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### Viewing cable 02BRASILIA4227, A/S REICH'S MEETING WITH LULA

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
02BRASILIA4227 | 2002-11-22 12:01 | 2011-07-11 00:00 | CONFIDENTIAL | Embassy Brasilia

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    C O N F I D E N T I A L SECTION 01 OF 04 BRASILIA 004227

    SIPDIS

    DEPT FOR WHA/BSC

    E.O. 12958: DECL: 11/22/2012
    TAGS: PGOV PREL ECON BR
    SUBJECT: A/S REICH'S MEETING WITH LULA

    Classified By: POLOFF RICHARD REITER FOR REASONS 1.5(b) AND (d).

    1.(C) SUMMARY. Assistant Secretary Reich had warm and
    productive meetings in Brasilia November 20-21 with
    President-elect Lula da Silva, his senior advisors in the PT,
    and Brazilian congressional leaders.  Both Ambassador Reich
    and Lula expressed great interest in working together across
    a range of issues, particularly trade.  The PT team floated
    the idea of concluding a bilateral trade pact with the US,
    but will first consult with their Mercosul partners and then
    likely raise some proposals during Lula's December 10 visit
    to Washington.  Lula is eager to meet President Bush, sure
    that "two politicians like us will understand each other when
    we meet face to face."  In keeping with efforts by Lula to
    distance himself from Castro and Hugo Chavez, PT leader
    Aloizio Mercadante sought to downplay his participation in
    the "Sao Paulo Forum" as an attempt to set a democratic
    example for other Latin American leftists.  Ambassador Reich
    also met with Brazilian congressional leaders, who similarly
    expressed eagerness to strengthen ties with the US in order
    to help address pressing economic and social needs.  END
    SUMMARY.

    RELATIONSHIP OFF ON THE RIGHT FOOT
    ----------------------------------
    ¶2. (C) WHA Assistant Secretary Otto Reich led a delegation to
    Brasilia November 20-21 that included WHA/BSC Director James
    Carragher, Special Advisor William Perry, and Michael Zarin
    of S/P.  The group, accompanied by Ambassador Hrinak and
    Poloff (notetaker), met November 21 with President-elect Lula
    da Silva and his three senior advisors: Jose Dirceu, Workers'
    Party (PT) President and Federal Deputy from Sao Paulo;
    Aloizio Mercadante, PT Federal Deputy and Senator-elect from
    Sao Paulo; and Antonio Palocci, who resigned this week as
    mayor of Riberao Preto (SP) to devote full time to leading
    Lula's transition team.  All three will have high profile
    positions in the new government.

    ¶3. (C) The messages on both sides were extremely positive.
    Before Lula joined the meeting, Jose Dirceu expressed the
    interest of the incoming government in strengthening
    Brazil/US ties.  He said the December 10 visit by Lula to
    Washington should focus on items on both countries' agendas,
    including FTAA and free trade, protectionism, terrorism, and
    the possibility of war in Iraq, which would have economic
    consequences for Brazil.

    LET'S GET BEYOND THE HEADLINES
    ------------------------------
    ¶4. (C) Assistant Secretary Reich commented that even after
    9/11 the US will continue to pursue a range of interests
    (commercial, economic, political, security) in the
    hemisphere.  President Bush's phone call to Lula after the
    Brazilian elections and invitation to the White House are
    strong signals of the USG's desire to strengthen ties to
    Brazil under Lula.  The message, Reich emphasized, is that
    the US and the incoming Brazilian government need to get
    beyond any preconceptions we may have had about each other
    and focus on things that bring us together.  The media often
    highlight policy differences, he added, but it is President
    Bush who sets the USG's direction, and he wants to strengthen
    the US/Brazil relationship.  Reich also reviewed the US
    position on Iraq, noting that there would not have been the
    current need to force compliance if Saddam Hussein had
    complied with the sixteen UN resolutions since 1991.

    BILATERAL TRADE PACT ON THE HORIZON?
    ------------------------------------
    ¶5. (C) Commenting on Mercadante's remark to D/USTR Peter
    Allgeier the day before that the US seems unwilling to
    negotiate a bilateral trade agreement with Brazil, Reich said
    the US was flexible on the best approach to free trade but
    that his impression was that Brazil was not interested in
    such a bilateral pact.  Mercadante noted that Mercosul
    partners Argentina and Uruguay are currently in crisis, which
    has scared foreign investors throughout South America.  Thus
    Brazil's two highest priorities with the US are: obtaining US
    support in gaining increased access to commercial credit (and
    demonstrating that Brazil is a better risk than Argentina);
    and secondly, to increase foreign trade, and particularly to
    double trade with the US in the next four years.  How,
    Mercadante asked, can the US/Brazilian trade total only $30
    billion per year?

    ¶6. (C) Mercadante urged that the US and Brazil sit down to
    discuss a range of bilateral trade issues, for example, IPR
    and music piracy, ethanol sales, and aircraft exports.  He
    added that FTAA ("ALCA" in Portuguese) will be a much more
    difficult project, but that the bilateral talks could start
    immediately.  Reflecting the PT's dedication to regional
    partners, Mercadante urged that the US seek a trade pact with
    Mercosul.  Ambassador Reich said he was pleased to hear of
    Mercadante's interest in such talks, noting that the US is
    open to bilateral pacts (e.g., Chile) as well as pacts with
    sub-regional groups (e.g. the Central American states).

    ¶7. (C) Ambassador Hrinak asked Mercadante if Lula would be
    extending an invitation to bilateral talks during the
    Washington visit.  Jose Dirceu answered before Mercadante
    could, saying that the bilateral talks were important but
    would have to be approached in the context of Brazil's
    regional commitments.  Dirceu admitted that the incoming
    government would like to conclude a bilateral pact quickly,
    but as Brazil is the only stable economic force in South
    America, they would have to proceed cautiously and in concert
    with regional partners.  Mercadante said that Lula will
    travel to Argentina on December 3, and then there will be a
    December 5-6 meeting of Mercosul presidents in Brasilia.
    Lula would use these opportunities to sound out the Mercosul
    partners on future negotiating mechanisms --for example a
    Mercosul 4 1 with the US.  After these talks, Mercadante
    said, it is possible Lula would arrive in Washington with
    "some initiatives".  Dirceu summed up by noting that while
    Brazil must consult its regional partners, it "does not want
    to be held hostage by them."

    LULA WANTS STRONG TIES AND TOUGH NEGOTIATING
    --------------------------------------------
    ¶8. (C)  President-elect Lula then joined the meeting and
    enthusiastically stated his interest in strong bilateral
    relations across the range of issues.  That, he said, is what
    is motivating him to travel to Washington on December 10.
    Appearing upbeat, smartly-dressed and rested, Lula expressed
    hope that after his visit, US officials will no longer
    misunderstand the PT.  Looking forward to meeting President
    Bush, he said "I think two politicians like us will
    understand each other when we meet face to face."  Brazil's
    image has suffered in recent years, he said, and the PT wants
    to consolidate its democracy and rescue it from the
    perception that Brazilian officials are a "bunch of
    irresponsible thieves" and "Brazil is another Colombia."

    ¶9. (C) The PT has the sense that Brazil can play an important
    role but can only reach its potential in cooperation with the
    US.  In a left jab at the Brazilian Foreign Ministry, Lula
    echoed remarks that he has made in public: "I want to do for
    Brazilians what you US diplomats do for your citizens --fight
    for their interests.  But I think Brazilian diplomacy has not
    been tough enough, not like yours.  We have sometimes made
    bad deals."  Dirceu added that the Brazilian government is
    committed to abiding by all agreements that it inherits, "We
    do not need any more headaches" that we would get by breaking
    deals, he said.  The PT team has emphasized its interest in
    negotiating FTAA with the US, but doing so by vigorously
    defending Brazil's interests.  After the meeting, Mercadante
    told the press. "The Americans always played tough, and now
    they have a Brazilian administration that is going to play as
    tough as they do."

    "WE ARE NOT AFRAID OF THE PT"
    -----------------------------
    ¶10. (C) Ambassador Reich congratulated Lula on his election
    victory, adding that his own visit was designed to follow up
    on President Bush's post-election phone call and lay the
    groundwork for the December 10 visit.  Ambassador Reich
    expressed support for Lula's social agenda ("Your commitment
    to three meals a day for every Brazilian is something that
    all Americans will want to support."), adding that
    democratization, human rights, economic progress, and
    transparency are key issues for the US public and policy
    makers.  Reich concluded, "We are not afraid of the PT and
    its social agenda".

    PALOCCI'S ECONOMIC MESSAGE:  CREDIT, CREDIT, CREDIT
    --------------------------------------------- ------
    ¶11. (C) After Lula was called away, Transition Director
    Antonio Palocci picked up on the economic themes.  He stated
    unequivocally that the PT government will focus on combating
    inflation and working smoothly with the IFIs.  Modifying
    Mercadante's two priorities a bit, Palocci said Lula would
    take two messages to Washington.  First, that Brazil really
    has three short-term priorities: credit, credit, and credit;
    and second, that Brazil will seek clear understandings and
    strong relations with the US in order to develop and grow.

    ¶12. (C) Ambassador Reich observed that the USG does not
    direct banks to extend credit, but that the Brazilians
    themselves were doing the right things to gain access to
    loans.  Reich noted that "since the elections you have been
    sending the right messages", adding that Brazilian/US
    cooperation will reinforce these messages by conveying to the
    financial markets US confidence in Brazil's economy.

    "THE PT IS A MODEL FOR LATIN AMERICAN LEFTISTS"
    --------------------------------------------- --

    ¶13. (C) Ambassador Reich asked Mercadante about the "Sao
    Paulo Forum", which Mercadante has addressed and which has
    included FARC and Cuban participants, among others.
    Mercadante downplayed the PT's work in the Forum, explaining
    that his primary interest is in developing the left in Latin
    America, and that many of the participants in the Forum are
    unreconstructed "outdated" leftists who can learn a lot from
    the PT's democratic model and emphasis on economic
    development.  He added that the Forum had issued a
    declaration after 9/11 condemning the terrorist attacks and
    defending the right of the US to respond in self-defense.
    "We are democratic," Mercadante assured us, "Washington needs
    to hear our ideas and our arguments."

    ¶14. (C) On Colombia, Dirceu said that the FARC needs to
    understand that if they cross into Brazilian territory,
    Lula's government will use the military and "treat them as
    enemies."  He added that groups such as the FARC that operate
    outside of democratic processes "do not interest us".  After
    Ambassador Reich outlined the range of human rights concerns
    in Cuba, Dirceu responded that "the strongest force in the
    world for changing Cuba is US trade", but he concluded that
    "we will simply have to agree to disagree" on Cuba policy.

    WASHINGTON AGENDA
    -----------------
    ¶15. (C)  Mercadante said that he will accompany Lula to
    Washington.  The rest of the travel team has not been
    decided, and the agenda will be finalized only after
    consultations with the Brazilian embassy in Washington,
    though Ambassador Barbosa has been consulting in Brasilia
    this week.

    INAUGURATION LIKELY JANUARY 1
    -----------------------------
    ¶16. (C)  In response to a question from Ambassador Reich,
    Dirceu stated that the inauguration will be on January 1.
    (N.b., Dirceu himself was a big proponent of moving the date
    to January 6 and had been urging his congressional colleagues
    to take quick action on the required constitutional
    amendment, so his statement on the January 1 date may well be
    the last word.)  Minister Pedro Parente, head of the outgoing
    administration's transition team, also told us November 21
    that the inauguration would be January 1.

    CONGRESSIONAL MEETINGS
    ----------------------
    ¶17. (C) Earlier, Ambassador Reich's group met with outgoing
    Chamber Speaker and PSDB leader Aecio Neves and separately
    with PT Senate leader Eduardo Suplicy from Sao Paulo and PT
    Deputy Waldir Pires from Bahia.  Neves, who will take over as
    Governor of Minas Gerais in January, focused his remarks on
    Brazil's economic plight.  He noted that he had supported the
    economic plan of President Cardoso, which had prevented
    Brazil from suffering the same fate as Argentina.  He also
    stressed that the PSDB and other opposition parties expect to
    support many of Lula's initiatives.  Suplicy stressed the
    importance of President Bush's understanding the Brazilian
    democratic process and the fact that Lula's 61% electoral
    support demonstrated that he has overwhelming legitimacy to
    address social and economic issues.  Both Suplicy and Pires
    spoke at length on the importance of addressing Brazil's deep
    social inequities.  Suplicy added that Lula may be a useful
    bridge in improving US relations with Cuba, to which
    Ambassador Reich replied that relations will improve as soon
    as Castro holds free elections.

    COMMENT
    -------
    ¶18. (C)  Lula and the senior PT officials are clearly eager
    to get down to work with us, and this visit went a long way
    toward reassuring them that the feeling is mutual.  Though
    they have not yet thought through their floater for bilateral
    trade talks, we can expect some sort of proposal in
    Washington, after they have consulted more deeply with their
    Mercosul partners as well as internally.

    ¶19. (C) The PT leaders have contrasting and complementary
    personalities.  Mercadante's former radicalism lies not far
    from the surface.  He speaks to convince rather than explain,
    often pointing a finger at his listeners.  Yet he is
    courteous and clearly focused on specific bilateral projects.
     Dirceu is much smoother.  He never corrected Mercadante but
    sometimes stepped in to qualify his remarks.  Dirceu seems to
    be the first among equals and is rumored to become Lula's
    Chief-of-Staff if he does not stay in Congress to become the
    Speaker of the Chamber.  Palocci, whose star has risen
    rapidly in recent months, is perhaps the most pragmatic of
    the group.  He speaks slowly and calmly --often about
    economic issues-- clearly aware of the effect of his words.
    His is a voice seemingly designed to reassure the markets.
    In a November 21 meeting with U/S Larson (septel), Cardoso
    administration minister Parente expressed great admiration
    for Palocci and hoped that we would become Minister of
    Finance.  END COMMENT.

    ¶20. (U) AMBASSADOR REICH CLEARED THIS CABLE.

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