Cablegate: Brazil: Ambassador Meets with Minister of Development,

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RR RUEHRG
DE RUEHBR #1702/01 2281613
ZNR UUUUU ZZH
R 161613Z AUG 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 6385
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 2689
RUEHRG/AMCONSUL RECIFE 5297
RUEHSO/AMCONSUL SAO PAULO 7759
RUEHBU/AMEMBASSY BUENOS AIRES 4200
RUEHAC/AMEMBASSY ASUNCION 5591
RUEHMN/AMEMBASSY MONTEVIDEO 6405
RUEHSG/AMEMBASSY SANTIAGO 5685
RUEHPE/AMEMBASSY LIMA 3125
RUEHCV/AMEMBASSY CARACAS 3389
RUEHQT/AMEMBASSY QUITO 1936
RUEHLP/AMEMBASSY LA PAZ 4781
RUEHBO/AMEMBASSY BOGOTA 3885
RUCPDO/USDOC WASHDC

UNCLAS SECTION 01 OF 03 BRASILIA 001702

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR:MSULLIVAN
STATE PASS USPTO
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/SHUPKA

E.O. 12958: N/A
TAGS: ETRD BEXP KIPR EFIN SENV BR
SUBJECT: BRAZIL: AMBASSADOR MEETS WITH MINISTER OF DEVELOPMENT,
INDUSTRY, AND COMMERCE

REF: State 128359

1. (SBU) Summary. On August 8, Ambassador paid an initial courtesy
call on Brazilian Minister of Development, Industry, and Commerce
Luiz Furlan. The wide-ranging session touched upon a variety of
topics, including the upcoming Commercial Dialogue meeting in
Washington during the fall between USDOC Secretary Gutierrez and the
Minister, the progress Brazil has made in stemming copyright piracy,
the GOB's agenda on bio-fuels, and Brazil's desire to retain access
to GSP benefits. In particular, the Ambassador emphasized his
desire to promote greater bilateral trade and investment between the
U.S. and Brazil, leveraging the private sector to the maximum extent
possible. Finally, Minister Furlan stated that while he supported
conclusion of a bilateral Brazil-U.S. tax treaty, the Finance
Ministry had the lead on that issue. End Summary.

Commercial Dialogue
-------------------
2. (SBU) Noting that the rate of growth in trade between Brazil
and the U.S. has trailed that recorded between Brazil and other
continents (Asia, Africa, and South America), Furlan declared that
the bilateral Commercial Dialogue inaugurated in June 2006 was the
way to get business relations with the U.S. back on track. He
stated that he wanted to see concrete results coming from the
requested October meeting with Secretary Gutierrez in Washington.
(In a subsequent conversation with Emboffs, Pompeu Andreucci Neto,
Furlan's International Affairs advisor, said that Brazil urgently
needed both confirmation of the proposed October dates and a
suggested format/agenda for the meeting.) The Ambassador suggested
that each of the 4 Working Groups within the Dialogue identify one
to two issues which could be resolved either in the run-up to the
October meeting or at that session. This way, he noted, both sides
could maintain momentum at the working level, and high-level issues
could be addressed during the bilateral meeting. Andreucci added
that one of Brazil's Working Group Chairs planned to travel to
Washington in late August for consultations with his U.S.
counterparts, while another planned to make a similar trip in
September.

Bio-Fuels
---------
3. (SBU) Furlan observed that Brazil stood ready to cooperate with
the U.S. on bio-fuels (i.e., ethanol and related products), noting
that he had previously spoken with Energy Secretary Bodman, Commerce
Secretary Gutierrez, and former USTR Portman on this point and that

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President Lula, enamored with the idea of "planting energy," has
frequently raised the issue in his conversations with President
Bush. U.S. companies were now beginning to show interest in
ethanol, he said. Archer, Daniels, Midland and four other U.S.
investors had entered the market, while Bill Gates had acquired 25%
of the firm Pacific Ethanol. Furlan stated that Brazil was actively
seeking partners overseas and that he personally had traveled to
Japan, Central America and Africa to pursue potential cooperative
efforts. Furlan mentioned that President Lula had appointed him as
the overall coordinator of a bilateral alternative fuels panel with
Japan, and noted that Japan had been easier to engage on biofuels
than the U.S.

4. (SBU) The Minister remarked that Brazilian producers were
ramping up 100 new sugar cultivation projects, not using Amazon
forest but land that had previously been devoted to pasture. The
percentage of new cars sold in Brazil that sported flex-fuel
technology had now reached 76 percent - versus 22 percent at the
beginning of 2005 -- while the price difference between flex-fuel
and traditional cars had dropped to zero. In closing, Furlan
pointed out that Brazil's biofuel effort went beyond ethanol and
included biodiesel (a blend of regular diesel and vegetable oil) and
H-Bio (a locally designed product in which vegetable oil and diesel
are refined into a new substance.)

5. (SBU) Ambassador Sobel noted that in the area of biofuels the
USG was working hard on new technologies such as producing more
efficient seeds and manufacturing ethanol from cellulosic matter.

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Central America and the Caribbean could particularly benefit from
greater use of ethanol production, he noted, given the relatively
high proportion of income to GDP that a number of countries in those
regions spend on fuel imports.

Intellectual Property
---------------------
6. (SBU) Turning to the issue of IPR, the Brazilians noted that
they had substantially improved their record on intellectual
property rights. Enforcement aimed at copyright piracy had been
strengthened, with the number of pirate goods confiscated at border
inspections registering a marked increase. With respect to patents,
Furlan noted that the Brazilian patent institute (INPI) was working
to improve its review process. On trademarks, he said, INPI was even
further advanced, as automation of the process would soon reduce the
time required to obtain a trademark by 80 percent. Furlan invited
the Ambassador to tour INPI facilities in Rio de Janeiro once that
agency had completed its move to its new headquarters. The combined
effects of the new building, the implementation of new hardware and
software products, and additional personnel, he said, would result
in a real change in the way INPI does business. For his part, the
Ambassador thanked Furlan for his help in ensuring that two of the
three U.S. pharmaceutical firms threatened with compulsory licensing
came to an equitable settlement with the GOB and urged Brazil to
rapidly agree to terms with the third company.

GSP
---
7. (SBU) The Minister felt that U.S. multinationals were doing
relatively well in Brazil, stating that sales for Dell, Microsoft,
ADM, and Intel all had grown 40 percent as compared to last year.
Indeed, he noted, Dell planned to open a new assembly plant in Sao
Paulo, as lower taxes on computers and greater credit opportunities
for low-income families had resulted in increased demand for PC's
and laptops. He also noted that a decrease in grey-market computers
has increased the sales of legitimate products. The early 2006
termination of the U.S. copyright industry's petition to revoke
Brazil's GSP benefits reflected an implicit bargain, he declared:
i.e., Brasilia would continue to improve its performance on IPR
enforcement while Washington would maintain Brazil within GSP.

8. (SBU) If in renewing the GSP the U.S. were now to exclude
Brazil, he said, officials here would view this as "hitting below
the belt" and not in keeping with the positive tone of current
bilateral relations. The Ambassador stated that the Administration
was currently formulating its options on GSP, though the U.S.
Congress would ultimately decide whether it wanted to include Brazil
within any renewal of the program or renew the program at all. The
Ambassador took the opportunity to pass to Furlan reftel demarche.
(Econ Counselor subsequently passed demarche points to the Ministry
of External Relations.)

Investment and Engagement
-------------------------
9. (SBU) The Ambassador stated that in a prior meeting with one of
President Lula's high-level policymakers, that interlocutor had
noted that it was key to bring the benefits of democracy and
economic growth to all within the hemisphere. The way to do this,
he continued, was through greater investment in economic and human
capital. The Ambassador stated that he planned to do his part by
bringing players in U.S. capital markets to Brazil. Minister Furlan
welcomed the Ambassador's remarks, noting that some movement was
already afoot in the Sao Paulo Stock Exchange as that entity was
engaged in merger talks with its Argentine counterpart. The
Ambassador observed that Brazil could attract greater foreign
investment - and assist its own private sector in the process - by
concluding a bilateral tax treaty with the U.S. Minister Furlan
agreed that such an accord would be desirable, but admitted that the
lead on this issue was with the Finance Ministry.

Comment
-------
10. (SBU) In Minister Furlan we have a very useful and practical

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interlocutor, who has been particularly helpful to us in bringing
about positive solutions on such hot-button issues as compulsory
licensing of pharmaceuticals. While on many of the items on our
trade agenda he is not the ultimate decision-maker, he has been
influential in making our dialogue with the GOB friendlier to the
interests of U.S. businesses.

Sobel

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