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### Viewing cable 04BRASILIA2253, GSP/IPR: BRAZIL'S EMERGING INITIATIVES

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
04BRASILIA2253 | 2004-09-03 22:06 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Brasilia

`

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

` `

    UNCLAS SECTION 01 OF 06 BRASILIA 002253

    SIPDIS

    SENSITIVE

    STATE FOR WHA/BSC, EB/TPP/MTA/IPC SWILSON
    STATE PASS TO USTR FOR SCRONIN, LYANG, BPECK
    USDOC FOR
    4322/ITA/MAC/WH/OLAC/WBASTIAN/JANDERSEN/DMCDO UGALL/DRSICOLL
    USDOC FOR 3134/USFCS/OIO/EOLSON/DDEVITO
    TREASURY FOR OASIA SEGAL
    NCS FOR DEMPSEY

    E.O. 12958: N/A
    TAGS: KIPR ETRD ECON BR
    SUBJECT: GSP/IPR: BRAZIL'S EMERGING INITIATIVES

    REF: (A) BRASILIA 2150 (B) BRASILIA 2017

    ¶1.  SENSITIVE BUT UNCLASSIFIED; PLEASE TREAT ACCORDINGLY

    ¶2.  (U) The announcement on June 30, 2004 to extend review of
    the possible withdrawal of trade benefits from Brazil under
    the Generalized System of Preferences, and the closing of the
    Congressional Investigative Commission (CPI) on Piracy on
    August 11 (ref a) have heightened public debate and led to
    work on new GoB initiatives to combat piracy.  Below provides
    an overview.  While some of the initiatives are not fully
    formed, the information provides some sense of the direction
    in which the GoB is moving; details are expected to be
    revealed during the second meeting of the bilateral IPR
    Working Group September 9-10 in Washington (ref b).

    National Council for the Defense of Intellectual Property and
    the Fight Against Piracy

    ¶3. (U) In a formal ceremony on August 12, Deputy Medeiros led
    the CPI on Piracy in presenting the Commission's final report
    to President Lula, who was flanked by Minister of Political
    Coordination, Aldo Rebelo, and Minister of Justice Marcio
    Bastos.  President Lula did not speak, but Minister Bastos
    used the occasion to announce the first of the GoB
    initiatives flowing from the CPI report, formation of a
    public-private sector National Council for the Defense of
    Intellectual Property and for the Fight Against Piracy.
    Deputy Medeiros has reportedly been working closely with the
    private sector and the Ministry of Justice on drafting the
    decree to establish the Council.   (Note: During an
    Information Technology forum in Sao Paulo August 10, a
    private sector contact told Consulate Econoff of the upcoming
    announcement and claimed the GoB was expediting establishment
    of the Council out of concern over the potential loss of GSP
    trade benefits.)  See para 16 for an unofficial Embassy
    translation of the decree's initial draft.

    ¶4. (SBU) Although the decree is not yet final, Ambassador
    Portella, Bastos's International Advisor, told Econoff in a
    meeting on August 23 he expected President Lula to sign it by
    the September 9-10 IPR Working Group meeting.  He said the
    final decree would not vary greatly in substance from the
    initial draft, the main hold-up being related to a mechanism
    for selecting private sector participants.  According to
    Portella, the new Council represents a significant
    improvement over the ineffectual Inter-ministerial Committee
    on Piracy, which will be dissolved with the Council's
    formation.  He claimed that to ensure clout, the rank of
    council members would be significantly higher, probably from
    within the first or second rung below minister; Committee
    members hailed only from the working-level.

    ¶5. (SBU) In contrast to the Committee's many-paged, vague
    workplan, Portella also said the Council's work will be much
    more focused.  The decree directs the Council specifically
    to: elaborate a national policy for defending intellectual
    piracy and fighting piracy; create and maintain a national
    database, integrated into the Unified Public Security System
    for better coordinating enforcement at the federal, state and
    local levels; and propose specific enforcement actions,
    including special operations and investigations, and
    mechanisms for more effectively combating piracy.  He also
    noted private sector participation within the Council as an
    improvement; the draft decree provided for three civil
    society representatives, but private sector has been lobbying
    the Ministry to increase the number of seats to five.  (Note:
    At Deputy Medeiros' urging, on August 30, representatives of
    copyright industries -- audiovisual, music, software, books
    and the Institute for Ethical Competition -- formed the
    Permanent Forum of Entities in Defense of Intellectual
    Property, Combat of Piracy, Contraband, and Tax Evasion,
    which they hope will be the forum for selecting the private
    sector representatives to participate in the Council.)

    Mercosul Coordination

    ¶6. (SBU) During the first IPR Working Group meeting in Rio de
    Janeiro August 5, GoB officials asserted that domestic action
    alone could not curb piracy given the magnitude of contraband
    flowing into Brazil from its neighbors (ref b).  At that
    time, they noted GoB plans to press for regional action by
    interjecting discussions on piracy into Mercosul
    deliberations during Brazil's time as the group's president
    pro tempore.  Following though on this, piracy and the search
    for collaborative efforts to address the problem region-wide
    are being discussed as part of a Mercosul (plus Associate
    Members) meeting September 1-3 in Manaus, Brazil of officials
    from Interior and Justice Ministries and Customs services.
    The group is charged with developing concrete actions for
    approval during a Ministerial slated to take place November
    19 in Brasilia.

    Paraguay

    ¶7. (SBU) Cooperation within Mercosul will probably focus on
    bilateral projects with Paraguay.  According to Ernani
    Checcucci, Coordinator General of the Customs Administration
    within the Ministry of Finance, there have been bilateral
    initiatives in the past, but that effort is being stepped-up.
     The GoB is considering changes to the "free customs transit"
    which provides inspection-free transit for containers passing
    through Brazilian territory from the Brazilian Port of
    Paranagua to the Paraguayan border.  Initially agreed to
    provide port access to Paraguayan exporters, this open
    channel has turned into a major corridor for merchandise
    moving into Paraguay for future smuggling into Brazil via the
    mass movement of trucks, buses and motorcycles over the
    Friendship Bridge linking Ciudad del Este in (P) and Foz do
    Iguacu (B).  Portella noted that the volume of virgin CDs
    moving through this corridor far exceeds Paraguayan
    consumption, leading the GoB to conclude that they are
    destined for illegal transport into Brazil.

    ¶8. (SBU) On August 26, during a visit to Brasilia of
    Paraguayan President Nicanor Duarte, President Lula directed
    his economic team to within 30 days find a formula for
    financially assisting Paraguay to the tune of $25 million to
    $55 million for social dislocation (unemployment) associated
    with bilateral projects for fighting piracy.  In an August 30
    conversation with Econoff, Checcucci said the GoB is
    cognizant of the potentially explosive social reaction in
    Ciudad del Este should there be an immediate, severe clamp
    down on piracy and smuggling.  He explained that the GoB's
    goal is to work with Paraguay to "formalize" the Ciudad del
    Este economy, moving people away from smuggling toward legal
    commerce.

    Customs

    ¶9. (U) Brazil's Customs service has an array of projects
    underway to improve its ability to control commerce moving
    across the border.  These have principally been prompted by
    USG security requirements post-9/11 and by GoB interest in
    improving the collection of import duties, but many serve
    anti-piracy interests as well.   According to Checcucci, the
    initiatives can be grouped roughly into three categories: (1)
    combat contraband, smuggling, and piracy; (2) regularize the
    assessment of duties and combat trade fraud; and (3)
    negotiate international customs assistance and cooperation
    agreements.  For some of these initiatives, customs is still
    in the process of securing a GoB budgetary commitment, and in
    cases involving organizational changes, approval of the
    Planning Ministry.  Below is a sketch of the specific Customs
    initiatives and their expected timelines within each category.

    ¶1. Combat contraband, smuggling, and piracy
    1) Establishment of a National Plan for Customs Security
    (2004-2007);
    2) Establishment of a computerized system for declarations
    and movement of cargo (Siscomex for Ports) (2004-2005)
    (enhances 1997 Siscomex trade flow registration system);
    3) Establishment of a Computerized System for Control of
    International Passengers (2004);
    4) Restructuring of physical facilities, automation of
    transit controls, and separation of traffic across the
    International Friendship Bridge (Foz do Iguacu-Ciudad del
    Este (2005-2006);
    5) Creation of specialized enforcement customs units. (These
    specialized units would operate in the interior of the
    country; customs already has the authority to seize goods
    smuggled into the country.)

    ¶2. Regularize the assessment of duties and combating trade
    fraud
    1) Creating Program for Fiscal Regularization: sets up a
    system whereby established trade operators may register with
    the service and once establishing legitimacy become eligible
    for a speedier customs clearance process (enabling Customs to
    focus efforts on more questionable movements) ;
    2) Establishment of a computerized system for risk assessment
    and inspection selection (2004); incorporation of artificial
    intelligence software into the computerized system to enhance
    its operation (2005-2007);
    3) Taking customs documents on-line (2004-2006);
    4) Second phase of Siscomex integration with the addition of
    information from state finance authorities (2005);
    5) Combat against customs fraud: registration of foreign
    suppliers (electronic invoices); establish process for
    official investigation on import valuation -- requires
    legislation (2004-2005).

    ¶3. Negotiate international customs assistance and cooperation
    agreements
    1) Conclusion of bilateral customs agreements (2004-2007).
    Target countries: China, South Korea, Taiwan, Hong Kong,
    India, Italy, Germany, Israel and Bolivia.
    2) Integration of other countries' electronic customs systems
    into Siscomex:  Phase I (tests): Argentina and Paraguay;
    Phase II: Other South American countries (2004-2007);
    Phase III: Others.

    ¶10. (U) To justify the expenditure of additional resources
    for its initiatives, Customs claims these projects will
    result in substantial savings for the government.  They
    estimate that the first activity (combating contraband,
    smuggling and piracy) would yield an annual rate of return of
    490 percent; the second (regularizing the assessment of
    duties and combating trade fraud), would yield an even higher
    rate of return of 2,854 percent.

    Agreement with Interpol

    ¶11. (SBU) Following a presentation by John Newton of
    Interpol's IP Crime Unit during the Brazilian Intellectual
    Property Association's (ABPI) 24th National Seminar August
    18-19 in Brasilia, a private sector contact informed Econoff
    that the Ministry of Justice was working to form an agreement
    with Interpol for greater cooperation on piracy, including
    the stationing of a Federal Police officer in Lyon.  However,
    on August 23, Ambassador Portella could not confirm this.
    Public Debate
    ¶12. (SBU) Less than a week after the CPI on Piracy concluded
    its work and presented a final report to President Lula, the
    ABPI hosted its two-day National Seminar on Intellectual
    Property.  With over 550 participants representing some 26
    countries, the seminar was a major platform for private
    sector and government debate.  What was striking was the
    consistent message from presenters -- for Brazil to attain
    its economic development goals, as a government and as a
    society it must protect intellectual property.  Broadly
    speaking, there were two elements to the argument: (1)
    sustainable economic development will to a large extent
    depend on creativity and technological innovation, which in
    turn requires a system in which intellectual property rights
    are assured; and (2) the economic informality and the
    pervasive crime, both street and organized, associated with
    piracy endangers the country's economic base and foundation
    on the rule of law, creating an untenable basis for economic
    development.

    Government Reaction

    ¶13. (SBU) A notable exception was the more defensive posture
    presented by Brazil's Ambassador to Geneva Luiz Felipe de
    Seixas Correa and the Foreign Ministry's Director for
    International Trade Negotiations Ambassador Regis Arslanian;
    both said IPR interests  principally belong to developed
    countries.  Seixas Correa for instance stated categorically
    that TRIPs had hurt developing countries, although he quickly
    added that Brazil is not seeking to secede from the
    Agreement.  Arslanian portrayed IPR as one, if not the,
    stumbling block in Mercosul negotiations with the EU and
    United States.  In particular, he complained that the EU and
    U.S. are unreasonably pressing resource-strapped Mercosul to
    commit to a 100 percent enforcement rate.  Interestingly,
    neither mentioned the GSP/IPR review.

    ¶14.  (SBU) Certain private sector contacts have also noted
    that their Ministry of Justice and Customs interlocutors are
    displaying much more interest and earnestness in discussing
    new initiatives for combating piracy than the Foreign
    Ministry, the one responsible for compliance with
    international obligations.  It may be that the former
    institutions welcome the focus that the CPI report, and even
    the GSP review, provide to the issue, helping them justify
    additional resources and gain political backing for
    undertakings they independently deem as important, whether it
    is improved duty collection or tools for better fighting
    organized crime.

    ¶15. (SBU) Despite institutional wariness on the subject, the
    Foreign Ministry members of the IPR Working Group have by all
    accounts been diligently assembling what they view as a
    comprehensive report of GoB efforts to combat piracy, which
    they will present during the September 9-10 meetings in
    Washington.  This report, which is being translated into
    English, will focus on activities over the last year.  In a
    converstaion with Econoff September 3, Otavio Brandelli and
    Henrique Moraes of the Ministry's IPR Division said there is
    some concern that the Council decree will not be final by the
    meeting date, raising a question about whether or not they
    will provide the written text at that time or later, once
    information on the decree is available.  In any case, they
    plan to present whatever information is currently available.

    ¶16.  (U) Unofficial Embassy translation:

    Decree no. of July    , 2004
    Regulates Creation of the National Council for the Defense of
    Intellectual Property and the Fight Against Piracy

    The President of the Republic, using the authority vested in
    him by art. 84, item IV of the Federal Constitution,

    DECREES

    Article 1: Creates the National Council for the Defense of
    Intellectual Property and Fight against Piracy, organ of
    collective deliberation, mixed composition, reporting to the
    Ministry of Justice.

    Article 2: The Council has the objective of elaborating
    proposals and structuring a national policy for the defense
    of intellectual property and the fight against piracy as well
    as:

    I - study the phenomenon of piracy and propose effective
    measures to adequately confront the problem, as well as
    actions for the protection of intellectual property in Brazil;

    II - propose measures for the defense of intellectual
    property and the fight against piracy;

    III - create and maintain a national database on the subject,
    integrated into the Single System of Public Security (SUSP);

    IV - study and support measures for the introduction of the
    fight against piracy to the States of the Federation by means
    of the Unified Public Security System (SUSP);

    V- encourage and support planning of special operations and
    investigations;

    VI - suggest mechanisms to combat the entrance of illegal
    products and control the entry of legal products that can be
    used in the practice of piracy;

    VII - suggest specific inspections in ports, airports,
    borders and Brazilian roadways;

    VIII - encourage and promote the training of public agents
    involved in operations and processing of information related
    to piracy;

    IX - prepare statistical data with the objective of
    establishing efficient mechanisms for prevention and fight
    against piracy; and

    X - encourage or coordinate educational campaigns about the
    defense of intellectual property and the fight against piracy.

    Article 3: The Council will consist of the following:

    I   One representative from the Ministry of Justice;
    II  One representative from the Ministry of Finance;
    III One representative from the Ministry of Foreign Affairs;
    IV One representative from the Ministry of Development,
    Industry and Foreign Commerce;
    V  One representative from the Ministry of Culture;
    VI  One representative from the Ministry of Science and
    Technology;
    VII  Two representatives named by the National Congress;
    VIII Three representative from civil society, chosen from
    organizations involved in the defense of intellectual
    property and the fight against piracy, chosen by the State
    Minister of Justice;
    IX One representative from the Federal Public Ministry
    Sole Paragraph.  Each organ mentioned in this article should
    determine members and substitutes who will be named to the
    Council by the State Ministry of Justice.

    Article 4: The Council will have an executive secretary with
    responsibility for promoting government coordination for
    planning and action for the protection of intellectual
    property and the fight against piracy.

    Sole paragraph.  The Executive Secretary of the Council will
    be named by the State Minister of Justice and will have
    duties set forth in the regulations.

    Article 5: The Ministry of Justice, through the National
    Public Security Secretary will provide technical and
    administrative support necessary for the functioning of the
    Council.

    Article 6: The members of the Council will not receive pay
    and their work will be considered relevant public service.

    Article 7: The Interministerial Committee for Combating
    Piracy created by the March 13, 2001 Decree no longer exists.

    Art. 8 This Decree goes into effect on the date of its
    publication, revoking the Decree of March 13, 2001.

    Brasilia,      of      , 2004.  183rd of Independence and
    114th of the Republic.

    End unofficial translation.
    Danilovich

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