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Cablegate: Brazil: Doc Secretary Gutierrez and Mdic Jorge Meeting

DE RUEHBR #2066/01 3031926
R 301926Z OCT 07




E.O. 12958:N/A
SUBJECT: BRAZIL: DOC Secretary Gutierrez and MDIC Jorge meeting
October 10, 2007

1. (U) SUMMARY: Commerce Secretary Gutierrez and Brazilian Minister
of Development, Industry and Trade (MDIC) Miguel Jorge met October
10 in Brasilia to discuss the CEO Forum, trade and investment
challenges in Brazil, and specific trade problems encountered by
American firms. The meeting was collegial. Both sides were
encouraged that ANVISA, the FDA-equivalent Brazilian regulatory
agency, had agreed to participate in a Commercial Dialogue working
group session for the first time. Jorge committed to ensure
Mattel's continuing difficulties with Brazilian customs and
un-notified, un-published regulatory standards were addressed. END
2. (U) MDIC Minister Jorge genially remarked in opening the meeting
how different he found government work from the private sector -
"It's been seven months; it feels like seven years!" He commented
that the CEO Forum was an important first step to enhance US-Brazil
relations, that though there was a long way to go and many important
issues to discuss, he hoped the dialogue would eventually lead to
increased American trade and investment in Brazil. He noted that
Spanish companies had just won six out of seven road construction
concessions (a Brazilian company won the seventh), that Spain was
the second largest investor (behind Portugal) in Brazil, and that no
American companies had wanted to bid for the roads.
3. (U) Jorge predicted (though admitted he was optimistic) five
percent GDP growth for 2007. He noted 14 consecutive quarters of
growth indicated sustainability. Jorge said the rising import level
did not worry him since the trade balance was still good (he quoted
usd 46 bn) and the import component was mainly capital goods such as
machinery and equipment rather than consumer goods. Jorge was
pleased Brazilian industry was "using the weak dollar" to invest in
capital equipment. He said automotive sector production was up 3 or
4 percent from last year, nominal capacity was currently 3.5 million
units and increasing investment would increase capacity over the
next five years. Jorge was pleased with rising consumption
patterns, claiming that some states' consumption was up sixteen
percent over last year, a phenomenon never before seen in Brazil.
Jorge noted that a continuing challenge for businesses in Brazil is
insufficient supply of workers with technical expertise.
4. (U) Secretary Gutierrez asked about "Bolsa Familia," Brazil's
social support program. Jorge admitted that, as a non-PT party
member and a former private sector leader, he had been very against
this program. However, he now saw its benefits - children were
staying in school longer, eight million families had been able to
"graduate" from the need for public assistance, and the university
scholarship element of the program was educating potential
contributors to the economy who otherwise would not have had any
prospects. Jorge noted that "Bolsa Familia" recipients were
concentrated in the Northeast of Brazil and the program would now be
expanded to cover assistance to families with children up to age 17,
vice 14. He noted there had been elitist objections to the
university scholarship program from those who felt the scholarship
candidates would take the place of those with more academic merit,
but in fact, in fourteen majors, the scholarship recipients had been
the top performers.
5. (U) Secretary Gutierrez turned to specific trade concerns.
Regarding ATA carnet (for importing trade show samples as well as
certain other temporary imports), MDIC staff updated that Receita
Federal was sending proposed legislation to facilitate such imports
forward to Itamaraty and to Congress. On express delivery,
Secretary Gutierrez underlined US concerns with restrictions on

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service and expressed hope that MDIC would continue to support
important reforms to this sector. Turning to medical devices,
Secretary Gutierrez drew attention to problems with Brazil requiring

business sensitive information and devising onerous ever-additional
requirements. Gutierrez was encouraged that ANVISA had therefore
agreed for the first time to come to the Commercial Dialogue to hear
business concerns. Jorge was similarly encouraged, believing that
ANVISA benefited by "feeling the tenor of the dialogue" and
understand better US procedures to ensure health and safety without
unnecessarily impeding trade. DOC DAS Walter Bastian offered to
follow up if ANVISA would be interested to send representatives to
meet with FDA. Secretary Gutierrez suggested we might invite FDA to
the next Commercial Dialogue with Brazil. Jorge agreed and
suggested NIST and INPI should also participate.
6. (U) Secretary Gutierrez raised Mattel's problems. Jorge said the
history of problems with Mattel pre-dated his arrival as Minister,
but that given the "big headlines" in Brazil, the country had to
initiate an investigation on product safety grounds. Currently, the
overall pattern of all toy imports from all countries was being
analyzed and a report is to be ready in two or three weeks. Jorge
said, "We have a problem, because they brought a lawsuit against
us." However, he welcomed that Mattel had changed its negotiating
approach "to clean the tubes; the tubes were very dirty with us"
(note, as in "clear the air"). He specifically welcomed Mattel's
hiring a former Brazilian ambassador who is well known and liked to
negotiate on Mattel's behalf. Jorge stated, "I was very clear to my
people that Mattel should not lose Christmas, since they already
lost Children's Day."
7. (SBU) COMMENT: Jorge was warm and forthcoming, clearing seeing
himself and our Secretary as similarly bringing valuable private

BRASILIA 00002066 002 OF 002

sector experience into their public roles. The one off-note was
Mattel, where, though promising to do the right thing from the
business point of view, Jorge made clear he felt the company had
burned some bridges in resolving its legitimate issues. END
8. (U) Delegation cleared this message.

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