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### Viewing cable 06SAOPAULO1197, AUSTR EISSENSTAT VISIT TO SAO PAULO

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06SAOPAULO1197 | 2006-11-16 17:52 | 2011-07-11 00:00 | UNCLASSIFIED | Consulate Sao Paulo

`

    VZCZCXRO1286
    RR RUEHRG
    DE RUEHSO #1197/01 3201752
    ZNR UUUUU ZZH
    R 161752Z NOV 06
    FM AMCONSUL SAO PAULO
    TO RUEHC/SECSTATE WASHDC 6061
    INFO RUEHBR/AMEMBASSY BRASILIA 7132
    RHEHNSC/NSC WASHDC
    RUCPDOC/USDOC WASHDC 2620
    RUEHMN/AMEMBASSY MONTEVIDEO 2207
    RUEHBU/AMEMBASSY BUENOS AIRES 2531
    RUEHSG/AMEMBASSY SANTIAGO 1912
    RUEHLP/AMEMBASSY LA PAZ 3116
    RUEHPE/AMEMBASSY LIMA 1070
    RUEHCV/AMEMBASSY CARACAS 0410
    RUEHBO/AMEMBASSY BOGOTA 1454
    RUEHRG/AMCONSUL RECIFE 3228
    RUEHRI/AMCONSUL RIO DE JANEIRO 7596
    RUEHAC/AMEMBASSY ASUNCION 2842
    RUEATRS/DEPT OF TREASURY WASHDC
    RUEHC/DEPT OF LABOR WASHDC

` `

    UNCLAS SECTION 01 OF 04 SAO PAULO 001197

    SIPDIS

    SIPDIS

    DEPT FOR WHA/BSC AND EB/TPP/IPE
    STATE PASS TO USTR FOR SCRONIN/MSULLIVAN
    STATE PASS EXIMBANK
    STATE PASS OPIC FOR MORONESE, RIVERA, MERVENNE
    NSC FOR FEARS
    USDOC FOR 4332/ITA/MAC/OLAC
    USDOC FOR 3134/USFCS/OIO
    USDOC ALSO PASS PTO/OLIA
    TREASURY FOR OASIA, DAS LEE AND JHOEK
    DOL FOR ILAB MMITTELHAUSER

    E.O. 12958:  N/A
    TAGS: KIPR ETRD ECON EINV KJUS BR
    SUBJECT:  AUSTR EISSENSTAT VISIT TO SAO PAULO

    REF: A) SAO PAULO 675, B) BRASILIA 2314

    SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY

    ¶1.  (SBU) Summary.  Following their attendance at the Bilateral
    Consultative Mechanism Meeting in Brasilia on October 16 (Reftel B),
    AUSTR for Latin America Everett Eissenstat, AUSTR for Industry
    Meredith Broadbent, and USTR Brazil and Southern Cone Director Sue
    Cronin visited Sao Paulo.  They met with the Sao Paulo State
    Federation of Industries (FIESP) and the American Chamber of
    Commerce (Amcham) to discuss trade issues, and with private sector
    representatives in the copyright and pharmaceutical areas to discuss
    intellectual property rights (IPR) issues.  FIESP and Amcham urged
    the U.S. to maintain Brazil's participation in the Generalized
    System of Preferences (GSP) program and discussed the outlook for
    the Doha Round trade negotiations and ongoing bilateral regional
    trade negotiations in the Americas.  The USTR officials were
    interviewed by prominent news, business and economic publications,
    and received balanced press coverage on GSP issues in four articles
    the following day.  End Summary.

    Amcham:  Focus on Improving the Business Climate

    ¶2.  (SBU) The USTR visitors had a productive exchange of information
    with members of Amcham's Executive Board, which has focused on
    improvement of Brazil's business environment as a priority. Amcham
    is targeting six major areas:  1) regulatory framework and
    infrastructure; (2) innovation and intellectual property protection;
    (3) taxation; (4) job creation; (5) international negotiations; and
    (6) education.  Amcham members repeatedly expressed the desire to
    maintain a good bilateral trade relationship with the U.S.,
    concentrating on common trade interests and promoting "win/win"
    situations for both countries.  Although complicated, cooperation on
    ethanol and the bilateral Commercial Dialogue are two areas that
    have shown movement in the right direction.  According to Amcham,
    problems hindering movement in the bilateral economic relationship
    include: (1) the lack of a consistent Brazilian foreign policy
    (although according to Board Members, Finance Minister Mantega is
    providing positive direction); (2) the perception that alignment
    with the U.S. is unpopular with the Brazilian public, especially
    given the unpopularity in Brazil of the current U.S. administration,
    Lula's leftist background, and the priority he gives to promoting
    South-South ties; and, (3) concern that the sudden termination of
    the GSP program will negatively impact mostly U.S. companies based
    in Brazil and Brazilian companies that are producing items that
    would not ordinarily be produced in the U.S.

    Amcham's Concern Over Losing GSP Benefits

    ¶3.  (SBU) Amcham views itself as a facilitator in the bilateral
    relationship, for example hosting a lunch meeting during the June
    visit of Secretary of Commerce Gutierrez.  Amcham voiced concern,
    however, over the possible non-renewal of GSP for Brazil and the
    negative impact such a decision would have on the present U.S. -
    Brazil relationship.  Amcham has recently advocated for the
    continuation of GSP benefits for Brazil and the reduction of U.S.
    import tariffs on ethanol.  In October, Amcham headed a delegation
    to meet with members of the U.S. Congress to support GSP renewal and
    sent a second delegation November 13 - 15, prior to GSP expiration
    on December 31, 2006.

    ¶4.  (SBU) Brazilians appear to be shocked at the abruptness of a
    possible GSP termination.  A representative from 3M gave as an
    example the manufacture of ear plugs.  GSP benefits enable 3M to

    SAO PAULO 00001197  002 OF 004

    export them to the U.S. from Brazil at a competitive price; however,
    removal of the benefits would create a ripple effect making the
    production and export of this product unprofitable.  Eaton Truck
    Components offered a similar example.  The company produces gear
    boxes in a smaller volume than could be profitably produced in the
    U.S.  If GSP benefits are discontinued, the company might in the
    future move production to China's cheaper labor market.  The major
    issue expressed by Eaton, however, was the suddenness of GSP removal
    - if it were to happen - and the fear of the negative impact of such
    a decision on Brazil-U.S. bilateral relations.  A more palatable
    decision, in the company's view, would be the gradual phasing out of
    the GSP program.

    ¶5.  (SBU) In response, AUSTR Broadbent explained in detail the
    original intent and purpose of the GSP program and the current
    review process.  She underscored that the entire program is under
    review, not just Brazil's participation.  USTR will make a
    recommendation, which will go to Congress for approval.  She noted
    the strong Brazilian response in favor of continuing GSP, with
    approximately 800 letters sent to USTR.  AUSTR Eissenstat followed
    with an overview of the U.S. trade agenda in the hemisphere,
    discussing the current status of NAFTA, the Chile Free Trade
    Agreement (FTA), CAFTA-DR, Colombia, Panama, Uruguay, and Peru.  He
    then gave his impressions of the five hour meeting in Brasilia the
    previous day with Rodrigo Azevedo, the Director of Monetary Policy,
    Brazilian Central Bank.  Sue Cronin closed the conversation with a
    short discussion of Mercosul, giving an explanation of the more
    comprehensive US perspective on trade with this organization.

    FIESP: Econ/Pol Outlook, Stalled Doha Round, GSP Worries

    ¶6.  (SBU) During an afternoon lunch meeting at FIESP, the USTR
    visitors met with Deputy Director for International Affairs, Carlos
    Cavalcanti, former Brazilian Ambassador to the US (and FIESP
    advisor) Rubens Barbosa, International Negotiations Coordinator
    Diego Bonomo, and staff members.  Cavalcanti opened the meeting with
    his impressions of the economic and political outlook.  He thinks
    that Celso Amorim will continue as the Foreign Minister, as he has
    unfinished business with the WTO Doha Round.  In matters of trade,
    he believes the likelihood of meaningful official dialogue between
    the GoB and the USG is limited, given the official stance of the
    Lula government.  The only alternative is for the private sector to
    facilitate business, concentrating on more exports and investments,
    in the hope that trade can be separated from foreign policy.  Trade
    will have to continue to be conducted under the present regulations,
    as most changes contemplated would require amending the
    Constitution, which would be very difficult under a second Lula
    administration.  If there is no legislative movement on trade
    issues, then FIESP is prepared and committed to move forward on its
    own.

    ¶7.  (SBU) One of FIESP's biggest concerns is what it feels is the
    misperception of Brazil's role in the Doha Round, especially among
    members of the U.S. Congress.  Cavalcanti clearly felt this during
    his visit to Washington in conjunction with the Amcham-led
    delegation to discuss GSP renewal.  (Comment:  In private
    conversations with various members of the delegation after their
    trip, most related that Brazil's role in the Doha Round negotiations
    was consistently brought up as a major point of contention in
    considering GSP renewal for Brazil.  One FIESP participant related
    that several of the congressional offices approached did not have
    any substantive discussions with the delegation, but instead
    referred them to Senator Grassley's office.  A CIESP (Sao Paulo
    State Industrial Center) representative said there was minimum
    reception at congressional offices and few meetings with actual

    SAO PAULO 00001197  003 OF 004

    Congressmen, leaving a less than positive perception of the
    delegation's treatment while in the U.S. End Comment.)

    ¶8.  (SBU) During the discussion, AUSTR Broadbent stressed the need
    for Brazil to differentiate itself from India, especially with
    regard to non-agricultural market access (NAMA) issues.  AUSTR
    Eissenstat made similar comments concerning the Doha G-20 proposal,
    where both India and Brazil's name appear on the proposal.  In
    differentiating between Brazil and India, he suggested that it would
    be advisable for Brazil to bring a measurable offer to the table.
    FIESP was concerned that if GSP is not renewed, it would be seen as
    a "punishment" of Brazil, resulting in an official GOB response that
    would only exacerbate the negative perception of the U.S.  This
    scenario, according to Cavalcanti, would be a "lose/lose" situation
    for both Brazil and the U.S.  All three USTR officials stressed that
    the GSP program was never conceived as a permanent program, but
    rather as a temporary program with a stated end date.  Previous end
    dates received a similar review, and the program was renewed.  The
    ongoing program renewal review is administrative, objective and
    transparent, and is not solely a review of Brazil's participation,
    but a review of the entire program.  Thus, Brazil can best serve its
    own interests by continuing to dialogue with Congress and by
    offering viable, logical, and clearly understood arguments for GSP
    renewal, all the while keeping in mind that the program is not
    permanent, and its goal is to stimulate the development of
    competitive companies that eventually do not rely on GSP benefits.

    IPR: Movie Industry Satisfied, but Book Publishers Frustrated

    ¶9.  (U) The USTR officials also held meetings with representatives
    of the various copyright industry associations.  Steve Solot, Senior
    Vice President for the Motion Picture Association (MPA) in the Latin
    American region, is relatively happy with the GOB's recent
    activities to combat piracy and IPR crime in Brazil.  At the MPA
    Annual Meeting this year, the head of the Brazilian National Council
    to Combat Piracy and Intellectual Property Crimes (CNCP) will be
    honored with the Association's first annual anti-piracy award in
    recognition of the Council's recent efforts to fight piracy.  Dalton
    Morato, Legal and Administrative Director for the Brazilian
    Association for Reproduction Rights (ABDR), which represents 90% of
    the publishers in Brazil, was very concerned with the actions of
    three major universities in Sao Paulo State, which allow 100%
    reproduction of foreign textbooks at their copy centers on campus.
    These are the University of Sao Paulo (USP), the Getulio Vargas
    Foundation (FGV - a major business school), and the Catholic
    University of Sao Paulo (PUC-SP).  This accounts for an annual loss
    to publishers of approximately USD 15 million.  ABDR has appealed to
    the Ministry of Education, which has ignored the appeals, stating
    that they cannot do anything since the universities are private.
    The CNCP has been unable to do anything either, as they have no
    control over university policies.  There has been some action on
    enforcement against this practice at the state level; however,
    police consider book-related crimes to be of lesser importance and
    of lower priority, and react accordingly.

    Pharmaceutical Industry: Problems with Patents and Piracy

    ¶10.  (U) The pharmaceutical industry was represented by Gaetano
    Crupi, President of Eli Lilly; Joao Sanchez, Governmental Relations
    Director for Merck Sharp & Dohme; Walban Damasceno Souza, Director
    of Governmental Relations at Bristol Myers Squibb; and, Ronaldo
    Pires, IPR Specialist for Interfarma.  General discussion focused on
    the need for continued improvements with ANVISA, the regulatory

    SAO PAULO 00001197  004 OF 004

    agency responsible for pharmaceutical patents.  The patent system
    now protects the investment and investor, and new examiners were
    hired recently, but there is still a backlog.  All agreed that
    private companies are not investing enough to combat piracy and that
    the piracy issue is a cultural one as well, as the predominant
    Brazilian attitude does not yet consider piracy a crime and an
    economic drain on society.  In the area of research, there are
    currently 43 biotech parks in Brazil and 23 incubators of companies.
     With regard to AIDS medications, the companies believe that Brazil
    is using the compulsory licensing issue to advance its reputation,
    gain support from the developing world and play a leadership role.
    All agreed that compulsory licensing should not be government
    policy.

    ¶11.  (U) This cable was cleared with USTR and Embassy Brasilia.

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