AMBASSADOR LOBBIES MINISTER OF TOURISM AND CIVAIR

UNCLAS SECTION 01 OF 02 BRASILIA 000290

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/TRA: JEFF HORWITZ, JOEL REIFMAN
TSA FOR VICKI REEDER, SUSAN HASMAN

SIPDIS
FAA FOR C. TERE FRANCESCHI, MAYTE ASHBY
DEPT OF TRANSPORTATION FOR BRIAN HEDBERG

E.O. 12958: N/A
TAGS: EAIR OTRA ECON BR
SUBJECT: AMBASSADOR LOBBIES MINISTER OF TOURISM AND CIVAIR
REGULATORS FOR INCREASED FREQUENCIES TO NORTHEAST BRAZIL


1. (SBU) Summary: On Feburary 13, Ambassador Sobel, EconCouns and
Civair Officer met with Minister of Tourism Walfrido dos Mares Guia
Neto, and National Civil Aviation Agency Director-President, Milton
Sergio Silveira Zuanazzi, to discuss flight frequency issues and
tourism development in Brazil, particularly in the underserved and
underdeveloped Northeast. Per Embassy's contacts with US air
carriers operating in Brazil, these airlines seek to expand their
routes, fairly aggressively in the case of carriers with Miami hubs,
though more cautiously for those with other US departure points.
Discussion with the Minister and ANAC President focused on the
possibility of raising the current 105-slots-per-week frequency
ceiling and the GOB's desire to attract US investment, especially in
the travel and hospitality industries. This cordial meeting will be
followed up with individual meetings by the Ambassador with airlines
flying to Brazil from the US, as well as with interested US hotel
chain operators, to discuss expansion and investment opportunities
in Brazil. End Summary.


2. (U) The US carriers flying to Brazil-American, United, Delta,
and Continental-have fully exhausted their collective allotted 105
frequencies under the bilateral civair agreement. However, given
the recent bankruptcy of Varig--and before it, Vasp and
Transbrasil--Brazil is currently operating only 28 of its 105
frequencies, fewer than 27% of its allotted capacity under the
agreement. Key Brazilian airlines such as TAM and Gol are
struggling to deal with recent crises in the domestic market, and
lack aircraft to devote to long-haul international routes. This has
drastically reduced the number of international flights to and from
the US. The Ambassador stressed the myriad beautiful locations in
Brazil that American tourists should and would see, if travel to and
within the country were made easier and not centered on the south of
Brazil. Miami would be just four hours from Brazil's Northeast by
air. Instead, flights currently are concentrated in
capacity-plagued Sao Paulo airports and/or Rio de Janeiro.


3. (U) The Minister agreed with the Ambassador's assessment, and
added that it is no longer just Portuguese-speaking Europeans who
are interested in exploring the Northeast; Eastern Europeans are now
arriving in greater numbers. The Minister stated that Sao Paulo
really is the problem right now--Congonhas, in particular (Sao
Paulo's domestic airport) is operating at over-capacity and with few
opportunities for expansion of flights. The Minister made it clear
that if Brazil were to allow US carriers increased frequencies under
a renegotiated bilateral agreement, such an accord would not allow
US airlines to unilaterally expand service to Sao Paulo, either
Congonhas or Guarulhos, the city's international airport. (Comment:
Congonhas Airport is also beset with infrastructure problems, such
as excess rubber on the runway, which causes aircraft skidding in
periods of heavy rain. The runways, therefore, are subject to
shutdown at any given moment and there is no prospect of getting
rubber removal equipment in for at least another few months. Also,
a third runway due to be constructed to help alleviate the situation
will not be ready for "at least another two years," according to the
Minister. End comment.)


4. (SBU) The Ambassador stressed the idea that expanded air links
would foster hemispheric integration; the positive aspects of
liberalizing our bilateral civair regime; and that this could be a
win-win situation for both countries. The Minister agreed,
producing a hefty report written this past year and recently
released in conjunction with Zuanazzi entitled "Programa de
Integracao Fisica da America do Sul: Modulo Aereo--Foco Turismo"
("South American Physical Integration Program: Air Module--Tourism
Focus"),which he noted was presented to President Lula in a
three-hour explanatory session. Several hundred pages in length,

BRASILIA 00000290 002 OF 002


the report details international air traffic within South America;
between South America and North America; between South America and
Europe; and between South and Central America. Based on an IDB
study, it looks at the "post-Varig crisis" and suggests, among other
things, granting fifth and even sixth freedoms to selected
countries. Currently, the countries mentioned are all on the South
American continent, but the report nebulously refers to "the north"
for fifth freedom and "the south" for sixth freedom concessions.


5. (SBU) This was not the Ambassador's first meeting with the
Minister, but it was his first opportunity to meet with Zuanazzi.
Zuanazzi appears to share a warm, yet somewhat deferential
relationship with the Minister, having previously served as his
chief of staff and having been nominated by Mares to head the newly
created ANAC in late 2005. Zuanazzi commenced his term a little
less than a year ago, in March 2006.


6. (SBU) Comment: While traditionally Brazil has prized the
principle of reciprocity, post believes that the lure of greater US
tourism and investment could well entice the GOB into offering us
increased frequencies, especially for flights to the Northeast. Now
that this issue is on the table, it could comprise part of a
positive agenda to be considered by Presidents Bush and Lula at
their upcoming meetings in March. End comment.

SOBEL