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### Viewing cable 06SAOPAULO675, COMMERCE SECRETARY PROMOTES U.S. EXPORTS, PUSHES

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06SAOPAULO675 | 2006-06-16 16:30 | 2011-07-11 00:00 | UNCLASSIFIED | Consulate Sao Paulo

`

    VZCZCXRO1887
    OO RUEHRG
    DE RUEHSO #0675/01 1671630
    ZNR UUUUU ZZH
    O 161630Z JUN 06
    FM AMCONSUL SAO PAULO
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 5264
    RUCPDOC/USDOC WASHDC IMMEDIATE 2477
    INFO RUEHBU/AMEMBASSY BUENOS AIRES 2297
    RUEHAC/AMEMBASSY ASUNCION 2621
    RUEHMN/AMEMBASSY MONTEVIDEO 2024
    RUEHBR/AMEMBASSY BRASILIA 6360
    RUEHLP/AMEMBASSY LA PAZ 2848
    RUEHPE/AMEMBASSY LIMA 1014
    RUEHCV/AMEMBASSY CARACAS 0335
    RUEHBO/AMEMBASSY BOGOTA 1397
    RUEHSG/AMEMBASSY SANTIAGO 1753
    RUEHRI/AMCONSUL RIO DE JANEIRO 7180
    RUEHRG/AMCONSUL RECIFE 2979
    RHEHNSC/NSC WASHDC
    RUEATRS/DEPT OF TREASURY WASHDC
    RUEHC/DEPT OF LABOR WASHDC
    RHMFISS/CDR USSOUTHCOM MIAMI FL

` `

    UNCLAS SECTION 01 OF 08 SAO PAULO 000675

    SIPDIS

    SIPDIS

    DEPT FOR WHA/FO, WHA/BSC, WHA/EPSC, WHA/PDA, EB/CBA
    STATE PASS USTR M.SULLIVAN/K.LEZNY
    STATE PASS EXIMBANK
    STATE PASS OPIC FOR DMORONESE, NRIVERA, CVERVENNE
    STATE ALSO PASS TDA FOR ANGULO AND MCKINNEY
    DOC FOR 4332/ITA/MAC/WH/OLAC
    USDOC FOR 3134/ITA/USCS/OIO/WH/RD
    USDOC ALSO FOR PTO AND NIST
    TREASURY FOR OASIA, DAS LEE AND DDOUGLASS
    DOL FOR ILAB MMITTELHAUSER
    NSC FOR FEARS
    SOUTHCOM ALSO FOR POLAD
    AID/W FOR LAC/AA

    E.O. 12958: N/A
    TAGS: OVIP ETRD BEXP KIPR EINV PGOV EAGR ENRG BR
    SUBJECT: COMMERCE SECRETARY PROMOTES U.S. EXPORTS, PUSHES
    ANTI-PIRACY FIGHT IN SAO PAULO

    -------
    SUMMARY
    -------

    ¶1.  During his June 7-8 visit to Sao Paulo, Secretary of Commerce
    Carlos M. Gutierrez discussed intellectual property rights with the
    Governors of four states and attended a meeting of the Sao Paulo
    State Interagency Committee to Combat Piracy; met with leaders of
    major business and industrial groups and delivered a speech at the
    American Chamber of Commerce (AmCham) (reported septel); and toured
    a business apprenticeship center and spoke with a number of students
    there.  In all his meetings and appearances, Secretary Gutierrez
    took the opportunity to call for closer commercial ties between the
    United States and Brazil, for a more investment-friendly business
    climate in Brazil, and for increased efforts to combat piracy.  He
    spoke of the common challenge from China, noting that China is not
    only a major market but an economy in competition with the U.S. and
    Brazil.  The visit advanced our economic/commercial agenda,
    receiving positive media coverage, and offered an opportunity to
    spread our message on the benefits of free trade and the importance
    of fostering a business environment that punishes piracy.  END
    SUMMARY.

    ¶2.  Following on his successful visits to Rio de Janeiro and
    Brasilia, Secretary of Commerce Carlos Gutierrez visited Sao Paulo
    June 7-8.  Members of the Secretary's delegation included:

    Robert Mosbacher, Jr., CEO, Overseas Private Investment Corporation
    (OPIC);
    Steven Pinkos, Deputy U/S for Intellectual Property;
    David Bohigian, A/S, Market Access and Compliance;
    Patrick Duddy, DAS, Western Hemisphere, State Department;
    Claire Buchan, Chief of Staff;
    John Andersen, Director, Latin America and Caribbean;
    Dulce Zahniser, OPIC;
    Albert Angulo, Trade and Development Agency (TDA);
    Anne McKinney, TDA;
    Dan Nelson, Office of Public Affairs;
    Dorian Mazurkevich, Patent and Trademark Office (PTO);
    Phillip T. Chicola, Charge d'Affaires, a.i.;
    Christopher J. McMullen, Consul General; and
    John Harris, Senior Commercial Officer

    ----------------------------
    BREAKFAST WITH THE GOVERNORS
    ----------------------------

    ¶3.  The Secretary attended a breakfast hosted by Sao Paulo Governor
    Claudio Lembo and attended by three other state Governors: Germano
    Rigotto of Rio Grande do Sul, Eduardo Pinho Moreira of Santa
    Catarina, and Jose Orcirio Miranda dos Santos ("Zeca do PT") of Mato
    Grosso do Sul.  Two other Governors, Roberto Requiao of Parana and
    Aecio Neves of Minas Gerais, were invited but were unable to attend;
    however, Governor Neves was represented by his State Secretary for
    Economic Development, Wilson Nelio Brumer.  Several of the Governors
    were accompanied by their chief foreign affairs advisors or state
    Commerce Secretaries.  The discussion was very lively and
    constructive and focused on four major areas: intellectual property
    rights (IPR), investment and partnerships, facilitating commerce
    (including the key role of OPIC), and bilateral cooperation on
    biofuels.

    SAO PAULO 00000675  002 OF 008

    ¶4.  Leading off the breakfast, Secretary Gutierrez briefed governors
    on his meeting with Minister for Development, Industry, and Foreign
    Trade Luiz Fernando Furlan  and the launching of the U.S.-Brazil
    Commercial Dialogue announced by Presidents Bush and Lula during the
    President's visit to Brazil last November.  The Secretary noted that
    the Commercial Dialogue would focus on facilitating trade by
    expediting customs, exchanging information that would benefit both
    sides, promoting IPR, and working together on common standards.  He
    said the U.S. wants to strengthen bilateral commercial relations
    with Brazil, work together to combat intellectual property piracy,
    promote two-way investment, and increase overall trade (currently at
    around USD 45 billion, which he said should be higher).  The
    Secretary observed that Brazil profits more from trade with the

    SIPDIS
    U.S., which largely involves value-added products, than from trade
    with China, which involves mostly commodities.

    ¶5.  Brazilian Ambassador to the United States Roberto Abdenur told
    the Governors that Secretary Gutierrez's visit had been very
    productive, with excellent meetings with Minister Furlan and other
    senior GoB officials.  He said the GoB will follow up with a visit
    to Washington this fall to try to move forward on issues identified
    in these meetings.   Minister Furlan is especially interested in
    making greater progress on biofuels, including increased cooperation
    on scientific research.

    ----------------------------
    INTELLECTUAL PROPERTY RIGHTS
    ----------------------------

    ¶6.  Secretary Gutierrez congratulated the Governors on the progress
    to date in combating piracy, but urged them to do more.  He observed
    that better IPR enforcement would protect Brazilian companies that
    are producing innovative products and would help attract greater
    U.S. investment.  Rio Grande do Sul Governor Germano Rigotto
    stressed that all five states represented are taking strong measures
    to attack the IPR piracy problem because they are aware of the
    economic equities they have in their states.  For example, Dell has
    a major facility in Rigotto's state.  He noted the need to do a
    better job of information-sharing regarding cross-border piracy --
    where the merchandise is coming from, who is bringing it in, where
    is it going.  Sao Paulo Governor Lembo affirmed that the state
    governments have the political will to combat the problem and
    welcomed continuing U.S. support.  Yet there remains a public
    perception, noted Minas Gerais State Secretary Brumer, that there is
    nothing wrong with piracy; this complicates and impedes law
    enforcement efforts.  Governor Pinho of Santa Catarina echoed
    Rigotto's point about the need to combat piracy as key to achieving
    the goal of attracting more U.S. investment.  Governor Zeca of Mato
    Grosso do Sul, which has a long border with Paraguay and Bolivia,
    called for a stronger partnership with the U.S. in the area of
    combating cross-border contraband.

    --------
    BIOFUELS
    --------

    ¶7.  The Governors expressed great interest in the issue of
    developing biofuels.  Several of the states, including Rio Grande do
    Sul, are already intensifying their efforts in this area and are
    seeking partnerships.  Speaking for the GoB, Ambassador Abdenur

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    recognized the need for closer cooperation with the U.S. and for
    more U.S. investment in Brazil.  He suggested the two countries form
    a working group to focus on building a global partnership on
    ethanol.  Both Abdenur and Governor Lembo called on the U.S. to
    eliminate the 54-cent per gallon surcharge on imported ethanol.
    Secretary Gutierrez noted that President Bush has committed the U.S.

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    to developing alternative energy sources, including ethanol.  This
    initiative opens up possibilities to work with Brazil. There are
    U.S. investors who would be interested in working with Brazilian
    companies in developing this area.  Bilateral cooperation in this
    area would benefit both sides.  The Secretary said the U.S. could
    learn something in this area since Brazil is far ahead of the U.S.
    in alternative energy.  He promised to take the biofuels question
    back to Washington with him.

    -------------------------
    INFRASTRUCTURE INVESTMENT
    -------------------------

    ¶8.  The Governors then raised the question of Brazil's critical need
    for infrastructure improvement and the GoB's public-private
    partnership (PPP) Program.  Governor Rigotto noted that all five
    states have the necessary legislation in place to implement PPPs,
    but the National Bank for Economic and Social Development (BNDES)
    needs to help facilitate financing of large infrastructure projects.
     Several others chimed in, pointing out that it is difficult for
    states and municipalities to find funds for big infrastructure
    projects.  They are looking for partnerships with U.S. entities.
    For example, Minas Gerais has three big projects that would welcome
    U.S. investments -- highways, prisons, and basic sanitation
    facilities.  In this context, CEO Mosbacher explained the role of
    OPIC in supporting U.S. investors interested in infrastructure
    projects, particularly housing for low- and medium- income families.
     He also underscored the importance of facilitating licenses and
    permits for such investments.  Several of the governors present
    indicated their interest in such programs, and Mosbacher committed
    to following up with them to outline possible housing programs and
    infrastructure activities in their states.

    ------------------
    TRADE FACILITATION
    ------------------

    ¶9.  In the area of trade facilitation, Senior Commercial Officer
    John Harris urged the Governors to promote greater participation in
    U.S. trade shows, and offered to facilitate broader Brazilian
    participation.  Governor Rigotto replied that the states would very
    much like to take advantage of these trade shows and asked that FCS
    provide information early enough to allow state governments to get
    word out to companies.

    -----------------------------
    ANTI-PIRACY COMMITTEE MEETING
    -----------------------------

    ¶10.  Following the breakfast, the Secretary and the Governors met
    with the Sao Paulo State Anti-Piracy Committee, a group formed in
    January of this year by then Governor (and now Presidential
    candidate) Geraldo Alckmin.  The Committee is composed of the
    Governor, his Chief of Staff, the Attorney General, and six State
    Secretaries (Justice; Finance; Public Security; Labor; Culture; and

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    Science, Technology, and Economic Development) and members of their
    staffs.  Sao Paulo is the second state to create an anti-piracy
    committee; the first was Rio Grande do Sul, whose committee includes
    representatives of the private sector as well.  The Sao Paulo
    Committee was created in response to strong and energetic advocacy
    by the Consulate.

    ¶11.  Sao Paulo State Attorney General Elival da Silva Ramos began by
    commenting on the importance of public and private participation in
    fighting copyright piracy.  He criticized the federal government for
    its inability to control the traffic of pirated goods at the borders
    and ports.  He also commented on the deleterious effects of piracy
    in terms of lost tax revenue, competitiveness, and innovation.  The
    State Secretary of Finance, Luiz Tacca Junior, commented on the
    state of Sao Paulo's capacity to attack counterfeit goods, focusing
    on a recent campaign against what the state government calls
    "counterfeit fuel" - watered down ethanol and gasoline.  Recent
    successes in combating adulterated fuel were attributed to a
    successful public education campaign, aggressive prosecution of
    traffickers in diluted fuel, and stricter licensing requirements and
    closer state scrutiny of fuel distributors.  Tacca was grateful for
    cooperation received from the U.S. in training the state's Fiscal
    Intelligence Unit, which has become an effective police unit in the
    fight against money laundering.  Tacca emphasized the lost revenue
    angle, noting that much can be done to fight piracy on the tax
    evasion side of law enforcement.  He concluded by acknowledging that
    much work remains to be done in terms of encouraging businesses to
    participate in the "legal economy."  Brazil's rampant tax evasion,
    off-the-books transactions, and under-invoicing make it critical for
    the government to offer incentives for gray market and "irregular"
    businesses to enter the formal economy and operate within the law.

    ¶12.  At this point, Attorney General Ramos noted that Sao Paulo is
    at the legal limit in terms of its power to enforce IPR.  In
    Brazil's federal system, all criminal legislation, including in the
    area of intellectual property, is made at the national level.  The
    state's only real power to fight piracy comes from the state tax
    laws.  This is the only angle that allows Sao Paulo to act above and
    beyond the federally mandated guidelines.  Nevertheless, Sao Paulo
    will remain active in pursuing tax evaders as a means of inhibiting
    counterfeiting.

    ¶13.  Following Tacca's remarks, Sao Paulo State Deputy Secretary for
    Public Security, Marcelo Martins de Oliveira, gave an overview of
    Sao Paulo's recent successes in fighting piracy.  Oliveira praised
    the police department's organized crime division (DEIC), which
    includes a unit dedicated to piracy, or crimes against "immaterial
    property."  This unit has recently conducted 1,812 operations,
    resulting in 4,500 indictments, 2,103 prosecutions, and over 400
    imprisonments.  DEIC raids have netted 3.7 million toys, 8.16
    million CDs and DVDs, 300,000 tennis shoes, 400,000 watches, and
    450,000 pieces of counterfeit clothing.  Oliveira concluded by
    saying that despite DEIC's excellent track record, piracy will be an
    unsolvable problem until the federal government is better able to
    control its ports and borders.  Nevertheless, Sao Paulo's police
    force is "unequivocally" dedicated to the continued fight against
    piracy.  Oliveira concluded by personally thanking the U.S.
    Consulate General in Sao Paulo for its "invaluable and unceasing
    assistance in the fight against piracy and drug trafficking."

    SAO PAULO 00000675  005 OF 008

    ¶14.  Secretary of Culture Joao Batista was the next to comment on
    the ills of piracy in Sao Paulo.  Batista criticized piracy as an
    attack on Brazilian culture, specifically in the music market, where
    75 percent of music sales in Brazil are of works by national artists
    and 52 percent of those are of counterfeit products.  In contrast
    with music sales, the Brazilian film market is dominated by foreign
    films.  Nevertheless, piracy is still a threat to Brazilian cinema.
    To reinforce the reality of this threat, Batista recounted the story
    of a pirated DVD version of the Brazilian blockbuster movie "Dois
    Filhos de Francisco" being watched aboard Brazilian President Lula's
    executive airplane.  [NOTE: Perhaps the most important, certainly
    the most popular film ever made in Brazil, "Francisco's Two Sons"
    was Brazil's top grossing film at the box office in 2005.  Filmed on
    a budget of less than USD 3 million, it outperformed several of the
    top twenty highest grossing films of all time, worldwide.
    "Francisco's Two Sons" was also nominated for an Oscar in the
    international film category.  END NOTE.]  Batista cited the failure
    of the federal government to secure the borders as the prime culprit
    behind the large market for pirated material in Sao Paulo.  He then
    reiterated the need for cooperation between state and federal
    authorities on this issue.

    ¶15.  Governor Lembo issued an invitation for the U.S. Consul General
    to participate in the periodic meetings of the Sao Paulo Anti-Piracy
    Council.  He extended the invitation to other consulate staff to
    attend the public hearings of the council.  Executive Secretary of
    the Sao Paulo state Anti-Piracy Committee Marco Vaz Guimaraes de
    Souza Netto then outlined the Committee's approach to the issue.
    The Committee, which convened for the first time in May of this
    year, has the following priorities: pursuing tax evasion, cracking
    down on money laundering, improving the warehousing of seized goods,
    and perfecting the logistics of combating piracy -- meaning
    developing the process from seizure of goods through prosecution to
    storage and ultimate destruction.  Netto noted that many warehouses
    are currently donated by anti-piracy groups, such as, for example,
    the Motions Picture Association; however, warehouse capacity will
    soon be outstripped by the tidal wave of incoming seized
    contraband.

    ¶16.  Echoing the State Secretary of Culture, Governor Rigotto
    complained that the federal government's inability to effectively
    police the borders was responsible for the problems of piracy
    arriving on the "our states'" doorsteps.  Noting that two of the
    states represented at the meeting - his own (which borders on
    Argentina and Uruguay) and Mato Grosso do Sul - bordered on other
    countries and that several others were home to major ports, he then
    made the bold suggestion that the Governors present form a working
    group comprised of the Secretaries in each government responsible
    for combating piracy, including the Secretaries of Finance,
    Security, and Culture, among others.  While recognizing that the
    states bordering on Paraguay (Mato Grosso do Sul; Parana was not
    represented at the meeting) face the largest challenges, Rigotto
    pointed out that the products that cross through these states
    ultimately end up on the streets of Sao Paulo and elsewhere.

    ¶17.  Mato Grosso Do Sul Governor Miranda dos Santos (Zeca do PT)
    immediately seized on this idea, saying the border states and major
    markets could help each other immensely.  He noted that counterfeit
    fuel from Sao Paulo is sold in Mato Grosso do Sul, and that drugs
    from Bolivia and Paraguay make their way through his state to Sao

    SAO PAULO 00000675  006 OF 008

    Paulo.  Thus, they had a lot to learn from each other and much to
    gain by coordinating efforts.  Governor Zeca thanked the U.S. for
    its helpful drug enforcement presence in Paraguay and Bolivia and
    called for a greater U.S. presence in the Brazilian border states
    themselves.  Santa Catarina Governor Pinho denied that his state had
    a large problem with piracy but expressed a willingness to
    participate in a regional working group.  He also noted that Santa
    Catarina's Federation of Industries (FIESC) has great expertise to
    lend in this area.

    ¶18.  Secretary Gutierrez thanked everyone for their comments and
    stated that in order to better fight piracy, we need better
    information.  For example, it would be good to know how much illicit
    material is being produced locally and how much is being imported,
    and from where.  In the United States, 70 percent of all counterfeit
    goods come from China; this is a useful figure for us to have when
    making policies to fight piracy.  He asked the participants to share
    information they may have with him.  In response, Governor Germano
    Rigotto clarified that most of Brazil's pirated goods comes from
    China via Paraguay and enters through weakly policed ports and
    borders in the form of textiles, computer software and hardware,
    CDs, and DVDs.  He noted that all counterfeit cigarettes in Brazil
    are manufactured in Paraguay, with falsified brand names.  No
    counterfeit cigarettes are made in Brazil.  There is, however, a
    large counterfeit computer industry in Brazil, for which all
    manufacturing takes place locally.  Rigotto advocated that the
    states play a stronger role in breaking up these illegal businesses.

    ¶19.  Commerce Deputy Under Secretary Stephen Pinkos of the Patent
    and Trademark Office then commented that Brazil is to be
    congratulated on its recent successes in combating piracy.  He also
    highlighted training programs currently being conducted in Brazil by
    the Department of Homeland Security and the Department of Justice.
    Pinkos then described the success the U.S. has had in organizing
    federal task forces, which combine federal, state, and local police
    efforts to combat piracy, even though ultimately the charges that
    will be brought are federal.  He suggested that the U.S. could work
    with Brazil to share experiences from this model and help Brazilian
    authorities implement a similar framework to fight piracy.  He also
    emphasized the health costs of piracy, which go beyond lost tax
    revenue and unfair competition.  Ten percent of medication worldwide
    is counterfeited, as are many auto parts.  The public safety
    ramifications of this phenomenon are sobering and need to receive
    wider public attention.

    ¶20.  Governor Lembo closed the Roundtable suggesting that the
    Governors' respective Chiefs of Staff contact each other to set up a
    sub-regional working group meeting.  Lembo offered to host the
    meeting in Sao Paulo, and suggested that the first meeting occur in
    the latter half of July, adding, "After the World Cup, of course."

    ---------------------
    VISIT TO SENAC CENTER
    ---------------------

    ¶21.  Secretary Gutierrez next visited a branch of the National
    Commercial Apprenticeship Service (SENAC).  SENAC is a University
    system begun in 1946 with the support of different Federations of
    Industry, including FIESP, which wanted to begin a system of schools

    SAO PAULO 00000675  007 OF 008

    that would increase the country's stock of technically trained
    students.  SENAC has 56 units in Sao Paulo State alone.  The
    Secretary, Consul General, and Senior Commercial Officer were

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    greeted by Joao Kulcsar, Director of the U.S. Study Center; Abram
    Szajman, President of SENAC and of the Federation of Commerce for
    Sco Paulo; and Emelio Umeoka, President of Microsoft.  The group
    toured SENAC's library, where they were given an overview of SENAC's
    activities and resources, and then went across campus to Microsoft's
    Center of Innovation learning center.  Umeoka provided an overview
    of Microsoft's investment in youth education and the goals of the
    Innovation Center, as well as a summary of other Microsoft corporate
    responsibility programs in Brazil.  Following a photo with some of
    the Center's students, the Secretary and others were escorted to a
    classroom, where they spent 30 minutes speaking to twelve students
    in a roundtable format about their different classes, incubator
    businesses, and hopes for future employment.  A brief interview with
    SENAC's internal television station followed, and Szajman and Umeoka
    and other SENAC representatives took their leave of the Secretary
    and his delegation.

    -------------------
    POSITIVE PRESS PLAY
    -------------------

    ¶22.  Media coverage of the visit was generally positive,
    comprehensive and objective.  There was much press interest in the
    Secretary - both his morning press conference with the Governors and

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    his late afternoon media roundtable, as well as his speech at
    AmCham, were covered by all major dailies, all TV networks, business
    dailies and newsweeklies, and wire services.  The questions he
    received from Brazilian journalists at the roundtable were probing
    and well-informed, but neither hostile nor friendly.  The
    Secretary's statements were accurately represented, and the main

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    points that he emphasized - greater Inter-American commercial and
    trade cooperation and integration; viewing China and India not only
    as potential markets, but also competitors; highlighting the
    positive steps that have been taken to combat piracy, but noting
    that more remains to be done - were covered.  "Folha de Sao Paulo,"
    the largest circulation daily newspaper, noted that he didn't
    mention FTAA in public at all, but seemed to focus more on bilateral
    efforts. The reporting was much more factual than analytical.
    Overall, the reporting was comprehensive, fair, and, on balance,
    positive.

    -------
    COMMENT
    -------

    ¶23.  This was a highly successful visit that advanced key aspects of
    our economic and commercial agenda.  The Secretary brought with him
    a clear, coherent message on the USG's trade policies and
    priorities, and he delivered it effectively to state government
    officials, business leaders, and the omnipresent Brazilian
    Ambassador.  He also demonstrated a keen awareness of Brazilian
    concerns on trade issues as well as a willingness to listen.  If, in
    the aftermath of his visit, Brazilian federal and state law
    enforcement agencies actually implement their proposal to
    communicate better with each other on issues related to combating
    IPR piracy, the visit will have accomplished something tangible and
    positive for both sides.  END COMMENT.

    SAO PAULO 00000675  008 OF 008

    ¶24.  This cable was coordinated/cleared with Embassy Brasilia.

    MCMULLEN

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