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Cablegate: Embassy Brasilia

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

UNCLAS BRASILIA 003251

SIPDIS

SENSITIVE

USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DDEVITO/DANDERSON/EOL SON
TREASURY FOR TVARDE
STATE PASS EXIM FOR FIRESTONE
MONTREAL FOR USICAO

E.O. 12958: N/A

TAGS: EFIN EAIR EIND ETRD KTIA BR

REF: STATE 199212

1. (U) Econoff made reftel points on the Cape Town convention to Michel Arslanian of the Foreign Ministry's Division of Services, Investment and Financial Affairs. Arslanian stated Brazil will likely accede to the treaty, but with a few reservations since certain points of the treaty were "incompatible" with Brazilian law. Arslanian, who was not versed in the technical aspects of the treaty, did not describe what the reservations might be.

2. (SBU) Marcus Tollendal of Brazilian aircraft manufacturer Embraer, which has been lobbying the GoB in favor of accession to Capetown for some time, shared with Econoff in a December 13 conversation his assessment that the GoB would eventually accede to the convention. Brazil's major airline, VARIG, which is currently under bankruptcy protection and under threat of having its aircraft seized by its creditors, was opposing Brazil's accession, according to Tollendal. Embraer had sought to involve Brazil's solvent airlines, TAM and GOL, in the political dialogue since they stood to benefit from reduced financing costs should Brazil accede to the treaty. While the Civil Aviation Directorate initially was opposed, its position appears to be changing. Tollendal believed the balance of forces was shifting in favor of Brazil's accession but did not think this would happen in the near term.

3. (SBU) Of more concern, Tollendal said, were the likely GoB reservations, which would affect the implementation in Brazil of central aspects of the treaty. There were restrictions under Brazilian bankruptcy law that limited a creditor's ability to seize assets, he explained. While Embraer's lawyers were still drafting an opinion on the issue, accession with the significant reservations the GoB was entertaining would, Tollendal maintained, significantly weaken creditor rights to repossess aircraft from the ideal laid out in the convention. He was uncertain, without seeing the final legal opinion, whether there was any basis for an accession without reservations.

CHICOLA

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