BRAZIL: GREEN LIGHT TO NEGOTIATE A TROPICAL FOREST

UNCLAS SECTION 01 OF 02 BRASILIA 000664 SENSITIVE SIPDIS DEPT FOR OES/ENRC - CHARITY DENNIS AND STEPHANIE CASWELL DEPT FOR L/OES - KATY YOUEL-PAGE DEPT PASS TO CEQ FOR DAVID BANKS TREASURY FOR KATIE BERG USAID FOR CONNIE CAMPBELL E.O. 12958: N/A TAGS: SENV KGHG EAID EFIN BR SUBJECT: BRAZIL: GREEN LIGHT TO NEGOTIATE A TROPICAL FOREST CONSERVATION ACT PROGRAM - SEEK TO CONCLUDE BY JULY BRASILIA 00000664 001.2 OF 002 ¶1. (U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED AND NOT FOR INTERNET DISTRIBUTION. ¶2. (SBU) SUMMARY. On May 5, the Ministry of External Relations' (MRE) Director of the Environment Department, Min. Figueiredo Machado, informed Post that the Government of Brazil wants to begin negotiations to establish a debt-for-nature program under the Tropical Forest Conservation Act (TFCA). Further, at a May 9 meeting between Chairman of the Council for Environmental Quality Jim Connaughton and MRE's Under Secretary for Policy Everton Vargas, the two agreed that both sides should seek to conclude TFCA negotiations by the time of the July 9 Major Economies Summit in Hokkaido. The aim would be for the two presidents to be able to announce the creation of a Brazil TFCA program there. END SUMMARY. A GREEN LIGHT TO LAUNCH TFCA NEGOTIATIONS ¶3. (SBU) On May 5, the Ministry of External Relations (MRE) Director of the Environment Department, Minister Luiz Alberto Figueiredo Machado, informed Post's Environment, Science and Technology (EST) Counselor that the MRE had discussed with the Ministry of Environment and the Finance Ministry the Government of Brazil (GOB) the creation of a debt-for-nature program under the Tropical Forest Conservation Act (TFCA). He stated that the GOB wanted to establish a TFCA program and was ready to begin negotiations on the two related instruments: a Debt Reduction Agreement (DRA) and a Tropical Forest Agreement (TFA). On April 22, EST Counselor had met with Figueiredo Machado once more to encourage the GOB to make a decision on the offer made in a letter dated February 29, 2008 by Treasury Department Assistant Secretary for International Affairs Clay Lowery to Finance Minister Guido Mantega. He explained that time was of the essence, and if the GOB did not give the green light to begin negotiations with a view toward concluding them before the end of Fiscal Year 2008 that it would be at risk of losing a significant portion of the $30 million currently being held for Brazil. ¶4. (SBU) In the same May 5 call, Figueiredo Machado agreed to a proposal made earlier to hold a teleconference between the USG and GOB to begin negotiations of the two instruments. The teleconference has been set for May 16 at 10 a.m. (EST time). All three ministries involved in the TFCA negotiations have copies of drafts of the DRA and TRA. None of the three ministries has yet opined whether or not the Brazilian congress would need to approve either or both of the instruments. CEQ CHAIRMAN CONNAUGHTON PRESSES FOR CONCLUSION BY JULY ¶5. (SBU) The topic of TFCA arose in a May 9 meeting in Brasilia between the Chairman of the Council on Environmental Quality (CEQ) Jim Connaughton and MRE Undersecretary for Policy, Amb. Everton Vargas, and Figueiredo Machado. Connaughton applauded the GOB for deciding to seek a TFCA program and urged them to conclude the negotiations by the July 9 summit of the leaders of the Major Economies in Hokkaido, Japan. He reinforced the point that there is a risk that significant delay could mean that some of the funding being held for Brazil would go to others. Vargas said, "I am confident that we can solve this." He noted there was a strong interest from the Environment Ministry in this program and that the Environment Minister had spoken to him about it. He went on to say there was good will on both sides and that Brazil wants to resolve the issues the sooner the better. Vargas added, "Maybe both Presidents can announce it at Hokkaido." As for the Brazilian congressional approval issue, he assured Connaughton that they would put their people on it. ¶6. (SBU) Figueiredo Machado commented that while there was not much money in the program, it was politically important. "We want to do it," he said. He did identify a concern about the role of NGOs in the program, saying they would prefer the funding go to help government projects. He added, "We would not like to see the money going to pay the salaries of NGO directors." Connaughton agreed that the money should go to activities on the ground. Figueiredo Machado said that they had talked to officials from Panama about their TFCA program, but stressed Brazil is different. Still, he assured Connaugton that "we will sort this out." ¶7. (SBU) COMMENT. The MRE officials in the meeting with BRASILIA 00000664 002.2 OF 002 Connaughton were the most positive they had ever been on the subject of creating a TFCA program. It appears that the combination of a deadline and interventions in Brasilia and Washington have succeeded in convincing the MRE to come to the table. The Finance Ministry and the Environment Ministry have been on board with a TFCA program going back to July of 2007, however, MRE had been a holdout until now. This new buy-in from MRE officials will be important as both sides work against a clock to negotiate the two instruments. ¶8. (SBU) COMMENT CONTINUED. The recent developments are very positive, though much remains to be done. MRE has demonstrated again and again a propensity, both for bureaucratic and political reasons, to move at a glacial pace when undertaking such negotiations, even on issues it considers important. At the same time, MRE has signaled repeatedly its discomfort with handing control and money to NGOs--a view widely shared in the GOB--and we will need to be prepared to address these concerns in the negotiations. Moreover, Vargas has in the past told Post that MRE's legal advisor has taken a position that almost every agreement with a foreign government needs to be approved by the congress. If Brazilian congressional approval is required, it will be difficult to secure final approval of the agreement prior to the October 5, 2008 municipal elections. We anticipate that we will need to continue to press MRE in order to conclude the agreement in a timely fashion. END COMMENT. CHICOLA