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Cablegate: Biofuels in Brazil

VZCZCXRO6641
RR RUEHRG
DE RUEHBR #1176/01 2492025
ZNR UUUUU ZZH
R 052025Z SEP 08
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 2363
INFO RUEHSO/AMCONSUL SAO PAULO 2667
RUEHRG/AMCONSUL RECIFE 8403
RUEHRI/AMCONSUL RIO DE JANEIRO 6546
RUCPDOC/USDOC WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 03 BRASILIA 001176

SIPDIS
SENSITIVE

STATE FOR WHA/BSC, WHA/EPSC FOR FCORNEILLE, E FOR GMANUEL,
STATE ALSO FOR EEB MMCMANUS, E FOR THASTINGS
STATE PASS USTR FOR KDUCKWORTH
STATE PASS DOE/NREL FOR HCHUM
DEPT OF ENERGY FOR CGAY, RDAVIS, GWARD, AKARSNER

E.O. 12958: N/A
TAGS: ENRG EAGR ETRD ECON EINV BR
SUBJECT: BIOFUELS IN BRAZIL

ENTIRE CABLE SENSITIVE BUT UNCLASSIFIED--PLEASE PROTECT ACCORDINGLY
1. (SBU) SUMMARY: The U.S. Brazil biofuels steering committee met
at the technical level on August 20 in Brasilia, following the
postponement of travel to Brazil by Under Secretary for Economic
Affairs Reuben Jeffery. The meeting included a highly constructive
private sector element and a very positive technical level working
group meeting. There are opportunities to continue moving forward
under each of the three pillars of the bilateral biofuels Memorandum
of Understanding (MOU) (bilateral, third country, and international)
and to address some sector needs identified by the private sector.
Brazil's high level biofuels summit planned for November 17 - 21 in
Sao Paulo presents an excellent catalyst for action under the MOU.
This is the optimal time for moving the biofuels agenda forward,
building on the sense of positive momentum and interest in achieving
demonstrable results for upcoming biofuels events. END SUMMARY.
2. (SBU) The August 20 technical level meeting of the U.S. Brazil
Biofuels Steering Committee was opened by Ministry of External
Relations (MRE) Ambassador Evarton Vargas, who with support from
Ambassador to the United States Patriota and Director of the Energy
Division Andre Correa do Lago, led the Brazilian side for the first
part of the meeting. Greg Manuel, State Department International
Energy Advisor, along with Ambassador Cliff Sobel, led the U.S.
side. Vargas noted that though he regretted the postponement of
Under Secretary for Economic Affairs Reuben Jeffery's trip to
Brazil, it presented some opportunities to make progress in
preparation for the eventual Steering Committee meeting. Ambassador
Sobel disclosed that likely dates for a postponed Jeffery trip were
October 1-3. Vargas said that his successor in what is to be a
newly created position of Undersecretary for Energy and Technology,
Andre Amado (currently Ambassador to Japan) would be taking up his
post on October 10. Vargas and MRE Energy Division Director
promised to inquire as to whether Amado could arrive in Brasilia
early enough to take part in a Committee meeting on Jeffery's
proposed dates. (Note: Post has learned that Amado is willing to
change his travel plans to be available for an October 2 meeting.)

3. (SBU) Greg Manuel opened the meeting up to the private sector
advisory group via conference call. Private sector participants
included Jeffrey Leonard, President and CEO, Global Environment Fund
and Max Guinn, Senior Vice President, Deere & Company on the U.S.
side and Jos Luiz Olivrio, Vice President, Dedini S/A, also
representing the Brazilian Machinery Builders Association (ABIMAQ),
Marcos Sawaya Jank - who attended in person, President of the
Brazilian Sugar Cane Industry Association (UNICA) and Marcio Nappo,
UNICA's Environmental Advisor, who also attended in person, for the
Brazilians. After Manuel reviewed a list of accomplishments under
the MOU, Jank took the floor to present a proposal with six items
UNICA has identified as private sector action priorities (proposal
has been emailed to WHA/BSC, WHA/EPSC, EEB, FCS, and DOE.)
4. (SBU) Jank prefaced his proposal by noting the need for the U.S.
and Brazil to continue working together, both to counter
anti-ethanol forces and to maximize the potential for commercial
partnerships given the U.S.'s technology and investment capacity and
Brazil's feedstock scale and infrastructure. Janks' proposal
included: 1) fast track environmental licensing in Brazil for site
selection, 2) joint recognition of fuel quality specifications and
production process certification schemes, 3) facilitating approval
for next generation technologies entering Brazil, 4) a lifting of
geographic restrictions to permit funding from U.S. public grants to
be utilized in joint research projects in Brazil, 5)improved U.S.
market access for next generation products from U.S.- Brazilian
joint ventures, and 6) a series of entrepreneurial meetings with
members of private sector advisory group, and other interested
members of the private sector to address issues in the biofuels
sector and develop commercial opportunities. Jank noted that he had
consulted numerous private sector entities in Brazil in preparing
his proposal, including CTC, EMBRAPA, etc. He proposed that the
advisory group consider meeting in person for a one day discussion
on the margins of the November biofuels conference and that perhaps
the first preparatory meeting could be held by the end of September.

5. (SBU) Janks' proposal was well received by all parties.
Ambassador Sobel suggested working closely with the private sector
to fully develop these ideas into a joint advisory group proposal,
permitting the governments to respond to the expressed interests of
the private sector representatives. Both Oliveira of Dedini and
Quinn of Deere Co. stated their interest in supporting such a
proposal, though Glen cautioned that one possible area of concern
regarding joint research projects could be confidentiality
provisions in existing research and development agreements.

BRASILIA 00001176 002 OF 003


Ambassador Patriota suggested it would be useful if the private
sector advisory group examined the three pillars of the MOU
(bilateral scientific cooperation, multilateral standards
cooperation, and third country assistance) from a private sector
perspective and made recommendations as appropriate.
6. (SBU) The meeting also addressed sustainability issues. During
Manuel's opening report, he noted that as a practical matter there
was now a fourth pillar to the biofuels relationship: the
sustainability task force and then went on to describe joint
sustainability efforts in the G-8 established Global Biofuels Energy
Partnership (GBEP). Later in the meeting, Quinn inquired about the
possibility of incorporating the Alliance for Abundant Food and
Energy which includes Deere, ADM, Dupont and others in the
sustainability discussion. Manuel noted that the international
commercial alliance MOSAN, with 800 members, was involved in the
GBEP process and further constructive private sector engagement
would be welcome. Manuel committed to get the appropriate contact
information to Quinn. Vargas noted that having this type of
involvement was crucial, since other private sector influences were
having strong effects in countries like Germany. Jank endorsed what
he saw as the more balanced approach via GBEP and remarked that
UNICA now has five people working full time to address
sustainability and respond to the plethora of fora examining these
questions.
7. (SBU) With an eye towards Brazil's November 17-21 biofuels
conference, Ambassador Patriota suggested that to ensure continuity
of the steering committee work, perhaps members of the incoming
transition team could be invited to attend the conference. The GOB
also confirmed that they will be inviting prominent members of
Congress to attend the conference as well. Ambassador Sobel
suggested that perhaps there would be some work out of the 2007
Biofuels MOU Standards group that could be either presented or
announced at the conference. Sobel also discussed the need to
compile a register of all ongoing research efforts in both countries
and Vargas enthusiastically agreed.
TECHNICAL WOKING GROUP
-----------------------
8. (SBU) In the technical working group meeting that followed, the
Head of MRE's Energy Division, Andre Correa do Lago noted that both
he and Ambassador Vargas were now in support of expanding third
country assistance to five countries but they were encountering
unspecified internal resistance among those who want to expand the
third country tranche by only two countries out of a concern about
getting over extended and wanting to ensure quality work. Head of
MRE's Renewable Energy Division, Claudia Vieira Santos, noted that
the outreach component was important as well and that we should be
defining our outreach strategy so that once a decision is made on
the additional countries, we can begin that outreach.
9. (SBU) Both sides expressed alarm at the current trajectory of
the sustainability argument in Europe, particularly in Germany and
in the European Union, and agreed on the need to work together to
counter protectionist forces using the sustainability argument to
exclude outside sources of ethanol from entering European markets.
Do Lago pointed to the more positive Swedish model in which Swedish
importers developed a specific voluntary contract with particular
Brazilians mills, ensuring that sustainability priorities indicated
by consumer research would be respected as part of their sales
agreements. There was also concurrence on the importance of
maintaining a science-based discussion in GBEP, despite the
Brazilians' repeated misgivings about the G-8 focused nature of the
forum, and ensuring that any criteria which are used to ensure
sustainability of biofuels are measurable.
10. (SBU) Much of the ensuing discussion focused on how to use the
prospects of the November conference to advance the agenda. Both
sides further agreed that it is important to document all ongoing
research efforts and foster lab-lab, public/private partnerships
with public/private partnerships, and university to university
cooperation. It was also agreed that bilaterally we should prepare
as much in the way of deliverables for the November conference as
possible, including on standards if at all possible, and on third
country cooperation. Manuel pledged to provide the GOB with his
briefing materials on all the ongoing third country cooperation
projects. Although they said that the attempts by the standards
agency, INMETRO, to put together a Brazilian sustainable biofuels
certification was "dead," the Brazilians also previewed a new plan
to be presented at the November biofuels conference which will
detail agricultural environmental zones, a mapping of the arable
land in Brazil with 3 sustainable development designations: 1)
optimal for developing sugar cane, 2) okay but not optimal, and 3)
off limits to development.

BRASILIA 00001176 003 OF 003


11. (SBU) At a follow up meeting between Ambassador Sobel, Manuel,
and do Lago the same day, the Ambassador suggested that high level
attention from the White House and its Brazilian counterpart, Casa
Civil, would be useful in maintaining the new momentum of the
private sector advisory group and suggested we examine a model
similar to the CEO Forum to demonstrate the importance placed by
both governments on this work.
12. (SBU) COMMENT: The main result of the August 20 biofuels
meeting is the sense of positive momentum and interest in achieving
demonstrable results, in part in response to the private sector
initiative, and in part to ensure deliverables for Brazil's November
biofuels conference. This is the optimal time for moving the
biofuels agenda forward. The most immediate ways to do that are: 1)
Private sector: members will exchange email addresses and discuss
UNICA proposal further. We will encourage entrepreneurial meetings
in September as Jank discussed as well as on the margins of the
November conference, focusing on technological integration and
financing; 2) Research: The USG and GOB should work together to
establish databanks or registries of R&D efforts on both sides to
facilitate matchmaking, 3) Third countries: USG and GOB should reach
consensus on which countries to add to third country cooperation,
and define outreach plan to selected countries, as well as achieve
clarity on funding for each, 4) Standards: The Steering Committee
should further explore what work from the Standards working group
might be possible to present as a deliverable for the Nov.
conference, 5)Sustainability: GOB and USG should continue to work on
a sustainability strategy, including joint approaches to the EU and
ways to highlight the work of GBEP sustainability group at Nov.
conference. Post looks forward to U/S Jeffery's early October visit
as an opportunity to have a formal Steering Committee meeting and
achieve progress in these areas in advance of the November biofuels
conference.

SOBEL

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