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 02 BRASILIA 001067 

SIPDIS 

STATE PASS USTR 
NSC FOR SHANNON, BREIER, AND RENIGAR 

E.O. 12958: DECL: 04/19/2012 
TAGS: ETRD KIPR SOCI BR FTAA
SUBJECT: PRESIDENTIAL CHIEF OF STAFF OF DIRCEU ON FTAA AND POTENTIAL COMPULSORY LICENSING OF PHARMACEUTICALS 

REF: BRASILIA 1017 
Classified By: AMB. DANILOVICH BASED UPON REASON 1.4(B) 

¶1. (C) Summary. On April 18, Ambassador and a visiting delegation from the State of Florida met with Presidential Chief of Staff Jose Dirceu to discuss Miami,s bid to become the permanent FTAA secretariat site. Dirceu took the opportunity to state his desire that the FTAA talks move forward, repeatedly declaring that Brazil should export at least four times more to the U.S. than it currently does (USD$20 billion). Adding that he has already spoken to Finance Minister Palocci about the Foreign Ministry,s inflexibility on FTAA issues, Dirceu said that next month both he and Palocci would seek to talk to President Lula about this. Florida delegation members had varying reactions to Dirceu,s performance, with some seeing his remarks as a way to jump-start the stalled talks and others interpreting his statements as providing cover (i.e., that Brazil has earnestly sought to bridge the impasse) should the May 12 U.S.-Brazil Co-chair meeting fail to produce results. Dirceu barely touched upon Brazil,s stance with respect to key issues of concern to the U.S., such as treatment of IPR within the FTAA common set. (In a subsequent conversation later that day, the GOB,s Chief FTAA policymaker Regis Arslanian told the delegation that Foreign Minister Amorim planned to push Brazil,s 4 1 Mercosul-U.S. FTA proposal in the Minister,s April 26 meeting with the Secretary in Brasilia.) Ambassador took the occasion to raise with Dirceu USG concerns regarding potential GOB compulsory licensing of HIV/AIDS antiretroviral drugs produced by U.S. firms; Dirceu said that the GOB would consult with the USG prior to any decision by President Lula. End Summary. 

¶2. (SBU) On April 18, Ambassador accompanied a visiting State of Florida delegation to a meeting with Presidential Chief of Staff Jose Dirceu. The delegation (consisting of Florida Secretary of State Glenda Hood, Florida FTAA Chairman and former Amb. Charles Cobb, and Florida FTAA President Jorge Arrizurieta) sought to argue the case for Miami as the site of any permanent FTAA Secretariat. From the Brazilian side, Dirceu was accompanied by Special Advisor Americo Fontenelle. The meeting, scheduled to last a half-hour, instead went for twice that time. 

¶3. (C) After the Florida delegation spoke about prospects for CAFTA ratification and the substantial trade links between Florida and Brazil, Dirceu briefed on his views. Brazil currently exports about US$20 billion to the U.S., though it should be exporting at least four times that amount, he said. Because of the FTAA stalemate, Brazil was losing a historic opportunity to gain access to the U.S. market, something he termed &a scandal.8 To sustain growth of 5 to 7 percent per year, Brazil needed to increase the percentage of GDP devoted to investment to 25 percent (versus 21.5 percent now) and generate 2 million jobs per year. An FTAA agreement, he declared, would help bring this badly-needed investment to Brazil, further stimulate the country,s highly-competitive agro-industry sector, and help Brazil increase its service sector exports. Dirceu claimed Brazil could become a major player in the services sector, noting that currently 60 percent of the Brazilian construction firm Odebrecht,s earnings come from abroad. 

¶4. (C) Dirceu commented that the FTAA framework agreed to in the 2003 Miami Ministerial was a good basis for negotiating and that the lack of progress in the current talks was due to the Foreign Ministry,s desire to further its regional integration goals at the expense of business concerns. What was needed to clear the logjam, he said, was to give the talks a political push. Dirceu stated that he had previously talked to Finance Minister Palocci about this issue, and that he would resume this discussion when the latter returned from his current trip to New York. Thereupon, the two of them would approach President Lula in May to argue in favor of resuming FTAA negotiations. Getting the Ministry of Agriculture and influential business groups (i.e., the National Confederation of Industries and the Sao Paulo State Industrial Federation) involved in the process was key, he added. 

¶5. (C) Dirceu did note that there were practical problems ahead. Agriculture was a complex issue for both sides, though if an agreement could be reached in the WTO limiting agricultural subsidies that would certainly help, he said. Dirceu recalled that in his previous conversation with the Secretary in Washington he had pointed out that hot-button SIPDIS topics like cotton and sugar needed to be treated as commercial issues, not political ones. What would really send a bad signal &pessimo sinal8 to the GOB, he thought, was any rejection by the US Congress of CAFTA. 

¶6. (C) Florida delegation members had varying reactions to Dirceu,s remarks. One participant in the meeting felt that Dirceu,s interest might provide newfound impetus to the stalled talks. Another felt that Dirceu might have been seeking to find a way forward should the scheduled May 21 U.S.-Brazil Co-chair discussions fail or position Brazil as the party not responsible for any impasse. 

¶7. (C) Later that day, the Florida delegation met with Foreign Ministry Director of International Trade Negotiations Regis Arslanian, the GOB policymaker directly responsible for the FTAA talks. (It appears that, at Dirceu,s request, the level of the Foreign Ministry meeting was bumped up from Office Director to Assistant Secretary) When asked by Cobb what he expected Minister Amorim to raise concerning the FTAA with Secretary Rice during their April 26 meeting, Arslanian said no doubt the Minister would push Brazil,s 4 1 Mercosul-U.S. FTA proposal. Arslanian reiterated Foreign Ministry opposition to the idea of the GOB accepting any IPR enforcement commitments in the context of the FTAA. 

¶8. (C) Comment. While Dirceu,s statements are certainly welcome, as noted above they are subject to interpretation. For instance, notwithstanding his general comments, Dirceu did not make any mention of GOB flexibility on issues at the heart of the current impasse on FTAA. In addition, Dirceu,s emphasis on market access was consistent with Arslanian,s statements that the GOB had not given up on its 4 1 market access proposal. Also unclear is the timing of any possible Dirceu intervention into the GOB decisionmaking process (i.e., before or after the scheduled May 12 U.S.-Brazil Co-chair meeting) and whether Dirceu (or Dirceu and Palocci together) could make the President and ForMin Amorim budge on FTAA. Indeed, Lula was recently quoted in the overseas press as follows: &(On the subject of the FTAA), the United States only wants to negotiate on matters that serve its interests, such as services. It does not want to negotiate on matters that are in our interests, such as agricultural produce. . . . Brazil is a key negotiator in the FTAA negotiations, and we will continue to negotiate as long as it takes to achieve what is required. 

¶9. (SBU) Finally, Ambassador raised with Dirceu the USG's concern that the GOB might break off negotiations with U.S. pharmaceutical companies and seek compulsory licenses for these firms' HIV/AIDs antiretroviral drugs. Dirceu noted that he planned to raise this issue with Health Minister Costa on April 19, and that whatever decision the GOB took would come from President Lula himself. Dirceu pointed out that the GOB found itself in a difficult situation given the rising cost of anti-AIDS pharmaceuticals and its desire to keep its world-class AIDS treatment program going. Nevertheless, he concluded, prior to coming to any final decision, the GOB would be in touch with the USG to hear our views. 

Danilovich