APPLICATION FOR OPIC FINANCE: COMSAT INTERNATIONAL

UNCLAS BRASILIA 000437

SIPDIS

OPIC FOR GREENBERG
TREASURY FOR FPARODI
USDOC FOR 3134/USFCS/OIO/WH/SHUPKA
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EINV BR
SUBJECT: APPLICATION FOR OPIC FINANCE: COMSAT INTERNATIONAL

REF: STATE 28219


1. (U) Per reftel tasking, post submits the following regarding
COMSAT and VICOM activities in Brazil.


2. (SBU) Begin Text.

On January 28, 2005, the Ministry of Communication signed a contract
with VICOM (which is owned by COMSAT) in the amount of R$114 million
for the implementation of the GOB's digital inclusion Electronic
Government Services to the Citizens program (GESAC). The 30-month
contract aims to connect 5,500 municipalities, providing broadband
internet connectivity to all. Previously, an Israeli company ran
the GESAC program, using satellites provided by TELSAT. When VICOM
took over the program, an agreement was made to continue utilizing
the TELSAT satellites to avoid any discontinuation of service. As
of October 2005, the program had reached 3,200 municipalities
including public schools and NGOs. Nevertheless, in November 2005,
the Canadian Embassy contacted Commercial Attache to share its
concerns regarding VICOM's failure to make contract payments to
TELSAT. VICOM couldn't pay TELSAT because the Ministry of
Communication was in arrears on its payments to VICOM. The
Canadians wanted to discuss possibilities of joint advocacy to the
Ministry of Communication for payment of the contract.
(Traditionally, there are often problems in getting government
agencies such as the Ministry of Communication to remain current on
their obligations). At that time, the Ministry of Communication was
3-4 months in arrears, and VICOM was threatening to shut down the
servers. On November 23, the Ministry of Communication paid VICOM
two of the 4 months of payments due. On November 25, VICOM then
paid TELSAT 70% of the outstanding balance due.

During the same time period, the Ministry of Communication began to
restructure the GESAC program. In early October 2005, Joanilson
Ferreira, the Secretary of the Electronic Communication for the
Ministry of Communications publicly stated that the Ministry wished
to substitute in some localities the existing GESAC satellite
connection (provided by TELSAT) for some other type of internet
connection (potentially broadband, supplied by VICOM). As a result
of this process, the Ministry of Communication asked VICOM in
November 2005 to disconnect some of its data and call centers.

On January 31st, 2005, VICOM won a 60-month, R$ 283 million contract
with Caixa Economica Federal(CEF) to provide telecommunication and
data transmission services to more than 9,000 lottery agents
throughout Brazil. According to CEF, its business relationship with
VICOM is good and the company is satisfied with VICOM's services.

The issue of lottery contracts in general has been controversial in
Brazil as allegations of undue influence/bribery had swirled around
the previous operator of the lottery, the firm GTECH. GTECH is no
longer involved in the lottery process.

End Text.

LINEHAN