BRAZIL; LOW EXPECTATIONS FOR THE UPCOMING

UNCLAS SECTION 01 OF 02 BRASILIA 000918 SIPDIS SENSITIVE SIPDIS STATE PASS TO USTR MSULLIVAN NSC FOR SUE CRONIN TREASURY FOR FPARODI AID/W FOR AA/LA USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D USDOC FOR 3134/USFCS/OIO/SHUPKA USDOE FOR GWARD/SLADISLAW E.O. 12958: N/A TAGS: ETRD ECIN KSUM PREL BR SUBJECT: BRAZIL; LOW EXPECTATIONS FOR THE UPCOMING LATAM-EU AND EU-MERCOSUL SUMMITS ¶1. (SBU) Summary. Brazilian officials admit that their game-plan for achieving results at the May 12 EU-Latin American summit in Vienna, followed by a May 13 EU-Mercosul bilateral in the same locale, is now in question. While they had hoped to use the opportunity of the summits to have President Lula press heads-of-state on WTO issues, they worry that Bolivia,s nationalization of the oil industry last week, and its stated intention to take similar action in other areas, will overshadow all else. Venezuelan leader Hugo Chavez, set to attend the event, could well steal the show given his penchant for sensationalism, further highlighting the divisions between Brasilia and Caracas and the wider instability in the region. Notwithstanding Mercosul,s efforts to emulate the EU in terms of true regional integration, the southern cone trade bloc looks to be more divided than ever, as does the Andean Community. In light of all the region,s internal tensions, EU interlocutors will likely find it difficult to achieve concrete results at the twin summits. End Summary. ¶2. (SBU) On May 9, the U.K. Charge made the following points to POlCouns about the upcoming EU-Latin American and EU-Mercosul summits in Vienna: -- Lula had pressed hard for private bilaterals with both U.K. Prime Minister Tony Blair and Germany,s Angela Merkel (to the extent that Lula,s foreign affairs advisors told the British that if Lula did not get a meeting with Blair, he would not even go to Vienna). Both meetings are now scheduled. -- Based upon its conversations with the GOB, the U.K. Embassy, believes that Lula's agenda in Vienna will be principally WTO-related. Lula wants to talk to Blair and Merkel about agriculture market access and what it would take to get the outlines of a deal before the window of opportunity closes on the Doha Round. As always, Brazil would push for the EU to come off its hard EU position on agriculture. Lula,s plan appears to be to use Blair and Merkel to leverage the French. -- As a breakthrough on agricultural issues would enable Lula to mute the (increasingly vociferous) critics of his foreign policy in one fell swoop, the Brits expect Lula to hammer them and the Germans on this at every opportunity, from Vienna to the July 15 G-8 Summit in St. Petersburg. ¶3. (SBU) Also on May 9, Econoff contacted Ministry of External Relations (MRE) Economic Department officials to inquire about Brazil,s objectives for the upcoming meetings. We were told their expectations for the EU-Latam summit and the EU-Mercosul session were now unclear. While the GOB,s primary objective had been to press at the head-of-state level for concessions to break the logjam in Doha Round talks, the concern now is that inevitable discussion of the Bolivian situation will undermine their ability to adequately focus leaders, attention on the WTO trade negotiations. ¶4. (U) As noted in a report in the influential daily &Folha de Sao Paulo,8 while it is possible to avoid the Bolivia issue in the heads-of-state plenary, this topic will inevitably arise in side discussions. The Folha article fretted that Lula will be seen at the summit as a &weakened8 leader, in comparison to Chavez and Bolivian President Evo Morales, limiting his ability to pursue his own agenda. BRASILIA 00000918 002 OF 002 ¶5. (SBU) Comment. Within the region, Lula must increasingly feel hemmed in on all sides. Mercosul, Brazil,s principal trade/political bloc, is plagued by internecine feuds while Venezuela appears to be egging Bolivia on in that country,s &war8 against Brazilian investment. On both fronts, the situation is likely to get worse before it gets better. Meanwhile, domestic criticism of Brazilian foreign policy is mounting. Achieving a breakthrough on Doha Round agricultural issues would indeed help Lula stem the critics and regain some of the visibility he has lost to Chavez. Whether at this late date his WTO arguments -- particularly in the absence of any specific Brazilian concessions -- will change any minds in Vienna, however, is a different story. Chicola