FINANCE MINISTRY QUERIES ON BILATERAL RELATIONS IN

UNCLAS BRASILIA 002811 SIPDIS NSC FOR CRONIN USTR FOR SULLIVAN TREASURY FOR OASIA - DAS LEE AND FPARODI STATE PASS TO FED BOARD OF GOVERNORS FOR ROBITAILLE USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DDEVITO/DANDERSON/EOL SON AID/W FOR LAC/SA SENSITIVE E.O. 12958: N/A TAGS: ECON SENV KIPR PGOV EFIN US SUBJECT: FINANCE MINISTRY QUERIES ON BILATERAL RELATIONS IN ADVANCE OF POTUS VISIT REF: Brasilia 2589 ¶1. (SBU) On October 18, Regional Treasury Attache Mat Haarsager, EconCouns, and Econ Assistant met with Finance Ministry U/S Joaquim Levy. The wide-ranging conversation touched upon the issue of debt-for-nature swaps, the USG's democracy/development agenda, and U.S. industry's GSP petition on copyright piracy. -- Debt-for-Nature. Levy conditioned GOB support of debt- for-nature swaps under the Tropical Forest Conservation Act on two conditions: i.e., that the debt relief offered be for at least US$100 million (possibly spread over 4-5 years) and that it only deal with the Mata Atlantica (and not the Amazon). With respect to the last condition, he said that any reference to the Amazon would only result in the Brazilian congress demanding that the USG ratify the Rio Summit Bio-diversity treaty - which could complicate matters immensely. With respect to the first condition, Emboffs sought to provide him more detail about the USG budget process and the difficulty of ensuring a multi-year appropriation. In the end, it was agreed to exchange further ideas (in advance of the POTUS visit) so as to move this issue forward. -- Democracy/Development. Levy further asked, in the wake of Deputy Secretary Zoellick's remarks on democracy/development during his October 6 visit, what did the USG want Brazil to do to advance this goal? Possible GOB efforts might include work with the USG on IFI lending to minority and small businesses or cooperation on a democracy conference, he noted, adding that what the GOB really wanted to know was whether the USG had a specific Action Plan in mind. -- GSP Review. Finally, Levy mused that now that Brazil had come to a negotiated settlement with Abbott Laboratories on compulsory licensing, he wondered whether the USG was considering terminating its anti-piracy GSP review as a positive economic signal prior to the POTUS visit. (Note: This is a theme which Foreign Ministry interlocutors have repeatedly raised with us on previous occasions as well.) ¶2. (SBU) Recently, the Finance Ministry has been prone to taking a more activist tack on international economic policy, sometimes at odds with the positions espoused by the Foreign Ministry. (See reftel.) The mere fact that Levy is considering issues such as the hemispheric democracy may mean that in the future Itamaraty diplomats will have to cede a bit their hegemony on policy issues - as they increasingly face interagency competition from an expansionist-minded Finance Ministry. DANILOVICH