

Currently released so far... 12553 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
2011/05/01
2011/05/02
2011/05/03
2011/05/04
2011/05/05
2011/05/06
2011/05/07
2011/05/08
2011/05/09
2011/05/10
2011/05/11
2011/05/12
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy Niamey
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sapporo
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
APECO
ASEC
AMGT
AFIN
APER
ACABQ
AORC
AEMR
AF
AE
AR
AGMT
AU
AY
ABLD
AS
AG
AJ
APCS
AX
AM
AMEX
ATRN
ADM
AMED
AFGHANISTAN
AZ
AL
ASUP
AND
ARM
ASEAN
AFFAIRS
AQ
ATFN
AMBASSADOR
AODE
APEC
ACBAQ
AFSI
AFSN
AO
ABUD
AC
ADPM
ADCO
ASIG
ARF
AUC
ASEX
AGAO
AA
AER
AVERY
AGRICULTURE
AIT
AADP
ASCH
AORL
AROC
ACOA
ANET
AID
AMCHAMS
AINF
AMG
AFU
AN
ALOW
ASECKFRDCVISKIRFPHUMSMIGEG
ACS
ADANA
AECL
ACAO
AORG
AGR
BEXP
BR
BM
BG
BL
BA
BTIO
BO
BP
BC
BILAT
BK
BU
BD
BRUSSELS
BB
BF
BBSR
BIDEN
BX
BE
BH
BT
BY
BMGT
BWC
BTIU
BN
CA
CASC
CFED
CO
CH
CS
CU
CE
CI
CM
CMGT
CJAN
COM
CG
CIS
CVIS
CR
CKGR
CHR
CVR
COUNTER
CIA
CLINTON
CY
CPAS
CD
CBW
COUNTERTERRORISM
CITEL
CDG
CW
CODEL
COUNTRY
CLEARANCE
COE
CN
CARICOM
CB
CONDOLEEZZA
CWC
CACS
CSW
CIDA
CIC
CITT
CONS
CL
CACM
CDB
CDC
CAN
CF
CJUS
CTM
CBSA
CARSON
CT
CLMT
CBC
CEUDA
CV
COPUOS
CTR
CROS
CAPC
CAC
CNARC
CICTE
CBE
ECON
ETRD
EIND
ENRG
EC
ELAB
EAGR
EAID
EFIS
EFIN
EINV
EUN
EG
EPET
EAIR
EU
ELTN
EWWT
ECIN
ERD
EI
ETTC
EUR
EN
EZ
ETC
ENVI
EMIN
ET
ENVR
ER
ECPS
EINT
EAP
ES
ENIV
ECONOMY
EXTERNAL
EINN
EFTA
ECONOMIC
EPA
EXBS
ECA
ELN
ETRDEINVECINPGOVCS
ENGR
ECUN
ENGY
ECONOMICS
ELECTIONS
EIAR
EINDETRD
EREL
EUC
ECONEFIN
EURN
EDU
ETRDEINVTINTCS
ECIP
ENERG
EFIM
EAIDS
EK
ETRDECONWTOCS
EINVETC
ECONCS
EUNCH
ESA
ECINECONCS
EUREM
ESENV
EFINECONCS
ETRC
ENNP
EAIG
EXIM
EEPET
EINVECONSENVCSJA
EUMEM
ETRA
ERNG
ETRO
ETRN
EINVEFIN
ICTY
IN
IS
IR
IC
IZ
IA
INTERPOL
IAEA
IT
IMO
IO
IV
ID
IRAQI
IEA
INRB
IL
IWC
ITU
ICAO
ISRAELI
ICRC
IIP
IMF
IBRD
ISLAMISTS
ITALY
ITALIAN
ILO
IPR
IQ
IRS
IAHRC
IZPREL
IRAJ
IDP
ILC
ITF
ICJ
IF
ITPHUM
INMARSAT
ISRAEL
IACI
IBET
ITRA
INR
IRC
IDA
ICTR
IGAD
INRA
INRO
IEFIN
INTELSAT
INTERNAL
INDO
ITPGOV
KWMN
KSCA
KDEM
KTFN
KIPR
KCRM
KPAL
KE
KPAO
KPKO
KS
KN
KISL
KFRD
KJUS
KIRF
KFLO
KG
KTIP
KTER
KRCM
KTIA
KGHG
KIRC
KU
KPRP
KMCA
KMPI
KSEO
KNNP
KZ
KNEI
KCOR
KOMC
KCFC
KSTC
KMDR
KFLU
KSAF
KSEP
KSAC
KR
KGIC
KSUM
KWBG
KCIP
KDRG
KOLY
KAWC
KCHG
KHDP
KRVC
KBIO
KAWK
KGCC
KHLS
KBCT
KPLS
KREL
KCFE
KMFO
KV
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KFTFN
KVPR
KTDB
KSPR
KIDE
KVRP
KTEX
KBTR
KTRD
KICC
KCOM
KO
KLIG
KDEMAF
KMRS
KRAD
KOCI
KSTH
KUNR
KNSD
KGIT
KFSC
KHIV
KPAI
KICA
KACT
KHUM
KREC
KSEC
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KCMR
KPIN
KESS
KDEV
KNAR
KNUC
KPWR
KENV
KWWMN
KWMNCS
KPRV
KOM
KBTS
KCRS
KNPP
KWNM
KRFD
KVIR
KTBT
KAID
KRIM
KDDG
KRGY
KHSA
KWMM
KMOC
KSCI
KPAK
KX
KPAONZ
KCGC
KID
KPOA
KIFR
KFIN
KWAC
KOMS
KCRCM
KNUP
KMIG
KNNPMNUC
KERG
KTLA
KCSY
KJUST
MOPS
MARR
MASS
MNUC
MX
MCAP
MO
MR
MI
MD
MK
MA
MP
MY
MTCRE
MOPPS
MASC
MIL
MTS
MLS
MILI
MAR
MU
MEPN
MAPP
MTCR
MEPI
MZ
MEETINGS
MG
MW
MAS
MT
MCC
MIK
ML
MARAD
MV
MERCOSUR
MTRE
MPOS
MEPP
MILITARY
MDC
MQADHAFI
MUCN
MRCRE
MAPS
MEDIA
MASSMNUC
MC
NZ
NZUS
NL
NU
NATO
NP
NO
NIPP
NE
NH
NR
NA
NPT
NI
NSF
NG
NSG
NAFTA
NC
NDP
NEW
NRR
NATIONAL
NT
NS
NASA
NAR
NV
NORAD
NSSP
NK
NPA
NGO
NSC
NATOPREL
NW
NPG
NSFO
OPDC
OTRA
OIIP
OREP
OVIP
OSCE
OEXC
OIE
OPRC
OAS
OPIC
OTR
OMIG
OSAC
OFFICIALS
OECD
OSCI
OBSP
OFDA
OPCW
ODIP
OFDP
OES
OPAD
OCII
OHUM
OVP
ON
OIC
OCS
PHUM
PREL
PGOV
PINR
PTER
PARM
PREF
PM
PE
PINS
PK
PHSA
PBTS
PRGOV
PA
PORG
PP
PS
PGOF
PL
PO
PARMS
PKFK
PSOE
PEPR
PAK
POL
PPA
PINT
PMAR
PRELP
PREFA
PALESTINIAN
PBIO
PINF
PNG
PMIL
PFOR
PUNE
PGOVLO
PAO
POLITICS
PHUMBA
PSEPC
PTBS
PCUL
PROP
PNAT
PNR
POLINT
PGOVE
PROG
PHALANAGE
PARTY
PDEM
PECON
PROV
PHUMPREL
PGOC
PY
PCI
PLN
PDOV
PREO
PGIV
PHUH
PAS
PU
POGOV
PF
PINL
POV
PAHO
PRL
PG
PRAM
POLITICAL
PARTIES
POLICY
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PGGV
PHUS
PSA
PHUMPGOV
PEL
PSI
PAIGH
POSTS
PBT
PTERE
RS
RU
RW
RM
RO
RP
REGION
RSP
RF
RICE
RCMP
RFE
RIGHTS
RIGHTSPOLMIL
ROBERT
RUPREL
RELATIONS
ROOD
REACTION
RSO
REPORT
SENV
SNAR
SCUL
SR
SC
SOCI
SMIG
SI
SP
SU
SO
SW
SY
SA
SZ
SAN
SF
SN
STEINBERG
SG
ST
SIPDIS
SNARIZ
SNARN
SSA
SK
SPCVIS
SOFA
SAARC
SL
SEVN
SARS
SIPRS
SHUM
SANC
SWE
SHI
SYR
SNARCS
SPCE
SYRIA
SEN
SH
SCRS
SENVKGHG
TRGY
TSPL
TPHY
TSPA
TBIO
TI
TW
THPY
TX
TU
TS
TZ
TC
TH
TT
TIP
TO
TERRORISM
TRSY
TINT
TN
TURKEY
TBID
TL
TV
TNGD
TD
TF
TP
TFIN
TAGS
TK
TR
UNSC
UK
UNGA
UN
US
UNHRC
UG
UP
UNMIK
UNHCR
UE
USTR
UNVIE
UAE
UZ
UY
UNO
UNESCO
USEU
USOAS
UV
UNODC
UNCHS
UNFICYP
UNEP
UNIDROIT
UNDESCO
UNDP
UNPUOS
UNC
UNAUS
USUN
UNCHC
UNCHR
UNCND
UNICEF
UNCSD
UNDC
USNC
USPS
USAID
Browse by classification
Community resources
courage is contagious
Viewing cable 08SAOPAULO423, DOHA, ETHANOL, AND THE WTO: WILL BRAZIL FIGHT?
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #08SAOPAULO423.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
08SAOPAULO423 | 2008-08-04 08:33 | 2011-01-12 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Sao Paulo |
VZCZCXRO6406
RR RUEHRG
DE RUEHSO #0423/01 2170833
ZNR UUUUU ZZH
R 040833Z AUG 08
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 8439
INFO RUEHBR/AMEMBASSY BRASILIA 9579
RUEHRG/AMCONSUL RECIFE 4165
RUEHRI/AMCONSUL RIO DE JANEIRO 8804
RUEHBU/AMEMBASSY BUENOS AIRES 3225
RUEHAC/AMEMBASSY ASUNCION 3472
RUEHMN/AMEMBASSY MONTEVIDEO 2750
RUEHSG/AMEMBASSY SANTIAGO 2472
RUEHLP/AMEMBASSY LA PAZ 3884
RUCPDOC/USDOC WASHDC 3139
RUEATRS/DEPT OF TREASURY WASHDC
RHMFIUU/DEPT OF ENERGY WASHDC
RUEHRC/USDA FAS WASHDC 0738
RHEHNSC/NATIONAL SECURITY COUNCIL WASHDC
UNCLAS SECTION 01 OF 03 SAO PAULO 000423
SIPDIS
SENSITIVE
STATE FOR WHA/BSC, WHA/EPSC FOR FCORNEILLE, E FOR GMANUEL,
EEB/ESC/IEC FOR BHAENDLER
STATE PASS USTR FOR KDUCKWORTH
STATE PASS DOE/NREL FOR HCHUM
DEPT OF TREASURY FOR JHOEK, BONEILL DEPT OF ENERGY FOR AMIRANDA, GWARD, CGILLESPIE
E.O. 12958: N/A
TAGS: ETRD ENRG EAGR ECON EINV TRGY BR
SUBJECT: DOHA, ETHANOL, AND THE WTO: WILL BRAZIL FIGHT?
SAO PAULO 00000423 001.5 OF 003
SENSITIVE BUT UNCLASSIFIED--PLEASE PROTECT ACCORDINGLY Summary -------
¶1. (SBU) The collapse of the DOHA round WTO negotiations brings with it a call to continue fighting US agriculture subsidies directly through the WTO. In particular, the Brazilian Foreign Ministry (Itamaraty) may choose this fall to initiate a WTO case against the US tariff on ethanol imports from Brazil. MRE U/S Roberto Azevedo has said publicly that a case this September is a strong possibility. Such a move may be attractive politically, and certainly ethanol producers represented by UNICA stand to reap a significant profit were the tariff removed. However, the rapid growth of ethanol demand in the United States and the significant disparity between Brazilian and U.S. prices could lead to an increase in ethanol exports and potentially increase local prices thus feeding into Brazilian inflation concerns. Removing the tariff could result in an immediate squeeze in domestic supply. Increased exports would have to be sourced from ethanol that would otherwise be sold as E-100. So while Foreign Minister Celso Amorim publicly calls for removal of these tariffs, many in the private sector are not as enthusiastic for an immediate tariff removal and key legislators are hesitant as well. End Summary.
Ethanol Supply, Demand, Consumption -----------------------------------
¶2. (SBU) The Agricultural Trade Office (ATO) in Sao Paulo expects continued strong growth in Brazil's ethanol production for the coming two to three years, as well as continued strong demand growth for ethanol by Brazilian consumers. Ethanol supply and demand expectations for Market Year (MY) 2008/9 are that total supply will increase to 26,357 billion liters and domestic demand increasing to 22,452 billion liters. (Note: MY 07/8 figures are 22,255.5 and 18,970 respectively. End Note.) Exports are forecast to reach 4,800 billion liters, the majority of which will find its way to the United States, and an increase over the 3,630 billion liters for export from MY 07/8. (Note: It should be noted that the export forecast was recently increased from 3.9 billion liters after a run-up in corn futures prices made Brazilian ethanol exports profitable even with the US$0.54/gallon import duty paid. End Note.)
¶3. (SBU) Higher domestic demand for ethanol during MY 08/9 is in large part due to the vigorous sales of flex-fuel vehicles. The Brazilian Association of Vehicle Manufacturers (ANFAVEA) reports that flex fuel vehicles represent some 23 percent of the total vehicle fleet of Brazil (5.43 million units out of 23.685 units in 2007), but more importantly represent over 90% of new car sales. The result of this has been a fundamental change in the energy matrix of Brazil. Since February of this year ethanol has accounted for a higher share of vehicle fuels use than gasoline. Two years ago, gasoline sales were roughly twice the volume of ethanol use.
¶4. (SBU) Ethanol is sold as a gasoline additive (at a required rate of 25%), sold pure as E-100, and exported. Approximately 18% of total production will be exported in 2008/09, leaving 82% for blending and direct sales as E-100. ATO estimates that approximately 33-37% of total production will be blended with gasoline (representing 25% of the volume of "gasoline" in Brazil) and 45-49% of production will be sold as E-100. As efficiencies for ethanol generally run at 70% that of gasoline, the price point at which consumers choose one over the other is fairly well established. The state of Sao Paulo is the largest ethanol consuming state and home to the largest producers of ethanol. In addition, in Sao Paulo the industry enjoys low transportation costs and significant tax incentives from the state government. Nonetheless, the industry must discount ethanol in order to stimulate demand in outlying states where tax treatment is not as generous, and the retail price for ethanol in Sao Paulo is currently some 40-45% the cost of gasoline. Rational consumers should
SAO PAULO 00000423 002.3 OF 003
continue to buy ethanol over gasoline even if the price were to increase close to 70% the value of gasoline.
Goodbye Tariff, Hello Shortage? -------------------------------
¶5. (SBU) Removing the tariff could result in an immediate squeeze in domestic supply. While the GOB mandate for blending with gasoline (currently 25% by volume) could easily be reduced in a tight market environment, increases in E-100 prices would inevitably stimulate increased gasoline consumption and demand for ethanol for blending would rise in response. ATO Sao Paulo therefore believes that volumes of ethanol destined for blending would be unlikely to change substantially. Increased exports would have to be sourced from ethanol that would otherwise be sold as E-100. If those volumes were sufficient to allow domestic producers to concentrate on core markets (especially Sao Paulo), prices would rise toward the market clearing rate for a more concentrated market characterized by more favorable tax rates and low transport and handling costs. If retail prices were to approach 70% of the gasoline price in the Sao Paulo market, this would imply an increase on the order of fifty percent in prevailing ethanol prices, possibly fueling inflation concerns. This scenario would almost certainly unfold in the event that export volumes were to double (to 30% of the total production).
¶6. (SBU) These potential market distortions have many in the Brazil ethanol industry viewing either a gradual tariff reduction or a move towards a quota system as preferable. Either move would allow for Brazilian ethanol production to increase over time to supply the US demand while minimizing disruptions in the domestic market. Former Director General of UNICA (association that represents the majority of sugar growers and ethanol distillers in Brazil), Fernando Ribeiro, stated that he sees the US ethanol mandate as well as demand by ethanol buyers, distributors, and end-users in the US as eventually leading to either a tariff reduction or institution of a quota system in the near term. While a quota would allow better control over export volumes, Ribeiro believes that a gradual tariff reduction would be better as it would continue to help promote growth of ethanol production in third countries. He also stated that he believes the GOB would take "aggressive" steps to control export volumes if there were a real threat to supply for the domestic market.
¶7. (SBU) Roberto Giannetti de Fonseca of FIESP (Federation of Industries of Sao Paulo) told Econoff that he would prefer to see a two-tiered system of tariffs on ethanol exports to the US with ethanol for blending staying in a tariff regime and E-100 for US flex fuel vehicles imported duty free. He stated that a movement towards a completely open trading regime would cause short-term distortions in the domestic market; however, he emphasized that in the medium to long-term, Brazil would be able to take advantage of this opportunity to supply the US demand.
¶8. (SBU) Dra. Heloisa Lee Burnquist, Researcher at the Center for Advanced Studies on Applied Economics (CEPEA) of the University of Sao Paulo stated that Foreign Minister Amorim's statement on seeking redress at the WTO count to eliminate countervailing duties in the U.S. on Brazil's ethanol export appeared "more political than anything else." She agreed that in the absence of a tariff, producers would welcome the ability to sell abroad at higher prices. However, she does not see the same possibility for distortions in domestic supply that others have indicated.
¶9. (SBU) Chairman of the Senate Biofuels Committee Chairman Joao Tenorio has a different concern. Tenario told Brasilia Econoff he worries that if the tariff were removed, the Brazilian biofuels industry would ramp up production. But without the tariff in place protecting the U.S. domestic industry, Tenario worries that U.S. reliance on ethanol as a fuel will never reach its real potential, resulting in backsliding of ethanol use. Such a development in his view could leave an over-stimulated Brazilian industry with nowhere to turn for a viable market to absorb its product.
SAO PAULO 00000423 003.3 OF 003
¶10. (SBU) COMMENT: On the surface, pursuing a WTO case on the ethanol tariff may be a logical plan B approach to lack of resolution through the Doha Round. In analyzing existing stocks of ethanol, future production in the short-term, the volume of US demand, and the key role that ethanol plays in the Brazilian fuels matrix, a complete removal of the tariff would likely cause disruption to the Brazilian economy. In order to counteract this threat, the GOB may be forced to act itself in placing a quota on exports of ethanol to the US in order to maintain domestic supply. While this should give the GOB pause in pursuing a WTO case against the ethanol tariff, politics may win over economics. UNICA will likely foot the bill for any GOB attempt to seek redress at the WTO as its members stand to gain immediately from any reduction in the ethanol tariff; however this too remains unresolved as we understand industry is pressing for GOB to cover part of litigation costs, estimated at three million dollars. END COMMENT.
¶11. This cable was coordinated with and cleared by the Embassy in Brasilia and the ATO in Sao Paulo.
Story