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C O N F I D E N T I A L SECTION 01 OF 04 BRASILIA 001859 

SIPDIS 

SENSITIVE 
SIPDIS 

FOR WHA ASSISTANT SECRETARY SHANNON FROM AMBASSADOR SOBEL 

E.O. 12958: DECL: 05/25/2016 
TAGS: PREL BR
SUBJECT: A LEGACY AND A FUTURE -- INITIAL OBSERVATIONS ON 
BRAZIL - U.S RELATIONS 

REF: A. BRASILIA 1784 
¶B. BRASILIA 1722 
¶C. BRASILIA 1670 

Classified By: POLITICAL COUNSELOR DENNIS HEARNE. REASONS: 1.4 (B)(D). 

¶1. (SBU) In my first weeks in Brazil, I reached out to a 
wide group of government policy makers, political leaders, 
business representatives, leading journalists, and 
representatives of civil society. I found a remarkable 
interest in strengthening bilateral relations. I met early 
on with Foreign Minister Amorim and Lula's foreign policy 
advisor, Marco Aurelio Garcia, and also had highly productive 
discussions with Justice Minister Bastos, Lula's Chief of 
Staff for Policy Dilma Rousseff, Finance Minister Mantega, 
Trade Minister Furlan, Central Bank President Meirelles, 
Supreme Court President Ellen Gracie Northfleet, 
congressional leaders Renan Calheiros (Senate President) and 
Aldo Rebelo (Chamber of Deputies President) and former 
President Fernando Henrique Cardoso, among many others. I 
met with most of the CEOs of the largest U.S. and Brazilian 
companies, including the media companies. 

¶2. (SBU) In these meetings, there emerged a number of key 
themes that I believe we must focus on going forward. 

--Business and investment are on everyone's mind; 

--There is a skepticism about the level of the U.S. 
commitment to Brazil and South America, and a lack of 
visibility in Brazil of the positive side of America -- and 
what we have done and what we can do; 

-- The Lula government has been tensely balanced until now 
with a conservative fiscal policy on one end, and an 
ideologically leftist foreign policy on the other; questions 
abound as to whether this will change in a second Lula 
government, and whether there are ways to shift the balance 
in a promising way. (Bio-fuels may be one important tool for 
doing this.) 

Business and Investment 
----------------------- 

¶3. (SBU) Across the range of my contacts with business, 
government, and political figures, I heard one message: 
There is a high degree of interest in increasing U.S. trade 
and investment, expanding existing commercial relations, and 
creating new public-private partnerships. This sentiment 
could even be heard from Dilma Rousseff, whose ideological 
history as a militant leftist would hardly suggest such an 
entrepreneurial spirit (see ref A). The energy is 
generalized, but often focused on specific questions of the 
moment. 

¶4. (SBU) A common refrain, for example, was Brazil's desire 
to retain eligibility under GSP as the U.S. Congress debates 
renewal of the authorizing statute. After moving our way on 
copyright piracy over the past 18 months, under the threat of 
USG revocation of GSP, the Brazilians now believe that it is 
unfair to cast them out of the program because of unrelated 
factors. I am concerned that should we proceed down that 
direction, this could cast a shadow over the increasingly 
positive dialogue that we are constructing, and could play 
into the hands of the far left here. We need to keep 
flexibility on this, as GSP can be a powerful tool in the 
future. Many are also enthused about the Commercial Dialogue 
that Secretary Gutierrez and the Minister of Trade initiated 
in June, and the latter is seeking a return meeting with the 
Secretary in October. We are also looking forward to 

SIPDIS 
Treasury Secretary Paulson's visit, which will hopefully 
focus on more of the micro details of the Brazilian economy 

BRASILIA 00001859 002 OF 004 


which Lula's government says would be their focus in a second 
term. 

¶5. (SBU) There is also an increase in investments between 
Brazil and the U.S. with Petrobras, Embraer, steel, 
construction and textiles firms all playing major roles. 
The increasing importance of large industrial companies -- 
both U.S. and Brazilian -- cannot be overstated. Just 
recently, Lula reached out to 25 of the largest companies at 
a dinner that included American companies. Large Brazilian 
companies (e.g., Petrobras) are interested in IPR and 
international tax treatment. In the future they will begin to 
change the balance of the debate. Many large companies also 
are voicing their deep concern about Venezuela's 
participation in Mercosul. I believe we should be able to 
leverage the concerns of these companies to effect salutary 
changes in policy in a GOB that is ever more attentive to the 
views of these powerful actors, the "stakeholders" in 
Brazil's economy. 

Skepticism and Visibility 
----------------------------- 

¶6. (SBU) There is skepticism here about the depth of U.S. 
commitment to its relationship with Brazil, and to the region 
as a whole. There is a related dearth of visibility on the 
positive side of America, of what America has done, including 
our historic concern for the common welfare and our tradition 
of corporate responsibility and community service. We should 
find ways to change these perceptions, focusing on specific 
projects and partnerships that demonstrate our commitment and 
genuine concern for Brazil's people. 

¶7. (SBU) For example, we should be more engaged in Brazil's 
northeast, a region of more than 50 million people, with huge 
disparities in income distribution and a living standard 
below that of Bolivia. In fact, this region could be the 
second largest country in size and population in South 
America. We need to restore and energize our AID programs and 
work with our corporate community, which is already very much 
engaged in corporate responsibility. A re-energized focus 
through USAID on health issues - especially TB, Malaria, and 
HIV-AIDS - would be one place to start, using our own direct 
action and seed money, and I believe we could then bring 
private sector partners in to multiply our impact. 

¶8. (SBU) Crime is a perennial concern in this violent 
country and an area where we can have a significant impact. 
In my meeting with Justice Minister Bastos (ref B), he asked 
urgently when our Attorney General could come to Brazil, and 
this presents a sterling opportunity to both address a 
Brazilian plea for immediate assistance in dealing with their 
public security crisis, and to establish the basis for a 
regular consultative process, biannually, between our AG and 
the Justice Minister. 

¶9. (SBU) Indeed, I am convinced that bringing high-level USG 
officials to Brazil can pave the way for dramatically 
enhanced cooperation, building a top-down momentum that can 
help Brazil address these critical democracy and stability 
issues, while changing perceptions that we are not committed 
or engaged. In addition to the AG visit, we could bring the 
DEA Administrator and an expert delegation to discuss crime 
and narcotrafficking. In fact, the Governor of Sao Paulo and 
the Mayor of Rio are also requesting high visibility visits 
from law enforcement officials. It is also important to 
maintain a regular schedule for our existing bilateral 
meetings, such as our P level political talks. U.S. Supreme 
Court Justices could bring their perspectives to Brazilian 
counterparts grappling with judicial reform. 

Balancing Acts - Ideology, Pragmatism and Democracy 

BRASILIA 00001859 003 OF 004 


--------------------------------------------- ------ 

¶10. (C) The conservative and pragmatic fiscal policy pursued 
successfully by Lula has been in tense balance with a foreign 
policy that is ideologically-skewed to the left, in 
strategic, trade and commercial issues. The south-south 
orientation that saw Brazil clumsily declare China a market 
economy, fumble its campaign for a permanent UNSC seat, and 
embark on dubious efforts to strengthen economic ties with 
Arab states and other marginal players at the expense of 
traditional relations with the U.S. and Europe, has 
established a foreign policy record that is tough to defend 
against attacks in the opposition and the media. There is 
some concern that Lula and his Amorim-led foreign policy team 
could, in a second term, radicalize Brazil's foreign policy 
further away from interests and partnerships that can best 
serve Brazil and our bilateral relationship. I believe we 
can help to diminish this risk by taking a practical approach 
that draws Brazil into collaboration with us in areas that 
clearly hold promise for both countries, such as energy and 
law enforcement. 

¶11. (SBU) We need to get away from ideological labels and 
find common ground. A superb means for doing this is 
cooperation on bio-fuels. The Brazilians' view that 
bio-fuels represent a transformational technology in which 
they are global leaders is one we should embrace and use as 
the basis for cooperation on a strategic level. It is very 
evident to me that in research and development, in 
elaboration of poverty alleviation initiatives for third 
countries, and in building new multilateral fora for policy 
discussions, we have the potential to work closely with the 
Brazilians in bio-fuels. They want this, we want it, and it 
can potentially serve as a vehicle for improving bilateral 
relations across the board without any ideological 
considerations. 

¶12. (SBU) There is a broad consensus that Brazil must 
continue to strengthen its already robust democracy, and, in 
the words of Presidential advisor Marco Aurelio Garcia, 
"bring the benefits of democracy to our poorest citizens." 
The sentiment is universal; however, the initial reaction to 
Dr. Krasner's trip clearly illustrates the concerns of Brazil 
of being too aligned with American foreign policy interest 
(ref c). As Itamaraty Under Secretary for Political Affairs 
Antonio de Aguiar Patriota related to me: Brazil does not 
want to be stereotyped as being in "Our Camp." I think that a 
follow up trip, perhaps by Under Secretary Paula Dobriansky, 
that revisits the democratic governance issue will be more 
successful, if it is not perceived as exclusively an American 
policy initiative. We need to get away from labels that are 
seen as ideological, such as FTAA. What we need to do is 
progress incrementally, without labels, perhaps taking a 
slower approach that will eventually achieve our foreign 
policy objectives. 

A Legacy and a Future 
--------------------- 

¶13. (SBU) Lula in a second term (should he win one) will be 
thinking of his legacy, his opponents will be looking toward 
the future, but most Brazilians seem to want many of the same 
things. It was interesting to talk to former President 
Fernando Henrique Cardoso about his interest in a grand 
coalition. President Lula clearly has an ability to build 
upon his economic achievements and perhaps redefine his 
government in a possible second term, without the need to 
balance it with a strongly ideological foreign policy. We 
cannot tell Brazilians how to shape their legacy and future, 
how to build up their democracy or bring in more investment 
or institute vital reforms, but we can offer our own 
experiences in relevant areas, and continue to press the 

BRASILIA 00001859 004 OF 004 


message that their ability to build the prosperity they seek 
rides on achieving these changes. There are ways we can 
help, and in so doing, we also will bolster the bilateral 
relationship and our own vital interests. 

Chicola