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Cablegate: Lula: Touch and Go in Caracas to Discuss Trade

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DE RUEHCV #2363 3521559
ZNY CCCCC ZZH
R 181559Z DEC 07
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC 0316
INFO RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEBAAA/DEPT OF ENERGY
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY
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RHEHNSC/NSC WASHDC

C O N F I D E N T I A L CARACAS 002363

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/12/2017
TAGS: ECON ETRD ENRG EINV VE BR
SUBJECT: LULA: TOUCH AND GO IN CARACAS TO DISCUSS TRADE
IMBALANCE

REF: A. 2006 CARACAS 03561

B. CARACAS 01816

Classified By: ECONOMIC COUNSELOR ANDREW BOWEN, FOR REASON 1.4 (D)

1. (U) SUMMARY: Brazilian President Lula Da Silva,
accompanied by approximately 130 Brazilian business leaders
paid a five-hour visit to Caracas on December 13, and met
with President Chavez and other senior BRV officials. Nine
agreements were signed in the areas of health, agriculture,
energy, industry and food. Brazilian presidential spokesman,
Marcelo Baumbach, stated the focus of the meeting was on
commercial trade and finding ways to make trade more
balanced. Chavez said that he was not concerned about the
current trade imbalance. From January to October 2007,
Brazil sold USD 3.8 billion of goods to Venezuela while
Venezuela sold just USD 296 million of goods to Brazil. END
SUMMARY.

---------------------------
Meetings every three months
---------------------------
2. (U) During the meeting the two leaders formalized
agreements reached September 20, in Manaus, Brazil.
Agreements signed included the provision of GOB technical
assistance to strengthen BRV food safety and inspection,
programs to improve sanitary controls for Venezuelan food
production, exchange programs for public health, and
Brazilian technical assistance for the production of coffee,
citrus fruits and yucca. There was also a petrochemical
agreement to establish a joint company in Venezuela to
produce plastic resins. Supplementary agreements to further
the construction of two hydro electric projects in
Uribante-Caparo, Venezuela were also signed. An agreement
was also signed on moving forward with the Petrobras-PDVSA
USD 2.5 billion Abreu de Lima joint oil refinery construction
project, located in Pernambuco, Brazil, which is scheduled
for completion in 2010. Chavez also proposed creating a
joint investment fund in 2008 but no details were provided.
Lula and Chavez are scheduled to meet again in Pernambuco in
March 2008.

-------------------
Presidents' Remarks
-------------------
3. (SBU) Lula underscored the obligation of wealthier South
American countries to help smaller and weaker countries. He
also emphasized his goal of improving Venezuela's bilateral
trade balance with Brazil. According to ABN, the BRV news
agency: from January to October 2007, Brazil sold USD 3.8
billion of goods to Venezuela; an increase of 29 per cent
from the previous year. During the same period, Venezuela
only sold USD 296 million of goods to Brazil; a decrease of
44 percent from the previous year. Lula also reiterated his
support for Venezuela's full Mercosur membership. Chavez
stressed South America unity: "We are molding a South
American Pole, a body of strength, a body of knowledge, a
political force." He added that he was not concerned about
the current trade imbalance with Brazil and that it would
eventually improve once Venezuela started shipping crude to
the Pernambuco refinery.

4. (C) Comment: The lucrative Venezuelan market continues
to grow for Brazil (Ref A), and provides Lula with ample
incentive to maintain friendly relations with the mercurial
Chavez. This may be the reason PDVSA and Petrobras were able
to reach an agreement for the joint refinery project in
Pernambuco despite previous reports that negotiations had
stalled. The Brazilian Ambassador to Venezuela had
previously predicted that Brazil will shortly eclipse
Colombia as Venezuela's second largest trading partner after
the US (Ref B).

DUDDY

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