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Cablegate: Commerce Secretary Gutierrez Meets with Private Sector

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DE RUEHBR #1245/01 1721900
ZNR UUUUU ZZH
R 211900Z JUN 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 5840
INFO RUCPDO/USDOC WASHDC
RHEBAAA/USDOE WASHDC
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHSO/AMCONSUL SAO PAULO 7248
RUEHRI/AMCONSUL RIO DE JANEIRO 2324
RUEHRG/AMCONSUL RECIFE 5002
RUEHAC/AMEMBASSY ASUNCION 5513
RUEHBU/AMEMBASSY BUENOS AIRES 4108
RUEHMN/AMEMBASSY MONTEVIDEO 6331
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RUEHLP/AMEMBASSY LA PAZ 4672
RUEHCV/AMEMBASSY CARACAS 3319
RUEHZP/AMEMBASSY PANAMA 0257

UNCLAS SECTION 01 OF 05 BRASILIA 001245

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STATE PASS USTR:MSULLIVAN
DOE FOR GWARD/SLADISLAW
NSC FOR FEARS
USDOC FOR 3134/USFCS/OIO/WH/SHUPKA
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
STATE PASS OPIC FOR MORONESE, RIVERA, MERVENNE
STATE PASS EXIM FOR NATALIE WEISS, COCONNER
STATE PASS USTDA FOR AMCKINNEY
TREASURY FOR OASIA:DDOUGLASS
AID/W FOR LAC/AA

SENSITIVE
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CORRECTED COPY (NEW PARA 13)

E.O. 12958: N/A
TAGS: ETRD ECON KIPR EINV ENRG BEXP BR
SUBJECT: COMMERCE SECRETARY GUTIERREZ MEETS WITH PRIVATE SECTOR
DELEGATIONS - RIO DE JANEIRO AND SAO PAULO, BRAZIL


1. (SBU) Summary. During Secretary Gutierrez's June 4 - 8 policy
visit to Brazil, the Secretary and his team - OPIC President Robert
Mosbacher Jr., USDOC A/S David Bohigian, State DAS Patrick Duddy, US
Patent and Trademark Office Deputy Director Steve Pinkos, Charge
Phil Chicola, TDA, Western Hemisphere Regional Director, Al Angulo,
Senior Commercial Officer John Harris, and DOC OLAC Director John
Andersen - met with representatives of a number of private sector
institutions, including the AACLA Executive Board and National
Presidents, the Brazil-U.S. Business Council, the Peru/Colombia
AMCHAM and Presidents of FIESP, CIESP, and the Sao Paulo AMCHAM.
The first two meetings focused on private sector priorities for the
hemisphere and the soon to be launched U.S.-Brazil Informal
Commercial Dialogue. The Peru/Colombia AMCHAM meeting focused on
the situation in Peru, the recent Peruvian presidential election and
next steps that both Peru and Colombia planned to take in light of
the FTA negotiations with the United States. During the FIESP,
CIESP, and the Sao Paulo AMCHAM, the Secretary focused on the
opening the Commercial Dialogue and follow-up to that event to
ensure that the launch would be followed by meaningful agreements to
boost U.S.-Brazilian commercial relations in each of the areas dealt
with in the Dialogue.

2. (SBU) During the latter discussion, Brazil's Ambassador to the
U.S. Abdenur noted that Brazil was awaiting a response from a letter
it had sent to the incoming USTR Schwab dealing with the FTAA and
noted Brazil's continued interest in moving forward on 4 plus 1
discussions with the United States. The Secretary promised to
follow-up on the former issue and reiterated the long-standing U.S.
position on the latter. End Summary

---------------------------------------------
AACLA Executive Board and National Presidents
---------------------------------------------

3. (SBU) In a friendly discussion, the Secretary noted that a
number of commentators are focused on the negative trends in the
hemisphere, especially the emergence of a new breed of leftist
leaders. The Secretary noted that despite the emergence of a few
outliers, most leaders in the hemisphere were committed to sound
economics and improving commerce. He stressed the role of the
private sector in this processes, noting that they were the answer
to ensuring the overall competitiveness of the hemisphere and for
improving economic and social conditions in each of their countries.
The Secretary described the Department's goals in the soon to be
launched U.S.-Brazil Commercial Dialogue, particularly its role in
improving commerce between the two nations. He stated that the
U.S.-Brazil commercial relationship, although strong, could be much
improved given the fact that we trade less on a per capita basis
with Brazil than we do with many of its neighbors. He further noted
that we all had to do a better job of advertising the fact that the
private sector was not part of the problem, but was in fact, the
only solution.

4. (SBU) AACLAA members agreed with the overall thrust of the
Secretary's message on recent trends, noting that early returns from

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Peru indicating a Garcia victory were another positive development.
Several voiced concern with the implementation phase of recently
completed FTAs, indicating that the USG needed to do more to ensure
that the FTAs were indeed trade creating. The Secretary agreed,
stating that he had led a mission to Central America last October to

BRASILIA 00001245 002 OF 005


highlight the opportunities arising from the CAFTA-DR agreement.
OPIC President Mosbacher stated that he had just come from a series
of meetings in Central America where OPIC had signed agreements in
excess of $100 million in new investment. The Secretary also noted,
when queried about the Panama FTA, that he was mystified at the
seeming inability of Panama to conclude the negotiations, as the
potential in his view for both nations, and especially Panama was
immense. Finally, the Secretary asked AACLAA members for their
assistance in a joint ITA-AACLAA project to produce a series of fact
sheets by country, which will include data demonstrating the
positive impact that the USG and U.S. companies have on the economic
prosperity of countries in the region.

----------------------------
U.S.-Brazil Business Council
----------------------------

5. (SBU) Mark Smith, Executive VP of the U.S. Section of the Council
served as moderator. (Minister Luiz Furlan was a last minute
scratch due to a last minute professional commitment.) Council reps
noted that they had three priorities. First, under the Commercial
Dialogue's Business Facilitation work group, they hoped that the
primary outcome would result in changes to a number of Brazilian
Customs' practices that impeded both imports and exports. Second,
that the Secretary's visit would give impetus to the conclusion of a
U.S.-Brazil Bilateral Tax Treaty. And third that the U.S. and
Brazil could find a way to cooperate on biofuels, especially
ethanol, for the good of both countries. Selected Council
representatives provided additional details on each of these
priorities. For example, UPS, FEDEX, GM reps reiterated their hope
to invite Ministry of Development, Industry and Trade officials,
along with representatives from Recita Federal to their facilities
in the U.S. during September to gauge first hand how U.S. businesses
were able to work with U.S. Custom's officials to expedite business
shipments.

6. (SBU) Secretary Gutierrez outlined the Department's Commercial
Dialogue goals, stressing the need for real substance in the
business facilitation work group particularly with respect to
Custom's issues. He noted that as a first step, we planned to
invite MDIC officials and their Recita Federal colleagues to visit
U.S. facilities in the U.S. in an effort to make them better aware
of best practices. The Secretary promised to raise the bilateral
tax treaty issue with his Brazilian counterparts and noted that DOC
officials would follow-up with U.S. Treasury personnel at the end of
the trip. Finally, on biofuels, the Secretary noted that President
Bush has stressed the need to promote greater energy independence
through the use of renewable energy sources like biodiesel and
ethanol, and that the Secretary would discuss this issue with
Secretary of Energy Bodman upon returning to Washington. He also

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stated that the issue would likely come up in all of his bilateral
meetings and that the working group on standards included a proposal
to work on developing common standards for biofuels as one of its
objectives.

-------------------------------
Peru/Colombia AMCHAMS
-------------------------------

7. (SBU) Peru Senior Commercial Officer Margaret Hanson-Muse,

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accompanied by representatives of the Peru and Colombian AMCHAMs met
briefly with the Secretary and his team to discuss the recent
election in Peru, Peruvian plans to move forward on ratifying the
FTA and likely next steps concerning the U.S.-Colombia FTA. SCO
Hanson-Muse provided a detailed political and economic overview of
Peru, beginning with news that Alan Garcia had indeed prevailed in
Sunday's Peruvian presidential election. The AMCHAM noted that
Garcia was a supporter of the FTA, but would have to rely on a
coalition government to govern. As a consequence, the current
Toledo Administration was intent on gaining Congressional
ratification of the agreement within Peru before it leaves office.
AMCHAM reps asked the Secretary to use his influence to place the
Peruvian FTA before the U.S. Congress prior to its August recess.
The Secretary agreed to carry this message back to Washington. The
lone Colombian AMCHAM representative noted that there were still
issues impeding progress on that agreement, but that they hoped the
Colombian government would make sufficient progress during President
Uribe's upcoming visit to the U.S. to quickly settle outstanding
issues.

--------------------------------------
FIESP, CIESP, and the Sao Paulo AMCHAM
--------------------------------------

8. (SBU) The AMCHAM was represented by Fernando Tigre, Vice
Chairman of the Board of the Amcham, Antonio Pargana, CISA Trading,
S. Peter Dam, Colgate-Palmolive, Mario Grecco, Brystol-Myers Squibb,
and Charles Wortman, JP Morgan. CIESP (Center of Industries of Sao
Paulo - Centro das Industrias do Estado de Sao Paulo) was
represented by Claudio Vaz, President, Humberto Barbato, Managing
Director, Luis Carlos Galvao, Juridical Director and Marco Aurelio
A. Rodrigues, Director. FIESP (Federation of Industries of the
State of Sao Paulo - Federagco das Industrias do Estado de Sao
Paulo) was represented by Roberto Giannetti da Fonseca,
International Business Director. Brazil's Ambassador to the U.S.
Abdenur was also in attendance.

9. (SBU) The Secretary began the discussion with a brief
description of the Commercial Dialogue, followed by his analysis of
the overall U.S.-Brazil commercial relationship. He noted that
although it is positive, and the U.S. is pleased to be both Brazil's
single largest trading partner and single largest investor, that it
could be better. He reiterated a comment made throughout the trip,
that the U.S. actually traded more on a per capita basis with many
of Brazil's neighbors. He concluded by noting that this was a time
for the two of us, as well as other nations within the hemisphere to
pull together, and to increase both our commercial ties and regional
competitiveness to compete better with the rest of the world. The
Secretary reminded the representatives that the reality of today's

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world was that with the emergence of the People's Republic of China
and India there were not only 2.3 billion new customers, but also
2.3 billion new competitors. And, he stated, that unless we worked
together to increase our ties and improve our competitiveness we,
and especially the nations of South America, would find it
increasingly difficult to compete in this new commercial reality.

10. (SBU) The AMCHAM opened the discussion, with a series of
issues that it felt needed to be addressed by both Brazil and the
U.S. These included the need for more efficient and modern Customs
at Brazil's major ports of entry and progress by both country's on

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improving business VISAs. The AMCHAM noted that graduating Brazil
from the Special 301 Priority Watch List would send a positive
signal of the important relationship between our nations. Referring
to the recent extension of GSP benefits, they stated that GSP for
Brazil covered 3300 products, valued at $4.3 billion in exports and
was supported by a host of major U.S. companies and associations.
The AMCHAM also stated that removing the 54-cent per gallon U.S.
surcharge on ethanol would be another important symbol for
U.S.-Brazil relations. This also would boost investment in Brazil
and had the support of many U.S. firms. And finally, the ACHAM
supported cooperation between the U.S. Patent and Trademark Office
and INPI. For its part, CIESP agreed wholeheartedly with the
AMCHAMs remarks and added three additional concerns - the need for
greater U.S. investment, agreement on a bilateral tax treaty and the
hope for a continued strong U.S. economy. FIESP reiterated a number
of the same concerns, but added that they had agribusiness issues,
including beef, poultry and tobacco that they hoped would be
addressed.

11. (SBU) The Secretary noted that business VISAs were affected by
tighter requirements promulgated in the U.S. following September 11,
but reminded the groups that the U.S. only had 4 offices in country
trying to deal with both tourist and business VISAs and that
business VISAs had priority. He welcomed any ideas the AMCHAM had
to expedite the process. On GSP, the Secretary stated that Congress
is undertaking an evaluation of the program. He noted that one of
the questions they would have to consider was whether the conditions
were still right for all countries for GSP eligibility, given the
fact that the program was designed to serve as a bridge to move
developing toward developed status. The Secretary noted that this
would be done in a thoughtful, straightforward manner. On ethanol,
the Secretary agreed that, following the President's State of the
Union message, there was need to look at all alternatives. He also
agreed that the U.S. and Brazil needed to look at further
cooperation, and mentioned standards was one area where we had
agreed to cooperate. He noted that biofuels in general promised a
long-term solution to our common energy problems. The Secretary
promised to talk with Treasury regarding the prospects for a
bilateral tax treaty and urged Brazilian officials to do likewise.
The Secretary also promised to follow-up on FIESP's agriculture
requests, but noted that the best way forward was to conclude an
ambitious Doha Agreement and look for ways where we could better
integrate in the Americas. In conclusion, the Secretary reviewed
the facts of the U.S. economy, emphasizing especially the 12
consecutive quarters of U.S. GDP growth and the lowest unemployment
in 4 decades.

12. (SBU) At this point ambassador Abdenur reiterated Brazil's
concerns with GSP, stating that he would do his best to bring this
issue to congress' attention. He also expressed concerns that the
recent FTAs that the U.S. had negotiated meant that brazil would be
losing ground in the U.S. relative to its competitors. The
Ambassador reiterated Brazil's call for four plus one negotiations,
stating that they would ensure market access for goods in services
in both the U.S. and Mercosul markets. He noted that the U.S. had
signed FTAs with norms and disciplines that "Brazil and Mercosul can
never accept." The Ambassador noted that as co-chair of the FTAA,
Brazil had renewed its commitments to the FTAA and looked forward to
the timely resumption of that dialogue. He complained that U.S. had
yet to respond to Brazil's letter to then USTR-designate Susan

BRASILIA 00001245 005 OF 005


Schwab requesting a meeting to discuss how the U.S. and Brazil could
move the FTAA forward. The Secretary noted that he would look into
this issue, but reminded those present of the commitment taken in
the Mar del Plata agreement where 29 of 34 countries stated their
goal of concluding the FTAA as soon as possible.

13. (Note: Brazil's FTAA lead, Amb. Eduardo Felicio, did indeed
dispatch a letter to Amb. Schwab proposing a Co-Chair letter be sent
announcing themselves as the new Co-Chairs. However, Amb. Schwab
responded to Felicio and raised two other issues as well: i.e., the
Secretariat's future and the need to send another letter to FTAA

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countries providing a readout of the Co-Chair meeting. USTR has not
heard back to Amb. Schwab's letter. End Note.)

14. (U) This cable was cleared by the Gutierrez delegation prior to
transmission.

Chicola

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