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Cablegate: Rio Radar - February 1, 2010

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DE RUEHRI #0028/01 0321527
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R 011526Z FEB 10
FM AMCONSUL RIO DE JANEIRO
TO RUEHC/SECSTATE WASHDC 0106
INFO RUEHBR/AMEMBASSY BRASILIA
RUEHRG/AMCONSUL RECIFE
RUEHRI/AMCONSUL RIO DE JANEIRO
RUEHSO/AMCONSUL SAO PAULO

UNCLAS RIO DE JANEIRO 000028

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET PGOV ELAB WHO
SUBJECT: RIO RADAR - FEBRUARY 1, 2010

1. (U) Rio Radar is a regular compilation of key economic,
political, commercial, and other developments in the states of Rio
de Janeiro, Bahia, Minas Gerais, Espirito Santo, and Sergipe. This
week's subjects:

LULA, PETROBRAS, AND GENERAL ELECTRIC OPEN FIRST ETHANOL POWER
PLANT

2. (U) On January 19, Petrobras and General Electric (GE)
inaugurated the first ethanol-fired gas turbine system in the world
to provide electricity for commercial use. The event took place at
the Juiz de Fora power plant in Minas Gerais and was attended by
President Lula, Chief of Staff and Worker's Party (PT) presidential
candidate Dilma Rousseff, Mines and Energy Minister Edison Lobao,
and Science and Technology Minister Sergio Rezende. First sold as
natural gas turbines to Petrobras three years ago, GE and Petrobras
engineers subsequently worked to convert one of the turbines to
enable both sugarcane ethanol and natural gas-derived power
generation. GE's Government Affairs Manager Adriana Machado told
Rio Commercial Officer, who also attended the event, that GE and
Petrobras will partner to market this technology in third
countries. She said the Japanese had already expressed significant
interest in the dual-fuel turbines, which Petrobras purchased from
GE for 36 million USD.

3. (U) In his remarks, President Lula said this plant would force
other countries to reexamine the relevance of sugarcane-based
ethanol to industrial power generation, stating the technology was
part of a cost effective solution to combating global climate
change. Dilma Rousseff emphasized the importance of Brazilian
excellence in education, especially in engineering and science,
that led to this development, and criticized the United States for
its dependence on carbon-based fuels for power generation.
Rousseff's remarks were warmly received with applause, but many in
the crowd booed Minas Gerais Governor and possible PSDB vice
presidential candidate Aecio Neves, when President Lula mentioned
his name. Neves did not attend the event (Comment: The Juiz da
Fora ceremony was one of four events in Minas attended by Lula and
Rousseff on January 19, and was seen by many as electoral
campaigning. Neves did not attend for that reason, and many in the
crowd were likely PT activists, transported to the event. End
Comment).

NEW PETROCHEMICAL GIANT GIVES BRAZILIAN GOVERNMENT MORE CONTROL

4. (U) An 870 million Brazilian Real (467 million USD) investment
agreement, signed on January 22 between parastatal Petrobras and
petrochemical firms Odebrecht, Braskem, and Quattor, created "Nova
Braskem," which will be the largest petrochemical company in
Brazil. "Nova Braskem", whose annual revenue is expected to reach
19.8 billion BR (10.6 billion USD), will become Latin America's
largest producer of thermoplastic resin (a key material for
consumer products ranging from kitchen utensils to automotive
parts), and the world's 11th largest producer of ethylene.
Analysts expect the company to control 80 percent of the domestic
market for petrochemicals. Petrobras President Jose Sergio
Gabrielli stated the deal supports the goal of Petrobras to become
one of the word's five largest petrochemical producers, in addition
to its oil and gas operations. Given Petrobras' 46.2 percent share
in the new company, the deal will therefore also give the Brazilian
Government more control over the sector. While some analysts have
criticized the deal as effectively creating a monopoly over
Brazilian petrochemicals, a former Odebrecht director told us that
such consolidations are a natural result of increasing
competitiveness in the industry.

LABOR MINISTRY SAYS RIO STATE HAS MOST CASES OF SLAVE LABOR IN
BRAZIL

5. (U) The Brazilian Government reported that the state of Rio de
Janeiro led the country in the most number of laborers working
under slavery-like conditions in 2009, based on the number of such

workers rescued by authorities. According to the Ministry of
Labor, authorities rescued 521 workers from slavery-like
conditions, 14.5 percent of the country's total of 3,571. This
number is 11 times greater than the 46 workers rescued in Rio state
in 2008. In all cases registered in Rio, violations involved the
cultivation of sugarcane, the primary input for Brazilian sugar and
ethanol. Authorities suggest the increase in cases in Rio is due
to improvements in monitoring and enforcement, as well as a
broadening of existing legislation that included "exhaustive work
days" and "high intensity of labor" under the definition of
slavery-like conditions. Adonio Prado of the Research Group on
Slave Labor (GPTEC) told us the primary causes for slavery-like
conditions in sugarcane plantations in Rio state is the method of
remuneration for workers. Prado said the strictly production-based
system forces workers into exhaustion, and recommended plantations
adopt a fixed hourly or monthly wage in order to improve workers'
conditions.

6. (SBU) While the number of cases in Rio increased, as well as
overall figures for the Southeast, the total figure across Brazil
fell from 5,016 workers rescued in 2008 to 3,571 in 2009. In the
Northeast, which registered 1,498 cases in 2008, the figure dropped
to 875. Authorities believe reduced demand due to the global
recession led to the decrease, but express concern that numbers
will increase as the Brazilian economy again gains momentum
(Embassy comment: The principal reason for the drop in the
Northeast and rise in Rio and the Southeast is due to the Ministry
of Labor's having shifted its inspection resources from one region
to another in 2009, rather than a dramatic drop in slave-like
conditions in either region. End Embassy comment). According to
the Federal Prosecutor's Office, officials will focus monitoring
efforts on workplaces that involve production of coal and wood, as
well as the cultivation of sugarcane and yerba mate tea leaves.

DENGUE FEVER RISK REMAINS HIGH, BUT CHANCES OF OUTBREAK REDUCED

7. (U) Researchers reported that almost 3 percent of Rio de
Janeiro's population is suffering from dengue fever this season,
above the 1 percent threshold designated "tolerable" by the World
Health Organization. According to entomologist Rafael Freitas,
the actual number of residents with dengue fever is lower than
expected, however, given the risk factors in Rio, such as a large
concentration of the mosquito that carries the strain. He stated
high incidences of exposure in previous years have resulted in high
rates of immunity among Rio's population. Dr. Paulo Cesar
Guimaraes, a specialist in infectious disease from the Brazilian
Society of Pediatrics, told us the greatest risk period for a
dengue fever outbreak has already passed and will continue to
decrease each day until the end of the Brazilian summer, in
mid-March.
HEARNE

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