C O N F I D E N T I A L TOKYO 002008

SIPDIS

SIPDIS

DEPT PLEASE PASS USTR FOR NEUFFER, CUTLER

E.O. 12958: DECL: 04/12/2026
TAGS: PREL ECON ETRD EINV APECO ENRG XR XK LA CH
JA
SUBJECT: WHA A/S SHANNON'S APRIL 10 CONSULTATIONS WITH MOFA
LATIN AFFAIRS DG SAKABA: AFTERNOON SESSION

REF: A. TOKYO 1959


B. TOKYO 1960

Classified By: Deputy Chief of Mission Joe Donovan. Reason:1.4 (b) (d)
.


1. (C) SUMMARY. Continuing April 10 consultations, MOFA
Latin American DG Sakaba told visiting WHA A/S Thomas Shannon
that Japan was waiting for a positive response from Bolivian
President Morales. Its three "issues" with Brazil were the
status of Japanese-Brazilians in Japan, ethanol imports and
Brazil's possible adoption of Japan's digital television
standard. A/S Shannon and Sakaba exchanged views on upcoming
elections; Sakaba said Japan had no preference in Brazil's
upcoming presidential election. A/S Shannon explained the
U.S. role in Paraguay and debunked rumors of a planned U.S.
military base there. Sakaba assured that Japan views APEC as
an American-Asian organization, and described the role of the
Forum for East Asia Latin America Cooperation. Both men
shared views on China's role in the LAC, with Sakaba pointing
out that Japan benefited indirectly. He also noted upcoming
Japan-China-ROK consultations on Latin America. End summary.

Bolivia
--------------


2. (C) Resuming discussions in the afternoon on April 10,
MOFA Latin America and Caribbean Affair Director General
Mitsuo Sakaba told WHA A/S Thomas A. Shannon that the big
issue in Bolivia is new President Evo Morales. Bolivia is a
top recipient of Japanese development cooperation programs
because of its poor economic conditions. Japan cancelled USD
500 million of Bolivian public debt in 2004. Japan's Special
Envoy Tatsuo Arima to met with Morales during his January 22
inauguration (a meeting which was scheduled for 5 a.m.,

Sakaba noted wryly) and conveyed that Japan had canceled its
remaining debt as a gesture of Tokyo's willingness to work
with the new government. Japan is now waiting for Morales to
respond with political and economic gestures. A particular
focus is Japan's investment in Bolivian mining. Japan wants
to see how the new government will handle its natural
resources, including royalties and joint ventures. Sakaba
also said Japan is watching how Morales handles illegal
narcotics.


3. (C) A/S Shannon agreed with Sakaba that Morales would
have difficulty tackling the coca issue. Morales has told
the United States he wants a counter-drug alliance;
Washington will make every effort to assist him. Morales'
core constituency, however, are cocaleros, who grow coca leaf
and harbor resentment against the U.S. for our eradication
programs. The U.S. recognizes that some coca production is
legal under Bolivian law, but it is important that Bolivia
continue counternarcotics efforts based on interdiction,

eradication and alternative development. The U.S. believes
it is important not to make Morales feel cornered; but he
needs to understand international realities. The U.S.
expects the United Nations to reject Morales' request to
remove coca from its list of illegal substances, which will
send a message to Morales on the seriousness with which the
international community views the issue. A/S Shannon
welcomed Sakaba's note that Morales has told the Japanese he
favors interdiction as the way to fight narcotrafficking, but
commented that in reality Bolivia has little capacity to
conduct interdictions without U.S. cooperation and assistance.

Colombia
--------------


4. (C) Japan expects the re-election of incumbent president
Alvaro Uribe in the upcoming Colombian presidential election,
Sakaba said. Uribe looks set for a second term, giving him
more time to make progress in combating narcoterrorism and
strengthening state institutions. Japan appreciates Uribe's
anti-insurgent stance and in particular his strong policies
toward the Revolutionary Armed Forces of Colombia (FARC).
Prime Minister Koizumi, he stressed, has made clear Japan's
support for counter-insurgency and business cooperation with
Colombia. Japan has a wide range of development cooperation
programs with Colombia, Sakaba added, in particular focusing
on re-integration programs for former insurgents. Japan does
not know, however, how closely the Uribe government
communicates with FARC.


5. (C) A/S Shannon explained there is not much contact
between the government and the FARC. The main interaction
with FARC is on a proposed humanitarian exchange of
FARC-kidnapped hostages for FARC prisoners, a process largely
driven by European countries because of interest in selected
hostages. FARC has shown it is not yet ready to enter
broader peace negotiations with the government because, while
it faces some pressure, its position in the field is still
tenable. Uribe's current priorities are to deal with the
paramilitaries, and then with the Army of National Liberation
(ELN). The FARC will come later. Sakaba asked about
extradition of FARC leaders to the U.S. A/S Shannon confirmed
that the U.S. currently holds several FARC members, that all
the major FARC leaders are under U.S. indictment, and the
U.S. will continue to ask for extradition of any captured
FARC leaders.

Brazil
--------------


6. (C) Japan is currently hosting a large Brazilian
delegation, Sakaba remarked, including Foreign Minister Celso
Amorim, Development, Industry, and Foreign Trade Minister
Luiz Fernando Furlan, and Communications Minister Helio

Costa. The visit has three main topics: 1) the status of
Japanese-Brazilians in Japan (education is an problem because
of language barriers); 2) ethanol exports to Japan; and 3)
Brazil's possible adoption of the Japanese digital television
broadcast standard. Overall, relations with Brazil are very
active and business ties are developing well. Japan does not
believe a Free Trade Agreement (FTA) is possible with Brazil
in the near term, however, because of Japanese difficulties
in accepting Brazilian agricultural exports and the
protectionist nature of the Brazilian market.


7. (C) Turning to Brazil's presidential election campaign,
Sakaba offered that Japan works well with the administration
of incumbent President Luiz Inacio Lula da Silva, but
believes it can also work with Brazilian Social Democracy
Party candidate Geraldo Alckmin who impressed Japanese
officials when he visited Japan last year. Japan, therefore,
has no particular preferences regarding the election outcome.
A/S Shannon commented that neither candidate will control
the Brazilian congress, making it difficult for either to
implement his legislative agenda.


8. (C) Regarding the U.S. free trade agenda, Shannon noted
that the U.S. has free trade agreements stretching from
Canada to Chile, but leaving out the Mercosur countries, as
well as Ecuador and Bolivia. Brazil is focused on the Doha
round rather than the FTAA, because of its concerns about
agricultural subsidies. Sakaba commented that Japan is now
watching closely Mercosur's FTA talks with Europe, because
this is Brazil's first FTA negotiation with a developed
rather than developing partner. Japan has also noted the
complaints of some smaller Mercosur members, such as Uruguay
and Paraguay, and their desires for separate FTAs with the
United States. A/S Shannon clarified that this idea is not
currently workable, particularly because Uruguayan beef and
dairy exports to the U.S. would be too sensitive. Uruguay
also uses the threat of seeking a separate U.S. FTA to exert
pressure on Mercosur, trying to show it does not need to work
inside the group. The U.S., however, has not ruled out an
eventual negotiation with Uruguay.

Mexico
--------------


9. (C) After reviewing the top three candidates for the
Mexican election, A/S Shannon commented that the race was
between PAN candidate Calderon and the PRD candidate Lopez
Cbrador. Sakaba noted the political controversy over illegal
immigration to the U.S., speculating that if incumbent
president Vincente Fox handles this issue well, he can
strengthen Calderon's chances in the race. Asked where
immigration stands in U.S.-Mexico relations, A/S Shannon
relied that U.S. immigration policy is a domestic rather than
foreign policy issue. The Department's role is to stress to

Mexico the importance of keeping a low profile on the issue.
The immigration debate in the U.S. is very sensitive, and a
too-strong Mexican voice could hurt progress toward
reasonable and effective immigration policies.

Paraguay
--------------


10. (C) Paraguay is unique in the LAC region because of its
diplomatic relations with Taiwan, its military relations with
the U.S. and its recent influx of immigrants from the Middle
East, Sakaba observed. He asked if the U.S. plans to
establish a U.S. military base in the region. While the U.S.
is coordinating with Paraguay on counterterrorism measures
and some military training, it has no plans to establish a
U.S. military base there, assured Shannon. The U.S. is party
to the "3 1" talks, along with Brazil, Argentina and
Paraguay. The group's focus is on the tri-border area, a
region known for contraband, money laundering and Islamic
groups, with some connections to Hezbollah sending money back
to the Middle East. President Duarte is eager to cultivate
better relations with the U.S. to gain leverage with Brazil
and prevent drug trafficking in the region from spreading to
Paraguay, Shannon explained.

ODA
---


11. (C) Japan's developmental assistance to LAC reached its
peak with the disbursement of USD 1.2 billion in 1997-1998,
but has since been slowly declining, according to Sakaba.
This is in large part due to many Latin American countries
"graduating" from the assistance program when their GDP rises
above a certain level. Japan's budget pressure also has led
to cuts in ODA. The most recent statistics available show a
low of USD 3 million disbursed in 2004. However, Sakaba
explained, the repayment of soft loans by LAC countries is
subtracted against the net disbursement, so the actual net
program amount is greater. Furthermore, he expects the
figures for 2005 to increase because Japan recently begun
extending soft loans again after a period of inactivity.
Sakaba expressed interest in U.S. reliance on NGOs for
development assistance. Shannon explained that U.S. use of
NGOs varies from country to country. In Colombia, the
assistance goes largely to the government, but in Haiti the
U.S. relies exclusively on NGOs.

APEC and FEALAC
--------------


12. (C) Shannon expressed his concern that Japan views APEC
as solely an Asian organization, even though Mexico, Peru and
Chile are current members and Panama, Colombia and Ecuador
are angling for membership. APEC can play an important role

in LAC by linking it to dynamic countries in Asia. This
could encourage LAC governments, especially new governments,
to make the right decisions and maintain a global focus,
Shannon noted. Japan views APEC as an American-Asian
organization and not just an Asian organization, assured
Sakaba. He added that Peru will be hosting the 2008 APEC
meeting. Since the moratorium for new members is up in 2007,
Colombia's membership bid should also come on the agenda.


13. (C) Sakaba also referred to the Forum for East Asia Latin
America Cooperation (FEALAC) as another important cooperative
forum between East Asia and LAC. To date, there have been
two Foreign Ministerial-level meetings, with Brazil set to
host the third. Brazil and Korea hold the current
Coordinator positions; Deputy Coordinators Japan and
Argentina will become the Coordinators after the Brazil
meeting. The framework of this forum aids in structuring
cooperation between East Asia and Latin America in three
specific areas: economic and social, political, and science
and technology. Still, Sakaba admitted it was a slow,
step-by-step process.

China
--------------


14. (C) Turning to China's presence in Latin and Central
America, Sakaba explained that Beijing's increased business
interests in the region were a recent development. China was
not simply competing with Taiwan and promoting its
businesses, but was also procuring natural resources
including food and energy supplies. Beijing is giving
priority to countries that can export natural resources to
China, such as Brazil, Argentina, Chile, Ecuador, Venezuela,
and to a certain degree, Colombia. In addition, Mexico is
now a large market for Chinese exports. Sakaba said that
China's volume of trade in the LAC reached USD 50 billion in
2005, for the first time surpassing Japan's at USD 41
billion. He felt China's level of trade would soon surpass
that of the European Union.


15. (C) China did not think about energy and natural
resources within the context of competing with the United
States, Sakaba opined. Instead, he said Japan was competing
with China. The sheer volume of Chinese trade in the region
affects the prices of products such as soybeans. Tokyo did
not view this acquisition of resources as a "negative,"
because Japan's investments in China were to a certain degree
dependent on the PRC's ability to procure resources. In
addition, Japanese shipping and trading companies were
currently involved in the Chinese trade to the LAC. As a
result, Sakaba said it is important for Tokyo to pay close
attention to how Beijing's relationship with Latin and
Central America further develops.


16. (C) Regarding the non-economic aspects of Chinese
engagement in the area, Sakaba said China's exports of
weapons to Latin America might be a "point of interest" for
both Japan and the United States to follow. Beijing is also
focusing on those Caribbean and Central America countries
that have established ties with Taiwan. China is pressuring
Central American countries to establish formal diplomatic
relations with the PRC. Sakaba cited China's decision to
refuse Panama's request to establish a trade office in
Beijing, wanting instead an Embassy.


17. (C) Top PRC leaders announced a USD 10 billion investment
program in Latin America, Sakaba continued, but many in the
region are disappointed because these commitments have not
materialized as quickly as they had hoped. Japan was working
through FEALAC and wanted to encourage the development of a
positive relationship between China and Latin America. The
U.S. largely shared Japan's assessment of China's role in
Latin America, A/S Shannon responded. Washington is keeping
an eye on how Beijing's political influence is growing with
increased economic engagement, noting that some in Latin
America may see an increased Chinese role as a counterbalance
to the United States in the region.


18. (C) Many Latin Americans did not have a clear
understanding of China or the Chinese people, Sakaba
asserted. Beijing could exploit this "innocence." Many
Latins do not understand that in dealing with Chinese
corporations, they are dealing with state-owned enterprises
rather than with private firms.


19. (C) Wrapping up the meeting, Sakaba said that Japan,
China and South Korea would hold trilateral consultations on
Latin America towards the end of April. The goal of the
meeting was for the three countries to better understand
their respective positions on the region. Shannon thanked
Sakaba for providing his assessment of Latin and Central
American affairs that, he said, largely parallels that of the
United States. He hoped to continue their discussion and to
explore how the United States and Japan could work together
in the region. Sakaba responded that USAID and JICA have a
good history of cooperation in the area, and that Tokyo would
like to continue working closely with Washington in the
future. Shannon concluded by saying that such joint
cooperation would send a strong message to Latin America.


20. (U) Assistant Secretary Shannon cleared this message.
SCHIEFFER