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Cablegate: Brazil: Nec Hubbard and Doc Gutierrez Roundtable With

VZCZCXRO8837
RR RUEHRG
DE RUEHBR #2090/01 3100925
ZNR UUUUU ZZH
R 060925Z NOV 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 0358
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 5382
RUEHSO/AMCONSUL SAO PAULO 1120
RUEHRG/AMCONSUL RECIFE 7329

UNCLAS SECTION 01 OF 02 BRASILIA 002090

SIPDIS

SIPDIS

E.O. 12958:N/A
TAGS: ECON ETRD BR
SUBJECT: BRAZIL: NEC Hubbard and DOC Gutierrez Roundtable with
Governors October 11, 2007


1. (U) SUMMARY: In an October 11 roundtable with Commerce Secretary
Gutierrez and National Economic Council Director Hubbard on the
margins of the CEO Forum and Commercial Dialogue, the governors of
Bahia (Jacque Wagner), Rio Grande do Sul (Yeda Crusius), and Santa
Catarina (Luis Henrique Silveira), as well as the vice-governor of
the Federal District/Brasilia (Paulo Octavio) discoursed on the
challenges and opportunities of their region with a view toward
attracting American trade and investment. Secretary Gutierrez
explained that the American message was "we want to help." END
SUMMARY.
2. (U) Secretary Gutierrez opened the roundtable noting that the
measure of success for the US and Brazil is creating jobs and growth
for both sides. He told the governors that the United States wants
Brazil to attract more investment. Regarding infrastructure, he
said the US message was "We want to help," whether by sharing
technology and technical capability, facilitating financing
guarantee mechanisms like EXIM and OPIC, or by introducing large
American companies that have been very successful in infrastructure
projects. He emphasized the importance of infrastructure
development to the growth and competitiveness of Brazil. Director
Hubbard noted that Brazil is growing, but has the opportunity for
even greater growth, and invited the governors' views regarding what
Brazil needs to do and how the US can help to encourage Brazil to
move from a 4 percent growth rate to a six or eight percent rate.
RIO GRANDE DO SUL
3. (U) Governor Yeda Crusius noted that as a frontier state,
Mercosul is important to Rio Grande do Sul and the state exports
every type of product it makes. She said the state has the most
favorable income distribution in the country and lauded the state's
innovation culture and research hubs. She underlined the need for
federal tax reform, saying her state loses much under the current
structure. Rio Grande do Sul runs a fifteen percent deficit; if tax
laws relieved the state's export tax burden, there would be no
deficit, she stated. She noted that fifty two percent of revenues
go to pay retiree pensions. The state ranks seventh in road
coverage. Crusius claimed any cooperation would have to be outside
existing arrangements - her state wants tax, pension and labor
reform. At the state level, she cited the need for irrigation, the
establishment of public-private partnerships for roads, help
developing the port, and reforestation assistance. Crusius proudly
claimed that her state had the lowest corruption rate in the country
and was focused on energy, bio-energy and pro-competitive
infrastructure. However, she said, the concentration of resources
at the federal level constrains the state's ability to plan and
legislation pits one state against another in competing for
investments. She urged quick establishment of an American Presence
Post in Porto Alegre.
BAHIA
4. (U) Governor Jacque Wagner lamented that Japanese and European
investors were in his state, but not American. He noted a Bahia
state-owned company was involved in building the Miami airport. He
noted Bahia requires much infrastructure investment and said he
would soon sign a 120 m usd sanitation private-public partnership
and intended eventually to fold a project to build a 1.3 bn usd
highway west to the Atlantic into the PAC. Wagner urged eliminating
visa requirements in both directions and increasing study and travel
exchanges between our countries. He noted the need for improved
airlinks between our countries, and opined that "ethnic tourism" was
an area for strong potential growth. He commented Bahia's growth
had been uneven, sometimes as much as seven percent, sometimes much
lower than four percent. He cautioned against any temptation ever
to compare Brazil to China, bristling that "we are not the same
culture; you have to get used to the way we are and the way we
grow."
SANTA CATARINA
5. (U) Governor Luis Henrique Silveira noted that while Santa
Catarina covers only one percent of Brazil's territory, the state is
the country's fifth largest food producer and fifth largest
exporter. He said two percent of the state's budget goes toward
science/tech research and another two percent toward university
scholarships. Almost one hundred percent of 7-14 year olds are in
school. The governor noted the state has lowered infant mortality
the most, has the highest life expectancy, and the lowest crime rate
in Brazil. Silveira felt that Santa Catarina's advantages included
lack of a big metropolis, a decentralized state government based on
36 separate districts, and its geographic location at the heart of
the territory covered by Mercosul. He said Santa Catarina is "about
culture, innovation and software development," and highlighted the
Ecopower conference in November that our Ambassador will attend.
FEDERAL DISTRICT/BRASILIA
6. (U) Vice-Governor Paulo Octavio highlighted Brasilia's relative
youth as a city at 47 years old and the importance of the United
States to its construction, from the lake designed by an American
company to US steel technology used in Brasilia's buildings. He
portrayed Brasilia as a vibrant growing city with a constant influx
of citizens moving in from other parts of the country. The
vice-governor noted that Brasilia has the highest per capita income
in the country. He hastily added that when his governor came in
nine months ago, he let go a great many superfluous civil servants.
The vice-governor noted his state had excellent relations with the

BRASILIA 00002090 002 OF 002


federal government, helped in part by the governor being the same
party as the executive branch. Octavio indicated plans to implement
sanitation and other projects financed by the World Bank, but said
the state needs further investment in infrastructure and in
education to support its growth. He mentioned full-day schooling
will start next year. Octavio said his state wants a 500 m usd gas
pipeline, a 150 m usd beltway, a new cargo airport, and development
of five "thematic" parks/complexes (for example, one for the
technology sector). He stated his government wants five million
dollars to make the city totally wireless and "would love an
American company to do it." He urged establishment of an
international flight between Brasilia and the United States and
noted the Brasilia/Lisbon flight is 80 percent full every day.
Octavio wanted Brazil to abolish visas for Americans, believing more
visitors would come in that case (drawing hearty agreement from the
other governors). He also wished the US visas process were easier.

CONCLUSION
7. (U) Secretary Gutierrez concluded the meeting by noting that he
was considering sending an investment mission focused on
infrastructure to Brazil. He urged the governors to let the
Ambassador know their specific infrastructure priorities, in order
to ensure that U.S. companies were aware of opportunities. COMMENT:
The event provided a good opportunity for the delegation to obtain
a sense of the challenges and opportunities faced at the state level
in Brazil. The governors were visibly pleased at the prospect of a
DOC-led infrastructure mission in the near future. END COMMENT.
SOBEL

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