AMBASSADOR'S AUGUST 23-24 VISIT TO SAO PAULO

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E.O. 12958: N/A
TAGS: ECON EINV ETRD BEXP KIPR BR
SUBJECT: AMBASSADOR'S AUGUST 23-24 VISIT TO SAO PAULO


SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY

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SUMMARY
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1. (SBU) Ambassador Clifford Sobel passed two eventful days in Sao
Paulo August 23-24, beginning his visit with an appearance at the
opening of a Calder exhibit at the Pinacoteca, one of the major art
museums in Sao Paulo. The following day he met separately with the
heads of the Brazilian subsidiaries of two major U.S. companies as
well as the Vice President for Latin America of the Motion Picture
Association. He also attended a lunch at the American Chamber of
Commerce and made remarks with the AMCHAM board and other
influential private sector leaders in attendance. The Ambassador
exchanged views on a range of economic and political issues,
discussed possible strategies for expanding trade and investment,
and explored the possibilities for corporate responsibility
activities in the private sector. End Summary.

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GM OF BRASIL
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2. (SBU) Ambassador Sobel met privately with Ray G. Young,
President and Managing director of GM of Brasil since January, 2004,
who also sits on GM's Latin America, Africa and Middle East Strategy
Board. Young expressed enthusiasm for the current Brazilian
economy, the outlook for GM's operations in the country, and the
adaptability of the Brazilian worker. According to Young, the
outlook for GM in Brazil is excellent. If the current GDP growth
levels of the last 3-4 years are maintained, or, better yet, if the
economy can grow 5 percent annually while remaining stable, GM will
be able to continue to operate profitably. His three
recommendations to the GoB would be: (1) establish growth targets
(of 5 percent annually) and then prepare a business plan to achieve
this goal; (2) implement tax reform and reduce government
inefficiency in order to help achieve the goal; and (3) make
education a high priority to help continue to develop a qualified,
skilled work force to meet the challenges of globalization and a
continually changing economy.


3. (SBU) GM of Brasil has 21,000 employees. Seventy percent of its
market is domestic, with foreign sales accounting for the other 30
percent. The company plans to double its engineering staff in order
to export engineering services. Young believes that if GM had
access to Asian markets it would be competitive there. He stressed
the importance of competitiveness and of "opening one's eyes" to
market opportunities. In his opinion, Brazil should be a global
player and should begin to use new business models. GM is well
respected in the community and has not encountered any
anti-Americanism in Brazil. The night prior to his meeting with the
Ambassador, Young and CEOs of other major companies attended a
dinner with President Lula, who was seeking feedback on issues of
concern to the business community and ideas on opportunities for the
next administration.

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GE BRASIL
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4. (SBU) The Ambassador also met privately with Alexandre G. Silva,
President and CEO of GE Brasil since October 2001 as well as Vice
President of the AMCHAM Board. GE is a thriving company in Brazil
with 6,000 employees, and expects 20 percent growth by the year

2010. In Latin America, GE predicts growth of more than 30 percent
by 2010, compared to 25 percent in China and 20 in India. GE's
aircraft overhaul business is very profitable in Brazil, due to the

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cost-efficient facilities, talented labor force, and growing number
of contracts with U.S. air carriers (Southwest, UPS, and others).


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DIFFERING EXPERIENCES IN VENEZUELA
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5. (SBU) Both GM and GE operate in Venezuela and have had different
experiences dealing with the GoV. GM has offices and factories
located in Venezuela, whereas GE only ships products to the country
and has little staff or facilities there. GM President Young said
GM believes it is discriminated against in Venezuela, resulting in a
reducing market share compared to Japanese auto makers. Venezuela
is still a profitable market for GM, but if continued exhaustive
perusal of documentation, imposition of further regulations, and
other obstacles persist, doing business may become increasingly
difficult. GE, which has no manufacturing operations in Venezuela,
has experienced no problems. GE is profitable in Venezuela and
plans to do more business there, particularly in the area of
equipment used by the oil industry.


6. (U) The Ambassador asked both Young and Silva about their
companies' corporate responsibility programs and activities. Young
stated GM has several social responsibility programs, focusing on
the local communities where GM facilities are located, and promised
to provide more detailed information. Silva said that of GE's 6,000
employees, 3,000 are active in social responsibility programs. Both
executives were also enthusiastic about the possibility of creating
a Brazilian "Council on Competitiveness" agenda, in addition to a
speaker's programs with local universities.

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AMCHAM LUNCH
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7. (U) AMCHAM Brazil sponsored a lunch for the Ambassador, with
approximately 50 members and private sector leaders in attendance.
The Sao Paulo AMCHAM is the largest American Chamber of Commerce in
the world outside the United States, bringing together over 6,000
small, medium, and large enterprises. There are affiliate offices
in Belo Horizonte, Brasilia, Campinas (Sao Paulo state),Curitiba,
Goiania, Porto Alegre and Recife. 80 percent of the members are
Brazilian companies, 13 percent are American companies, and the rest
are of other nationalities. The Ambassador delivered brief remarks
on USG's interest in promoting investment and trade, and corporate
responsibility. During the discussion period, some major issues of
concern raised by the business leaders were the renewal of GSP
benefits, the benefits to be derived from a closer bilateral trade
relationship, cooperation on biofuels, the importance of the
agricultural sector to U.S. and Brazilian commercial interests,
concern over Venezuela's being part of Mercosul, and prospects for
the Doha Round. The Ambassador stressed the important role that the
AMCHAM played in these issues.

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MOTION PICTURE ASSOCIATION
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8. (SBU) The Ambassador later met with Steve Solot, Senior Vice
President for Latin American Operations for the Motion Picture
Association (MPA). Brazil is the Latin American region's most
important market, with 40 percent of regional media revenue, of
which half is in video. The MPA has a very good relationship with
the Brazilian film industry. Approximately 60 films were
co-produced or co-distributed in the past two years, including the
top five Brazilian films for 2005. MPA continues to have major
concerns about IPR piracy. In recognition of the GoB's growing

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efforts and accomplishments in combating piracy, MPA plans to give
an award to the head of the National Anti-Piracy Council. Other
issues of concern are: (1) the transition to digital TV and its
effect on protection of content, (2) Brazil's Development Agenda in
WIPO, which seeks to provide more flexible copyright protection for
developing countries (the MPA believes it should be the opposite),
and (3) the USG's Special 301 process. Solot explained that the
copyright industries advocated upgrading Brazil on the Watch List
this year. Brazil remained on the Priority Watch List largely due to
the GoB's policies on pharmaceutical patents; nonetheless, most
Brazilians believe MPA was responsible for the ranking due to its
energetic advocacy for copyright protection. The Ambassador
expressed interest in Solot's offer to host film screenings, perhaps
in coordination with Foreign Minister Celso Amorim, a former
executive of Brazil's largest film company.

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COMMENT
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9. (SBU) This was a successful visit that enabled the Ambassador to
make further progress in the key areas of promoting trade and
investment, underscoring the importance that the business community
played in Brazilian policy decisions. It also allowed the Ambassador
to stress the importance of corporate responsibility. END COMMENT.



10. (U) Ambassador Sobel has approved this cable.

McMullen