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Cablegate: Sao Paulo Key Economic Developments, November 16-30, 2009

VZCZCXRO0334
RR RUEHRG
DE RUEHSO #0706/01 3421123
ZNR UUUUU ZZH
R 081121Z DEC 09
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 0238
INFO RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAC/AMEMBASSY ASUNCION
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHCV/AMEMBASSY CARACAS
RUEHLP/AMEMBASSY LA PAZ
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHPE/AMEMBASSY LIMA
RUEHRG/AMCONSUL RECIFE 0050
RUEHRI/AMCONSUL RIO DE JANEIRO
RUEHSG/AMEMBASSY SANTIAGO
RUEHSO/AMCONSUL SAO PAULO

UNCLAS SECTION 01 OF 02 SAO PAULO 000706

SENSITIVE
SIPDIS
STATE EEB/TPP/BTA PASS TO FTC

E.O. 12958: N/A
TAGS: ECON EFIN ETRD BR PGOV ENRG
SUBJECT: SAO PAULO KEY ECONOMIC DEVELOPMENTS, NOVEMBER 16-30, 2009

REF: BRASILIA 1383

1. (U) SUMMARY: This cable covers the period of November 16-30,
2009. It highlights economic, energy and science and technology
developments in the Sao Paulo Consular District not covered by
broader reporting. Some significant developments during the period
were: the upcoming first wind power auction, the development of
smart grid standards, and Sao Paulo's share of the national GDP.
END SUMMARY.

--------------------------------------------- -----------------

Brazil's First Wind Power Auction Signals Energy Diversification

--------------------------------------------- -----------------

2. (U) Brazil is likely to hold its first wind power auction on
December 14 that should result in the construction of two gigawatts
of new electricity production and investment of US$6 billion. The
auction is attracting several international players - Energias de
Portugal, Electricit???? de France, Spain's Iderbrola, and the US
EnerFin - plus several Brazilian firms. The president of Abeeolica
(the Brazilian Wind Power Association), Pedro Perrelli, lauded a
record 441 proposals representing 13.3 gigawatts of potential power
generation. Brazil's potential for wind energy is 143 gigawatts,
concentrated around its blustery 4,600-mile coastline where most
projects would be based. The government's goal is to build 10
gigawatts of wind power capacity by 2020 to diversify away from its
80 percent reliance on hydroelectricity. New hydro installations
are increasingly held up over environmental concerns. The winners
of this auction will get a 20-year power purchase agreement from
the State.

--------------------------------------------- --------

Brazil Likely to Develop Smart Grid Standards by 2010

--------------------------------------------- ---------

3. (SBU) The National Coordinator for Smart Grid Interoperability
(NIST), Dr. George Arnold, visited Sao Paulo November 9-11 to
provide a key note address at the most important Smart Grid Forum
in Latin America and to meet with Brazilian regulators and the U.S.
private sector. According to data from the National Agency for
Electric Energy, Brazil loses approximately US$4 Billion from
transmission inefficiencies and theft each year. These losses could
be reduced with smart grid technologies. Their meetings identified
areas of bilateral cooperation, including assisting Brazil in
developing smart grid standards by July 2010. Adding more urgency
to the situation, Brazilian experienced its first major blackout
since 2003 affecting almost half of the country the last night of
the conference. (Reftel A)

--------------------------------------------- -------------------

Possible Regulatory Changes in the Medical Devices Sector

--------------------------------------------- -------------------

4. (SBU) In response to Brazil's decision to begin new inspections
in May 2010 of companies selling certain "high risk" in vitro
diagnostic products and medical devices, Commercial Services Sao
Paulo organized a technical seminar on November 4 with the
inspecting agency (ANVISA) and 100 U.S. and Brazilian industry
representatives to discuss regulatory changes in the medical
devices sector. U.S. companies are concerned that ANVISA does not

SAO PAULO 00000706 002 OF 002


have enough resources to conduct the good manufacturing practices
(GMP) inspections by the deadline, which could then jeopardize
entry of over US$800 million worth of U.S. exports. As a result of
the seminar, ANVISA agreed to publish a technical note answering
over 70 of industry's questions. ANVISA also agreed to improve its
website with instructions on how to request an inspection
appointment.

--------------------------------------------- -----

Sao Paulo increases its share of the country's GDP

--------------------------------------------- -----

5. (SBU) According to data from Brazil's Institute of Statistics
and Geography (IBGE), the State of Sao Paulo has gradually
increased its role in the country's economy in the last five years,
despite national efforts of economic de-centralization. Sao
Paulo's economy now accounts for 34 percent of the national GDP, up
from 33 percent in 2004. This increase is mainly due to average
industrial growth around 7.4 percent well above the country's
average of 6.1 percent. Sao Paulo's industrial growth, which
accounts for 44 percent of Brazil's industrial GDP, has occurred
amid a decline in the fiscal advantages provided by other states to
encourage private companies to set up industrial parks. As a
result, Sao Paulo remains the largest contributor to the national
GDP, with the State of Minas Gerais, a distant second, contributing
10 percent of the national GDP.
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