ETHANOL FORUM - PREPARATORY MEETING OUTCOMES

UNCLAS SECTION 01 OF 03 BRASILIA 001934

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SUBJECT: ETHANOL FORUM - PREPARATORY MEETING OUTCOMES


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1. (U) Summary: Brazil hosted the first preparatory meeting to the
Ethanol Forum on September 5 in Brasilia. Five delegations attended
including India, South Africa, China, the EU, the U.S. and Brazil.
The USG delegation was headed by State's Greg Manuel and included
Sarah Ladislaw from the Department of Energy, Morgan Perkins of USDA
and Matthew Golden from Embassy Brasilia. The Forum acted as a
reaffirmation of the delegations' desire to facilitate, in a yet to
be defined manner, an international biofuel market and provided a
platform from which to begin its work. Upon concluding, the
delegations unanimously agreed to meet again before the end of the
year and U/S Patriota, chairing the meeting for the GoB, assigned a
set of tasks which each country should complete by October 30. End
Summary


2. (U) The GoB hosted the first preparatory meeting of the Ethanol
Forum on September 5 at the Itamaraty Palace in Brasilia, Brazil.
U/S Patriota of the Brazilian MFA hosted the meeting on behalf of
Tereza Campello, a member of the Casa Civil and Dilma Rousseff's
deputy Chief of Staff. Patriota opened by emphasizing the
intergovernmental nature of the proceedings and the benefits of
ethanol, including environmental friendliness, third-world
development, energy security and job creation. He also made clear
that Brazil's objective in creating the Ethanol Forum is not to sell
anything, but to promote an idea. Moreover, he identified as the
underlying driver for this forum, the GoB belief that an
international market for ethanol would not develop as expeditiously
as the GoB would like without government intervention. True to its
free-form beginnings, Patriota clarified that the GoB had no view on
how to structure the debate except to bring together producers and
consumers to promote economic expansion and map a path to make
biofuels available on a global scale. The meeting produced neither
minutes nor a statement. The ultimate goal was to have each of the
parties present their views on the subject and agree to meet again
before the end of the year.


3. (U) In opening the debate, the Casa Civil's Tereza Campello and
Ricardo Dornelles of the Ministry of Mines and Energy each gave
brief presentations outlining Brazil's current biofuel outlook from
a political and technical standpoint. Campello highlighted that the
Forum is key to Brazil's energy strategy and that an
interministerial group composed of the Ministries of Agriculture,
Science and Technology, Mines and Energy and External Relations was
created to discuss the issue. It is important to note that Dilma
Rousseff and the Casa Civil are and will continue running Brazil's
biofuel/ethanol strategy. Dornelles, for his part gave a view of
Brazil's biofuel matrix, emphasizing Ethanol, Biodiesel and H-Bio.
The GoB's current energy policy is to guarantee internal supply of
ethanol, stimulate private investment, provide a tax model to
promote increased use and production, and to maintain free prices
throughout the production and supply chain.


4. (U) Following this overview, Patriota proffered four questions
with which to structure the discussion: 1) In which way can our
governments cooperate to create an international market for biofuels
taking into consideration environmental and food security aspects;
2) What should be the scope of an intergovernmental partnership to
promote an international market for ethanol; 3) Which are the core
elements of a common agenda; 4)Agreement on a date and venue of an
additional meeting (before the end of 2006) to pursue further
dialogue. Minister Antonio Simoes, director of the MFA's Energy
Division, opened the dialogue.


5. (U) Simoes posited that each of the representatives needed to
think about production to ensure adequate supply of fuel, while
taking into account environmental and food security. He reiterated
the concept that Brazil is promoting an idea on renewable fuels and
not trying to sell anything. Noting each country's unique
environment and experience he emphasized the need to democratize the
production process and create more producers, making money available
to help developing countries via AID agencies, technical assistance
bilateral and trilateral means. He also highlighted the GoB desire
to focus on rules and regulations and to define concrete standards.
In terms of the intergovernmental scope, Brazil would like to work
on this project bilaterally, trilaterally, and plurilaterally
(through multiple governments outside the fora of the UN). Finally,
the GoB deems an ideal core agenda to include an analysis of ethanol
production aspects, its current and potential use as a fuel and a
presentation of perspectives of promoting ethanol in an
international market.

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6. (U) The EU represented by Ambassador Pacheco followed, agreeing
to the concept of an ethanol forum and to the commoditization of
ethanol. The EU reiterated the need to discuss technological
standards and proposed that the conference adopt a more holistic
Biofuel Forum. This would, according to Pacheco, more adequately
address the unique situation in a variety of countries/regions. In
closing, the Ambassador added that the EU will host an international
Biofuel Conference in early 2007 (invitations will be sent shortly)
and will also host a more technical conference in January of 07 to
discuss biofuel technical standards.


7. (U) India, represented by Ambassador Puri welcomed the initiative
as timely and overdue. He underscored the need to shore up ethanol
supplies, noting that while India produces nearly as much sugar as
Brazil, it needs to import additional sugar to support its immense
population. Puri proffered that the principal mechanism to affect
public policy change on a global scale is to make raw materials
available. Under core concepts, India agreed with the EU proposal
to expand the focus of the forum from ethanol to biofuels.


8. (U) The South African delegation, led by Ambassador Zulu,
declared itself a nation with a biofuels program in its infancy. As
its program develops, South Africa's principal concern will be to
ensure that biofuel development is somehow tied into food security,
and the delegation emphasized the import of creating ethanol from
food sources. South Africa also recommended focusing on the
electricity generating potential of biofuels and the need to
harmonize standards in order to facilitate increased trade. The
delegation asserted that the Forum's core concepts must include
sustainable production and job creation in developing countries. It
also underlined the need to evaluate current biofuel endeavors so as
to not duplicate existing efforts.


9. (U) China, for its part, agreed verbatim to the talking points
set forth by the GoB and Simoes, agreed to expand the breadth of the
Forum to include biofuels and agreed to cooperate with the consensus
decision regarding a time to meet before the end of the year.


10. (U) Greg Manuel rounded out the discussion elaborating on the
USG's two key principals: 1) any cooperation that promotes
production and consumption benefits collective interests and 2) the
private sector should be involved in the discussion early and often.
He posited that the immense economic opportunity represented by
biofuels mean that the private sector will be the natural engine
driving the globalization of the product. Manuel underscored this,
alluding to the fact that the private sector in the U.S. is
responsible for the large majority of investment into biofuels. He
also emphasized tool sets with which the collective could obtain the
Ethanol Forum's goal. The USG perspective is that governments
should play a strong role in orienting and assembling public and
private institutions toward production and consumption, and should
utilize diplomatic persuasion and foreign assistance to assist
transitional economies via development assistance, technology
transfer, etc.


11. (U) Following the aforementioned comments, Patriota stepped back
into the fray. Noting the convergence of body as a whole, he
suggested holding the next meeting in the second half of November.
He also presented the delegations with a list of taskers to finish
by October 30. Itamaraty's Energy Division will act as a clearing
house for the collection and dissemination of the aggregate data.
The tasks include creating a 5-6 page paper outlining each
delegation's view of intergovernmental action especially in light of
the USG view that future modalities should include the private
sector. Other tasks include mapping current research to avoid
repetition, drawing up a survey of national and international
institutions relevant to the discussion (generating resources for
country development),and outlining each countries own structure and
procedure in dealing with biofuels: i.e. who generates policy,
responsible for execution.


12. (SBU) Comment: Brazil's own internal debate or struggle to
formulate policy was the most salient factor to come out of this
meeting. From U/S Patriota's deferential treatment of the Casa
Civil's Campello, to his allusion that a policy shake-up is due, it
is clear that Dilma Rousseff and the Casa Civil are in charge
Brazil's biofuel policy. It is also obvious that the exact nature
of the GoB's biofuel executing mechanism is not yet certain.

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Patriota was unwilling to divulge Brazil's organic make-up noting
that Brazil is still deciding how to organize and noting that a
change is likely following Brazil's October election.


13. (SBU) On a whole, the meeting produced no substance. It did,
however, provide a backdrop for the USG to present its views on the
Forum; most importantly, the necessary role that the private sector
needs to play in its development. It also proved that, at least
initially, tariff and trade would not be incorporated into the
Forum's substantive discussions. In a side conversation with
Patriota and Simoes, the USG expressed concern about the existence
of two international biofuel forums, GBEP and Brazil's Ethanol
Forum. The USG stressed the need for Brazil to find a way to
reconcile the two groups in terms of scope and purpose, perhaps by
talking with the Italians. Otherwise, the USG would have difficulty
participating in the Ethanol Forum. The ultimate achievements of the
meeting were the universal agreement that the Ethanol Forum should
include biofuels, opening more doors to develop regions unsuitable
for ethanol production and greater private sector participation, and
the decision to meet prior to the end of the year. End Comment

SOBEL