VZCZCXYZ0002
RR RUEHWEB

DE RUEHSO #0084/01 0351332
ZNR UUUUU ZZH
R 041329Z FEB 10
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 0343
INFO RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAC/AMEMBASSY ASUNCION
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHPE/AMEMBASSY LIMA
RUEHRG/AMCONSUL RECIFE
RUEHRI/AMCONSUL RIO DE JANEIRO
RUEHSG/AMEMBASSY SANTIAGO
RUEHSO/AMCONSUL SAO PAULO
RULSJGA/DEPT OF TRANSPORTATION WASHINGTON DC

UNCLAS SAO PAULO 000084 
 
SIPDIS 
SLUG FOR TDA AND USTR 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV ENRG BR EAIR EIND ATRN
SUBJECT: SAO PAULO KEY ECONOMIC DEVELOPMENTS, JANUARY 16-30, 2010 
 
REF: SAO PAULO 42; SAO PAULO 652; SAO PAULO 728 
 
¶1. (SBU) SUMMARY: This cable highlights economic, energy and 
science and technology developments in the Sao Paulo Consular 
District for the period January 16-30, 2010, not covered by broader 
reporting.  Significant developments during the period include: 
Embraer adjusting to slower global demand, Brazil's auto sector 
expecting strong domestic growth through 2014, and public forums 
begin for bullet train project. END SUMMARY. 
 
 
 
Embraer Charts Course for Slower 2010 
 
-------------------------------------- 
 
¶2. (SBU) Coming off a record number of aircraft deliveries in 2009 
(ref A), Embraer faces a significantly slower 2010 as the global 
demand for regional commercial aircraft, executive jets, and 
military trainers remains soft.  Embraer dismissed 4,000 workers in 
2009 as it noticed a slowdown in new export orders, 90 percent of 
its business, and is now looking at additional measures to solidify 
its business as previous growth areas such as executive jets have 
dwindled.  Embraer has been particularly affected by the economic 
slowdown in the United States which represents 43 percent of its 
market.  Weaker U.S demand and thinner global profit margins led 
the company to slip from Brazil's second largest exporter in terms 
of revenue to third place in 2009. 
 
 
 
¶3. (SBU) During a January 27 visit to the company's San Jose dos 
Campos manufacturing facility, Embraer Director for External 
Relations Jose Serrador Neto told Econ/Pol Chief and Econoff that 
the company aimed to weather 2010 without further major cuts in the 
hope of aircraft demand returning in 2011.  In the meantime the 
company is looking for new efficiencies such as implementing 
just-in-time inventory practices and aggressively seeking out new 
productivity gains.  For example, after hiring a Japanese 
consulting firm to evaluate the company's organizational practices, 
Embraer recently made adjustments to its final assembly hanger 
operation that cut work time in the last step of manufacturing from 
22 days to 11 days.   The company is also planning to develop new 
aircraft models to expand its product line.  On January 30 Embraer 
announced plans to develop a 122-seat version of its current top 
regional jet the E-195 by 2016.  The new aircraft would be the 
largest ever build by the company.  According to the Executive 
Vice-President, Muro Kern, the main purpose is to boost Embraer's 
manufacturing expertise, rather than to directly compete with 
Boeing or Airbus, which lead the market segment for aircraft with 
150 or more seats. 
 
 
 
Auto Sector Likely to Continue Growing 
 
-------------------------------------- 
 
¶4. (U) According to a recent study by PriceWaterhouseCoopers, if 
domestic auto sales continue to grow at rates similar to those 
registered over the past six years Brazil will have one car for 
every 5 people by 2014, the highest rate ever, and a 31 percent 
increase from the current rate (Ref B). In 2010, domestic auto 
sales are expected to reach 3.4 million units, or 9.3 percent 
greater than 2009.  According to Jackson Schneider, President of 
the National Association of Vehicle Manufacturers, the study 
underscores the fact that Brazil will continue to be an attractive 
market for international vehicle companies, as Brazil's middle 
class continues to expand and demand new vehicles. 
 
Public Forums Begin for Bullet Train Project 
 
-------------------------------------------- 
 
¶5. (SBU) On January 27, the first of three programmed public 
audiences to discuss planning for the high-velocity train (ref C) 
to connect Sao Paulo and Rio de Janeiro took place in Sao Jose dos 
Campos, an important high technology, aerospace and engineering 
center located along the anticipated rail corridor. Two more 
meetings will be held in Aparecida (SP) and in Barra Mansa (RJ) in 
the next few weeks.  The three cities are competing to have 
stations in the USD $20 billion project as well as one planned 
maintenance hub for the entire system.  While the high-velocity 
train program has been subject to several delays and more than 50 
different potential routings have already been proposed, Sao Jose 
Mayor Eduardo Cury told Econ/Pol Chief and Econoff his city was 
competing hard for a station and the maintenance hub.  Cury said 
that S????o Jos???? dos Campos could provide the third highest number 
of 
passengers in Sao Paulo for the system after S????o Paulo city and 
Campinas. The Mayor also expects that a station and a maintenance 
hub would further reinforce Sao Jose's existing industrial network 
and growing technology park. 
White