Keep Us Strong WikiLeaks logo

Currently released so far... 97115 / 251,287

Articles

Browse latest releases

Browse by creation date

Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z

Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
ETRD EAGR ETTC EAID ECON EFIN ECIN EINV ELAB EAIR ENRG EPET EWWT ECPS EIND EMIN ELTN EC ETMIN EUC EZ ET ELECTIONS ENVR EU EUN EG EINT ER ECONOMICS ES EMS ENIV EEB EN ECE ECOSOC EK ENVIRONMENT EFIS EI EWT ENGRD ECPSN EXIM EIAD ERIN ECPC EDEV ENGY ECTRD EPA ESTH ECCT EINVECON ENGR ERTD EUR EAP EWWC ELTD EL EXIMOPIC EXTERNAL ETRDEC ESCAP ECO EGAD ELNT ECONOMIC ENV ETRN EIAR EUMEM ENRGPARMOTRASENVKGHGPGOVECONTSPLEAID EREL ECOM ECONETRDEAGRJA ETCC ETRG ECONOMY EMED ETR ENERG EITC EFINOECD EURM EENG ERA EXPORT ENRD ECONEINVETRDEFINELABETRDKTDBPGOVOPIC EGEN EBRD EVIN ETRAD ECOWAS EFTA ECONETRDBESPAR EGOVSY EPIN EID ECONENRG EDRC ESENV ETT EB ENER ELTNSNAR ECHEVARRIA ETRC EPIT EDUC ESA EFI ENRGY ESCI EE EAIDXMXAXBXFFR EETC ECIP EIAID EIVN EBEXP ESTN EING EGOV ETRA EPETEIND ELAN ETRDGK EAIDRW ETRDEINVECINPGOVCS EPEC ENVI ELN EAG EPCS EPRT EPTED ETRB EUM EAIDS EFIC EFINECONEAIDUNGAGM EAIDAR ESF EIDN ELAM EDU EV EAIDAF ECN EDA EXBS EINTECPS ENRGTRGYETRDBEXPBTIOSZ EPREL EAC EINVEFIN ETA EAGER EINDIR ECA ECLAC ELAP EITI EUCOM ECONEFINETRDPGOVEAGRPTERKTFNKCRMEAID EARG ELDIN EINVKSCA ENNP EFINECONCS EFINTS ECCP ETC EAIRASECCASCID EINN ETRP EAIDNI EFQ ECOQKPKO EGPHUM EBUD ECONEINVEFINPGOVIZ ENERGY ELB EINDETRD EMI ECONEFIN EIB EURN ETRDEINVTINTCS EIN EFIM ETIO ELAINE EMN EATO EWTR EIPR EINVETC ETTD ETDR EIQ ECONCS EPPD ENRGIZ EISL ESPINOSA ELEC EAIG ESLCO EUREM ENTG ERD EINVECONSENVCSJA EEPET EUNCH ECINECONCS ETRO ETRDECONWTOCS ECUN EFND EPECO EAIRECONRP ERGR ETRDPGOV ECPN ENRGMO EPWR EET EAIS EAGRE EDUARDO EAGRRP EAIDPHUMPRELUG EICN ECONQH EVN EGHG ELBR EINF EAIDHO EENV ETEX ERNG ED
KMDR KPAO KPKO KJUS KCRM KGHG KFRD KWMN KDEM KTFN KHIV KGIC KIDE KSCA KNNP KHUM KIPR KSUM KISL KIRF KCOR KRCM KPAL KWBG KN KS KOMC KSEP KFLU KPWR KTIA KSEO KMPI KHLS KICC KSTH KMCA KVPR KPRM KE KU KZ KFLO KSAF KTIP KTEX KBCT KOCI KOLY KOR KAWC KACT KUNR KTDB KSTC KLIG KSKN KNN KCFE KCIP KGHA KHDP KPOW KUNC KDRL KV KPREL KCRS KPOL KRVC KRIM KGIT KWIR KT KIRC KOMO KRFD KUWAIT KG KFIN KSCI KTFIN KFTN KGOV KPRV KSAC KGIV KCRIM KPIR KSOC KBIO KW KGLB KMWN KPO KFSC KSEAO KSTCPL KSI KPRP KREC KFPC KUNH KCSA KMRS KNDP KR KICCPUR KPPAO KCSY KTBT KCIS KNEP KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG KNNB KGCC KINR KPOP KMFO KENV KNAR KVIR KDRG KDMR KFCE KNAO KDEN KGCN KICA KIMMITT KMCC KLFU KMSG KSEC KUM KCUL KMNP KSMT KCOM KOMCSG KSPR KPMI KRAD KIND KCRP KAUST KWAWC KTER KCHG KRDP KPAS KITA KTSC KPAOPREL KWGB KIRP KJUST KMIG KLAB KTFR KSEI KSTT KAPO KSTS KLSO KWNN KPOA KHSA KNPP KPAONZ KBTS KWWW KY KJRE KPAOKMDRKE KCRCM KSCS KWMNCI KESO KWUN KPLS KIIP KEDEM KPAOY KRIF KGICKS KREF KTRD KFRDSOCIRO KTAO KJU KWMNPHUMPRELKPAOZW KEN KO KNEI KEMR KKIV KEAI KWAC KRCIM KWCI KFIU KWIC KCORR KOMS KNNO KPAI KBWG KTTB KTBD KTIALG KILS KFEM KTDM KESS KNUC KPA KOMCCO KCEM KRCS KWBGSY KNPPIS KNNPMNUC KWN KERG KLTN KALM KCCP KSUMPHUM KREL KGH KLIP KTLA KAWK KWMM KVRP KVRC KAID KSLG KDEMK KX KIF KNPR KCFC KFTFN KTFM KPDD KCERS KMOC KDEMAF KMEPI KEMS KDRM KEPREL KBTR KEDU KNP KIRL KNNR KMPT KISLPINR KTPN KA KJUSTH KPIN KDEV KTDD KAKA KFRP KWNM KTSD KINL KJUSKUNR KWWMN KECF KWBC KPRO KVBL KOM KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG KEDM KFLD KLPM KRGY KNNF KICR KIFR KM KWMNCS KAWS KLAP KPAK KDDG KCGC KID KNSD KMPF KPFO KDP KCMR KRMS KNPT KNNNP KTIAPARM KDTB KNUP KPGOV KNAP KNNC KUK KSRE KREISLER KIVP KQ KTIAEUN KPALAOIS KRM KISLAO KWM KFLOA
PHUM PINR PTER PGOV PREL PREF PL PM PHSA PE PARM PINS PK PUNE PO PALESTINIAN PU PBTS PROP PTBS POL POLI PA PGOVZI POLMIL POLITICAL PARTIES POLM PD POLITICS POLICY PAS PMIL PINT PNAT PV PKO PPOL PERSONS PING PBIO PH PETR PARMS PRES PCON PETERS PRELBR PT PLAB PP PAK PDEM PKPA PSOCI PF PLO PTERM PJUS PSOE PELOSI PROPERTY PGOVPREL PARP PRL PNIR PHUMKPAL PG PREZ PGIC PBOV PAO PKK PROV PHSAK PHUMPREL PROTECTION PGOVBL PSI PRELPK PGOVENRG PUM PRELKPKO PATTY PSOC PRIVATIZATION PRELSP PGOVEAIDUKNOSWGMHUCANLLHFRSPITNZ PMIG PREC PAIGH PROG PSHA PARK PETER POG PHUS PPREL PS PTERPREL PRELPGOV POV PKPO PGOVECON POUS PGOVPRELPHUMPREFSMIGELABEAIDKCRMKWMN PWBG PMAR PREM PAR PNR PRELPGOVEAIDECONEINVBEXPSCULOIIPBTIO PARMIR PGOVGM PHUH PARTM PN PRE PTE PY POLUN PPEL PDOV PGOVSOCI PIRF PGOVPM PBST PRELEVU PGOR PBTSRU PRM PRELKPAOIZ PGVO PERL PGOC PAGR PMIN PHUMR PVIP PPD PGV PRAM PINL PKPAL PTERE PGOF PINO PHAS PODC PRHUM PHUMA PREO PPA PEPFAR PGO PRGOV PAC PRESL PORG PKFK PEPR PRELP PREFA PNG PGOVPHUMKPAO PRELECON PINOCHET PFOR PGOVLO PHUMBA PRELC PREK PHUME PHJM POLINT PGOVPZ PGOVKCRM PGOVE PHALANAGE PARTY PECON PEACE PROCESS PLN PRELSW PAHO PEDRO PRELA PASS PPAO PGPV PNUM PCUL PGGV PSA PGOVSMIGKCRMKWMNPHUMCVISKFRDCA PGIV PRFE POGOV PEL PBT PAMQ PINF PSEPC POSTS PHUMPGOV PVOV PHSAPREL PROLIFERATION PENA PRELTBIOBA PIN PRELL PGOVPTER PHAM PHYTRP PTEL PTERPGOV PHARM PROTESTS PRELAF PKBL PRELKPAO PKNP PARMP PHUML PFOV PERM PUOS PRELGOV PHUMPTER PARAGRAPH PERURENA PBTSEWWT PCI PETROL PINSO PINSCE PQL PEREZ PBS

Browse by classification

Community resources

courage is contagious

Viewing cable 05BRASILIA1142, SLOW GROWTH IN US EXPORTS TO BRAZIL

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.
To understand the justification used for the classification of each cable, please use this WikiSource article as reference.

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. #05BRASILIA1142.
Reference ID Created Released Classification Origin
05BRASILIA1142 2005-04-28 19:02 2011-07-11 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Brasilia
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 04 BRASILIA 001142 
 
SIPDIS 
 
SENSITIVE 
 
STATE PLEASE PASS TO USTR FOR SCRONIN 
DEPT OF TREASURY FOR FPARODI 
USDOC FOR 3134/USFCS/OIO/WH/EOLSON 
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD 
USDA FOR FAS/ITP AND FAS/FAA/WH 
STATE PASS OPIC FOR MORONESE, RIVERA, MERVENNE 
STATE PASS EXIM FOR NATALIE WEISS, COCONNER 
STATE PASS USTDA FOR AMCKINNEY 
 
E.O. 12958: N/A 
TAGS: BEXP ECON ETRD EAGR BR
SUBJECT: SLOW GROWTH IN US EXPORTS TO BRAZIL 
 
REF:  BRASILIA 682 
 
1. (U) THIS IS A JOINT STATE/FCS MESSAGE; IT INCLUDES INPUT 
FROM AMCONSULATES SAO PAULO AND RIO DE JANEIRO.  UNLESS 
OTHERWISE SPECIFIED, DISCUSSION OF U.S. EXPORT TOTALS IS 
BASED UPON USDOC, NOT GOB, DATA. 
 
2. (SBU) SUMMARY AND INTRODUCTION.  OVER THE PAST DECADE 
GROWTH IN U.S. EXPORTS TO BRAZIL HAS STAGNATED, WITH THE 
TOTAL OSCILLATING AROUND THE USD 11 TO 13 BILLION LEVEL. 
THE GOOD NEWS, HOWEVER, IS THAT, AT LEAST FROM 1992-2001, 
EXPORTS TO BRAZIL FROM U.S. SMALL AND MEDIUM-SIZED 
ENTERPRISES HAVE INCREASED IN VALUE SUBSTANTIALLY (242 
PERCENT).  BASED UPON OUR CONTACTS WITH POTENTIAL EXPORTERS 
AND A REVIEW OF THE DATA, POST BELIEVES THAT THE SPOTTY 
PERFORMANCE OF U.S. EXPORTS OVERALL REFLECTS:  A) THE 
INABILITY OF THE BRAZILIAN ECONOMY TO EXPAND IN A 
SUSTAINABLE FASHION, B) THE TEN-YEAR DECLINE IN THE VALUE 
OF THE BRAZILIAN REAL VERSUS THE USD, AND C) THE 
DIFFICULTIES U.S. EXPORTERS FACE (I.E., LACK OF KNOWLEDGE, 
ARCANE IMPORT REGULATORY REGIME, AND INADEQUATE PORT 
INFRASTRUCTURE) IN ENTERING THE BRAZILIAN MARKET.  MORE 
WORRISOME, WHILE IN 2004 U.S. EXPORTS TO BRAZIL INCREASED 
23.6 PERCENT, THE U.S. MARKET SHARE OF BRAZILIAN IMPORTS 
DECLINED TO 18 PERCENT, INDICATING THAT THE U.S. IS LOSING 
GROUND COMPARED TO OTHER COUNTRIES. 
 
3. (U) ALL THIS IS AGAINST THE BACKGROUND OF DECLINING GOB 
NORMAL-TRADE-RELATIONS (NTR) TARIFFS OVER THE PAST TEN 
YEARS.  RECENT STATEMENTS BY PRESIDENT LULA THAT HE IS 
CONSIDERING PROMOTING GREATER IMPORTS TO BRAZIL PROBABLY 
ARE INTENDED MORE TO PRESSURE DOMESTIC INDUSTRY TO KEEP 
PRICES IN CHECK RATHER THAN TO SIGNAL ANY UPCOMING IMPORT- 
FRIENDLY POLICY.  INDEED, ONE OF THE DRIVING FORCES BEHIND 
BRAZIL'S RECENT RESURGENCE IN INTERNATIONAL FINANCIAL 
MARKETS HAS BEEN ITS ABILITY TO POST STRONG TRADE AND 
CURRENT ACCOUNT SURPLUSES.  END SUMMARY AND INTRODUCTION. 
 
4. (U) WITH A GROSS DOMESTIC PRODUCT OF NEARLY US$600 
BILLION, BRAZIL REPRESENTS ABOUT HALF OF SOUTH AMERICA'S 
POPULATION, TERRITORY, AND ECONOMY.  IN 2004, BRAZIL 
IMPORTED US$62.8 BILLION IN PRODUCTS, THE VAST MAJORITY OF 
WHICH WERE INDUSTRIAL AND MANUFACTURED GOODS.  (BRAZIL IS A 
HIGHLY COMPETITIVE PRODUCER OF AGRICULTURAL COMMODITIES AND 
A MAJOR FORCE IN THE AG EXPORT MARKET.)  LAST YEAR, 
ESTIMATED U.S. EXPORTS TO BRAZIL WERE US$13.86 BILLION AND 
BRAZILIAN EXPORTS TO THE UNITED STATES REACHED US$20 
BILLION.  THIS US$13.86 BILLION FIGURE REPRESENTS A 23.6 
PERCENT INCREASE OVER THE U.S. EXPORT TOTAL FOR 2003 - US$ 
11.218 BILLION - BUT IS SUBSTANTIALLY LOWER THAN THE PEAK 
LEVEL OF US$15.928 BILLION IN 2001 AMD MORE OR LESS 
EQUIVALENT TO THE EXPORT TOTAL FOR 1999, US$13.249 BILLION. 
SEE TABLE 1 BELOW. 
 
               TABLE 1 
 
US EXPORTS TO BRASIL, 1994 TO 2004 
         (IN BILLIONS OF US$) 
---------------------------------------- 
1994     1995    1996     1997    1998 
8.118   11.443  12.699   15.912  15.157 
 
 1999    2000    2001     2002    2003     2004 
13.249  15.359  15.928   12.408  11.218   13.863 
 
 
ALTHOUGH DISCERNING A CLEAR TREND FROM THE ABOVE FIGURES IS 
DIFFICULT, IT WOULD APPEAR THAT BOTH STRONG GDP GROWTH AND 
A STABLE EXCHANGE RATE -- AS WAS THE CASE IN 1995, 1997, 
2000 AND 2004 -- ARE ESSENTIAL TO U.S. EXPORT GROWTH. 
(TABLE 2 BELOW SETS FORTH EXCHANGE RATE AND GDP GROWTH DATA 
OVER THE SAME PERIOD.) 
 
                          TABLE 2 
 
BRAZIL GDP AND AVERAGE ANNUAL EXCHANGE RATES, 1994 TO 2004 
--------------------------------------------- -------------- 
                    1994     1995     1996     1997    1998 
GDP GROWTH          5.9%     4.2%     2.7%     3.3%    0.1% 
E/R VERSUS USD      .85      .97      1.04     1.12    1.21 
1999      2000      2001     2002     2003     2004 
0.8%      4.4%      1.3%     1.9%     0.5%     5.2% 
1.79      1.96      2.32     3.53     2.89     2.93 
 
5. (U) THIS UP-AND-DOWN PERFORMANCE ON EXPORTS COMES 
AGAINST A BACKGROUND OF STEADILY DECLINING IMPORT TARIFFS. 
BETWEEN 1994 AND 2003, AVERAGE BRAZILIAN N-T-R TARIFFS 
DECLINED FROM 14.38 PERCENT (MEDIAN 20 PERCENT) TO 10.83 
PERCENT (MEDIAN 13 PERCENT).  MEANWHILE, PER TABLES 3 AND 4 
BELOW, IN 2004 THE U.S. MARKET SHARE OF BRAZILIAN IMPORTS 
HAS DECLINED TO 18 PERCENT (GOB MINISTRY OF DEVELOPMENT 
INDUSTRY AND COMMERCE FIGURES), INDICATING THAT THE OVERALL 
LEVEL OF U.S. EXPORTS IS NOT ONLY LEVELING OFF BUT THAT THE 
U.S. IS LOSING GROUND COMPARED TO FOREIGN COMPETITORS, 
PRINCIPALLY, ASIA. 
 
                            TABLE 3 
 
        PERCENTAGE MARKET SHARE OF U.S. IMPORTS (FOB) 
--------------------------------------------- -------- 
1994      1995      1996      1997      1998 
 20%       21%       22%       23%       23% 
 
1999      2000      2001      2002      2003      2004 
 24%       23%       23%       22%       20%       18% 
 
                           TABLE 4 
 
  INROADS INTO IMPORT MARKET BY FOREIGN COMPETITORS* (FOB) 
--------------------------------------------- ------------- 
             1998   1999   2000   2001   2002   2003   2004 
ASIA          13%    13%    15%    16%    17%    18%    20% 
AFRICA         3%     5%     5%     6%     6%     7%     9% 
 
*PERCENTAGE MARKET SHARE 
 
6. (U) A REVIEW OF THE MINISTRY'S IMPORT STATISTICS FOR 
2004 PROVIDES A FEW SNAPSHOTS OF THE DEGREE TO WHICH 
FOREIGN COUNTRIES ARE GAINING GROUND IN THE BRAZILIAN 
MARKET.  FOR EXAMPLE, IN 2004 THE U.S. WAS THE FOURTH 
LEADING SUPPLIER OF AUTO PARTS, TRAILING GERMANY, 
ARGENTINA, AND JAPAN.  HOWEVER, WHILE U.S. EXPORTS FOR 2004 
INCREASED A HEALTHY 32 PERCENT, THOSE OF ARGENTINA (65.56%) 
AND JAPAN (42.8%) INCREASED EVEN MORE.  THE SAME PHENOMENON 
OCCURRED WITH INTEGRATED CIRCUITS, WHERE THE UNITED STATES 
IS THE SECOND LEADING SUPPLIER, BEHIND SOUTH KOREA BUT 
AHEAD OF TAIWAN.  YET, SOUTH KOREAN EXPORTS ROSE 64.72%, 
TAIWANESE EXPORTS 96.94 PERCENT, AND U.S. EXPORTS ONLY 
18.22%.  PHARMACEUTICALS TELL A SIMILAR STORY.  THE U.S. 
LEADS SWITZERLAND IN THIS CATEGORY, THOUGH U.S. EXPORTS 
ROSE 12.46% WHILE SWISS EXPORTS ROSE 16.16%.  THE GOOD 
NEWS, HOWEVER, IS THAT IN THOSE CATEGORIES IN WHICH THE 
U.S. HELD A COMMANDING MARKET SHARE, INTER ALIA, AVIATION 
MOTORS AND AVIATION PARTS, U.S. EXPORTERS WERE ABLE TO 
OUTDO THEIR FOREIGN RIVALS IN TERMS OF INCREASING SALES. 
 
7. (U) IN REVIEWING THE DATA, IT IS IMPORTANT TO BE AWARE 
THAT THE OCCURRENCE (OR NON-OCCURRENCE) OF SEVERAL HIGH- 
VALUE ADDED SALES IN A SPECIFIC YEAR COULD DISTORT THE 
EXPORT TOTALS FOR THAT YEAR.  FOR INSTANCE, TURNING BACK TO 
USDOC FIGURES, ONE HTS CATEGORY WHERE THIS MIGHT TAKE 
PLACE, MIGHT BE "AIRCRAFT, SPACECRAFT AND PARTS THEREOF." 
HOWEVER, LOOKING AT THE FIVE BEST YEARS FOR U.S. EXPORTS 
UNDER THIS LINE ITEM (2001 - $1.569 BILLION, 2002 - $1.236 
BILLION, 2004 - $1.274 BILLION, 1999 - $.954821 BILLION, 
AND 1998 - $.910094 BILLION), IN THREE OF THOSE YEARS TOTAL 
U.S. EXPORTS DECLINED AS COMPARED TO THE YEAR BEFORE. 
 
8. (SBU) THE DIFFICULTY OF DOING BUSINESS IN BRAZIL MAY BE 
ONE REASON BEHIND THE SPOTTY PERFORMANCE OF U.S. EXPORTS. 
FOR INSTANCE, A RECENT STUDY PREPARED BY THE MINISTRY OF 
DEVELOPMENT, INDUSTRY, AND COMMERCE CONCLUDES THAT BRAZIL'S 
PORTS ARE OPERATING AT VERY NEAR THE SATURATION POINT. 
EVEN AT BRAZIL'S MOST EFFICIENT PORTS, THE COSTS OF MOVING 
CARGO ARE SIGNIFICANTLY HIGHER THAN THOSE IN MANY 
INDUSTRIAL COUNTRIES.  MEANWHILE, A DIZZYING ARRAY OF 
TAXES, FEES, AND OTHER SURCHARGES (A NUMBER OF THEM 
CASCADING, I.E., INCLUDING OTHER TAXES IN THE CALCULATION 
BASE) CAN MAKE FINAL PORT COSTS UP TO 70 PERCENT HIGHER 
THAN FREE ON BOARD PRICES.  SOMETIMES IT TAKES LOCAL LEGAL 
REPRESENTATION TO MANEUVER THROUGH THE INTRICATE MAZE OF 
REGULATIONS, WHICH, OF COURSE, ONLY DRIVES UP IMPORT COSTS 
EVEN MORE.  NOTWITHSTANDING THE DIFFICULTIES INHERENT IN 
EXPORTING TO BRAZIL, THIS CANNOT FULLY EXPLAIN THE LAGGING 
U.S. EXPORTS - AFTER ALL, ASIAN AND AFRICAN EXPORTERS FACE 
THESE SAME PROBLEMS AND THEIR SALES TO THE BRAZILIAN MARKET 
ARE INCREASING. 
 
9. (U) THE SILVER LINING TO THIS CLOUD IS THE PERFORMANCE 
OF U.S. EXPORTS FROM SMALL AND MEDIUM-SIZED ENTERPRISES 
(SME), WHICH OVER A TEN-YEAR TIME PERIOD HAVE REGISTERED 
SOLID GROWTH.  SPECIFICALLY: 
 
--  U.S SME EXPORTS TO BRAZIL INCREASED IN VALUE BY 242 
PERCENT FROM 1992 TO 2001.  IN US DOLLAR TERMS, THE 
INCREASE VALUE WAS NEARLY US$2.65 BILLION. 
 
--  OVER THIS SAME TIME-PERIOD, THIS 242 PERCENT GROWTH 
MADE BRAZIL THE FASTEST GROWING MARKET FOR U.S. SME EXPORTS 
IN THE WORLD.  MEASURED BY THE US DOLLAR GAIN (US$2.65 
BILLION), BRAZIL RANKED SEVENTH IN THE WORLD. 
 
--  MEANWHILE, IN 2001, 26 PERCENT OF U.S. EXPORTS TO 
BRAZIL CAME FROM SMES. 
 
THE EFFORTS EXERTED BY THE U.S. COMMERCIAL SERVICE OF THE 
DEPARTMENT OF COMMERCE ON BEHALF OF U.S. SMES ARE ONE OF 
THE CHIEF REASONS BEHIND THIS INCREASE IN SME EXPORTS TO 
BRAZIL.  IT IS ESTIMATED THAT THE U.S. COMMERCIAL SERVICE 
HAS ASSISTED OVER 200 COMPANIES PER YEAR FOR THE LAST TEN 
YEARS IN ENTERING THE BRAZILIAN MARKET (INCLUDING 281 IN 
2003 AND 171 IN 2004.)  THIS IS IN ADDITION TO HELPING 
COMPANIES ALREADY EXPORTING TO BRAZIL TO INCREASE THEIR 
SALES (I.E., 272 IN 2003 AND 371 IN 2004.)  OTHER U.S. SMES 
COME TO MARKET THEIR WARES AT THE DOZENS OF REPUTABLE 
INTERNATIONAL SHOWS IN SAO PAULO AND OTHER BRAZILIAN 
BUSINESS CENTERS. 
 
10. (SBU) RECENTLY PRESIDENT LULA HAS THREATENED TO 
ENCOURAGE GREATER IMPORTS IF LOCAL BUSINESS DOES NOT HOLD 
THE LINE ON PRICE INCREASES.  WHILE, IN OUR VIEW, THE GOB 
IS PRINCIPALLY USING THE PRESIDENT'S STATEMENTS AS A DEVICE 
TO JAWBONE THE BUSINESS COMMUNITY INTO HELPING HOLD THE 
LINE ON INFLATION, IT WOULD BE A MISTAKE TO ASSUME THAT HE 
WILL NOT ACT IF HE HAS TO.  INDEED, ON MARCH 4, AT FINANCE 
MINISTER PALOCCI'S REQUEST, LULA ZEROED OUT TARIFFS ON 
IMPORTS OF 15 TYPES OF STEEL PRODUCTS, GIVEN THE RECENT 
SERIES OF PRICE INCREASES SPARKED BY SURGING WELL DEMAND. 
(REFTEL A). 
 
11. (SBU) HAVING MADE CLEAR THAT, IN SPECIFIC CASES WHERE 
NECESSARY, HE WILL MAKE GOOD ON HIS THREAT, LULA IS NOW 
FREE TO RELENT ON THE IDEA OF SLASHING TARIFFS ACROSS-THE- 
BOARD -- ESPECIALLY SINCE DOING SO MIGHT ERODE THE BALANCE 
OF TRADE AND CURRENT ACCOUNTS SURPLUSES THAT THE GOB HAS 
WORKED SO HARD TO ACHIEVE.  THE 2004 CURRENT ACCOUNT (US$11 
BILLION) AND TRADE (US$33.6 BILLION) SURPLUSES HAVE HELPED 
IMPROVE BRAZIL'S REPUTATION WITH BOTH INTERNATIONAL MARKETS 
AND THE CREDIT RATING AGENCIES, AND HAVE PROVED A READY 
SOURCE FOR FINANCING DOLLAR-BASED LOANS.  IT IS UNLIKELY 
THAT THE GOB WILL END UP BITING THE HAND THAT FEEDS IT. 
 
DANILOVICH