Cablegate: Brazil: Ambassador Discusses Biofuels and Other Topics With

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RUEHQT/AMEMBASSY QUITO 1973
RUEHSG/AMEMBASSY SANTIAGO 5790
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEBAAA/USDOE WASHDC
RUCPDO/USDOC WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BRASILIA 001992

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD PGOV PREL EFIN EINV BR
SUBJECT: BRAZIL: AMBASSADOR DISCUSSES BIOFUELS AND OTHER TOPICS WITH
ABDI PRESIDENT ALESSADRO TEIXEIRA

REF: (A) BRASILIA 1973(B) BRASILIA 1935

1. (SBU) Summary: Ambassador Sobel, accompanied by PolCouns and
Commercial Counselor, met with Alessandro Teixeira, President of the
Brazilian Agency for Industrial Development (ABDI) on September 14
to discuss biofuels issues. The meeting quickly boiled over to
cover a range of topics and potential areas for cooperation, such as
innovation, competitiveness, foreign investment and venture capital
-- just to name a few of the topics discussed in a lengthy and
animated conversation during which there was surprising convergence
of views on many topics.

2.(SBU) Teixeira echoed many of the points made just two days before
when the Ambassador met with Presidential Chief of Staff for Policy
Dilma Rousseff, concurring that the U.S. and Brazil need to move
quickly on biofuels, but first must work through their bilateral
policy relationship before going forward with cooperation in third
countries or determining which resources may be tapped to put the
policy into action. Like Rousseff, Teixeira expressed great
interest in meeting with interlocutors on bio-fuels, as well as
competitiveness and venture capital when he travels to the U.S. at
the end of September. Teixeira said he has a very close
relationship with Rousseff and promised to help reconfirm several
meetings that the Ambassador has arranged for Rousseff when she is
in New York and Washington. End Summary.

3. (SBU) On September 14, the Ambassador met for the first time with
Alessandro Teixeira, President of the Brazilian Agency for
Industrial Development (ABDI). Teixeira opened the meeting by
explaining that ABDI was formed by the Lula administration in 2004
to coordinate GoB industrial policy and promote industrial and
technological development through competitiveness and innovation.
The agency receives policy guidance from the National Council of
Industrial Development, which falls under the direction of the
Ministry of Development, Industry and Trade (MDIC) and the Ministry
of Science and Technology (MST). (Note: Previoius Mission contact
with Teixeira was during the Commercial Dialogue meetings in Rio
this past June, on the margin of the Ethanol Forum on September 5 -
Ref B).

4. (U) The Ambassador told Teixeira that his meetings in the U.S. on
biofuels had only reinforced his commitment to move forward with the
Brazilians and expand the opportunity for third countries. He
reiterated the complexity of the USG interagency process, but
expressed our interest in still moving forward quickly.

5. (U) Like Rousseff, Teixeira expressed strong interest in
cooperating with the USG and provided an update of such cooperation
beginning with the visit of ex-Minister of Agriculture Rodriques to
the U.S. in June 2005. He said that Brazil has made significant
progress in research and development at the Ministry of
Agriculture's research institute (EMBRAPA), the Sugarcane Technology
Center (CTC), and Petrobras's Research and Development Center
(CENPES). Teixeira finished by noting that Brazil is the only
country in the world with a complete production chain in biofuels -
including seeds, crops, ethanol production and distribution, and
full-flex automobiles along with the research and development of
technology in all of these areas. On the international side, he
added that Brazil has ""more than 20 countries ready to form
agreements"" and he questioned the inclusion of "small countries
like Kits and Nevis" in the U.S. Draft Biofuels Strategy.

6. (U) Wondering whether the U.S. is ready to implement a vertically
and horizontally integrated policy on bio-fuels, Teixeira noted what
he called "different positions from different parts of the U.S."
referring to recent visits to Brazil by the Florida FTAA group which
expressed certain policy stances, and another visit from Californian
bio-fuels'' specialists who proposed other policies. He asked if
the Ambassador was "not afraid in the U.S. of a big fight in these
areas?"

7. (U) The Ambassador responded that in the U.S., like Brazil, there
are different political and commercial interests that need to be
worked out before a national policy is implemented, and he also

BRASILIA 00001992 002 OF 002

recognized the U.S. has two different feed stocks for ethanol
production, i.e., corn and sugar cane. He added that we also
require coordination amongst our government agencies - both at the
state level as well as the federal level - but despite all the
differences we are close to an inter-agency agreement.

8. (SBU) The Ambassador mentioned the need to keep environmental
concerns in the development of a bio-fuels policy, adding "we need
to keep our eye on the environment." Teixeira vigorously responded
that "we need more than just one eye on it." He said he is tired of
hearing stories about "our NGOs" (referring to supposed Brazilian
NGOs) adding, "they are NOT 'our NGOs' - they are international
organizations". He added, "many NGOs don't know what they are
talking about." He said that Rousseff is pushing for a "strong -
but not tight - environmental regulatory regime for bio-fuels."

9. (SBU) In other areas of mutual interest the Ambassador and
Teixeira discussed the need for Brazil to attract DFI as well as to
have modern equity fund and venture capital markets. Teixeira
complained agencies that evaluate countries for risk consitently
rate China and India better for markets for foreign investment. He
said he was familiar with both countries and could not believe that
they are rated higher than Brazil. Teixeira also expressed interest
in the U.S.'s leadership in the area of venture capital funds and
the private equity market. Teixeira will be speaking in New York
City at the Brazilian Venture Capital and Private Equity Day
luncheon to he held in New York City on September 25.

10. (U) On the topic of competitiveness, ABDI is currently
negotiating MOUs with the U.S. Council on Competitiveness and the
Brazilian Competitiveness Movement. Teixeira will be visiting with
Deborah Wince-Smith on September 28 when he is in the U.S.

11. (U) Teixeira asked why there is not more direct investment and
the Ambassador said there are agreements like and F.T.A and a tax
treaty which we have with many other countries that would support
more American direct investment. Teixeira said Brazil opposes these
agreements today because there is not yet a sound analysis as to
what the impact would be in particular industries. Teixeira went on
to say; until we are able to estimate the effects the GOB cannot
begin to discuss the Free Trade Agreement.

12. (U) Teixeira is very interested in meeting with USG and private
sector interlocutors on biofuels and other issues, and expressed
interest in the Ambassador's offer to assist in scheduling such
meetings with at the National Renewable Energy Labs and/or the
University of California-Berkley. He will be in the U.S for one
week from September 24 through 30 and would like to visit one of
these labs the day of September 29.

Chicola

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