BRAZIL: U.S. TREASURY SECRETARY PAULSON MEETING WITH

UNCLAS BRASILIA 001368

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SENSITIVE
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STATE PASS USTR FOR KATE DUCKWORTH
STATE PASS FEDERAL RESERVE BOARD FOR P.ROBITAILLE
TREASURY FOR OASIA - J.HOEK
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/SHUPKA
STATE PASS USAID FOR LAC

E.0. 12958: N/A
TAGS: ECON ETRD EFIN PGOV BR
SUBJECT: BRAZIL: U.S. TREASURY SECRETARY PAULSON MEETING WITH
FOREIGN MINISTER AMORIM


SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY


1. (SBU) Summary: Foreign Minister Amorim emphasized to Secretary
Paulson in their July 11 Brasilia meeting the significance Brazil
places on regional infrastructure integration. Paulson noted the
importance of bringing in the World Bank to this discussion. On
trade, Amorim stated that even though FTAA "didn't work" and
Mercosul is still working to "digest" Venezuela, Mercosul remained
interested in a market-access only free trade agreement with the
U.S. The Secretary responded that his highest priority on trade was
Doha. End Summary.


2. (SBU) After an initial one-on-one session, Minister Amorim and
Secretary Paulson continued their discussion of infrastructure,

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trade and financial issues in a broader session. Amorim noted in
the general meeting that they had discussed trade and a possible
debt swap under the Tropical Forest Conservation Act (TFCA).


3. (SBU) Amorim noted the GoB's keen interest in implementing the
vision of infrastructure investment and integration voiced at the
Camp David summit between presidents Bush and Lula. Amorim said
Brazil and South America are trying to do what the United States did
in the 19th century: unite the two oceans with trans-continental
transportation links. We know, Amorim said, of the interest of U.S.
companies in participating in what may be a new railway boom in
South America. Perhaps we can find ways to associate U.S. and
Brazilian companies to qualify for U.S. financing as well, he
added.


4. (SBU) Paulson noted that the Ambassador has been a strong
advocate for Brazil on the question of infrastructure. I believe
that access to infrastructure is key to many development issues,
Paulson said. He related that the President of the Brazilian
Development Bank BNDES, Luciano Coutinho, had discussed with him the
idea of strategic infrastructure finance over dinner the previous
night. In his former job in private business, Paulson said, he had
seen a lot of time wasted on project finance deals that failed
because the conditions were not right. Paulson said he would like
to do more at Treasury on these issues as well as find ways to bring
into the dialogue institutions such as the World Bank. There were
also environmental issues to be considered, Paulson noted, as
Coutinho had mentioned that the cost of a railroad from the Atlantic
to the Pacific would probably be US$3 billion more than of a road
linking the two, but there was little doubt a railroad would be
environmentally less harmful.


5. (SBU) Turning to trade issues, Amorim stated that even though
FTAA "didn't work" and Mercosul is working to "digest" Venezuela,
Mercosul remains very interested in a market-access only agreement
with the United States. This approach would leave the more
difficult issues of "rules-making" to the WTO but still advance the
cause of freer trade, he argued. Amorim stated that EU-Mercosul
negotiations may be re-started in the near future. Paulson
responded that on trade, his highest priority is successful
conclusion of the Doha Round.

SOBEL