BRAZIL ON IRAQ RECONSTRUCTION THROUGH EXPORT

UNCLAS BRASILIA 002698 SIPDIS SENSITIVE STATE FOR EB/IFD/OMA STATE PASS EXIM E.O. 12958: N/A TAGS: EFIN ECON PGOV BR IZ SUBJECT: BRAZIL ON IRAQ RECONSTRUCTION THROUGH EXPORT CREDIT AGENCY AGREEMENTS REF: STATE 228304 ¶1. (U) Econoffs delivered reftel points on reopening export agency credits to support Iraqi reconstruction to Piragibe Tarrago, Chief of the Foreign Ministry's Economic Department, in an October 27 meeting. Tarrago said that Brazil would like to reestablish normal trade relations with Iraq, including reestablishing export credit lines, as soon as the political situation has stabilized. While Brazil never broke diplomatic relations with Iraq, Tarrago noted, it does not envision reopening its Baghdad embassy until the security situation has improved. The Brazilian Embassy in Amman will continue covering Iraq until then. ¶2. (U) Brazil, Tarrago said, has been participating in Paris Club discussions of Iraqi debt. He estimated Iraq's debt to Brazilian entities at $3 billion, about three quarters of which is owed to private creditors. Much of this debt was trade finance or infrastructure project finance involving Brazilian firms. Brazil's principal concern is that there be an "equitable" settlement, Tarrago affirmed. It also was keeping an eye on the implications of any Paris Club treatment of Iraqi debt on the interests of private Brazilian holders of Iraqi debt. ¶3. (SBU) Comment: Tarrago did not link the reopening of export credit lines to Iraq to Paris Club treatment of outstanding Iraqi debt. It was nevertheless clear that the GoB does not expect that the political situation in Iraq will be conducive to normalizing trade relations any time soon. End Comment. MINIMIZED CONSIDERED DANILOVICH