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### Viewing cable 08BRASILIA823, SCENESETTER FOR THE JUNE 18-22 VISIT OF SECRETARY

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
08BRASILIA823 | 2008-06-16 12:12 | 2010-12-05 12:12 | CONFIDENTIAL | Embassy Brasilia

`

    VZCZCXRO0272
    PP RUEHRG
    DE RUEHBR #0823/01 1681224
    ZNY CCCCC ZZH
    P 161224Z JUN 08
    FM AMEMBASSY BRASILIA
    TO RUEAHLC/DEPT OF HOMELAND SECURITY WASHDC PRIORITY
    RUEHC/SECSTATE WASHDC PRIORITY 1882
    INFO RUEHRG/AMCONSUL RECIFE PRIORITY 8141
    RUEHRI/AMCONSUL RIO DE JANEIRO PRIORITY 6266
    RUEHSO/AMCONSUL SAO PAULO PRIORITY 2236

` `

    C O N F I D E N T I A L SECTION 01 OF 06 BRASILIA 000823

    SIPDIS

    E.O. 12958: DECL: 06/05/2018
    TAGS: PGOV PREL PTER KHLS OVIP ECON BR
    SUBJECT: SCENESETTER FOR THE JUNE 18-22 VISIT OF SECRETARY
    CHERTOFF

    REF: A. BRASILIA 000043
    ¶B. BRASILIA 001664

    Classified By: Ambassador Clifford Sobel. Reasons: 1.4 (B and D).

    ¶1. (U) Summary: The relationship between the United States
    and Brazil is as productive and broad-based as it as ever
    been, the result of the excellent relationship between
    President Bush and President Luiz Inacio Lula da Silva, new
    cooperation mechanisms on biofuels, business issues, and
    economic matters, and our shared goals of fostering
    hemispheric stability, promoting democracy, developing a
    consensus on next steps regarding climate change, and
    achieving a mutually satisfactory conclusion to the Doha
    round of WTO negotiations. Cooperation on law enforcement
    issues, such as counternarcotics, container security, and
    intelligence sharing, are highlights of the bilateral
    relationship. Brazilian officials at the policy level,
    however, are always keen to underplay the range of organized
    criminal activities, including arms and narcotics trafficking
    and money laundering that takes place in the
    Argentina/Brazil/Paraguay tri-border area (TBA). U.S.-Brazil
    cooperation on foreign policy issues is often limited by the
    GoB's unwillingness to speak out against anti-democratic
    actions in the hemisphere (Venezuela and Cuba), take
    proactive steps to address key issues such as nuclear
    proliferation and counterterrorist concerns, and expand its
    international leadership in meaningful ways. Brazil's
    ethanol program has made it a global model for alternative
    energy and offers potential for bilateral cooperation on an
    important strategic issue. On the environment, Brazil has
    long been on the defensive about the ongoing, extensive
    deforestation of the Amazon, which has made Brazil one of the
    leading producers of greenhouse gases. The Brazilian labor
    movement is strong, well-organized, and very influential in
    many key industrial sectors. Lula came out of the organized
    labor movement and labor and social issues have always been
    among his top priorities. Trafficking in Persons is present
    in all of its forms in Brazil, but the GoB is making a
    serious effort to combat it. End Summary.

    ----------------------------------
    Lula Popular, but What Comes Next?
    ----------------------------------

    ¶2. (C) With a 67 percent approval rating, President Lula is
    more popular than at any other point since he took office in
    ¶2003. Continuity and legacy are the guiding lights of Lula's
    second term. Lula continues to shape his legacy as a friend
    of the poor and builder of a foundation for prosperity for
    the lower and middle classes through broad social welfare
    programs and a vast, new economic growth program of public
    works and growth incentives. At the same time, Lula has
    failed to promote needed reforms to abolish a political
    culture of corruption, clientelism, and spoils. Although a
    seemingly endless series of corruption scandals has not
    dented his personal popularity or that of his government,
    these scandals have felled political allies, including
    cabinet ministers, in recent years.

    ¶3. (U) Lula is concerned with finding an electable successor
    for 2010, and appears to be grooming his top domestic policy
    adviser, Minister Dilma Rousseff, while keeping other options
    open. Attention in the media and among the political elite
    is already focused on the race; the opposition governor of
    Sao Paulo state and former presidential candidate, Jose
    Serra, currently leads the pack of possible candidates.

    -----------------------------------
    Latin America's Economic Powerhouse
    -----------------------------------

    ¶4. (U) President Lula and his economic team,s prudent fiscal
    and monetary policies and reform efforts are a major reason
    for his popularity and have resulted in Brazil,s position as
    the tenth largest economy in the world, with a trade surplus
    and, just this year, achievement of a BBB-minus (lowest
    investment grade) credit rating. Annual GDP growth was
    approximately 5.4 percent for 2007, with inflation within its
    target range at 4 percent. Buoyed by exports and investment
    inflows, Brazil's currency, the Real, has remained strong,
    and the government has succeeded in paying down its external
    debt. However, there are major structural challenges to long
    term growth. Real interest rates are among the highest in
    the world. The informal sector constitutes an estimated 40
    percent of the economy, in part due to the tax burden (34.2
    percent of GDP in 2006), one of the highest among large
    developing economies. Brazil,s opaque and onerous
    regulatory and legal system, as well as poor transport and

    BRASILIA 00000823 002 OF 006

    other infrastructure, continue to constrain growth.

    -------------------------------------------
    Friendly Cooperation, Not Strong Friendship
    -------------------------------------------

    ¶5. (C) Bilaterally, the GoB has pursued generally friendly
    relations with the United States and we continue to seek
    opportunities for positive bilateral cooperation. Following
    the signing of the biofuels MOU in March 2007, Brazil and the
    United States have been seeking ways to increase our
    collaboration toward the next generation of biofuels, as well
    as in developing international standards on biofuels which
    should facilitate greater international acceptance and use of
    biofuels. The Economic Policy Dialogue (EPD) launched last
    year provides an important opportunity to reinforce our view
    of Brazil as partner. Cooperation to foster innovation and
    agricultural coordination, to possibly include assistance to
    African countries, are new topics of conversation
    bilaterally. Additionally, we have been working to develop a
    regional infrastructure initiative. We have been exploring
    one another,s regulatory frameworks in hopes of addressing
    barriers and achieving a Bilateral Tax Treaty and a Bilateral
    Investment Treaty. Civil aviation is an area of renewed
    focus with the next round of talks scheduled for the week of
    June 23rd. There are also continuing efforts under the
    auspices of the bilateral CEO Forum to address issues of
    common interest.

    ¶6. (C) Nonetheless, the GoB continues to favor building ties
    with developing nations over closer relations with the United
    States and other developed nations. While seeking to expand
    our bilateral dialogue, the GoB has studiously avoided
    working closely with us on broad strategic issues important
    to us. Those issues on which it has been willing to work
    with us--biofuels, investment, and climate change, for
    example--are areas where the GoB considers itself a visibly
    equal partner. The exception may be security-related issues,
    where the appointment of Nelson Jobim as Defense Minister has
    brought new interest in cooperation. But it appears that in
    this area, as with our efforts on counternarcotics,
    environmental protection, counterterrorism, and other issues,
    the Foreign Ministry is seeking to maintain its historic
    dominance and distance from the United States, which it does
    by controlling the agenda and throwing up barriers that delay
    and sometimes scuttle bilateral efforts that other ministries
    support.

    ¶7. (SBU) The Brazilian public has a mixed view of the United
    States. Seventy-five percent say relations between Brazil
    and the U.S. are very good or fairly good, and Brazilians by
    a wide margin consider the U.S. the most important country in
    the region for Brazil. Those who follow the news know that
    U.S.-Brazil cooperation on trade issues has global importance
    and new areas of cooperation such as biofuels are potentially
    significant. There has been a much more positive view of
    U.S.-Brazil cooperation since the signing of the biofuels MOU
    last year. On the other hand, there is a good deal of
    skepticism about U.S. foreign policy, particularly on issues
    such as Iraq and Cuba. There is resentment over the long
    wait times for U.S. visa applications, a product of a spike
    in demand without commensurate increases in staffing.

    --------------------------------------
    Hesitant Globally; Cautious Regionally
    --------------------------------------

    ¶8. (C) Brazil's foreign policy is dominated by symbolic steps
    to burnish its South-South credentials and status as an
    emerging leader, rather than by resolute attention to core
    political and economic interests, including strengthening
    bilateral political and trade relations with the United
    States. The attainment of a permanent seat on the UN
    Security Council has been a central tenet of Brazil's foreign
    policy under President Lula's government, and most of its
    actions on the international stage are geared toward that
    goal. However, Brazil has largely failed to assume the
    international leadership role that would make it a strong
    candidate for such a position. Brazil's latest two-year
    stint on the UNSC, which ended in January 2006, was
    characterized by caution and equivocation rather than vision
    and leadership. The GoB has so far not used its significant
    contribution to stability in Haiti as a step along the road
    to becoming a champion of international peace and security.
    For example, the GoB has yet to respond to repeated requests
    for assistance with peacekeeping in Darfur.

    ¶9. (C) Brazil's general desire not to be too closely
    identified with the U.S. is borne out in non-proliferation.

    BRASILIA 00000823 003 OF 006

    The GoB has expressed approval of the Proliferation Security
    Initiative (PSI), but has not yet endorsed the PSI statement
    of principles. Brazil has also not yet signed the NPT
    Additional Protocol, although it has not ruled out signing it
    in the near future. The GoB consistently refused to take a
    strong position against Iran's nuclear efforts, questioning
    the effort to refer Iran to the Security Council until the
    vote in the IAEA had become a foregone conclusion. Brazilian
    officials consider their seat at the table in Annapolis as a
    foreign policy success and see themselves as balanced in
    their dealings with Israel and the Palestinians, but they
    have yet to define a substantive role for Brazil. FM
    Amorim's suggestion recently that Iran, Syria, Hamas, and
    Hizbollah should be included in the negotiations suggest
    continuing naivete regarding the peace process and Middle
    East relations, as does his recent remark to a U.S. official
    that Brazil's growing "friendship" with Iran will prove
    useful should the United States, in the future, decide to
    engage Iran.

    ¶10. (C) Regionally, Lula has maintained Brazil's historic
    focus on stability, seeing dialogue and good relations with
    all parties as the best way to achieve this goal. As a
    result, Brazil maintains an active dialogue with and refuses
    to criticize human rights violations in Venezuela and Cuba,
    has worked hard to restore relations with Bolivia even at the
    expense of its own economic interests, and stood firmly on
    the principle of respect for sovereignty, with only minimal
    mention of counterterrorism concerns, in responding to the
    recent dispute between Colombia and Ecuador.

    ---------------------------
    Law Enforcement Cooperation
    ---------------------------

    ¶11. (SBU) Cooperation on security and law enforcement issues
    is a highlight of the bilateral relationship, and a potential
    area for increased cooperation as public security is
    frequently cited in opinion polls as the most pressing
    concern for Brazilians. The newly arrived Resident Legal
    Advisor is working in support of USG law enforcement agencies
    and the political and economic sections to expand and
    intensify our relations with the judiciary, prosecutors, and
    Brazilian law enforcement. We hope this year to seat another
    Brazilian observer at JIATF-S. Also, the GoB has expressed
    interest in negotiating a General Security of Information
    Agreement (GSOIA). The Narcotics Affairs Section (NAS)
    expects to sign a new Letter of Agreement shorly, which
    will allow us to move forward to expad cooperation on
    counternarcotics and countercrie issues, including at the
    state level. The GoBcooperates with the USG on the
    operational level in the fight against terrorism, document
    fraud, ad drug trafficking. Information sharing at the
    orking level between Brazilian and US law enforcemnt and
    intelligence agencies is productive. Brail has been a
    valuable partner in the efforts to secure our own borders
    against terrorism through ts support for DHS's Container
    Security Initiatie (CSI), its implementation of enhanced
    passenge screening at airports and its fulfillment of the
    International Maritime Organization (IMO) ISPS code on port
    and ship security. Immigration and Cusoms Enforcement (ICE)
    is also currently working ith the Brazilian authorities to
    detect financia and smuggling violations, financial crimes
    and commercial fraud with the assistance of the Trade
    Transparency Unit (TTU) initiative.

    ---------------------------
    Cooperation on Cybercrimes
    ---------------------------

    ¶12. (U) Assisting Brazil in creating legislation to counter
    cybercrimes, including online child pornography and tracking
    of sex offenders, represents another potential area of
    cooperation on law enforcement matters. Brazil lacks
    cybercrime laws and the Congress has opened a Parliamentary
    Committee of Inquiry (CPI) to look at the issue and come up
    with draft legislation. As part of the CPI's work, the CPI
    was able to obtain over 3,000 Google records of identified
    child pornography that had been distributed on the Internet
    from Brazil. The chairman of the CPI has voiced his concern
    about, in his view, inadequate cooperation from Google and
    its subsidiary Orkut, a relationship site. Google, Orkut,
    Microsoft, and all other Internet service providers are
    required to report the discovery of child pornography on the
    Internet and DHS/ICE has established a mechanism to have
    access to this information which has been reported. DHS/ICE
    has already initiated the practice of sharing this
    information with Brazilian Federal Police. Related to the
    CPI, its Chairman has made inquiries to the Mission on the

    BRASILIA 00000823 004 OF 006

    case of DHS/ICE Deportation officer accused of child
    exploitation at a hotel in Brazil. The U.S. is seeking the
    toughest penalty possible, whether in Brazil or the U.S., and
    is fully cooperating with Brazilian authorities.

    --------------------------------------------- ----------------
    Counterterrorism: Operational Cooperation; Policy-Level
    Equivocation
    --------------------------------------------- ----------------

    ¶13. (C) Cooperation on counterterrorism matters remains good
    at the operational level, and we regularly obtain valuable
    information from GoB sources on terrorism. The Lula
    administration just re-structured its intelligence apparatus
    to beef up their counterterrorism focus. The senior policy
    levels of the GoB, however, have refused to publicly endorse
    U.S. counterterrorism initiatives and, wary of Brazil's
    large, prosperous and influential Arab population, make every
    effort to downplay in public even the possibility of
    terrorist fund-raising going on inside Brazil, a situation
    exacerbated by their refusal to consider Hizballah or HAMAS
    as terrorist organizations. The Lula administration failed
    to introduce long-delayed draft legislation outlawing
    terrorist-related activity, including its financing.

    ¶14. (U) The governments of Argentina, Brazil, and Paraguay
    have long been concerned over illicit activities in the
    tri-border area (TBA) joining Foz de Iguacu in Brazil, Ciudad
    del Este in Paraguay, and Puerto Iguazu in Argentina. The
    TBA concentrates a range of organized criminal activities,
    including arms and narcotics trafficking, document fraud,
    money laundering, as well as the manufacture and movement of
    contraband goods. A wide variety of counterfeit goods,
    including cigarettes, CDs, DVDs, and computer software, are
    moved from Asia into Paraguay and transported primarily
    across the border into Brazil. This inflow of illicit goods
    stands to be increased with the potential passage of
    legislation that purports to ease customs procedures for
    small-scale importers but, due to a lack of enforcement
    provisions, would likely serve to abet traffickers. The
    United States remains concerned that Hizballah and HAMAS are
    raising funds in the TBA by participating in illicit
    activities and soliciting donations from extremists within
    the sizable Muslim communities in the region.

    ¶15. (U) In the 1990s the three governments established a
    mechanism, which the US joined in 2002 at their invitation,
    to address illicit activities in the TBA. The "3 1 Group on
    Tri-border Area Security" is intended to improve the
    capabilities of the three TBA states to thwart cross-border
    criminal activity and potential terrorist fundraising
    activity. Brazil is an active partner within this mechanism,
    but the effectiveness of this group is hampered by GoB
    denials of any potential terrorist activity taking place in
    their territory (see reftels). The suggestion that planning
    for the 1994 bombing of AMIA, an Argentine Jewish center,
    might have taken place in Brazil caused the GoB to abstain in
    an international vote over whether to issue Interpol warrants
    for Iranian officials accused in the case, an action that
    disappointed and irritated Argentina. Nonetheless, Brazil
    has established and hosts a Joint Intelligence Center (JIC)
    in Foz de Iguacu to combat transnational criminal activity,
    although staffing issues on the part of Argentina and
    Paraguay continue to impede its full functioning.

    --------------------------------------------- --------
    Labor and Trafficking in Persons: An Improving Record
    --------------------------------------------- --------

    ¶16. (SBU) The labor movement in Brazil is strong,
    well-organized, and very influential in many key industrial
    sectors. President Lula comes from the labor movement. He
    worked his way up through the powerful metal workers union,
    was one of the founders of the largest Brazilian labor
    confederations -- the Unified Workers Confederation of Brazil
    (CUT) -- and of the ruling Workers Party (PT). Labor and
    related social issues, such as combating Trafficking in
    Persons (TIP), and forced labor, are important priorities of
    the Lula Administration. The Lula Government's commitment to
    social issues is exemplified by its popular Bolsa Familia
    (Family Stipend) program which involves direct cash pay outs
    to over 11 million families as an incentive for low-income
    Brazilians to keep their children in school and up-to-date
    with their immunizations. Most economists and policymakers
    agree that labor reform is necessary for the Brazilian
    economy to grow at a faster rate and to reduce the large
    informal sector, which employees close to 45 percent of all
    Brazilian workers. However, comprehensive labor reform is
    politically unpopular and unlikely to happen during the Lula

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    Administration.

    ¶17. (SBU) The use of child labor and the exploitation of
    children for sexual purposes is widespread in Brazil. NGOs
    estimate that there are at least 240,000 children working
    illegally, although the number may be much higher. The
    Federal Police estimate that at least 250,000 children are
    involved in prostitution, while some NGO's put the number as
    high as 500,000. Many work in the poor northeastern sector
    of Brazil where there is a booming sex tourism industry
    catering mostly to Europeans, and to a lesser extent,
    Americans.

    ¶18. (U) Trafficking in Persons is present in all of its forms
    in Brazil, including the trafficking of women and children
    internally and internationally for purposes of sexual
    exploitation, the internal trafficking of men for use in
    slave or forced labor in the cattle-raising and agricultural
    sectors, and in the production of charcoal, some of which is
    used to produce pig iron. There are an undocumented number
    of foreign laborers working in slave-like conditions in
    factories in the city and state of Sao Paulo. However, the
    GoB is making a serious effort to combat TIP and forced/slave
    labor. It signed the Palermo Protocol in 2004 and is now
    working to get implementing legislation passed by the
    Congress. President Lula signed a decree in October 2006
    establishing a national anti-TIP policy. A binding work plan
    to implement that policy was publicly in January 2008.
    Ministry of Labor mobile inspection teams have freed over
    29,000 laborers from slave-like working conditions since
    starting work in 1993. The inspection teams freed over 5,900
    forced labor victims last year (2007) alone.

    ¶19. (SBU) As a result of reports of slave or forced labor in
    the production of charcoal used to produce pig iron, in
    September of last year the Mission requested the GoB's
    concurrence in having DHS/ICE personnel work with the
    appropriate ministries and agencies in the Brazilian
    government to investigate allegations that American companies
    may have received products produced in Brazil with the
    possible use of forced labor. So far, the Brazilian
    government has not responded to our requests.

    --------------------------------------------- --------------
    Protecting Brazil's Borders: Extreme Sensitivity on
    Sovereignty
    --------------------------------------------- --------------

    ¶20. (U) There is long-standing and widespread fear among
    Brazilians that the United States or other foreigners want to
    take over or internationalize the Amazon. Although
    demonstrably unfounded, it surfaces regularly in official and
    media circles, as with President Lula's recent assertions
    that "The Amazon has an owner." More recently, the prospect
    of enormous oil reserves off Brazil's coast have added new
    fears that the United States or others might have designs on
    these, as well. Some Brazilians have linked the
    just-announced re-establishment of the U.S. Fourth Fleet to
    these Brazilian oil discoveries. However, most Brazilians do
    not realize that the Fourth Fleet consists solely of a
    planning staff of approximately 80 people based in Florida,
    and that it has no permanently assigned ships. Its main
    missions will be support of peacekeeping operations, such as
    in Haiti, respond to natural disasters, such as Hurricane
    Felix in Nicaragua, organize humanitarian relief, typically
    of a medical nature, and assist counternarcotics efforts.
    Standing up the Fourth Fleet intends to demonstrate the
    priority the United States places on its partnerships in
    Latin America and will help ensure that Latin America remains
    a high priority for U.S. engagement.

    ¶21. (U) There have also been some rumors about the permanent
    stationing of a ship in Brazilian waters by the US Navy in
    light of the recent the port visit of the USS George
    Washington CVN-73. The U.S. Navy has no vessels in Brazilian
    waters and has not had any since the USS George Washington
    departed Brazilian territorial waters in early May. By
    policy, the U.S. Navy will not enter territorial waters of
    any national without diplomatic clearance and the cooperation
    of the host nation.

    ¶22. (U) Defense Minister Nelson Jobim stated publicly in
    early June that Brazil needed to improve security for its
    off-shore oil resources and that, as permitted by the UN
    Convention on the Law of the Sea (UNCLOS), Brazil was
    planning to increase the 200-mile exclusive economic zone to
    350 miles to include the Santos basin and other oil deposits
    located on Brazil's continental shelf.. Although there were
    suggestions in the press that the United States might not

    BRASILIA 00000823 006 OF 006

    respect such an extension because we have not ratified
    UNCLOS, the U.S. does fully respect exclusive economic zones
    established pursuant to customary international law as
    reflected in UNCLOS. Furthermore, the US has established its
    own exclusive economic zone according to the same customary
    international law. UNCLOS recognizes the sovereign rights of
    a coastal State over its continental shelf, which extends out
    to 200 nautical miles--and beyond, if it meets specific
    criteria. These rights include sovereign rights for the
    purpose of exploring the continental shelf and exploiting its
    natural resources, including oil, gas, and other energy
    resources.

    SOBEL

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