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Cablegate: Survey of Brazil's Efforts to Combat Piracy

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 06 BRASILIA 002813

SIPDIS

DEPT FOR EB/IPE SWILSON, AMADAMO AND WHA/BSC
DEPT PLEASE PASS TO USTR MSULLIVAN, VESPINEL AND MSANDLER
DEPT PLEASE PASS TO USPTO FOR JURBAN
USDOJ FOR CCIPS/CMERRIAM
USDOC FOR 3134/USFCS/OIO/WH/EOLSON
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD
NSC FOR SCRONIN

SENSITIVE

E.O. 12958: N/A
TAGS: KIPR ETRD ECON
SUBJECT: SURVEY OF BRAZIL'S EFFORTS TO COMBAT PIRACY

REF: A) Brasilia 487 (notal), B) Brasilia 599 (notal),
C) 04 Brasilia 1384, D) Brasilia 1978

1. (U) Introduction. Under pressure from the USG's review of
trade benefits under the Generalized System of Preferences
(GSP) (ref A) and in response to domestic concerns about
organized crime, tax losses, and risks for consumers
associated with illegitimate products, the GoB has over the
last one and one-half years undertaken efforts to combat
piracy. A survey of those efforts, with particular
attention to copyright enforcement, follows. End
Introduction.

2. (U) The information provided below is not exhaustive, but
provides highlights of actions taken by the GoB to combat
piracy since the first extension of the GSP review in June
2004.

Institutional Changes
---------------------

3. (U) National Council for Combating Piracy and other IPR
Crimes (CNCP): On November 24, 2004, the GoB established an
institutional foundation for combating piracy with formation
of the permanent public-private sector National Council for
Combating Piracy and other IPR Crimes (CNCP) (ref B). The
CNCP falls under the Ministry of Justice, giving it a law
enforcement emphasis, and is chaired by the Vice-Minister of
Justice, an activist, career law enforcement official who
has kept the CNCP and its work on high-profile. The
Ministry of Justice hired an Executive Secretary and staff
to direct and move forward Council initiatives on a day-to-
day basis; most private sector reps give the Executive
Secretary, who hailed from the music industry, high marks

SIPDIS
for his competence and commitment. The GoB claims the
Council is a one-of-a-kind for including private sector
members - three of which are directly associated with U.S.
film, music and software industries.

4. (U) The CNCP established a roadmap for tackling piracy
through a 99-point national action plan which was adopted in
April, 2005. The CNCP started working on all items, but
broke them down according to when they were to be completed,
in the short-term (6 months), medium-term (1 year), or long-
term (2 years). According to CNCP's schedule, 46 action
items are due for completion by November 1; the Executive
Secretary claims 11 have been completed and remains

SIPDIS
confident that implementation of the remaining 35 will
concluded on time. The plan is lengthy, and therefore not
as focused as desirable. The plan covers three broad
categories of actions: enforcement; education, and economic
measures.

5. (U) The CNCP maintains a website
(http://www.mj.gov.br/combatepirataria/defaul t.asp) that
provides information on the Council, the national action
plan, IPR events, article and news items relating to piracy,
and a link for the public to provide info on pirate activity
to the CNCP; a hotline has also been established for people
who do not have access to a computer. The Ministry of
Planning approved inclusion of the Council in the federal
budget, elevating its status and facilitating the
acquisition of needed resources. On August 31, 2005, the
CNCP released the its first semi-annual report on the
country's anti-piracy efforts entitled "Brazil Against
Piracy"; the CNCP Executive Secretary emphasized the
importance of the report since it is the first ever produced
by the GoB to document anti-piracy actions.

6. (U) To enhance operational effectiveness, the Receita
Federal (tax and customs) has created a specialized
"Division for Repression of Contraband, Embezzlement, and
Piracy" (DIREP) and as well as additional divisions
regionally and 36 new operational units. Specialized units
within the Federal Police and Federal Highway Police are
operating informally, awaiting formal approval from the
Planning Ministry. Receita Federal and Ministry of Justice
now share information through the "Infoseg" system to better
identify and interdict smugglers at the borders; the Federal
Police has launched a new system to increase security at
ports; and the CNCP has a formal protocol with the
Department of Consumer Defense and Protection in the
Ministry of Justice to assist in efforts to educate
consumers on the risks posed by some counterfeit goods.

Law Enforcement
---------------

7. (U) The Receita Federal, Federal Police, and Federal
Highway Police have undertaken a number of large scale
operations, principally to crack down on piracy in the
Brazil-Paraguay border area. The Cataratas I operation was
conducted in the last 45 days of 2004 and yielded seizures
valued at USD 5 million; Cataratas II was extended into 2005
and produced record seizures in Foz do Iguacu. Operation
Leao Dourado (Golden Lion) maintained and intensified
operations on the Brazil-Paraguay border. As a result of
the Hydra Operation coordinated by the Federal Police, one
of the largest smuggling rings in Brazil was dismantled;
more than 750 law enforcement agents were involved and 60
people, including federal, highway, and military police
officers, were arrested. (Note. The Federal Police do not
maintain a database with copyright enforcement statistics.)

8. (U) According to the Association for the Protection of
Phonographic Intellectual Rights, almost 11.5 million virgin
CDs and DVDs and 2.9 million recorded CDs and DVDs were
seized in law enforcement operations in Brazil between
January and July 2005. Figures for the year are expected to
top those for 2004 in which 17.5 million virgin CDs were
confiscated.

Receita Federal:

9. (U) In the first six months of this year, Receita Federal
recorded 290 million reais (roughly USD 120.8 million) worth
of pirated/counterfeit merchandise seized by its customs
agents, a 45 percent increase compared to the same period in
2004. An additional 26 million reais (about USD 10.8
million) worth of goods were seized in July. Receita
Federal's new specialized DIREP division carried out 607
operations during the first half of 2005. Throughout
Brazil, Receita claims that almost 700 buses used to
transport pirated products across the border have been
seized in 2004 and 2005; hundreds have been arrested and
over 7,000 fined.

10. (U) Looking specifically at results for Foz do Iguacu,
Receita seizures through September were valued at more than
USD 43.8 million, around a 100 percent increase over the
value seized during the same months in 2004, and already a
31 percent increase over that seized in all of last year
(USD 33.5 million). Receita Federal estimates that the
volume of pirated goods and contraband moving through Foz do
Iguacu has decreased between 60 and 70 percent since the
beginning of 2004.

11. (U) Receita Federal's seizures in Foz do Igaucu
specifically of media for music, films and software have
continued to climb, consistent with the increase it recorded
for overall merchandise seizures. In 2003, Receita
confiscated 2,373,166 units of Virgin CDS/DVDS, recorded
CDs/DVDs, tapes, and game cartridges of which the vast
majority (2,255,048) were virgin CDs. In 2004, the total
seized in Foz do Iguacu reached 3,872,277 with virgin CDs
accounting for 3,517,985. Through July this year, the
number of units seized totaled 4,165,443, over double the
amount confiscated in the same period last year. While
virgin CDs still accounted for the vast majority
(4,140,454), the number of virgin DVDs seized jumped from
14,157 in 2004 to 151,457 so far this year. Receita efforts
to stop entry of pirated goods at the border were enhanced
through the GoB's elimination in September 2004 of the "free
transit" status that had existed for CD-Rs, and their
plastic cases entering Brazilian ports for Santos and
Paranagua, ostensibly bound for Paraguay; free transit had
been abolished for recorded CDs in 2001.

Highway Police:

12. (U) Brazil's Federal Highway Police have also seized
record volumes of goods. Looking just at CDs and DVDs, 1.6
million units were seized between January and September this
year, compared with 568,614 and 548,269 seized in all of
2003 and 2004, respectively.

State and Local Enforcement - Marketplaces:

13. (U) Although federal agencies have significantly stepped
up seizures, pirated products are still readily available in
local marketplaces throughout Brazil. According to the CNCP
Executive Secretary, the Council's initial focus was on
coordinating federal agencies in order to stem the tide of
pirated products entering the country. Now that
coordination at the federal level has improved, the CNCP is
increasing its focus on enforcement at state and local
levels. The Council has incorporated IPR crimes into the
nation's Single Public Security System (SUSP) and the
Secretary for National Public Security (SENASP) joined the

SIPDIS
CNCP in August 2005; the CNCP has charged the SENASP with
mobilizing state and municipal authorities to fight piracy.
Unlike federal level actions which focus mainly on gangs and
large scale operations at the border, state and municipal
actions focus more on the smaller producer of pirated
products and at point-of-sale enforcement.

14. (U) The CNCP and SENASP are encouraging states to
establish specialized IPR crime units within their police
forces and/or tax departments; Sao Paulo and Rio de Janeiro
already had such units, but have been joined by the states
of Pernambuco, Rio Grande do Sul (in process), and Santa
Catarina. The CNCP's goal is to establish specialized units
in each state's police force, as well as establish state and
local anti-piracy councils that mirror the federal-level
CNCP. Only the cities of Rio de Janeiro and Porto Alegre
have so far established such councils. Some cities have
established specialized units/offices within their public
prosecutors' office.

15. (U) On September 21, 2005, the CNCP and SENASP announced
a National Operation for Combating Piracy, which SENASP is
coordinating with state police forces. In the first four
days of the operation, over 1 million pirated products were
seized and more than 200 persons detained. The operations
were carried out in Rio de Janeiro, Sao Paulo and Minas
Gerais; they are slated to expand to an additional three
states in October, and to include at least 10 states by the
end of the year. The operations are focusing on producers
and street vendors in local markets, including some
identified by U.S. copyright representatives as of
particular interest.

16. (U) In Sao Paulo city alone, raids conducted September
20-23 in the Galeria Page, the 25 de Marco avenue, Santa
Efigenia, Santana, Voluntarios da Patria, Centro da Penha,
Pinheiros, Largo 13, Sao Mateus, and Sao Miguel resulted in
the seizure of around 482,000 CDs, DVDS, and tapes worth 2.2
million reais. In Rio de Janeiro, actions were taken in the
camelodromo de Rua Uruguaiana (on list of well-know
marketplaces), as well as areas in the North and West of the
city and the Baixada Fluminense. Local police claim that
due to actions, piracy in Rio's area of Niteroi has been
nearly eradicated. Police actions in Rio de Janeiro between
January and August resulted in the seizure of 591,931
pirated products compared to 778,838 in all of 2004. In
extensive press reports, the CNCP Executive Secretary noted
the importance of these raids not only in terms of removing
pirated products from the streets, but also as a means of
educating the public that piracy is a crime.

17. (U) Since February 2005, the CNCP has posted over 400
news articles on piracy, many chronicling local police
actions. A sampling of info provided by the GoB and these
news articles for later 2004 through 2005 reveals the
following police actions at markets the private sector has
identified as priorities: downtown Porto Alegre (11/3/2004)
(11/18/2004), camelodromos Campinas (12/2/2004); Rua
Uruguaiana - Rio de Janeiro (12/16/2004) (1/10/2005)
(1/19/2005) (1/25/2005), Paje Gallery - Sao Paulo
(1/6/2005); Rua Santa Efigenia - Sao Paulo (1/19/2005);
Stand Center Gallery - Sao Paulo (1/27/2005) ; Victoria da
Conquista - Bahia (2/16-18/2005); and Paraguay Fair (Import
Fair) - Brasilia (4/12/2005)(6/7/2005)
(10/14/2005. The Portuguese language version of CNCP's
August 2005 report "Brazil Against Piracy" also contains
articles detailing police actions in the various states.

Arrests:

18. (U) Overall statistics on arrests are not available.
According to ADEPI, the Motion Picture Associations'
enforcement group, this year 182 people had been arrested
for audiovisual piracy through July 2005, compared with 154
for the entire year of 2004.

Judiciary
---------

19. (U) Although merchandise seizures and arrests are up,
Brazil's judicial system remains a weak link in its efforts
to confront piracy. The prosecution process is slow and
uncertain; piracy cases have traditionally taken about 5
years to work their way through the system. Historically,
the ratio of convictions to the numbers of police raids is
less than 1%. To date, prosecutions have been few and
penalties are too low to act as effective deterrents.

20. (U) So far this year, 10 people have been convicted for
audiovisual piracy. All received a sentence including
prison time plus fine, although only one is actually serving
time. This year marks the first time a person convicted for
piracy is serving a prison sentence. Part of the problem
has been that current cases pre-date a July 2003 stiffening
of penalties associated with piracy; the change was not
retroactive. Under the earlier, lower penalties, Brazilian
law allows the judge to commute a jail term to a fine, if
for instance, the defendant is a first-time offender. For
crimes committed after July 2003, piracy carries a penalty
of a 2 to 4 year jail term plus a fine. (The person serving
time was caught in the act while on parole.)

21. (U) In compliance with the CNCP's action plan, members
of the Council have been engaged in a dialog with judges on
the supreme court and in the federal court system to educate
them on the seriousness of the crime and the need for
improved adjudication of piracy cases and stiffer penalties.
As part of a judicial reform initiative, the Supreme Court
is planning to establish 183 new federal courts by the end
of 2005; a total of 400 would be established over eight
years. Congressional approval is pending for this
initiative. The President of the Supreme Court justified
the need for additional jurisdictions to increase the
courts' effectiveness and competency in dealing with the
worst crimes, listing piracy alongside drug trafficking,
arms running, and money laundering. The court is also
considering establishing some form of IPR expertise within
the judicial system, either in the form of specialized
courts or judges with specialized knowledge. The CNCP has
limited authority to force changes within the Brazilian
judiciary, but its Executive Secretary has expressed
confidence that the conviction of Law Kin Chong (see below)
and judicial reform initiatives reveal a changing mindset
within the judiciary.

Law Kin Chong:

22. (U) This year, the notorious smuggler Law Kin Chong was
sentenced to four years of partial confinement and an
associate of Chong's received a four and one-half year jail-
term related to their attempts to bribe the head of a
Congressional Investigative Committee (CPI) on Piracy in
2004 (ref C). While the case against Chong was for bribery,
not piracy, the GoB counts his conviction as a significant
accomplishment and a further indication of its commitment to
combat piracy; in previous run-ins with the law, Chong had
always managed to work the legal system to avoid
prosecution. In April 2005, the Federal Police raided three
secret depots in warehouses belonging to Law Kin Chong

SIPDIS
seizing 25 million reais worth of merchandise. On May 17,
2005 Receita Federal levied fines of USD 23.2 million and
USD 6.4 million against two firms belonging to the syndicate
led by Law Kin Chong; the charges were illegal importation
and false customs declarations for hundreds of thousands of
CDs and DVDs.

International Cooperation
-------------------------

23. (U) In November 2004, Brazil forged an operational
agreement with its Mercosul partners (Argentina, Uruguay,
and Paraguay) to provide for establishment of
joint/coordinated actions to fight piracy. A June 21, 2005,
Presidents Lula da Silva (Brazil) and Duarte (Paraguay)
signed a memorandum of understanding establishing a joint
intelligence group in the border area for the purpose of
combating piracy, counterfeiting, and smuggling.

24. (U) Brazil's law enforcement agencies have worked
closely with Interpol over the last year. A Federal Police
Office was seconded to Interpol's IPR Crime Unit in Lyon.
Ronald Noble, General Secretary of Interpol, participated in
the Regional Forum for Latin America in the International
Congress to Combat Piracy that was held in early June in Rio
de Janeiro. Noble met with President da Silva and Interpol
is to provide technical assistance in establishing
specialized units within state police forces to combat
piracy. The GoB worked closely with Interpol on "Operation
Jupiter - South America," a major anti-counterfeiting
operation in the tri-border area of Argentina, Brazil and
Paraguay, that was conducted in a collaborative effort
between police, customs and industry.

25. (U) In July, USG-GoB bilateral law enforcement technical
cooperation talks were launched (ref D). In two meetings to
date, the GoB interlocutors have displayed an interest in
strengthening bilateral collaboration and in exploring how
lessens learned by U.S. law enforcement agencies involved in
anti-piracy work can be applied in Brazil.

Education Campaigns
-------------------

26. (SBU) According to the CNCP Executive Secretary, the
private sector has dropped the ball in this area. He
claimed that when discussing priorities within the Council,
the private sector wanted the GoB to focus on law
enforcement, which it did, but the private sector had
committed to taking the lead in the area of education, which
it has not. No national education campaign has been
launched by the CNCP, even though item 22 of its action plan
calls for one. The Motion Picture Association's Steve Solot
also confided to Econoff that the private sector has yet to
follow through in this area.

27. (U) However, some government groups are moving forward.
For instance, the National Union for Receita Federal
technical staff, in cooperation with the Ministry of
Justice, has launched a national campaign entitled "Original
- Choose the Guarantee" for schools. Likewise Brasilia's
Federation of Industries recently launched its "I Want the
Original" campaign and is distributing 10,000 leaflets in
schools. Public awareness has also been raised through now
ubiquitous IPR events; there have been 13 major IPR
seminars/events in the country during the first 9 months of
the year and more locally. The week of June 8 was IPR week
in Rio de Janeiro which hosted the Regional Forum for Latin
America in the International Congress to Combat Piracy
meeting, a separate Interpol meeting, as well as training
for judges and hundreds of police and customs agents.

Legislative Initiatives
-----------------------

28. (SBU) Building on bills conceived by deputies of the CPI
on Piracy, the CNCP's Legislation Working Group, with input
from a private sector forum, has developed draft legislation
which proposes a number of changes in the country's penal
code and industrial property law. Most suggested changes
are practical in nature, such as providing a right-holder
with additional time for initiating legal proceedings;
providing law enforcement agencies with the authority to
seize maritime and aviation craft, in addition to buses,
used to transport pirated goods; clarification of procedures
for seizing and destroying goods, as well as enabling law
enforcement agencies the ability to retain only samples for
use in litigation; introducing differentiation in penalties
between individual offenders (camelo owners) and those
involved in a larger operation; holding responsible owners
of media in which advertisements promote buying, renting,
exporting or importing of goods produced in violation of IPR
laws; incorporating penalties for software copyright
violation into the penal code; and stiffening penalties if
pirated goods are imported.

29. (SBU) The CNCP Executive Secretary and Foreign Ministry
interlocutors have expressed concern to post that placing
such a wide array of changes within one piece of legislation
may hamper speedy consideration within Congress, but note
that the content and form has been determined largely buy
private sector council members. The CNCP as a whole will
debate the draft legislation October 31, with approval
expected at its November meeting.

DANILOVICH

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