BRAZIL: SCENESETTER FOR BILATERAL POL-MIL

C O N F I D E N T I A L SECTION 01 OF 04 BRASILIA 001018

SIPDIS

FOR PM A/S BLOOMFIELD

E.O. 12958: DECL: 04/27/2009
TAGS: MARR MASS MOPS PGOV PREL BR POL MIL
SUBJECT: BRAZIL: SCENESETTER FOR BILATERAL POL-MIL
MEETINGS, MAY 14, 2004

Classified By: DCM Richard Virden, Reasons 1.4 b & d


1. (C) Summary: Mission warmly welcomes your visit to
Brazil. Much is changing in Brazil. Under President Lula
there has been renewed focus on social issues and structural
reform; economic performance, meanwhile, has been mixed.
Urban crime poses an increasing threat to public security.
The military budget is severely constrained and this is
having a negative impact on military readiness. Brazil is
poised to lead the UN peacekeeping effort in Haiti with the
deployment within two months of a contingent of about 1400
soldiers. At such a level, this would be the largest PKO
deployment by Brazil since Angola in the 1970s. The USG
imposed ASPA sanctions July 1, 2003, when Brazil declined to
sign an Article 98 agreement; we see no prospect that the GOB
will alter its decision. The USG and GOB remain engaged in
seeking a solution to the airbridge denial (shootdown) issue.
Despite these challenges, many Brazilian officers want a
strong relationship with the U.S. military and are looking
for ideas and programs that reinforce our continued
commitment to the partnership. END SUMMARY

OVERVIEW
--------------


2. (SBU) Since January 1, 2003, when President Lula assumed
office, much has changed in Brazil. By making deals with
many of Brazil,s political parties, Lula and his PT party
crafted a working majority in the legislature. Led by
Finance Minister Antonio Palocci, the Lula government
continued the prudent macroeconomic policies of former
President Cardoso; financial markets and the IMF have
generally reacted positively. Since early 2003, the &Real8
has remained stable against the dollar and the country's
market risk factor declined to its lowest level in years.
Interest rates have declined almost 40% since their peak in
late 2003 but in real terms they still remain high due to
inflationary fears. High interest rates continue to depress
investment and growth. During 2003 GDP growth was slightly
negative, although some rebound is expected for 2004. Job
creation remains moribund and foreign investment stagnant.
Meanwhile, in early 2004 a political scandal hit the PT party
and cost the government political support. Despite problems
within his party, Lula personally remains popular among
Brazilians. But it will be his ability to deliver economic
results for the masses that will determine whether he can
retain his high popularity until the 2006 presidential
elections.


3. (C) Under President Lula, Brazil has become more involved
on the world stage, including leadership of the Friends of
Venezuela Group, greater engagement with Colombia, renewed
ties with Africa and other "New Agenda8 countries, co-chair
of the FTAA, and possible leadership of the follow-on force
in Haiti. The President travels extensively and in the last
year, in addition to South America, has been to the Middle
East, South Asia, and Africa. He will travel in mid-May to
China as Brazil extends its foreign policy reach to
non-traditional regions. Yet, despite the administration's
increased focus on bilateral foreign policy, the government
strongly favors support for multilateral responses to world
events. Brazilian President Lula opposed U.S. policy in
Iraq, a position that broadly reflected Brazilian public
opinion, although he later muted his public comments. Brazil
reacted with shock to the 19 August 2003 attack on the UN
headquarters in Baghdad, in which respected Brazilian
diplomat and UN Iraq chief Sergio Vieira de Mello was killed.
On January 1, 2004, Brazil assumed a two-year rotating seat
on the UN Security Council. Brazil continues to lobby to
obtain a permanent UNSC seat and this topic is a key point
raised by President Lula during his travels. The GOB remains
reluctant to criticize the Castro regime and recently
abstained on a critical Cuba resolution at the UN Human
Rights Commission.

SECURITY ISSUES


4. (C) On counter-terrorism operational issues, cooperation
between the USG and Brazilian law enforcement and security
services is good. Unfortunately, recent media reports
following published interviews with the disgruntled former
Embassy Brasilia Legatt have led to political queries in
Congress. The GOB is hypersensitive to &unsubstantiated8
allegations that terrorist groups are active on Brazilian
territory, particularly in the Tri-border region. Senior GOB
officials maintain that there is no evidence to support
claims that terrorists operate on Brazilian territory and the
GOB has repeatedly asked us for specific information to
support such allegations. GOB police and security officials
acknowledge that fundraising, money laundering, and related
criminal activities are likely ongoing, but again, they
request solid intelligence that would link funding with
terrorist groups. Brazil has a sizable population with
ethnic origins in the Middle East, including many Brazilians
who are economically and politically influential. The USG is
concerned that these communities contain persons who
financially support terrorist organizations.


5. (C) Crime remains a severe problem in Brazil,s large
cities. In Rio, where violence has become endemic, a gang
war in Rocinha, a favela notorious for crime and drugs,
culminated with bloodshed and revealed the depth of criminal
druglord control over the favelas. The police reacted by
launching a highly publicized incursion into Rocinha. In the
countryside, the Landless Movement (MST) illegally occupies
land, causing confrontations with landowners and the GOB. In
April the MST accelerated its occupations throughout Brazil,
worsening an already tense situation in rural areas. A role
for the Brazilian military in dealing with crime and public
security is being reviewed, and President Lula appears to
favor some increased military role. Many field-grade officers
regard some armed forces involvement as inevitable; however,
most senior officers are strongly opposed. The military
establishment is sensitive to the legal ramifications that
could result from civilian casualties, increased corruption,
and the residual legacy of 21 years of military rule. Hence,
it prefers not to take on police functions without prior
adjustments in legislation and increased budgetary support.


6. (C) Brazil has found itself in an uncomfortable spotlight
regarding its non-proliferation credentials of late. IAEA
officials expressed disappointment with the Brazilians over
the institution of a suitable inspection regime for the new
enrichment facility at Resende. In addition, the IAEA, the
U.S., and many other countries have asked Brazil to sign an
Additional Protocol to the NPT, a measure the GOB has
resisted so far. Brazil,s main argument is that the nuclear
weapons states need to accelerate their disarmament even as
the nonweapons states consider additional compliance
measures. Meanwhile, Brazil is considering signing onto the
International Code of Conduct for missile technology but
remains unenthusiastic about the Proliferation Security
Initiative and the Australia Group.

THE ARMED FORCES IN BRAZIL
--------------


7. (C) Since the end of military rule in 1985, the armed
services have steadfastly supported Brazil,s civilian
leadership and adapted to their new apolitical status.
Brazil,s military has subordinated itself to civilian rule,
under a civilian Ministry of Defense. The officer corps is
professional and dedicated to defending Brazil,s
constitution. In recent public opinion surveys the military
tops all institutions in the level of public trust, even
surpassing the Catholic Church.


8. (C) Public esteem does not translate, however, into
funds. Military budgets have decreased steadily for 15
years, with the severest cuts introduced over the last four
years. This has naturally had a negative impact on the
readiness of the armed forces. As President Lula stresses
social priorities while working within tight fiscal
constraints, the prognosis for the military's budget is for
more of the same. The military grumbles that it is entitled
to pay raises. The lack of money dampens the force
projection capability. Procurement programs for new weapons
systems to replace outmoded equipment are also starved for
funds, while programs such as the development of a Brazilian
nuclear-powered submarine and maintenance of antiquated
vessels drain resources that could be better directed
elsewhere. One of President Lula,s first acts as president
was to postpone a decision on the F-X jet fighter
competition. Minister of Defense Jose Viegas claims a
decision on the F-X will be made &this year.8 Other key
procurement decisions are also being held up.


9. (C) A major internal issue is the relationship between
the armed services and the Ministry of Defense. Defense
Minister Viegas, an experienced diplomat with extensive
service in political-military affairs, commands the respect
of senior military leadership. However, as Viegas
consolidated power within the Ministry, stress with the
services was inevitable. The Minister created, for example, a
four-star level secretariat of cooperative studies headed by
a diplomat. Many officers felt such senior civilian
placements within the Ministry diminished the military's
access and rendered it less effective in fighting important
bureaucratic battles. In addition, within the Ministry there
are problems in the chain of command. Although the Chief of
Defense and the Secretary for Strategy, Policy and
International Affairs are four-star generals with direct
advisory roles to the Minister, their positions are
unofficially subordinate to the service commanders. Their
ability to impose &jointness8 is compromised. Morale among
the senior military grades has been negatively affected,
leading to transfers and some retirements.


10. (C) The services maintain close ties with counterparts
in neighboring countries and there are no identifiable
trouble spots in these relations. Each service conducts
annual or more frequent dialogue at various levels of command
with neighboring militaries. Army-to-army relations with
Brazil,s neighbors, for example, are conducted at the chief
of staff, regional command, brigade, and battalion levels.
Despite a troubled history, relations between the Argentine
and Brazilian militaries have never been closer. Brazil is
also doing some regional intelligence sharing, and there is
steady improvement in this field with Colombia and Peru.

SPECIFIC ISSUES
--------------


11. (C) Army Issues: Brazil,s army has the lead in
preparations for the 1400 man follow-on force for Haiti.
While army leadership is confident in the ability of their
taskforces to conduct such PKO missions, actual funding is a
concern. The army is attentive to Brazil,s borders,
particularly in the Amazon Basin where it has relocated 5,000
troops and established several new frontier platoons. There
is increased concern with the spillover effects of Plan
Colombia and some skirmishes with the FARC have been
reported. While the army does not anticipate a direct
confrontation with the FARC, there is recognition that FARC
gunrunning and narcotics smuggling activities will eventually
have to be challenged. DAO has visited a number of frontier
platoons throughout the Amazon. They report that while the
various commands may lack hardware and support, they are
keenly aware of their mission and seem prepared to carry it
out.


12. (C) Navy Issues: In recent years, the navy procured 23
A-4 Skyhawk attack aircraft from Kuwait and bought the former
French aircraft carrier Foch, renamed the Sao Paulo. Several
pilots have already become carrier qualified in the U.S. The
Navy is sending on average two officers a year for flight
training. In March 2004, the navy signed an LOA for the FMS
LINK 11 case to upgrade their secure communications. In a
program plagued by technological and design flaws, the
navy,s nuclear submarine program has swallowed about $1
billion in R&D costs. The navy claims it is still 20 years,
and $500 million, away from final development and delivery of
a nuclear sub. (We believe it would be much longer and cost
much more.) Meanwhile, the navy is in dire need of escort
vessels, and is hard pressed to maintain its aging fleet.
Navy command is interested in submarine rescue, diesel
submarine, and UNITAS training and exercises.


13. (C) Air Force Issues: The air force desperately wants
to replace its aging Mirages. Upon taking office in January
2003, President Lula postponed a decision on a new generation
fighter (F-X),an understandable decision given the cost
involved, approximately $700 million. New Lockheed F-16 Block
50 aircraft were previously offered in the competition.
However, recognizing that other competitors might be
preferred by FAB, Lockheed-Martin also decided to offer used
F-16s in a deal that would provide the air force with capable
aircraft at a fraction of the cost of new planes. Recent
soundings from the GOB suggest that in order to avoid the
significant budgetary outlay, consideration is also being
given to upgrade of the current Mirage fleet. However, FAB
continues to focus on the procurement of new, not used,
aircraft. Regardless of the decision, GOB funding of the F-X
will be difficult. FAB is also looking to replace its aging
UH-1 helicopter fleet. In February 2004, the FAB sent a
delegation to Alabama to discuss possible modifications
needed on the 6-10 Black Hawks they are interested in
purchasing.


14. (C) SIVAM (Amazon Surveillance System): Now almost
complete, the SIVAM system being built by Raytheon consists
of ground, aerial, and space-based sensors, communications
and patrol aircraft. Raytheon has had contract differences
with the GOB and has threatened to stop its support unless it
receives payments the company insists are due. Brazil has
indicated its willingness to share data with neighboring
countries under certain conditions.


15. (C) Article 98: Brazil has not signed an Article 98
agreement and is now subject to ASPA sanctions. The GOB, in
keeping with its long-standing &multilateralism,8 insisted
it was committed to the International Criminal Court and that
signing our Article 98 waiver would weaken this commitment.
The Government also asserted that it could conceive of no
circumstances under which it would subject U.S. citizens to
extradition to The Hague. The GOB calculated that the
projected loss under ASPA sanctions of $500,000 of IMET funds
was tolerable. However, the imposition of full FMS pricing
for training, an unforeseen consequence of ASPA, caught the
GOB by surprise and has caused additional frustration and
friction. Despite this additional blow, the loss of access
to EDA grant funds, the withdrawal of the Spruance destroyer
offer (combination sale and grant transfer),and the
financial impact on the training portion of procurement
offers such as the F-16, we do not expect Brazil to reverse
its position on Article 98. In fact, the MOD has indicated
that it will continue training at the same level as pre-ASPA
sanctions, just with other countries. The armed services
have already shifted training to Great Britain and France and
may expand programs with Russia, China, and even Vietnam.


16. (C) Airbridge Denial/Shootdown: Due to international
treaty obligations and USG laws threatening possible economic
sanctions, Brazil has not implemented its law permitting the
shootdown/forcedown of civil aircraft suspected of illicit
trafficking. In the last few months, President Lula has
become personally energized in seeking a way to challenge
suspected narcotraffickers who flagrantly violate Brazilian
airspace. The GOB has had confidential contacts with the USG
on the issue in search of a solution.


17. (SBU) Despite Article 98 and other irritants in the
relationship, we consider ties between the U.S. and Brazilian
militaries good. Brazil and the U.S. will continue to
participate in joint exercises such as Cabanas and UNITAS.
In June, the aircraft carrier Ronald Reagan is slated to make
a port visit to Rio. The MOD still views the U.S. military
relationship as important and the U.S. a dependable partner.
Brazil, as a strategic partner, remains important to the U.S.
Beyond ASPA, there remain many areas of defense cooperation
and interaction, as well as areas of cooperation that remain
untapped. Many in the Brazilian Armed Forces recognize that
they must expand their role in counter narcotics and counter
terrorism. As the MOD proceeds with the development of a
National Military Strategy for Brazil, the U.S. can offer its
perspectives on the process.


18. (C) Maintaining the U.S.-Brazil pol-mil relationship
requires constant attention and, perhaps, more effort than
with any other bilateral relationship in the hemisphere.
Within Brazil, there is no institutional propensity to curry
favor with the U.S. Given its size, Brazil views itself as a
regional leader and global player, even if it sometimes
appears to fall short of what is expected from a world power.
The GOB will be eager for ways to enhance the bilateral
relationship, overcoming the obstacles created by ASPA and
Brazil,s rejection of an Article 98 agreement. But the GOB
will also remain sensitive that it not appear too eager to
consummate deals with us that could backfire politically.

Hrinak