BRAZIL: AMBASSADOR DISCUSSES BIOFUELS AND OTHER TOPICS WITH

UNCLAS SECTION 01 OF 02 BRASILIA 001992 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON ETRD PGOV PREL EFIN EINV BR SUBJECT: BRAZIL: AMBASSADOR DISCUSSES BIOFUELS AND OTHER TOPICS WITH ABDI PRESIDENT ALESSADRO TEIXEIRA REF: (A) BRASILIA 1973(B) BRASILIA 1935 ¶1. (SBU) Summary: Ambassador Sobel, accompanied by PolCouns and Commercial Counselor, met with Alessandro Teixeira, President of the Brazilian Agency for Industrial Development (ABDI) on September 14 to discuss biofuels issues. The meeting quickly boiled over to cover a range of topics and potential areas for cooperation, such as innovation, competitiveness, foreign investment and venture capital -- just to name a few of the topics discussed in a lengthy and animated conversation during which there was surprising convergence of views on many topics. 2.(SBU) Teixeira echoed many of the points made just two days before when the Ambassador met with Presidential Chief of Staff for Policy Dilma Rousseff, concurring that the U.S. and Brazil need to move quickly on biofuels, but first must work through their bilateral policy relationship before going forward with cooperation in third countries or determining which resources may be tapped to put the policy into action. Like Rousseff, Teixeira expressed great interest in meeting with interlocutors on bio-fuels, as well as competitiveness and venture capital when he travels to the U.S. at the end of September. Teixeira said he has a very close relationship with Rousseff and promised to help reconfirm several meetings that the Ambassador has arranged for Rousseff when she is in New York and Washington. End Summary. ¶3. (SBU) On September 14, the Ambassador met for the first time with Alessandro Teixeira, President of the Brazilian Agency for Industrial Development (ABDI). Teixeira opened the meeting by explaining that ABDI was formed by the Lula administration in 2004 to coordinate GoB industrial policy and promote industrial and technological development through competitiveness and innovation. The agency receives policy guidance from the National Council of Industrial Development, which falls under the direction of the Ministry of Development, Industry and Trade (MDIC) and the Ministry of Science and Technology (MST). (Note: Previoius Mission contact with Teixeira was during the Commercial Dialogue meetings in Rio this past June, on the margin of the Ethanol Forum on September 5 - Ref B). ¶4. (U) The Ambassador told Teixeira that his meetings in the U.S. on biofuels had only reinforced his commitment to move forward with the Brazilians and expand the opportunity for third countries. He reiterated the complexity of the USG interagency process, but expressed our interest in still moving forward quickly. ¶5. (U) Like Rousseff, Teixeira expressed strong interest in cooperating with the USG and provided an update of such cooperation beginning with the visit of ex-Minister of Agriculture Rodriques to the U.S. in June 2005. He said that Brazil has made significant progress in research and development at the Ministry of Agriculture's research institute (EMBRAPA),the Sugarcane Technology Center (CTC),and Petrobras's Research and Development Center (CENPES). Teixeira finished by noting that Brazil is the only country in the world with a complete production chain in biofuels - including seeds, crops, ethanol production and distribution, and full-flex automobiles along with the research and development of technology in all of these areas. On the international side, he added that Brazil has ""more than 20 countries ready to form agreements"" and he questioned the inclusion of "small countries like Kits and Nevis" in the U.S. Draft Biofuels Strategy. ¶6. (U) Wondering whether the U.S. is ready to implement a vertically and horizontally integrated policy on bio-fuels, Teixeira noted what he called "different positions from different parts of the U.S." referring to recent visits to Brazil by the Florida FTAA group which expressed certain policy stances, and another visit from Californian bio-fuels'' specialists who proposed other policies. He asked if the Ambassador was "not afraid in the U.S. of a big fight in these areas?" ¶7. (U) The Ambassador responded that in the U.S., like Brazil, there are different political and commercial interests that need to be worked out before a national policy is implemented, and he also BRASILIA 00001992 002 OF 002 recognized the U.S. has two different feed stocks for ethanol production, i.e., corn and sugar cane. He added that we also require coordination amongst our government agencies - both at the state level as well as the federal level - but despite all the differences we are close to an inter-agency agreement. ¶8. (SBU) The Ambassador mentioned the need to keep environmental concerns in the development of a bio-fuels policy, adding "we need to keep our eye on the environment." Teixeira vigorously responded that "we need more than just one eye on it." He said he is tired of hearing stories about "our NGOs" (referring to supposed Brazilian NGOs) adding, "they are NOT 'our NGOs' - they are international organizations". He added, "many NGOs don't know what they are talking about." He said that Rousseff is pushing for a "strong - but not tight - environmental regulatory regime for bio-fuels." ¶9. (SBU) In other areas of mutual interest the Ambassador and Teixeira discussed the need for Brazil to attract DFI as well as to have modern equity fund and venture capital markets. Teixeira complained agencies that evaluate countries for risk consitently rate China and India better for markets for foreign investment. He said he was familiar with both countries and could not believe that they are rated higher than Brazil. Teixeira also expressed interest in the U.S.'s leadership in the area of venture capital funds and the private equity market. Teixeira will be speaking in New York City at the Brazilian Venture Capital and Private Equity Day luncheon to he held in New York City on September 25. ¶10. (U) On the topic of competitiveness, ABDI is currently negotiating MOUs with the U.S. Council on Competitiveness and the Brazilian Competitiveness Movement. Teixeira will be visiting with Deborah Wince-Smith on September 28 when he is in the U.S. ¶11. (U) Teixeira asked why there is not more direct investment and the Ambassador said there are agreements like and F.T.A and a tax treaty which we have with many other countries that would support more American direct investment. Teixeira said Brazil opposes these agreements today because there is not yet a sound analysis as to what the impact would be in particular industries. Teixeira went on to say; until we are able to estimate the effects the GOB cannot begin to discuss the Free Trade Agreement. ¶12. (U) Teixeira is very interested in meeting with USG and private sector interlocutors on biofuels and other issues, and expressed interest in the Ambassador's offer to assist in scheduling such meetings with at the National Renewable Energy Labs and/or the University of California-Berkley. He will be in the U.S for one week from September 24 through 30 and would like to visit one of these labs the day of September 29. Chicola