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