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Cablegate: Under Secretary Burns' Lunch with Sao Paulo Governor Serra,

VZCZCXRO2101
PP RUEHRG
DE RUEHSO #0166/01 0601606
ZNR UUUUU ZZH
P 011606Z MAR 07
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 6504
INFO RUEHBR/AMEMBASSY BRASILIA 7608
RUEHAC/AMEMBASSY ASUNCION 2953
RUEHBU/AMEMBASSY BUENOS AIRES 2665
RUEHMN/AMEMBASSY MONTEVIDEO 2298
RUEHLP/AMEMBASSY LA PAZ 3252
RUEHCV/AMEMBASSY CARACAS 0457
RUEHBO/AMEMBASSY BOGOTA 1511
RUEHSG/AMEMBASSY SANTIAGO 2010
RUEHRG/AMCONSUL RECIFE 3417
RUEHRI/AMCONSUL RIO DE JANEIRO 7860
RHEHNSC/NSC WASHDC
RUCPDOC/USDOC WASHDC 2730
RUEHRC/USDA FAS WASHDC 0661
RHEBAAA/USDOE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHMFISS/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 04 SAO PAULO 000166

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/FO, WHA/BSC, WHA/EPSC, WHA/PDA, INL
STATE ALSO FOR P, E, S/P
STATE PASS USTR FOR CRONIN
STATE PASS EXIMBANK
STATE PASS OPIC FOR DMORONESE, NRIVERA, CVERVENNE
NSC FOR FEARS
TREASURY FOR OASIA, DAS LEE AND JHOEK
USDOC FOR 4332/ITA/MAC/WH/OLAC
USDOC FOR 3134/ITA/USCS/OIO/WH/RD
DOE FOR GWARD
SOUTHCOM ALSO FOR POLAD
USAID FOR LAC/AA

E.O. 12958: N/A
TAGS: PGOV PREL EAGR EPET SNAR ASEC EINV BR
SUBJECT: UNDER SECRETARY BURNS' LUNCH WITH SAO PAULO GOVERNOR SERRA,
FEBRUARY 6, 2007

REF: (A) SAO PAULO 58; (B) SAO PAULO 36

SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY

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SUMMARY
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1. (SBU) Summary: During his February 6-7, 2007 visit to Sao Paulo,
Under Secretary for Political Affairs R. Nicholas Burns and his
delegation were hosted for lunch by Sao Paulo Governor Jose Serra
and key members of Serra's cabinet. U/S Burns and the Governor
discussed cooperation on biofuels, public security challenges and
possible U.S. assistance, and trade and investment issues, including
the importance of curbing IPR piracy. On the key theme of biofuels,
U/S Burns proposed that the U.S. and Brazil develop a strategic
partnership to work with third countries on creating a global market
for ethanol. Governor Serra outlined public security challenges
facing the state of Sao Paulo, and proposed USG assistance at the
state level in key areas. U/S Burns and A/S Shannon raised regional
foreign policy issues, noting that while state governors like Serra
have no direct role, their states are affected by Brazil's global
posture and regional approach. U/S Burns encouraged Serra to visit
the U.S. in the near future. End Summary.

2. (U) On February 6, Sao Paulo Governor Jose Serra hosted a lunch
for Under Secretary Burns and his delegation.

PARTICIPANTS
------------

Under Secretary Burns
WHA Assistant Secretary Tom Shannon
Special Energy Coordinator Greg Manuel
William McIlhenny, S/P Member
Heide Bronke, P Special Assistant
Ambassador Clifford Sobel
DCM Phil Chicola
Consul General (CG) Chris McMullen
Peter Higgins, POL (notetaker)

Governor Serra
Lt. Governor/Secretary of Development Alberto Goldman
Secretary of Public Security Ronaldo Marzagao

SIPDIS
Secretary of Justice Luiz Antonio Guimaraes Marrey

SIPDIS
Deputy Secretary of Prison Administration Lourivel Gomes
Foreign Affairs Advisor Helena Gasparian
Veronica Bourgeois, the Governor's daughter.

3. (U) Serra, 65, is a former Minister of Health who ran
unsuccessfully for President in 2002 and again for his party's
presidential nomination in 2006. He is widely expected to make yet
another try in 2010. He served two terms as a Federal Deputy and
one as a Senator. He has also been Sao Paulo Secretary of Economy
and Planning, national Minister of Planning, and Mayor of Sao Paulo
(2005-6). A leader of the National Students' Union (UNE) in the
1960s, he spent fourteen years in exile in France, Chile, and the
United States during the 1964-85 military dictatorship. He earned a
PhD in Economics at Cornell and taught at Princeton.

4. (SBU) After the initial pleasantries and words of welcome,

SAO PAULO 00000166 002 OF 004


Governor Serra's first remark was that Sao Paulo state is Brazil's
largest producer of sugarcane and ethanol, and that many here are
concerned that the U.S. ethanol market is protected (a reference to
the 54-cent per gallon surcharge/tariff on ethanol imports).
Economic issues of this nature are an extremely important aspect of
Latin America's relationship with the United States, Serra
commented.

5. (SBU) U/S Burns began by outlining the agenda for his visit,
noting that he planned to meet in Brasilia with senior GoB officials
with a view to strengthening bilateral relations. While the
relationship is good, he stressed that it could be larger and that
the two countries could do much more together than they are
currently doing. The USG is engaging with the GoB at the highest
level, he continued, noting that Attorney General Gonzales is
visiting Brasilia and Rio de Janeiro this week. POTUS is expected
to meet in the near future with President Luiz Inacio Lula da Silva.


6. (U) U/S Burns described the energy roundtable he participated in
earlier that morning and said he was impressed with what Brazil has
done with biofuels. He proposed that the U.S. and Brazil become
strategic partners in creating a global market for ethanol, reaching
out to third countries.

7. (SBU) Ambassador Sobel described U/S Burns' responsibility for
overseeing funding for USG assistance to other countries to combat
transnational crime. He recalled Governor Serra's recent remark
(ref B) that Sao Paulo state has adequate funding but needs U.S
equipment, technology, and expertise to improve its security
capabilities. U/S Burns commented that diplomacy has changed in
recent years; the critical areas are now counter-narcotics,
anti-terrorism, border and port security, and combating trafficking
in persons and HIV/AIDS, to name a few. He outlined the role of INL
in providing assistance and how it works in other countries, most
notably Colombia, and suggested that A/S Patterson visit Sao Paulo.
Like Brazil, he said, the United States has border concerns. The
Ambassador cited research showing that Sao Paulo's international
airport in Guarulhos has the highest incidence of false documents in
the world.

8. (SBU) DCM explained that NAS security assistance is funneled
through the National Public Security Service (SENASP) in Brasilia
but that funds trickle down to the states slowly, and noted that
Embassy is working on a plan to amend the NAS MOU with the GoB to
make it possible to provide assistance directly to states.

9. (SBU) The Governor recalled that Ronaldo Marzagao, state
Secretary for Public Security, had served as national anti-drug

SIPDIS
director in the late 1980s under the Sarney administration. The
U.S. Ambassador at the time advised Marzagao that drugs were "not
just a gringo problem," but rather one that would impact on Brazil -
and he has been proven right.

10. (SBU) Sao Paulo state has about 130,000 police (civil and
military), Governor Serra continued. Its prison population of about
150,000 represents more than half of all prisoners in Brazil.
Organized criminal gangs, especially the First Capital Command
(PCC), have enormous influence in the state prison system. The
state needs technical assistance to combat these problems. Serra
reiterated his priorities as fighting drug and arms trafficking and

SAO PAULO 00000166 003 OF 004


contraband and piracy as well as organized crime. The state needs
the technology to tap telephones. Security in the metropolitan
area's subways and commuter trains is also a growing concern
(reftels). Foreign Affairs Advisor Helena Gasparian elaborated on
this problem and noted that the recent DHS/TSA visit and assessment
had been immensely helpful to state transit authorities. Under
Secretary Burns commented that the USG works increasingly at state

SIPDIS
and local levels in other countries, citing examples in India. He
and Ambassador Sobel stressed the importance of getting the GoB's
approval for such cooperation; the Ambassador observed that
Itamaraty (MFA) is sometimes sensitive about such matters. The
state government may need to help convince the federal government of
the value of having the U.S. work directly with the state. Serra
indicated he would also be willing to talk to the media about the
need for such assistance.

11. (SBU) Secretary Marzagao (Public Security) described in more
detail some areas of bilateral cooperation the state would like to
pursue with the U.S. These include counter-narcotics and anti-money
laundering initiatives, exchanges of information, prison
administration and prison reform, and assistance with police
intelligence. He outlined problems the state has not only with
organized crime but also with common street crime, and described
efforts to coordinate and integrate the state's law enforcement
agencies and to improve federal-state police coordination as well.
CG McMullen cited recent meetings between law enforcement officials
of the four southeastern states - Rio de Janeiro, Sao Paulo,
Espirito Santo, and Sao Paulo - to discuss information-sharing and
coordination on state borders. This, he said, is the sort of
regional initiative that the USG would like to work with. The
Ambassador noted that a new law enforcement position had been
established in the Embassy to coordinate NAS cooperation with cities
and states.

12. (SBU) U/S Burns turned briefly to Brazil's foreign policy,
noting that while state governors like Serra have no direct role,
their states are affected by Brazil's global posture and approach to
the region. A/S Shannon described the USG approach to Bolivia. The
U.S. continues to try to work with the Morales administration on
coca eradication and interdicting cocaine paste, but we remain
concerned that President Morales is permitting an increase in the
level of legal coca production, negotiating village by village.
There could be explosion in the amount of coca leaf produced in the
next eighteen months. This would be extremely problematic for
Brazil, and we have so advised the GoB. Brazil is involved in
alternative development efforts in Bolivia, and biofuels technology
is one area of possible cooperation, but would require considerably
more political groundwork to get Morales to agree. The U.S is
working to maintain good relations with Morales but cannot guarantee
that these efforts will not collapse. Governor Serra noted that a
great deal of cocaine from Bolivia ends up in Brazil and that Brazil
needs to do its part in the area of counter-narcotics.

13. (SBU) While the U.S. has enjoyed good success cooperating with
Europe on counter-terrorism initiatives, U/S Burns observed, it has
done less well in improving prison administration and fighting
organized crime. The U.S. and Brazil have much to learn from each
other. The U.S. can promise to approach Brazil's and Sao Paulo's
problems with humility and to give a one hundred percent effort, but
cannot guarantee success.


SAO PAULO 00000166 004 OF 004


14. (SBU) Returning to the area of biofuels, the Governor, U/S
Burns, and the Ambassador discussed California's biofuels initiative
and the possibility of a visit to Sao Paulo by Governor
Schwarzenegger. Governor Serra noted that the U.S. is spending
public and private funds on ethanol research. He advised that Sao
Paulo, using both private and state funding, expects within about
two years to complete a pipeline that will carry ethanol from the
interior, where it is produced, to port. U/S Burns cautioned that
Congress is unlikely to change the surcharge on imported ethanol.
He stressed the importance of developing alternative fuels because
the U.S. dependence on oil, which is exported by countries with
problematic governments (e.g., Iran and Venezuela), has a negative
impact on foreign policy.

15. (SBU) As lunch grew to a close, U.S Burns again highlighted the
common ground shared by Brazil and the United States and suggested
that Serra visit the U.S. soon. Ambassador Sobel noted that Sao
Paulo is home to the world's largest American Chamber of Commerce
outside the United States and thanked the Governor for his recent
action to ward off legal action that would have taken away state tax
credits from electronic technology producers, seriously compromising
the interests of a number of large U.S. investors in the state. The
Governor expressed his intention to seek a long-term solution to the
"tax wars" between the states that sometimes prejudice investors.

-------
COMMENT
-------

16. (SBU) Governor Serra is clearly interested in developing closer
ties between his state of 40 million and the United States. His
administration, which took office just over a month ago, faces
serious challenges in the area of security. Mission Brazil will
continue to engage with Serra to identify target of opportunity
where we can work together. End Comment.

17. (U) This cable was coordinated with Embassy Brasilia and cleared
by U/S Burns' delegation and Ambassador Sobel.

MCMULLEN

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