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### Viewing cable 07BRASILIA1819, BRAZIL: UNDER SECRETARY JEFFERY LEADS ECONOMIC DISCUSSION

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07BRASILIA1819 | 2007-09-24 15:13 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Brasilia

`

    VZCZCXRO2452
    RR RUEHRG
    DE RUEHBR #1819/01 2671513
    ZNR UUUUU ZZH
    R 241513Z SEP 07
    FM AMEMBASSY BRASILIA
    TO RUEHC/SECSTATE WASHDC 0020
    INFO RUEHRG/AMCONSUL RECIFE 7158
    RUEHSO/AMCONSUL SAO PAULO 0853
    RUEHRI/AMCONSUL RIO DE JANEIRO 5146

` `

    UNCLAS SECTION 01 OF 03 BRASILIA 001819

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE PASS TO E FOR TOM PIERCE
    STATE FOR WHA/EPSC LISA KUBISKE
    STATE FOR S/P WILLIAM MCILHENNY
    STATE FOR EEB/CIP, EEB/TRA

    E.0. 12958: N/A
    TAGS: ECON ETRD ECIN EAIR ECPS TSPA BR
    SUBJECT:  BRAZIL: UNDER SECRETARY JEFFERY LEADS ECONOMIC DISCUSSION
    WITH GOB COUNTERPART AZEVEDO

    BRASILIA 00001819  001.2 OF 003

    ¶1. (U) Summary:  Following up on a March conversation between the
    Secretary and Foreign Minister Amorim, Under Secretary Jeffery,

    SIPDIS
    along with Ambassador Sobel and State Department officers, in an
    August 20 discussed with Brazilian Ministry of External Affairs
    (MRE) Under Secretary Roberto Azevedo and his economic team possible
    topics for deeper economic engagement between the State Department
    and MRE.  Both sides agreed that an over-arching theme for dialogue
    between State and MRE should be rising to the challenges of
    globalization.  Azevedo suggested that discussions might be most
    useful if they focused on a positive agenda and did not try to
    resolve issues, such as a tax treaty, that are already under
    discussion in different fora or have gone unresolved for some time.
    He proposed topics he had discussed with Foreign Minister Amorim,
    including what Brazilian membership in the OECD might entail; the
    Millennium Challenge Account Program; private sector engagement; the
    investment climate; civil aviation cooperation; and financial
    inter-connectivity of markets in a global economy.  The GoB did not
    rule out including some form of telecommunication discussion in
    future economic meetings.  Both sides agreed to consider these ideas
    (and any others) as a possible agenda for a dialogue.  Azevedo
    suggested we work quickly toward an initial agenda so that we could
    report to Secretary Rice and FM Amorim before their next meeting, as
    yet unplanned. End summary.

    ¶2.  (U) On August 20, Under Secretary Reuben Jeffery III, along with
    Ambassador Sobel and State Department officers from E, S/P and WHA,
    discussed with Brazilian Ministry of External Affairs (MRE) Under
    Secretary Roberto Azevedo and his economic team possible topics for

    SIPDIS
    deeper economic engagement between the State Department and MRE.
    Under Secretary Roberto Azevedo opened the meeting by espousing a
    focus on a new and positive agenda, in lieu of readdressing topics
    that have gone unresolved for years (such as double-taxation) or
    issues that are covered in other bilateral forums.  He noted that,
    although the USG and GoB have a close relationship, there is no
    ongoing (broad-ranging) economic discussion between the Department
    of State and the MRE.  Under Secretary Jeffery suggested that these
    economic discussions could serve to formalize economic issues at the
    policy level with a view towards moving forward existing issues in
    some areas.  Ambassador Sobel pointed out that we should not
    discount the positive influence of our respective foreign ministries
    and used Foreign Minister Amorim's influence on double taxation as
    an example.

    ¶3.  (U) The under secretaries agreed that rising to the challenges
    of globalization is important to both countries and that a dialogue
    between the foreign ministries could help develop consensus on
    various economic issues within the respective governments and
    facilitate progress.  Azevedo said that the GoB had many ideas, but
    was not sure which would work best.  He called for engaging the
    private sector in the economic discussion to the extent possible
    (using the governments as "catalysts").

    ¶4.  (U) Under Secretary Jeffery suggested that both countries remain
    open to bilateral issues and to U.S. - Brazil cooperation in third
    countries, if appropriate areas could be identified.  Azevedo noted
    that FM Amorim would favorably view this type of bilateral
    cooperation, especially in Africa and in areas in which both
    governments shared a common approach and complementary technologies.
     Ambassador Sobel pointed to HHS Secretary Leavitt's health
    initiatives in Africa as an example.

    -------------------------- -------------------------------
    Organization for Economic Cooperation & Development (OECD)
    -------------------------- -------------------------------

    ¶5.  (U) On the basis of a conversation with FM Amorim, Under
    Secretary Azevedo offered several suggestions.  The first concerned

    SIPDIS
    the Organization for Economic Cooperation and Development (OECD).
    Azevedo noted that Brazil had been invited to deepen its cooperation
    with the OECD at the organization's May meeting.  He said Foreign
    Minister Amorim thought it would be helpful for the USG and GoB to
    discuss expectations for Brazil's involvement in the OECD, including
    such issues as what membership entails.  Azevedo added that
    constructive U.S. - Brazil cooperation had made possible the recent
    OECD agreement on civil aircraft.  (Comment: In an earlier meeting,
    Finance Ministry officials indicated to Under Secretary Jeffery that
    such bilateral discussion in the civair area had been productive and
    indeed led to an agreement that Brazil joined as a signatory.  They
    added that the GoB now would like to work with OECD on a
    topic-by-topic, committee-by-committee basis for now in order to see
    if Brazil was comfortable subscribing to the norms of each OECD
    item.  Within a couple of years, working in this fashion, Brazil
    would probably be ready to join.  End Comment.) Jeffery noted that
    the OECD was indeed committed to enhanced engagement with Brazil and

    BRASILIA 00001819  002.2 OF 003

    thought the GoB's idea might be a worthwhile topic.

    ---------
    Sectorals
    ---------

    ¶6.  (U) Azevedo pointed out that Foreign Minister (FM) Celso Amorim
    was concerned about the challenges of an increasingly globalized
    world economy for traditional sectors such as textiles, steel and
    footwear.  He suggested that the MRE and the Department of State
    facilitate a meeting between U.S. and Brazilian industries in these
    areas so that the private sector groups together might find areas of
    mutual cooperation.  Perhaps, he suggested, the GoB and USG could
    offer some assistance, such as facilitation of joint ventures or
    market studies.  All of this assumed, of course, that the industries
    themselves were interested, Azevedo noted.  Jeffery agreed that such
    discussion must be demand driven.  Ambassador Sobel suggested that
    the automobile industry might, for example, be included in these
    discussions.

    ¶7.  (U) Referring to the April visit to Brazil by the Governor John
    Engler, President of the National Association of Manufacturers
    (NAM), Azevedo said one by-product of the visit was identification
    by U.S. and Brazilian companies of possible areas for cooperation.
    He said the MRE would like to approach Brazilian industry about
    this.

    ----------------------------
    Millennium Challenge Account
    ----------------------------------

    ¶8.  (SBU) Azevedo also raised the Millenium Challenge Account.  The
    GoB would be interested in hearing an explanation of the MCA
    indicators and process.  Brazil might like to emulate this idea, or
    perhaps become a partner with the USG in offering the Millennium
    Challenge Account in third countries.  Under Secretary Jeffery
    replied that the USG would welcome the opportunity to exchange
    knowledge about the program.

    ----------------
    Other Key Issues
    ----------------

    --Infrastructure Investments

    ¶9.  (U) Azevedo said the GoB was interested in working with the USG
    to explore ways to maximize funds, technology and managerial skills
    in infrastructure projects in the country, or possibly for the two
    countries' entities to invest in third countries.  He suggested that
    both governments work together on implementation as well as
    financing.  To that end, he proposed a possible "tripod format"
    (GoB, Brazilian company, US company) for encouraging infrastructure.

    --Investment Promotion

    ¶10.  (U) Azevedo was interested in discussing what steps Brazil
    could take to create a more attractive investment environment.  He
    advised avoiding discussions within the State-MRE context of
    investment agreements - specifically bilateral investment treaties
    (BITs) - since there were other channels for those discussions.  He
    added that there was a lack of support for investment agreements in
    the Brazilian congress, where 14 BITs were on hold.

    --Civil Aviation

    ¶11.  (U) The GoB expressed openness to exploring a possible civil
    aviation agenda.  Azevedo said this was a top priority in Brazil and
    the GoB would like to find areas in which both countries could work
    together and establish a positive agenda.  He indicated that the MRE
    would need to further explore this with the Ministry of Defense
    (which oversees civil aviation in Brazil).  Under Secretary Jeffery
    noted that civil air cooperation has proven fruitful in the past
    and, given transportation difficulties in the hemisphere, there was
    an opportunity to make a difference in this area.

    --Telecommunications

    ¶12.  (U) Under Secretary Jeffery asked whether the MRE might be
    interested in telecommunications.  Azevedo said that the GoB was
    interested in discussing telecommunications issues and observed that
    the challenge would be to find out what areas were open to
    discussion.  He cautioned that, as with other objectives of the
    economic discussions, both governments should avoid conflicting

    BRASILIA 00001819  003.2 OF 003

    agendas and look for areas of agreement.

    -- Financial structure as it relates to the inter-connectivity of
    markets in a global economy

    ---------------
    The Way Forward
    ---------------

    ¶13.  (U) Both sides agreed to consider further these ideas, and to
    engage in outreach as needed (e.g., Brazil with its private sector).
    Azevedo suggested working quickly toward an initial agenda so that
    there would be progress to report to Secretary Rice and FM Amorim
    before they next meet.  Azevedo agreed each side could remain open
    on the level at which a dialogue should be held (Under Secretary or
    Assistant Secretary), but suggested that under secretary involvement
    might be needed at times.

    ¶14.  (U) This cable was cleared by Tom Pierce in E.

    Sobel

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