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Cablegate: Brazil: Under Secretary Jeffery's Meetings with Gob

VZCZCXRO2432
RR RUEHRG
DE RUEHBR #1813/01 2671317
ZNR UUUUU ZZH
R 241317Z SEP 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 0017
INFO RUEHRG/AMCONSUL RECIFE 7155
RUEHSO/AMCONSUL SAO PAULO 0845
RUEHRI/AMCONSUL RIO DE JANEIRO 5140
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS SECTION 01 OF 03 BRASILIA 001813

SIPDIS

SENSITIVE
SIPDIS

STATE PASS TO E FOR TOM PIERCE
STATE FOR WHA/EPSC LISA KUBISKE
STATE FOR S/P WILLIAM MCILHENNY
STATE FOR S/P GREG MANUEL
DOE FOR CGILLESPIE, GWARD

E.0. 12958: N/A
TAGS: ECON ENGR ETRD ECIN EAIR ECPS TSPA SENV BR
SUBJECT: BRAZIL: UNDER SECRETARY JEFFERY'S MEETINGS WITH GoB
OFFICIALS


BRASILIA 00001813 001.2 OF 003


1. (SBU) Summary: Under Secretary Reuben Jeffery and delegation met
with Acting Minister of Mines and Energy, Nelson Hubner; Vice
President Jose Alencar; and senior Ministry of Finance officials
during his August 20 visit to Brasilia. Hubner said he saw an
immediate need to showcase a biofuels production success story to
refute the claim that biofuel production would lead to food
shortages. GoB officials at the meeting noted the importance of the
USG climate change initiative. The meeting with Vice President
Alencar focused on Brazil's infrastructure needs and proposed a
U.S.-Brazil public-private partnership to improve one airport as a
model for foreign investment in infrastructure development. He also
pointed to the need for foreign investment in the country's
waterways, railways and ports, and suggested that some energy
sectors, such as hydroelectric and nuclear, might be receptive to
external investors. Ministry of Finance officials showcased
Brazil's strong macroeconomic progress and told the Under Secretary
that the GoB was progressing towards eventual acceptance of
bilateral investment treaties (BITs). They also emphasized the need
to build the biofuels market and develop related financial
instruments. The Ministry of Finance officials noted that Brazil
had only recently emerged as a donor nation and acknowledged that
the GOB needed to make decisions on assistance issues, such as
contributing towards relieving the Liberian IMF arrears. End
Summary.

--------------------------------------------- ---
Meeting with Acting Minister of Mines and Energy
--------------------------------------------- ---

2. (U) Under Secretary Reuben Jeffery and delegation met with
Acting Minister of Mines and Energy, Nelson Hubner, Ambassador
Antonio Simoes of the Ministry of Exterior Relations, and various
other GoB officials. The discussion centered on biofuels and the
USG climate change initiative.

-- Biofuels

3. (SBU) Hubner said the U.S. and Brazil should use their
collective advantages in biofuel technology and auto production to
promote industry standardization. He noted that although biodiesel
standardization might take longer, he believed ethanol
standardization was well on its way. Simoes reported that experts
from the Brazilian standardization agency (INMETRO) were working
with NIST and other institutions with a goal of establishing, by
year-end, criteria to move the standardization discussion to the
International Biofuels Forum (IBF).

4. (SBU) Hubner suggested that the MOU wording was too general and,
as a result, might preclude a concrete plan of action. He also said
that it was crucial to showcase a success story to refute the claim
that biofuel production would lead to food shortages - a claim that
he said was ideologically driven. To combat this perception, he
suggested using the experiences of small farms in Nicaragua that
produce sustainable biodiesel without sacrificing food supply.

-- Climate Change Initiative

5. (SBU) Simoes underscored the importance of the USG climate
change initiative to the GoB and affirmed his government's
participation in the initiative. Simoes highlighted Brazil's view
that the U.S., as a non-signatory to the Kyoto Protocol, placed more
emphasis on energy efficiency and expense than the environment. He
added that both countries should focus on underlining their
partnership in promoting alternative energy such as biofuels.

6. (SBU) The Under Secretary said the September Major Economies
Meeting (MEM) on climate change was a beginning that he hoped, over
the next 18 months, would lead to the achievement of a global
greenhouse emissions goal involving the creation of national plans
and intermediate benchmarks. He observed that several important
meetings on climate change would follow the MEM and build on the
dialogue established there.

----------------------------------------
Meeting with Vice President Jose Alencar
----------------------------------------

7. (SBU) Under Secretary Jeffery, along with Ambassador Sobel and
State Department officers, discussed advancing U.S. - Brazilian
infrastructure investment partnerships, promiting foreign direct
investment, and biofuels with Brazilian Vice President Jose Alencar.


BRASILIA 00001813 002.2 OF 003

-- Energy

8. (SBU) The Vice President told the Under Secretary that there was
opportunity for a public-private partnership in non-strategic areas
of the energy sector, particularly in hydroelectricity and nuclear
energy. He pointed to the country's "urgent" need for vastly
improved infrastructure to support its growing biofuels industry and
observed that most transportation in Brazil was by road. He said
the country needed to develop and improve its waterways, railways
and ports to improve transport. There was, he said, the possibility
of private industry involvement in these types of projects.

-- Promoting Private Investment

9. (SBU) The Under Secretary asked about the opportunity for
private sector involvement in President Lula's Program to Accelerate
Growth (PAC) and emphasized the importance of the upcoming October
CEO forum in Brasilia to attracting private sector investment. As
an example, Ambassador Sobel pointed out that the U.S. - Brail forum
was modeled on a similar program held in India that brought in USD 5
billion in investments to India one year later.

10. (SBU) Alencar appeared receptive to the possibility of
increased private investment in Brazilian infrastructure projects.
He suggested connecting interested U.S. companies with the
appropriate ministries and Brazilian companies for further
discussions.

-- A First Step? An Airport Infrastructure Partnership

11. (SBU) According to Alencar, the GoB saw a particular opening
for private capital in its airport infrastructure plans. As a
start, he suggested the participation of a U.S. company in
partnership with a Brazilian firm and the GoB in the capital
improvement project at one airport as a possible model for other
airport development. (He did not specify which airport would be the
model.)

----------------------------------
Meeting at the Ministry of Finance
----------------------------------

12. (SBU) Under Secretary Jeffery, Ambassador Sobel and delegation
met at the Ministry of Finance with Secretary for Economic Policy
Bernard Appy and Secretary for International Affairs Luiz Melin.

-- Macro Overview

13. (SBU) Appy showcased Brazil's strong macroeconomic progress.
He pointed out the sharp rise in exports over the last five years,
with a corresponding increase in trade surplus and foreign reserves.
Appy also noted that Brazil had gone from a negative current
account as a percentage of GDP, to a positive position since 2003.
Appy noted that Brazil had become the fifth largest creditor of the
United States. He said the GoB was focused on improving conditions
to increase growth, enhancing the credit market, advancing long term
fiscal policy, and expanding investment.

-- Biofuels Market

14. (SBU) On biofuels, Melin discussed the need for International
Biofuels Forum (IBF) agreement on compatible market standards.
Calling for a "new market for a new century" with no enclaves of
protectionism, he emphasized the need to build the market and
develop related financial instruments.

-- Tax and Investment Treaties

15. (SBU) Melin said the proposed bilateral tax treaty was a
political matter that the GoB was not ready to move forward. In
contrast, he felt the bilateral investment treaty (BIT) was further
along. He pointed to internal GoB discussions as evidence and said
the next meeting of Brazil's Foreign Council would address the BIT
format.

-- Liberian Arrears

16. (SBU) On the issue of Liberian arrears, Melin said that Brazil
had to become accustomed to its new role as a donor country. He
said that he expected the GoB to determine soon how much of a
contribution it would make.

BRASILIA 00001813 003.2 OF 003

17. (U) This cable was cleared by Tom Pierce in E.

Sobel

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