Cablegate: Under Secretary Burns's Meeting with Brazilian

DE RUEHBR #0362/01 0601451
R 011451Z MAR 07




E.O. 12958: N/A

1. (SBU) Summary: U/S Nicholas Burns met in Brasilia with
six state governors, representing some of the largest and
most significant states by population and GDP, on February 8
to discuss areas of potential cooperation. The governors
described specific areas where they would welcome technical
assistance and private sector investment, including biofuels,
law enforcement, information technology, tourism, health,
education, petroleum and petrochemicals, and others. U/S
Burns told the governors that he and Ambassador Sobel will
work to enlarge the bilateral relationship through private
sector and state to state contacts. End summary.

2. (SBU) U/S Burns opened the meeting recalling that in his
meetings with Sao Paulo governor Jose Serra, Civil Household
Chief Dilma Rousseff, and Foreign Minister Celso Amorim, he
had had the opportunity to discuss common ground between the
two countries. He told the governors we have the opportunity
to build a stronger U.S.-Brazil relationship, and pointed to
the good personal relationship between Presidents Lula da
Silva and Bush. He said we already have substantial
cooperation in trade and investment and other areas, but the
relationship could be stronger. He said that while this is
true of the federal to federal government relationship, it is
also true of the state to state relationships.

3. (SBU) U/S Burns indicated the United States expects a
big expansion in the biofuels market, and would like to work
with Brazil to help create a large, global biofuels market.
He mentioned a number of areas he had discussed with Sao
Paulo Governor Serra (septel), including crime, drug
trafficking, judicial reform, police investigative
techniques, and prison reform. Japan, China, India, the EU,
and Brazil are the United States' key regional partners, and
U/S Burns asked how we can stimulate the U.S.-Brazilian

Rio Grande do Sul: Governor Yeda Crusius

4. (SBU) Governor Crusius said building a state to state
relationship is a challenge. Crusius said that the USG has a
huge capacity to get things done in comparison with the
government of her state. One area of need was prisons, which
she indicated she would raise with Attorney General Alberto
Gonzales (reported septel). Crusius said building a stronger
business relationship could be helped by government to
government relations, with the welcome intermediation of the
American Embassy. She said that there is already substantial
agricultural trade between her state and the United States,
and more could be done. On state to state relationships,
Governor Crusius said we would have to look for opportunities.

Pernambuco: Governor Eduardo Campos

5. (SBU) Governor Campos said that there has been little
economic growth in Brazil in the last three decades. Latin
America is at a special moment now, and Brazil has an
important role, at the side of the United States, he opined.
Campos said ties with the U.S. depend both on Brazilian
federal and state policies, and it is important for U.S.
diplomacy to understand the current environment in Brazil.
His region, the northeast, he said, is poor; people want
change and want to advance. They want economic growth and
development. Campos said a state government's range of
action is limited because social demands are heavy, and there
is no way out of the current situation if the social
pressures are not addressed. He stated emphatically that
there is a "total absence" of a U.S. policy of building a
closer relationship with the whole of Brazil, and said "we
need a closer relationship." He mentioned new ports,
planning, business infrastructure, biotechnology, and
biofuels as areas for cooperation. Campos said he hopes
education, university exchanges, and health, especially
tropical disease research, but above all, economic
development, can also be areas of cooperation. Campos said
Pernambuco needs to increase its export production in the
coastal forest zone ("zona da mata").

6. (SBU) Referring to himself, Gomes, Cabral, and Wagner,
Campos said that the governors in the meeting who are allied
with Lula see that they must make improvements in their

BRASILIA 00000362 002 OF 004

relationship with Latin America, and said sometimes they take
only small steps even when the stakes are high. Pernambuco
wants more economic integration with the United States, but
the U.S. is absent from the local economy. Noting that
Pernambuco already has a petrochemical center, he mentioned
petroleum and petrochemicals, especially refining, as an
opportunity sector.

7. (SBU) Finally, Campos said northeastern states have
skilled information technology workers. U.S companies could
generate 20 to 40 thousand information technology jobs in the
northeast, and the beneficiaries would mainly be youth who
are otherwise at risk of becoming involved in crime and

Ceara: Governor Cid Gomes

8. (SBU) Governor Gomes said 60 percent of federal
resources stay in the federal government, 25 percent is
distributed to states, and 15 percent goes to cities. With
that as a backdrop, Ceara has two main challenges, he said.
First, thirty percent of Ceara's 8,500,000 inhabitants are
engaged in low-yield, subsistence agriculture in the
interior. To illustrate Ceara's low productivity he pointed
out that it produces only seven percent of Brazil's gross
domestic product. Second, a third of Ceara's inhabitants
live in cities, where there are serious problems. He said
the state's cities are "powder kegs," where violence is rife.
The situation in the cities is comparable to that of eastern
Sao Paulo state or the city of Rio de Janeiro. Yet, he said,
there are great opportunities for closer relations with the
United States. In spite of its small size, Ceara has a lot
of water resources, and the state has made advances in
agricultural irrigation, an area in which exchange with the
U.S. would be useful, Gomes said. Although there is great
potential for cooperation, there are some obstacles in the
tourism sector, which is unfortunate in view of northeastern
Brazil's good climate and excellent beaches, according to
Gomes. Of all the states represented at the table, Ceara is
geographically closest to the U.S., he said. He also
mentioned energy as an area for cooperation, particularly in
renewable types such as wind energy, ocean wave energy, for
which Ceara is launching an experimental project, and
bio-diesel energy, produced in Ceara's semi-arid zone.

Bahia: Governor Jaques Wagner

9. (SBU) Governor Wagner said he believed it was possible
to intensify the bilateral relationship through states, and
said that Mercosur did something similar when, at the recent
January 18-19 summit in Rio de Janeiro, representatives of
sub-state bodies were invited to participate, including a
number of governors. Echoing Campos and Gomes, he said that
the whole of the northeast is closer to the United States
than southern Brazil, and he has been asking American
Airlines to fly to Salvador five times a week. He also
pointed out that Bahia, Pernambuco, and Rio de Janeiro have
the most important carnivals, and make up a "Carnival
triangle" that is ideal for tourism. Wagner said it is
important for people in both countries to get to know each
other, and for that flights are necessary. Currently there
are 40 to 50 flights a week between northeastern Brazil and
Europe. From Ceara alone there are five a week. He said air
connections are fundamental, and while there already are
flights from Miami to Salvador on a Brazilian airline, Bahia
also needs reciprocation by a U.S. carrier. He also said
that Bahia, as the state with the largest black population in
Brazil, is actively promoting "racial tourism" and he hoped
to tap into the U.S. market. Another area for cooperation is
health and education. Bahia has the 6th largest economy
among Brazilian states, but is the 6th worst in health and
education, Wagner said. Bahia and the World Bank have a
program in this area, and he said he would welcome the
involvement of a U.S. company. On the positive side, Wagner
said that the Ford Motor Company in Bahia has the highest
productivity rate of any Ford plant in the world. Finally,
he said piracy and drug trafficking are two important
criminal challenges in his state. People go into crime to
survive, and so piracy and drug trafficking are rooted in the
state's social circumstances.

BRASILIA 00000362 003 OF 004

Federal District: Governor Jose Roberto Arruda
--------------------------------------------- -

10. (SBU) Governor Arruda described the Federal District
(DF) as a meeting point of all cultures in Brazil. It has
three million inhabitants and is a "portrait" of Brazil's
social problems. Brasilia proper has the nation's highest
per capita income, while not far away there are communities
with the nation's lowest. The capital therefore deserves
special treatment, he argued. First, on energy, he mentioned
a 40 kilometer mass transit rail project using bio-diesel
that is under negotiation with the World Bank. Second, on
law enforcement, Arruda said police in the DF use
American-made software, and they are doing good
counternarcotics work. Police are well-trained, but they
need short-term intelligence help, especially in the fight
against organized crime. He said the crime rate in the
periphery around Brasilia is higher than Rio de Janeiro's.
Third, Arruda praised the high quality of the American School
of Brasilia and proposed that the USG also build a technical
school in the DF.

Rio de Janeiro: Governor Sergio Cabral

11. (SBU) Governor Cabral said the relationship between
Presidents Bush and Lula has strengthened the bilateral
relationship. Rio de Janeiro is committed to creating
conditions for investment and research, he said, and he would
like to expand the business relationship between the United
States and Rio de Janeiro. He said states cannot deal with
some problems alone, and for that reason he sought foreign
partners. On security, he said he needs a partnership with
experienced countries. Cabral said we should work to expand
investments in public safety. He mentioned that the federal
government has given the state 150 million reais for
investment and infrastructure in preparation for the July
2007 Pan American Games. Another large project in the state
is the construction of a highway ring around the city of Rio
de Janeiro. On the environment and energy, Governor Cabral
said ethanol is important, and the north and northeast of the
state have historically been sugar cane producing regions.
Annual production is soon expected to reach 5 million tons a
year. He said an oil refinery has been converted to a diesel
plant for used cooking oil.

U/S Burns and Ambassador Sobel

12. (SBU) U/S Burns said our governments can establish a
vision for a closer private sector relationship, but the
sector itself must move it forward. He said the vision has
not been high enough up to now and we can do more to amplify
the bilateral relationship. He recalled the case of India,
where the bilateral relationship has grown immensely over the
last ten years following President Clinton's decision to make
it a high priority. U/S said Governor Campos' remarks about
northeastern Brazil's links with Europe were important, and
the United States should be in the northeast, too. He and
Ambassador Sobel will try to work on this, he said. Ten
years from now our relationship should be larger than it is
now, he concluded. U/S Burns offered to help governors if
they travel to the United States. He said the U.S. is
becoming "greener" and in the coming years alternative energy
and climate change will be increasingly a part of the
national debate. Biofuels will connect Brazil and the United
States. He said Jose Serra asked why we were taxing ethanol
imports if we were committed to promoting its use, and he had
taken note of the question. Ambassador Sobel added that the
U.S. and Brazil should establish tax and bilateral investment
treaties, and that pressure from governors could help force
the process.

13. (SBU) Comment: The six governors represent some of the
most economically and politically important states in Brazil.
Only Sao Paulo, whose governor met with Burns separately
(septel), and Minas Gerais, are more important. (The
governor of Minas Gerais wanted to attend but bad weather
grounded his flight.) Four of the six governors are close to
President Lula or part of his coalition. Their interest was
clear: Without exception, they were all very interested in

BRASILIA 00000362 004 OF 004

expanding cooperation and promoting trade and investment
opportunities with U.S firms. They all face, to one degree
or another, serious law enforcement challenges that present
opportunities for the private sector as well as official
assistance and cooperation. There are important trade and
cooperation opportunities with these states that, if
developed, will contribute to the overall expansion of the
bilateral relationship. End comment.


14. (U) U.S.:
Under Secretary R. Nicholas Burns
Ambassador Clifford Sobel
DCM Phillip Chicola
Political Counselor Dennis Hearne
USAID Mission Director Jennifer Adams
Political Officer Dale Prince (notetaker)

Brazilian Governors:
Yeda Crusius, Rio Grande do Sul
Jaques Wagner, Bahia
Eduardo Campos, Pernambuco
Cid Gomes, Ceara
Sergio Cabral, Rio de Janeiro
Jose Roberto Arruda, Federal District

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