 
¶19.              (SBU) Minister Cozendey said Brazil's objective is 
to see that the recommendations of the Dispute Settlement Body 
(DSB) are implemented (both on subsidies and guarantees) and that 
Brazil would prefer compliance to retaliation.  He explained that 
Brazil intends to chose measures it views as reversible and would 
lift any retaliation as soon as the United States complies with the 
DSB recommendations.  He said it is likely Brazil will have some 
form of retaliation in place by the end of January (and will base 
the 2010 retaliation value on 2008 data provided by the United 
States, since 2009 data is not yet available). 
 
 
 
¶20.              (SBU) AUSTR Eissenstat asked that Brazil continue 
to work closely with the United States and guard against unintended 
or unpredictable consequences.  He emphasized that the U.S. 
Congress has its own process and priorities, but USTR wants to 
manage this "potentially corrosive" issue such that the 
relationship can still grow in the long term. 
 
 
 
Agenda Item: Trade Facilitation 
 
---------------------------------------- 
 
 
 
¶21.              (SBU) Minister Cozendey said CAMEX is looking for 
ways to simplify trade and is very interested in ongoing 
cooperation on trade facilitation.  AUSTR Eissenstat suggested the 
topic as part of the work plan under the new framework agreement. 
 
¶22.              Calling the Department of Homeland Security's 
Customs-Trade Partnership Against Terrorism (C-TPAT) a valuable 
mechanism, Minister Cozendey said that Brazil nonetheless has 
difficulty with some requirements like 100% scanning.  Embassy 
Brasilia's Commercial Attache passed to the Brazilian delegation a 
fact sheet on C-TPAT and highlighted several recent and successful 
meetings and visits on trade facilitation.  She also asked the 
Brazilian delegation to clarify recent visa refusals for C-TPAT 
inspectors, which she said hurt Brazilian exporters. 
 
 
 
¶23.              (SBU) Minister Cozendey said MRE recognizes the 
importance of C-TPAT and would like to continue to discuss the 
issue at the EPD.  The immediate solution to the visa problem, he 
said, is for inspectors to specify trade facilitation rather than 
anti-terrorism activities on their visa applications so that the 
applications are channeled to the appropriate MRE division. 
 
 
 
Agenda Item: GSP Renewal 
 
----------------------------------- 
 
 
 
¶24.              (SBU) Minister Cozendey registered MRE's interest 
in renewal of the Generalized System of Preferences (GSP) program 
and asked about Brazil's prospects for continued inclusion.  He 
argued that loss of GSP status would further inhibit bilateral 
trade flows and said some regions in Brazil use the GSP program as 
an important opportunity to engage in trade with the United States. 
He also argued that withdrawing Brazil's GSP status would only 
benefit other advanced developing economies since lesser-developed 
countries do not produce the goods that would be needed to fill the 
space left by Brazil.  AUSTR Eissenstat described the short-term 
prospects for GSP renewal as good but said the program will 
probably be subject to broad reform in 2010.  Given the U.S. 
Congress' interest in ensuring that the program apply only to the 
most needy countries, AUSTR Eissenstat asked Brazil to provide more 
data on the benefit of GSP inclusion for particular Brazilian 
products and regions (for example, the under-developed North and 
Northeast). 
 
 
 
Agenda Item: Preferential Regime for Haiti 
 
--------------------------------------------- --------- 
 
 
 
¶25.              (SBU) Minister Cozendey explained that the 
Brazilian government is still pursuing a unilateral preference 
program for Haiti that is similar to the HOPE II program.  Minister 
Cozendey explained that the Brazilian private sector is discussing 
a proposal that would include reciprocity with HOPE II that should 
be presented to CAMEX early in 2010.  MRE sees some opportunities 
in the current formulation of the HOPE II preferential regime, but 
some products are excluded under the present rules.  Minister 
Cozendey also cited some opposition from within the Brazilian 
textile industry in pursuing a preferential regime for Haiti, 
saying some have questioned assistance to Haiti rather than to 
under-developed domestic regions.  Minister Cozendey acknowledged 
that the U.S. Congress would be responsible for making the sorts of 
changes to HOPE II that are likely to be advocated by the Brazilian 
private sector. 
 
 
 
¶26.              (SBU) AUSTR Eissenstat stressed the United States' 
shared interest in stability and economic growth for Haiti, but 
explained that legislative modification of the program would be 
very difficult.  He asked Minister Cozendey whether the Brazilian 
private sector had spoken with the U.S. private sector as the USG 
had previously suggested.  Cozendey noted that the Brazilian 
private sector had reported that a meeting of both private sectors 
would occur in early 2010.  In addition, AUSTR Eissenstat said 
USTR's textile negotiator has concerns that some products being 
proposed for inclusion by Brazil could hurt the development of 
Haiti's domestic production capacity.  Minister Cozendey requested 
further details, which AUSTR Eissenstat agreed to provide.  AUSTR 
 
Eissenstat noted that there was nothing to inhibit Brazil from 
establishing a preferential trading regime for Haiti immediately 
without waiting for new legislative action by the United States. 
 
 
 
Agenda Item: Technical Regulations and SPS Measures 
 
--------------------------------------------- ---------------------- 
-- 
 
 
 
--Beef and Pork 
 
 
 
¶27.              (SBU) Minister Cozendey expressed concern that the 
United States has not yet proposed a rule on Brazilian pork exports 
from Santa Catarina after a technical evaluation was completed in 
February 2009.  He also said that the situation for Brazilian beef 
is even worse, since Brazil has controlled foot and mouth disease 
for many years and is certified by the World Organization for 
Animal Health (OIE). 
 
 
 
¶28.              (SBU) AUSTR Eissenstat said that the pork process 
is proceeding through normal rule-making channels and emphasized 
that technical regulations and sanitary and phyto-sanitary (SPS) 
measures should be purely science-based and not politicized.   He 
asked whether Brazil has any draft regulations to bring the country 
in line with international guidelines on Bovine Spongiform 
Encephalopathy (BSE) following submission of comments by the U.S. 
Animal and Plant Health Inspection Service (APHIS).  Minister 
Cozendey committed to following up with the Ministry of 
Agriculture.  He asked that USTR reach out to the U.S. Department 
of Agriculture in order to help schedule the next meeting of the 
Consultative Committee on Agriculture. 
 
 
 
--Medical Devices 
 
 
 
¶29.              (SBU) AUSTR Eissenstat thanked the Brazilian 
health vigilance agency (ANVISA) for its efforts to address 
industry concerns, offered to work as a facilitator where helpful, 
and committed to helping continue ANVISA's engagement with the Food 
and Drug Administration (FDA).  He asked for ANVISA clarification 
on the publication date for a promised technical note regarding 
Resolution 25 and continued concerns from U.S. industry regarding 
possible disruption of trade resulting from Resolution 25's 
inspection requirements.  Commercial Attache thanked ANVISA for its 
work thus far to answer industry concerns and suggested that 
another public forum could be helpful. 
 
 
 
¶30.              (SBU) Ana Paula Juc????, from the international 
relations office of ANVISA, said the technical note would be 
available on ANVISA's website by the end of December.  Minister 
Cozendey further explained that ANVISA has scheduled most of the 
inspection requests for the remainder of 2009 and approximately 30 
for 2010.  He also said that ANVISA remains interested in increased 
cooperation with FDA. 
 
 
 
--Toys 
 
 
 
¶31.              (SBU) AUSTR Eissenstat thanked Brazil for the 
revisions in the toy licensing regulations published in November 
and welcomed additional information clarifying the accreditation 
process, particularly regarding the samples and locations for 
testing.  Minister Cozendey regretted that the Brazilian National 
Institute of Metrology, Standardization, and Industrial Quality 
(INMETRO) could not be present at the BCM and asked that USTR pass 
its questions in writing. 
 
Agenda Item: Biofuels 
 
---------------------------- 
 
 
 
¶32.              (SBU) Minister Cozendey asked for an update on the 
administration's position regarding the ethanol tariff.  He said 
the issue of cooperation in biofuels would be discussed at the 
December 15 Biofuels Steering Committee meeting in Washington but 
wanted to raise the tariff in the BCM because it could have 
consequences for cooperation on international biofuels standards 
and in third countries.  AUSTR Eissenstat referred Minister 
Cozendey to the Administration's letter on ethanol written 
following Ambassador-designate Tom Shannon's confirmation hearing. 
 
 
 
Agenda Item: Trade and Environment 
 
--------------------------------------------- --- 
 
 
 
¶33.              (SBU) Minister Cozendey asked for more information 
regarding the content of climate-related trade legislation pending 
before the U.S. Congress and conveyed Brazil's interest in assuring 
that any measures taken comply with WTO obligations and are 
discussed multilaterally.  Minister Cozendey indicated that the 
Brazilian government was unclear about whether the draft 
legislation contains clear guidelines on border measures.  AUSTR 
Eissenstat requested the questions in writing and offered to 
facilitate the appropriate technical contacts. 
 
 
 
 
 
Agenda Item: Subsidies in the Pulp and Paper Industries 
 
--------------------------------------------- ---------------------- 
--- 
 
 
 
¶34.              (SBU) Minister Cozendey inquired about "worrisome" 
efforts by U.S. industry to maintain the subsidies beyond their 
scheduled expiry in 2009, which he said would "pose a serious 
problem."  He said that Canada had been obliged to match the U.S. 
subsidy but would withdraw it when the United States does.  AUSTR 
Eissenstat said that the Obama Administration has proposed to 
terminate the subsidy but is aware of industry's attempts to pursue 
additional avenues.  He asked that Brazil please contact USTR if 
they see new developments within industry. 
 
 
 
Agenda Item: Subsidies for the Aircraft Sector in Third Countries 
 
--------------------------------------------- ---------------------- 
--------------- 
 
 
 
¶35.              (SBU) Minister Cozendey said that Brazil is 
concerned about federal and provincial subsidies for the aircraft 
industry in Canada and hopes to meet with the United States early 
in 2010 to discuss the applicability of WTO rules and a possible 
future dispute.  AUSTR Eissenstat said that USTR is reviewing the 
issue and would like to keep sharing information.  He committed to 
discuss the possibility of a meeting and respond to MRE in the near 
future. 
 
 
 
Agenda Item: Intellectual Property (IP) 
 
--------------------------------------------- --- 
 
--Brazilian National Plan for Combating Piracy 
 
 
 
¶36.              (SBU) Andre Barcellos, Executive Secretary of the 
Brazilian National Anti-Piracy Council (CNCP), gave a brief 
presentation on CNCP's history and current priority projects.  The 
priority projects include "Cities free of piracy" (agreements were 
signed on December 1 with Sao Paulo and Curitiba), "Legal Markets," 
cooperation with internet service providers, an anti-piracy 
internet portal, and "Commerce against Piracy" (ref C).  He agreed 
to supply more details on the municipal agreements.  AUSTR 
Eissenstat said that while there is still work to undertake, the 
CNCP's interagency effort was to be commended, and suggested that 
further opportunities for cooperation on IP could perhaps be 
included in the previously discussed trade framework agreement. 
 
 
 
--Google Books 
 
 
 
¶37.              (SBU) Minister Cozendey and expressed great 
interest in the outcome of the Google Books case, particularly 
regarding whether Brazilian authors would be required to "opt-out" 
of the final settlement in order to maintain their ability to file 
separate suits against Google.  The U.S. Patent and Trademark 
Office's (USPTO) Regional IP Specialist explained that the 
situation is fluid, with the court currently analyzing a second 
draft of the proposed settlement.  In response to Brazil's 
questions, the USPTO representative said the current draft does not 
require foreign authors to be covered by this settlement unless 
they are registered USPTO or published in Canada, Australia, or the 
United Kingdom. 
 
 
 
--Orphan Works 
 
 
 
¶38.              (SBU) Minister Cozendey asked whether there was a 
current proposal in the U.S. Congress concerning "orphan works" and 
inquired about the United States' experience in cases where the 
rightsholder is not found.  A representative from the Ministry of 
Culture said that Brazil does not have a tradition of registering 
works so no comprehensive database exists, unlike in the United 
States where tradition has obligated the registration of works at 
the USPTO.  Post's Regional IP Specialist explained that that there 
is currently no legislation on "orphan works" pending before the 
U.S. Congress. 
 
 
 
--Competition Policy and IP 
 
 
 
¶39.              (SBU) Citing the European Union's research on 
anti-competitive practices by brand-name pharmaceutical 
manufacturers and a July court filing by the U.S. Department of 
Justice's antitrust division regarding the unlawful nature of 
settlements aimed at delaying the introduction of generic drugs, 
Minister Cozendey asked for further updates and for the U.S. 
delegation to identify an appropriate competition policy contact 
for further discussion, which Embassy Brasilia has provided in 
coordination with USTR and the Federal Trade Commission. 
 
 
 
--Patent Matters 
 
 
 
¶40.              (SBU) AUSTR Eissenstat said that U.S. industry has 
expressed concern about the role of ANVISA in reviewing 
pharmaceutical patent applications.  He also asked for further 
information on a November opinion by the Brazilian Attorney General 
(AGU) which ruled that only the Brazilian patent and trademark 
office (INPI) is competent to review patentability requirements 
(ref E).  Minister Cozendey said he could not clarify much as there 
is division within the government.  The AGU opinion, which does not 
 
carry the force of law or regulation, is awaiting analysis by the 
Office of the President, with an unknown timetable for decision or 
next steps. 
 
 
 
Agenda Item: CITEL Mutual Recognition Agreement (MRA) 
 
--------------------------------------------- ---------------------- 
-------- 
 
 
 
¶41.              (SBU) Minister Cozendey explained that the 
Brazilian telecommunication authority (ANATEL) has reviewed the 
issue and found no interest on the Brazilian side in exports and a 
strong interest in developing a domestic testing laboratory 
network.  He said that while he does not expect the United States 
to abandon the issue, prospects are not positive, though he did 
propose the creation of a cooperative working group between U.S. 
and Brazilian regulatory agencies to maintain an open dialogue, 
perhaps including exchanges between Brazilian and United States 
labs. 
 
 
 
Agenda Item: Pre-Salt Legislation 
 
------------------------------------------ 
 
 
 
¶42.              (SBU) AUSTR Eissenstat said that the USG has been 
hearing from many stakeholders concerned about the lack of a 
transparent regime that maximizes the opportunities for 
development.  Eissenstat said the United States is concerned about 
this issue from an investment standpoint, but also has concerns 
that Brazil may not be able to adequately meet its own goals. 
Andre do Lago, Director of MRE's Energy Department, said it is 
lucky for Brazil that it discovered oil now, when it has an 
established democracy and strong institutions.  He said that the 
proposed legislation attempts to address fears regarding the 
negative consequences that "out of control exploitation" of the 
pre-salt oil reserves could provoke.  Minister do Lago acknowledged 
that Petrobras alone cannot meet its goal of investing funds 
equivalent to its own value over the next five years and that 
Brazil will need large investments of capital and equipment to 
exploit the oil reserves.  He acknowledged that the final law will 
likely provide preferences for Brazilian inputs, but noted the need 
for flexibility in case the Brazilian private sector is unable to 
meet all of the needs.  Some segments of the population are more 
"nationalistic" than others, he said, but he is confident they will 
reach the right balance. 
 
 
 
--------------- 
 
COMMENT 
 
--------------- 
 
 
 
¶43.              (SBU) The commitment of both Brazil and the United 
States to begin work on a framework agreement for trade and 
investment early in 2010 represents a significant achievement.  The 
framework can make the bilateral trade dialogue more concrete and 
goal-oriented, while also moving away from disputes and toward 
results.  The overall tone of cooperation during the BCM, even on 
difficult topics, represents a positive shift from prior, more 
confrontational meetings, one that will be very helpful in 
progressing on many issues.  END COMMENT. 
 
 
 
¶44.  This message has been cleared by USTR. 
KUBISKE