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Cablegate: Brazil: Ceo Forum Members Meetings Feb 20

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INFO RUEHRI/AMCONSUL RIO DE JANEIRO 5855
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RUEHRG/AMCONSUL RECIFE 7755
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UNCLAS SECTION 01 OF 02 BRASILIA 000288

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DEPT PASS USTR FOR KATE DUCKWORTH
DEPT PASS DOC/ITA/MAC/WH/OLAC ANNE DRISCOLL
DEPT PASS TREASURY IA LUYEN TRAN
DEPT PASS NSC GARY TOMASULO

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E.O. 12958:N/A
TAGS: EINV ETRD ECON EFIN BR
SUBJECT: Brazil: CEO Forum Members meetings Feb 20


1. (SBU) SUMMARY: CEO co-chair Tim Solso (CEO Cummins) and Brazilian
CEO Forum representatives Jorge Gerdau (CEO, Gerdau SA) and Flavio
Leite (representing Josue Gomes da Silva of Cotaminas) met with
Embassy staff and MRE visas chief Mitzi Gurgel the morning of
February 20 to discuss progress on CEO Forum priorities. They were
joined by Marco Antonio Stefanini (CEO Stefanini IT Solutions), APEX
President Alessandro Teixera, MDIC staff and the Ambassador for
further discussion at lunch. The group, joined by Embraer CEO
Mauricio Botelho, moved to Casa Civil for an afternoon discussion
with Casa Civil Dilma Rousseff and MDIC Minister Miguel Jorge. On
behalf of the CEOs, Tim Solso underlined the need for demonstrated
progress by the April 28 CEO Forum in Washington and identified six
possible priority action areas: 1) transmission of a letter signed
by the 20 CEOs to both governments identifying Doha priorities; 2)
moving a GOB legislative proposal to revise Brazilian
visa/immigration law forward to the congress; 3) Brazilian
ratification of the TIEA and intensified discussions regarding a
bilateral tax treaty; 4) initiating exploratory USG/GOB talks on a
bilateral investment treaty/announcing the start of a negotiating
process; 5) advancing civil aviation negotiations; and 6) a CEO
initiative (no government assistance requested) to develop a
corporate social responsibility fund. Dilma Rousseff encouraged
CEOs to concentrate on "achievable successes" rather than a full
bilateral tax treaty, was receptive to bilateral investment treaty
discussions while cautioning that inclusion of an international
arbitration mechanism would be extremely difficult, believed
progress on civil aviation seemed achievable while underlining Sao
Paulo's infrastructure challenges were real and significant,
welcomed a positive Doha outcome, and did not react regarding visas.
END SUMMARY.

2. (SBU) In the morning session, ECON and FCS provided updates on
CEO Forum matrix priorities. CON briefed the group on on-going
efforts to address backlog and accelerating demand for visas to the
United States, explaining that the number of visas adjudicated
annually had more than doubled in the past three years, that the
consular sections were in the process of expanding staff by almost
40 percent, and that more resources would be committed until the
backlog was brought down. MRE's Mitzi Gurgel noted a legislative
proposal to update Brazilian immigration law currently awaited Casa
Civil approval and transmission to congress for consideration. If
passed as proposed, the legislation would permit Brazil to offer 10
year visas and eliminate the requirement that Brazilian visas must
be used within 90 days of issuance. MRE is also exploring a way to
eliminate its visa processing fees (including the sixty dollar fee
on business visas). Gurgel cautioned, however, that new legislation
would not be in place before 2010 at the earliest and may be
significantly changed by the congress. CEOs emphasized the need for
demonstrable progress on Forum priorities by the April 28 event if
the Forum is to maintain CEO interest in participation.

3. (SBU) In the CEOs' meeting with Dilma Rousseff and Miguel Jorge,
Rousseff emphasized that unless it can be demonstrated how "revenue
losses under a bilateral tax treaty can be stopped, we are not going
to be able to do one" with the United States. She stated GOB
believes there is a "lack of balance" between gains to the United
States and to Brazil under a BTT. Rousseff indicated that in the
coming weeks, GOB will "assess the format of the possible, the
structure that will allow us to negotiate without losses." She
added that GOB "can not ignore segments harmful to parts of our
economy; the challenge is to find win-win" areas. CEO Gerdau noted
CEOs are paying for a survey to examine cost-benefit and believe
"the balance is there between our two countries." Stefanini
emphasized that "if we want to have a first-world economy," GOB must
support mechanisms like a BTT and a bilateral investment treaty that
will help companies expand and grow. CEO Solso noted that companies
like Cummins would invest more if a BTT were in place and smaller
companies would be encouraged to invest - so revenue would in fact
increase. Rousseff agreed and said she had to be able to show that
to the Finance Ministry and Receita Federal. MDIC Jorge said CEOs
needed to present a concrete, detailed proposal. CEO Gerdau agreed.


4. (SBU) Dilma Rousseff underlined that progress on international
arbitration mechanisms beyond the 1996 international arbitration law
would be difficult. While MDIC Jorge indicated that perhaps
international arbitration merited further discussion and
consideration within GOB, and Rousseff encouraged further
discussions with MRE and MDIC regarding possibilities for a
bilateral investment treaty, Rousseff said twice she did not believe
an agreement could include an international arbitration provision.
Rousseff believed that dispute resolution clauses built into
specific contracts were adequate and effective. As an example, she
pointed to successes she felt she had achieved during her Petrobras

BRASILIA 00000288 002 OF 002


tenure in resolving disputes with foreign countries based on
contract provisions.

5. (SBU) COMMENT: Continued engagement directly by the Forum
members, as well as USG, with GOB will be essential to seeing
short-term progress on issues such as moving visa legislation to the
Congress and encouraging rapid ratification of the TIEA. In
addition, CEOs, particularly on the Brazilian side, must concretely
articulate the benefits to Brazil of a bilateral tax agreement and
an investment agreement that includes international arbitration.
Mission continues to press hard on these issues. Ultimately, CEOs
showing why these initiatives help them and help Brazil will be a
crucial element in achieving medium-term progress. Post was
encouraged that Dilma Rousseff explicitly stated Brazil wants the
money and sense of entrepreneurship that US companies bring to
Brazil's economy, yet GOB clearly needs to be convinced more fully
that agreements like a BTT or BIT that would encourage more American
involvement in the Brazilian economy are truly a "win-win" in
Brazil's economic interest as its own companies expand their trade
and investment relationships. END COMMENT

SOBEL

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