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### Viewing cable 05RIODEJANEIRO1120, MINAS GERAIS: THE VIEW FROM BELO HORIZONTE

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05RIODEJANEIRO1120 | 2005-10-11 16:15 | 2011-07-11 00:00 | UNCLASSIFIED | Consulate Rio De Janeiro

`

    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 RIO DE JANEIRO 001120

    SIPDIS

    SENSTIVE
    ________

    STATE FOR WHA/BSC

    E.O. 12958: N/A
    TAGS: PGOV ECON EFIN ETRD BR
    SUBJECT: MINAS GERAIS:  THE VIEW FROM BELO HORIZONTE

    Reftel:  Rio de Janeiro 1118

    SUMMARY
    -------

    ¶1.  (U)  From September 28-30, Rio Econ/Poloff
    visited a variety of people in Belo Horizonte, Minas
    Gerais state, to discuss business investments in the
    state and the state's aggressive and successful
    economic plan as well as national and local
    politics.

    Abijaodi on international investments
    -------------------------------------

    ¶2.  (U)  Rio Econ/Poloff, accompanied by Foreign
    Commercial Service (FCS) officer John Mueller, met
    with Carlos Abijaodi, manager of the powerful
    Federation of Industries of the State of Minas
    Gerais (FIEMG), which is working in concert with the
    Neves government to speed up the development process
    to attract more foreign investment.  There are
    numerous points in favor of such investments,
    including the size of the state (larger than France
    or Spain) with an excellent climate, rich soil, and
    adequate water; the robust economy (equivalent to
    Denmark's or Chile's); and its strategic geographic
    position, in the center of a region where 78 percent
    of the Brazilian consumer market lies.  The state
    has the best infra-structure in Brazil, according to
    Abijaodi, and its inhabitants are spread evenly
    throughout the state.  The rail network is the
    largest in the country and is linked to maritime
    ports -- Vitoria in Espirito Santo state, Sepetiba
    in Rio de Janeiro state, and Santos in Sao Paulo
    state.  Minas is responsible for almost a third of
    the electrical energy produced in Brazil.  The state
    invests half of its budget in health and education,
    which in turn produces healthy, educated workers who
    can be responsive to innovations in industry.

    ¶3.  (U)  The kinds of industries which have been
    established in Minas Gerais include the following:
    mining, coffee, corn, paper and cellulose, soy,
    milk, beef, sugar, leather, automobile parts, cars,
    fruit, furniture, textiles and clothing,
    biotechnology, tourism, gold, plastic, and steel.
    Minas is responsible for 10.17 percent of Brazilian
    exports; in 2004, Minas Gerais achieved record sales
    of approximately USD 10 billion, making Minas the
    second largest exporting state in the country.  For
    the past two years, Minas state registered the
    highest growth in the number of micro, small and
    medium businesses that export their goods.   Imports
    in 2004 represented approximately USD 3,000,000.
    The largest importing partner is the United States,
    with 22 percent of the market, followed by Italy at
    12 percent; the largest exporting partner is the
    United States, with 18 percent of the market,
    followed by China, with 12 percent.  Abijaodi was
    particularly proud of the support his organization
    offers to investors in the state, including the BDMG
    (Development Bank of Minas Gerais), CEMIG (Energy
    Company of Minas Gerais), and the Industrial
    Development Institute of the State of Minas Gerais.
    The partnership between the FIEMG and the state
    government of Aecio Neves has been enthusiastic and
    professional in the promotion of foreign trade, to
    which the numbers attest.  FIEMG has participated in
    organizing business delegations to European
    countries, Mercosur, India, China, Russia, among
    others, with satisfactory results.

    Minas Gerais Development Bank
    -----------------------------

    ¶4.  (SBU)  Dr. Marilene Chaves, director, and
    Reinaldo Barros Lobo, manager for Planning and
    Economic Studies of the Minas Gerais Development
    Bank (BDMG), received Econ/Poloff on September 29 in
    the bank's downtown office.  The BDMG has been the
    executive agent of State Government projects for 43
    years, Dr. Chaves stated enthusiastically.  These
    projects, she said, have promoted the growth and
    modernization of the state and have diminished
    regional inequalities.  The BDMG's first priority is
    to generate investment, jobs and income, she said.
    When Aecio Neves took office as Governor a little
    over two years ago, he informed the BDMG that his
    government was determined to launch a new style of
    development in the state.  From being one of the
    economically worst managed states in Brazil when
    Neves took over, the state is now functioning in the
    black.  Two important plans were developed at the
    beginning of Neves tenure -- the Plan for Integrated
    Development in Minas Gerais and the Multiannual Plan
    for Governmental Action, both of which have led to
    the promotion and financing of State economic and
    social development.

    ¶5.  (U) The BDMG's scope of activities is large and
    diversified, both regionally and sectorally,
    focusing on industrial, agricultural,
    agroindustrial, commercial, and service sectors and
    infrastructure and urban development.  In 2003, the
    BDMG approved loans amounting to Reais 696 million
    (approximately USD 258 million) to 4,691 customer in
    different regions and economic sectors of the state,
    creating approximately 11,700 direct job
    opportunities in the private sector. In addition to
    the expansion and modernization of the economy by
    strengthening the industrial hub, a new project is
    underway -- the Jaiba Project in the north of the
    state, which is an impoverished area with few
    productive opportunities.  When the Jaiba Project is
    completed, it will be one of the world's largest
    irrigated areas, and the largest in Latin America.
    Another area of development is in the sugar/alcohol
    production chain, which will enable the state to
    become self-sufficient in the area.  The BDMG also
    publishes studies by professionals in its areas of
    interest and recently published a ten-volume study
    entitled "Minas Gerais in the 21st Century." Two
    previous studies of this magnitude were done in 1967
    and 1989.  The study has as its goal a discussion of
    how state and municipal governments can create
    programs and projects that will contribute to
    economic development.  These two economists, Dr.
    Chaves and Dr. Barros, were clearly proud to be
    involved in the direction the state government is
    going --  developing social programs along side its
    modernization of industries and businesses in the
    state.

    State Secretary for Economic Development
    ----------------------------------------

    ¶6.  (SBU)  FCS Mueller also joined Econ/Poloff in
    the office of State Secretary for Economic
    Development Luiz Antonio Athayde Vasconcelos.
    Athayde iterated the dire economic straits of the
    Minas economy in 2003, when Aecio Neves took charge
    of the state government:  it was the worst among the
    27 states of Brazil.  Neves got off to a good start,
    Athayde said, by reducing the bureaucracy, starting
    with cutting 27 Secretariats back to 14.  In
    reality, however, only 6 Secretariats are running
    the state government.  The result is that the state
    has gone from red to black, with a primary surplus
    this year of R800,000,000 (approximately USD 364
    million) because of the huge reduction in
    administrative expenditures.  With a lighter
    administration, decision-making moves quickly.  The
    economic target of his Secretariat is to partner the
    state with private initiatives -- the hope is to
    open new enterprises within eight days, rather than
    the 180 days it takes in the rest of Brazil.
    Athayde predicted that in ten years Minas Gerais
    will have the highest level increase in economic
    activities in the country.  The Neves government,
    with its team of economists and planners, has taken
    a long-term view of economic investment --
    development of infrastructure, economic
    diversification, and promotion of innovation through
    support of state universities.  They have developed
    a strategic plan for fifteen years -- and are
    currently in the third year.  The central focus of
    this plan now is highway development, sewage and
    water treatment plants, rural electrification,
    building an administration center, airport
    development, improvement of the prison system, and
    building the campus of the state university (UEMG).
    He said many of those working economic issues in the
    current administration used to work at the BDMG and
    demonstrate the same contagious enthusiasm we
    noticed there.
    Coimbra on national and local politics
    --------------------------------------

    ¶7.  (SBU)  No visit to Belo Horizonte is complete
    without talking with Marcos Coimbra, President of
    the Vox Populi polling organization. Coimbra, an
    avid observer of national and local politics, opined
    that the scandals in Brasilia would have little
    impact on the 2006 presidential elections.  He said
    the ball was clearly in Lula's court and that if
    Rebelo won the Presidency of the Chamber (he did),
    the political crisis would end.  Coimbra said the
    press was demonizing the politicians involved in the
    scandals, as the Workers' Party (PT) had not
    deviated at all from the political norm of handing
    out money to secure votes.  President Lula said as
    much in a joint interview with French President
    Jacques Chirac in Paris on July 14, Econ/Poloff
    observed.  Coimbra feels the only way forward now is
    for the PT to recognize the status quo as illegal
    and open an honest discussion on political
    financing.  Coimbra asserted that Lula is still the
    favorite presidential candidate, despite the
    probable opposition of Sao Paulo Governor Alckmin
    and Sao Paulo Mayor Serra.  Alckmin, the incarnate
    anti-Lula, has the support of the monied classes in
    Sao Paulo, and if only business people voted,
    Alckmin would receive 70 percent of the vote.  He
    lacks personality, however, according to Coimbra
    (has never been involved in anything questionable,
    is a man who speaks softly, unemotionally, but is an
    excellent organizer), which will hurt him in running
    in areas of the northeast where Lula has
    particularly high support.  Nonetheless, Coimbra
    believes Alckmin the best candidate by far to run
    for President.

    ¶8.  (SBU) Not everything that can happen has yet
    happened, Coimbra stated.  If for some miracle
    Anthony Garotinho (PMDB/Party of the Brazilian
    Democratic Movement) forced a second round in 2006
    in the race for President, Coimbra said, he would be
    roundly defeated.  Coimbra believes the PMDB has two
    other worthy candidates who are much better than
    Garotinho and that all the public brouhaha Garotinho
    is making (reftel) is simply to manipulate for a
    position in the future government.  Coimbra noted
    that the opposition leaders in the PMDB feel
    uncomfortable with Garotinho because they do not
    like how he operates, having two or three satellite
    parties up his sleeve and prioritizing political
    cleverness as opposed to developing sound political
    positions.

    ¶9.  (SBU)  Coimbra said the people of Minas Gerais
    state were happy with their governor, Aecio Neves.
    Aecio, Coimbras noted, is moderate, and has
    established good relations with PT Mayor Pimentel
    and Minister of Social Development Patrus.  This is
    in stark contrast to the PSDB in Sao Paulo, which
    tries to draw PT blood at every turn.

    ¶10.  (SBU)  Coimbra concluded the meeting by
    elaborating on Lula's likelihood of winning the
    Presidency in 2006, predicated on the economy
    continuing to remain strong.  Lula's social programs
    such as the Bolsa Familia have already reached 8
    million families.  By next year, 11-12 million
    families will be receiving this assistance.  Their
    strong tendency, he thought, would be to think well
    of the present government and vote Lula back into
    office.

    ¶11.  (SBU)  Comment:  Certainly, the economic
    figures for the State of Minas Gerais augur well for
    near-term growth and stability; it appears that the
    bubbling enthusiasm of the economists and planners
    involved in this success, under the aegis of
    proactive Governor Aecio Neves, is merited.  Whether
    Coimbra's predictions about the future presidential
    elections come true remain to be seen -- twelve
    months to October 2006 is a long political time.
    ¶12.  (U)  This cable was cleared by Embassy
    Brasilia.
    ATKINS

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