BRAZIL: NO POST-CANCUN REGRETS OR SECOND THOUGHTS

UNCLAS SECTION 01 OF 03 BRASILIA 003124

SIPDIS

SENSITIVE

NSC FOR WALLACE
TREASURY FOR SSEGAL

E.O. 12958: N/A
TAGS: ETRD PREL EFIN ECON EINV BR FTAA
SUBJECT: BRAZIL: NO POST-CANCUN REGRETS OR SECOND THOUGHTS

REFS: (A) Brasilia 3089, (B) Brasilia 3070 (C) Brasilia 2233


1. (U) All public and official signs are that the GoB still
feels solid self-satisfaction over its performance at Cancun.
It displays zero compunction over Cancun's collapse or the
possible damage to the WTO's future, while reaffirming that
the WTO remains the planet's indispensable multi-lateral
trade-policy forum. This general sentiment seems to reign
across the spectrum of Brazilian opinion, aside from a few
muted worries or warnings by independent commentators. The
common if vague Brazilian sense is that the G-21's actions
constituted an overdue, laudably successful demand to be
taken seriously, and that any adverse reaction by the U.S. or
EU simply demonstrates that the rich-country club is loath to
accept developing countries' standing up to defend their
rights.


2. (U) USTR Zoellick's September 22 Financial Times opinion
column ("America will not wait for the won't-do countries")
unquestionably hit a sensitive spot. It was published the
next day in Portuguese translation by top circulation daily
`Folha de Sao Paulo,' and no-one in the GoB pretended to
doubt that USTR's criticisms were aimed squarely at Brazil.
However, those criticisms from abroad have had no evident
effect in swaying Brazilian opinion.


3. (U) If anything, official reaction to the column has just
further tightened the GoB's rhetorical ranks. Finance
Minister Palocci: "Brazil has been characterized in this
episode and in others by a clear will to negotiate. There is
no reason to doubt the decision, the will, and the potential
of Brazil and its partners in the negotiations." Agriculture
Minister Rodrigues: "Zoellick's statement was a mistake."
Development Minister Furlan: "Brazil is simply putting its
interest on the table, knowing that a negotiation means give
and take." Less restrainedly on the non-government side,
Folha columnist Clovis Rossi summed up that "Zoellick's op-ed
is an open declaration of war on Brazil, with the explicit
threat of leaving the country behind in trade negotiations."


4. (U) Foreign Minister Amorim himself, in an official
release, responded unrepentantly to the USTR op-ed, inter
alia by saying that "Having maintained a constructive
position, Brazil does not consider it useful to be involved
in an exercise of blame over the difficulty of reaching
consensus in Cancun." See full substantive text of the
Itamaraty release below at Para 10. Media have since quoted
Amorim as asserting that "(i)f someone changed, it was the
United States and not Brazil. The position defended by
Brazil in Cancun coincides 70% to 80% with the earlier U.S.
position." (NOTE: presumably referring to specific
agricultural issues such as export-subsidy phase-out. END
NOTE.) President Lula is reported to have publicly echoed
this assertion on September 25 in New York.


5. (U) The Brazilians continue to declare that Cancun has not
altered the WTO's status as the world's legitimate, necessary
forum for multilateral trade negotiations. The Itamaraty
release includes the declaration: "From Brazil's perspective,
what is most important now is, in accordance with the
declaration approved in Cancun by the ministers, to promptly
resume the negotiations in Geneva." FM Amorim repeatedly
asserted in his September 17 testimony to Brazil's Congress
that resumption of WTO and Doha-Round business as usual may
at worst suffer a six or twelve-month delay (Ref B).


6. (U) FM Amorim as well as presidential foreign policy
advisor Marco Aurlio Garcia have also gone out of their way
to deny that the GoB's trade-policy course is a product of
any "anti-American" bias. Amorim told Brazil's Congress
that "the relationship between Brazil and the United States
has never been as good as now," and that official and
unofficial sources confide to him that President Bush "has
only made praiseworthy references to Lula." Amorim seemed
to dismiss the notion that Cancun will have far-reaching
consequences for trade talks or relations with the U.S.,
saying that occasional criticisms during trade and political
talks are just "part of the game." (Ref B.)


7. (U) In like vein, top national dailies made much of the
report that, just one day after USTR's criticism of Brazil's
position at Cancun, U.S. Treasury Secretary Snow spoke to
Brazilian Foreign Minister Palocci in Dubai in complimentary
tones. "We spoke about Cancun, and (Snow) made it very clear
that the U.S. government will continue with its multilateral
agenda of trade negotiations, and that they have great
interest in keeping a close cooperation with Brazil,"
Palocci was quoted repeatedly.


8. (SBU) There are a few well-informed exceptions to the
breezy trend. Aside from the occasional media commentator
warning that Brazil will be left behind in a future process
of bilateral trade negotiations, these include Itamaraty U/S
for WTO Clodoaldo Hugueney. Over lunch with us on September
25, Hugueney left no doubt that he felt "the Doha train had
been derailed," due, in his judgment, to poor preparation
that had left the WTO leadership badly unaware of the state
of play over Singapore issues. Hugueney said he believed
that, were it not for the abrupt Singapore-issue fiasco,
Cancun could have produced an agricultural paper "albeit
with brackets" that could have met minimum Doha-Round needs.
Now, it was hard to see how a way out or forward could be
found, he opined.


9. (U) In public, the GoB front remains united behind
Itamaraty, but there is the occasional suggestion of
dissension in the ranks. One post-Cancun media article has
referred to Ministers Furlan, Palocci and Rodrigues lining up
against Itamaraty over a specific trade-policy issue at a
recent meeting of the CAMEX. Supposedly, they rejected
Itamaraty's advocacy that Brazil unilaterally revise its
schedule for submission of FTAA offers. It was not plain
from the article whether the offers in question are ones
Brazil has already made, on schedule, or ones for the well-
known areas vis-a-vis which Brazil is already months behind
the FTAA timetable.


10. (U) Following is the Itamaraty release responding to
USTR Zoellick's September 22 opinion piece in the Financial
Times.

(Begin text)

In regard to the article published today (.) by the U.S.
Trade Representative (USTR),about the results of the Fifth
Ministerial Conference of the World Trade Organization (WTO)
- in which Brazil is explicitly cited five times - Minister
Celso Amorim has the following comments to make:

-- each country has the right to present its own evaluation
of Cancun;

-- Brazil, secure that it maintained a constructive
position, does not consider it useful to get involved in the
attribution of guilt over the difficulties in reaching a
consensus in Cancun;

-- Brazil would rather focus on strengthening the WTO, in
coordination with trade partners that are interested in the
liberalization of agricultural trade and in the elimination
of subsidies, according to the Doha mandate;

-- if the explicit references to Brazil reflect the
importance that is attributed to our performance in the WTO,
this criticism, either implicit or explicit, comes in
contrast with the comments made by the USTR to the head of
the Brazilian delegation - on the eve of the closing of the
conference - that the declaration made just hours before in
the name of the G-20 "plus" had been "businesslike," which
constituted in and of itself a positive indication;

-- this criticism is also surprising because, until
recently, the United States shared in large measure the same
level of ambition expressed by the G-20 "plus" in regard to
the three pillars of agricultural trade reform;

-- from Brazil's perspective, what is most important now is,
in accordance with the declaration approved in Cancun by the
ministers, to promptly resume the negotiations in Geneva;

-- Brazil will continue to commit itself to building genuine
consensus leading towards the legitimate aspirations of all
participants, especially developing countries.

(End Text of Statement)

COMMENT
--------------

11. (SBU) We judge there to be little chance in coming weeks
of the GoB repenting or reforming its recent Cancun actions
and current trade-policy attitude. Ill-advised and
ultimately damaging to Brazil itself though they may prove,
those actions and attitude have not been a matter of caprice.
They have evolved consistently from the stew of GoB
priorities and considerations -- political, social,
developmental as well as "just" commercial -- which we tried
to describe in detail last July in Ref C, and recently
updated in Ref A. Politically, Lula, FM Amorim and Congress
alike for now perceive this as a sure domestic and
international winner.


12. (SBU) We credit the GoB with believing its own rhetoric
that it will be better to delay than to accept a "bad" deal,
i.e., one insufficiently attentive to their demands.
Implicit in its position is the assumption that trade talks
cannot move forward without Brazil, that, in effect, the
latter has a kind of veto on real progress. One positive
aspect to underline is that, despite what we do see as tinges
of 1970s ideological antipathy amongst the professional
castes of Itamaraty, GoB actions are not/not being propelled
by anti-U.S. antagonism. On the contrary: the GoB is
unrealistically counting on being able to both have its cake
and eat it -- to stand up to the rich nations with developing-
country demands, while paying little or no price in terms
either of the WTO's future effectiveness or of overall
bilateral relations with the U.S.

VIRDEN