BRAZIL - DIGITAL TELEVISION: NEXT STEPS AFTER THE MARCH 17

UNCLAS SECTION 01 OF 02 BRASILIA 000587

SIPDIS

DEPT FOR EB/CIP/MA
USDOC FOR NTIA
STATE PASS OPIC
STATE PASS EXIM

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECPS EIND OPRC BR
SUBJECT: BRAZIL - DIGITAL TELEVISION: NEXT STEPS AFTER THE MARCH 17
DVC



1. (SBU) Summary. Reporting on Ambassador Gross' Digital Video
Conference (DVC) advocating adoption of the ATSC digital television
standard focused primarily on the questions raised regarding the
reliability of the European and Japanese "offers" to build a
semiconductor factory in Brazil and highlighted the idea that
construction of factories ought to follow market forces and not the
edicts of government. The media viewed our message as a critique of
the European and Japanese standards. News articles also noted the
constant evolution of digital technology, and that the ATSC Forum is
looking for partners. In addition, some editorials criticized
Minster of Communications Helio Costa's vocal advocacy for the
Japanese standard. While Minister Costa probably has had too much
press exposure on the issue, the ATSC Forum has had too little.
Brazilian journalists and the GOB as well simply refuse to accept
the premise that the choice of the new standard shall be based on
its merits--not the number of free trinkets thrown in. End Summary.


BRAZILIAN HYPERSENSITIVITY
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2. (U) Media reporting of Ambassador David Gross' March 17 Digital
Video Conference (DVC) with the Brazilian journalists focused on the
Ambassador's doubts about European and Japanese "promises" to invest
in a semiconductor plant. Most outlets interpreted this skepticism
as implicit criticism of the Brazilian government's decision making
process, which for better or worse, centers around gaining a
commitment to construct a USD 2-3 billion semiconductor factory in
Brazil.

MARKET FORCES
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3. (U) The media reflected the Ambassador's message that economic
development -- in this case in the form of building factories --
must be market-driven. Most papers highlighted Ambassador Gross'
pointed comment that the adoption of a hemispheric-wide standard
would be the best way to make television and equipment manufacturing
installations in Brazil viable, adding that Canada and Mexico have
already adopted the ATSC standard. The media also noted Ambassador
Gross' statement that constant evolution of the digital television
technology means the ATSC companies are looking for partnerships in
the region, which could provide opportunities for Brazilian
technological development. Finally, the media understood that U.S.
engagement on the issue has also been market-driven and that USG
involvement is ongoing.

COSTA SUPPORT HURTING THE JAPANESE
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4. (SBU) Minister Costa's continued and vocal support for the
Japanese standard is one of the reasons the ATSC tandard has been
portrayed as being in a distantthird place. However, according to a
March 18 edtorial in the conservative daily, "O Estado de Sao
Paulo," Costa's support for the Japanese has become a liability for
the Japanese companies involved. The editorial linked Costa's
support of the Japanese to his failed political ambitions, stating,
"Considering that his chances are slim to run for governor of Minas
Gerais, he needs to use a Plan B, which is to remain in the ministry
to become the Minister of digital television." It quoted a Japanese
company representative as saying, "The worst thing is that we have
nothing to do with the Minister's attitude. His defense of ISDB (the
Japanese standard) is so passionate that it ends up hurting us. He
could be a little more discreet." The press also linked Costa's
support for the standard to his former employer, TV Globo, which
favors the ISDB. However, Costa defended his position, noting that
TV Globo needs no sponsor and that the "Brazilian standard will not
be simply European, American or Japanese. We are using different
components of the three standards." Finally, Costa criticized the
U.S. for "spending USD 1.5 billion on subsidies" for decoders,
something the GoB would not do.

BRASILIA 00000587 002 OF 002



COMMENT
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5. (SBU) The recognition that industrial development is
market-driven is definitely a step in the right direction for the
media in Brazil, which still embraces the concept of government-led
development. However, the portrayal of our message as an attack on
Brazil's selection process, and implicitly on the GoB, with the USG
offering nothing new, is a concern. More worrisome still, however,
is the portrayal of the ATSC financing package. The media here
simply refuses to understand that the USD 150 million in OPIC
loans/guarantees is only part of a possible finance package.


6. (SBU) In our view, the effective game-playing on this issue by
Brazilian officials has been ongoing and, although the exact
timetable for decision remains unknown, it more than likely will
continue until mid-year, and perhaps later. The longer
deliberations take, the better off ATSC will be. Now is not the time
for the ATSC forum to be reticent. A comprehensive media campaign by
the ATSC Forum will have to be a necessary complement to USG
advocacy. End Comment.


7. (U) Charge would like to express his appreciation to Ambassador
Gross, his staff and USDOC for their continuing efforts on this
difficult issue.

Linehan