Identifier
Created
Classification
Origin
09BEIJING1522
2009-06-08 01:37:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Beijing
Cable title:
Brazilian President Lula's Trip
how-toVZCZCXRO2616 PP RUEHCN RUEHGH RUEHVC DE RUEHBJ #1522/01 1590137 ZNR UUUUU ZZH P 080137Z JUN 09 FM AMEMBASSY BEIJING TO RUEHC/SECSTATE WASHDC PRIORITY 4360 INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY RUEHBR/AMEMBASSY BRASILIA 0504 RUCPDOC/DEPT OF COMMERCE WASHDC RUEATRS/DEPT OF TREASURY WASHDC RHEHNSC/NSC WASHDC
UNCLAS SECTION 01 OF 02 BEIJING 001522
STATE PASS USTR
SIPDIS
SENSITIVE
TAGS: ETRD EINV EIND PREL EFIN EPET
EAGR, CH, BR, AU-1
SUBJECT: Brazilian President Lula's Trip
to China Focuses on Trade and Investment
Ref: Brasilia 619
UNCLAS SECTION 01 OF 02 BEIJING 001522
STATE PASS USTR
SIPDIS
SENSITIVE
TAGS: ETRD EINV EIND PREL EFIN EPET
EAGR, CH, BR, AU-1
SUBJECT: Brazilian President Lula's Trip
to China Focuses on Trade and Investment
Ref: Brasilia 619
1. (SBU) Summary. During President Lula's trip to
China, Brazil and China reaffirmed their commitment
to strengthen their relationship and finalized China
Development Bank's (CDB) $10 billion loan to
Petrobras. Details of the deal indicate that China
will not acquire stakes in any Brazilian oil
resources but instead be repaid in cash. Another
trip deliverable was access to the Chinese market
for Brazilian poultry exports, a topic that has been
under negotiation for over four years. Lula
reiterated his call to settle bilateral trade in
local currency instead of the US dollar, but
discussions on this subject seem to remain more
abstract than substantive. Other agreements were
reached in the areas of financing, ports and
satellite cooperation.
Brazilian Embassy Briefing on Lula Trip
--------------
2. (U) Lula's May 17-20 trip to China was his second.
He was accompanied by the Minister of Foreign
Affairs, the Minister of Commerce, the Minister of
Ports, the Vice Minister of Agriculture and 220
businessmen. Lula met with President Hu Jintao as
well as Premier Wen Jiaobao, Chairman of the Chinese
People's Political Consultative Conference Jia
Qinglin, and Vice President Xi Jinping. Lula also
attended the opening ceremony of the Center for
Brazilian Studies at the Chinese Academy of Social
Sciences (CASS),one of Beijing's most prominent
research institutes, and visited the Chinese
Aerospace Technology Agency to highlight space
cooperation.
Joint Communique and Joint Action Plan
--------------
3. (U) In a joint communique, Brazil and China
committed to further strengthening their partnership
and stressed coordination in response to the Global
Financial Crisis. They agreed to meet again in the
second half of 2009 to continue their strategic
dialogue at the vice-minister level. In addition,
Brazil and China will develop a Joint Action Plan
for 2010-2014 outlining bilateral cooperation on
science, technology, space, trade and culture.
Brazilian Emboffs said that the Joint Action Plan
will be prepared in the upcoming weeks and launched
later this year in Brasilia.
Trade in other currencies?
--------------
4. (SBU) President Lula continued to publicly
promote the idea of conducting bilateral trade in
Reais and Yuan (versus U.S. dollars),but an
economic officer at the Brazilian Embassy
acknowledged that this discussion is in the very
early stages and there is little possibility of its
being implemented in the near-term. However, Lula
proposed that the Brazilian and Chinese Ministers of
Finance and the respective Central Bank Governors
meet in the upcoming months to further study the
issue as a next step.
Oil and Oil Financing
-------------- --
5. (U) Two significant agreements were reached in
the energy sector. One is a purely financial
arrangement under which CDB will lend Petrobras $10
billion to help finance exploration of Petrobras'
deep-sea oil reserves. The loan does not give China
any stake in Brazilian oil fields. Instead, Brazil
intends to repay it in cash, using oil revenue -- but
not oil -- as collateral. A separate MOU between
the two governments committed to providing
additional financing and equipment to support the
CDB-Petrobras contract.
Brazilian poultry to directly enter China
BEIJING 00001522 002 OF 002
-------------- --
6. (U) Brazilian Emboffs were particularly pleased
with progress on sanitary issues, especially an
agreement under which Brazil can begin to export
poultry products to China from Brazilian plants that
have been inspected by Chinese health authorities.
Brazilian Embassy officials were also positive about
progress made in securing access for pork exports.
China is now in the process of inspecting Brazilian
pork facilities.
CDB provides additional bank loans
-------------- --
7. CDB also agreed to provide the Brazilian
Development Bank (BNDES) with an $800 million credit
line to bolster its cash reserves amid the ongoing
global financial crisis. According to Brazilian
Emboffs, as part of their expanded cooperation, CDB
will open an office in Brazil and BNDES will open an
office in China. Two further MOU's were signed
between Brazil's largest financial Institute Itau
BBA and CDB and between Banco do Brazil and CDB to
provide additional financing for further Chinese
projects in Brazil.
Potential Chinese investment in Santos Port
-------------- --
8. The Chinese Ministry of Transport signed an MOU
for cooperation in planning and building ports in
Brazil. In particular, the Chinese government
expressed interest in investing in the expansion
project for Santos Port, Brazil's busiest container
port.
Satellite Cooperation
-------------- --
9. China and Brazil signed an MOU to provide free
satellite images to three ground stations located in
South Africa, Egypt and the Canary Islands. China
and Brazil have been cooperating on satellite
projects for over 20 years. The China-Brazil Earth
Resources Satellite (CBERS) program is a 50/50
partnership, dividing all expenses evenly from
manufacture to launch. Brazilian Emboffs stressed
two important developments in this cooperation --
the decision to continue and expand the partnership
and the steps to internationalize the program by
providing both free images and technical know-how to
African nations.
Trade Imbalance and Trade Data
-------------- --
10. Brazilian Emboffs reiterated that Brazil
continues to seek diversification of its exports and
an increase in Chinese investment in Brazil. They
reported that the two sides reached an agreement on
the methodology for calculating trade statistics.
Currently Brazilian and Chinese trade data vary
significantly due to different methods of
calculating freight. However, Brazilian Emboffs are
confident that they have found a way to standardize
their data. Details of the new methodology should
be available in July.
Other Notable Investments
-------------- --
11. Brazilian Economic and Commercial Officer noted
a few of the agreements reached by the visiting
business delegation. Wuhan Iron and Steel signed an
MOU with Brazilian iron ore producer MMX Mineracao e
Metalicos SA to build a steel plant in Brazil with
an annual capacity of 5 million tons. Chongqing
Loncin, one of China's largest motorcycle companies,
committed to building 200,000 units of motorbikes in
Manaus, and Chinese automaker Chery announced plans
to open a factory in Brazil.
STATE PASS USTR
SIPDIS
SENSITIVE
TAGS: ETRD EINV EIND PREL EFIN EPET
EAGR, CH, BR, AU-1
SUBJECT: Brazilian President Lula's Trip
to China Focuses on Trade and Investment
Ref: Brasilia 619
1. (SBU) Summary. During President Lula's trip to
China, Brazil and China reaffirmed their commitment
to strengthen their relationship and finalized China
Development Bank's (CDB) $10 billion loan to
Petrobras. Details of the deal indicate that China
will not acquire stakes in any Brazilian oil
resources but instead be repaid in cash. Another
trip deliverable was access to the Chinese market
for Brazilian poultry exports, a topic that has been
under negotiation for over four years. Lula
reiterated his call to settle bilateral trade in
local currency instead of the US dollar, but
discussions on this subject seem to remain more
abstract than substantive. Other agreements were
reached in the areas of financing, ports and
satellite cooperation.
Brazilian Embassy Briefing on Lula Trip
--------------
2. (U) Lula's May 17-20 trip to China was his second.
He was accompanied by the Minister of Foreign
Affairs, the Minister of Commerce, the Minister of
Ports, the Vice Minister of Agriculture and 220
businessmen. Lula met with President Hu Jintao as
well as Premier Wen Jiaobao, Chairman of the Chinese
People's Political Consultative Conference Jia
Qinglin, and Vice President Xi Jinping. Lula also
attended the opening ceremony of the Center for
Brazilian Studies at the Chinese Academy of Social
Sciences (CASS),one of Beijing's most prominent
research institutes, and visited the Chinese
Aerospace Technology Agency to highlight space
cooperation.
Joint Communique and Joint Action Plan
--------------
3. (U) In a joint communique, Brazil and China
committed to further strengthening their partnership
and stressed coordination in response to the Global
Financial Crisis. They agreed to meet again in the
second half of 2009 to continue their strategic
dialogue at the vice-minister level. In addition,
Brazil and China will develop a Joint Action Plan
for 2010-2014 outlining bilateral cooperation on
science, technology, space, trade and culture.
Brazilian Emboffs said that the Joint Action Plan
will be prepared in the upcoming weeks and launched
later this year in Brasilia.
Trade in other currencies?
--------------
4. (SBU) President Lula continued to publicly
promote the idea of conducting bilateral trade in
Reais and Yuan (versus U.S. dollars),but an
economic officer at the Brazilian Embassy
acknowledged that this discussion is in the very
early stages and there is little possibility of its
being implemented in the near-term. However, Lula
proposed that the Brazilian and Chinese Ministers of
Finance and the respective Central Bank Governors
meet in the upcoming months to further study the
issue as a next step.
Oil and Oil Financing
-------------- --
5. (U) Two significant agreements were reached in
the energy sector. One is a purely financial
arrangement under which CDB will lend Petrobras $10
billion to help finance exploration of Petrobras'
deep-sea oil reserves. The loan does not give China
any stake in Brazilian oil fields. Instead, Brazil
intends to repay it in cash, using oil revenue -- but
not oil -- as collateral. A separate MOU between
the two governments committed to providing
additional financing and equipment to support the
CDB-Petrobras contract.
Brazilian poultry to directly enter China
BEIJING 00001522 002 OF 002
-------------- --
6. (U) Brazilian Emboffs were particularly pleased
with progress on sanitary issues, especially an
agreement under which Brazil can begin to export
poultry products to China from Brazilian plants that
have been inspected by Chinese health authorities.
Brazilian Embassy officials were also positive about
progress made in securing access for pork exports.
China is now in the process of inspecting Brazilian
pork facilities.
CDB provides additional bank loans
-------------- --
7. CDB also agreed to provide the Brazilian
Development Bank (BNDES) with an $800 million credit
line to bolster its cash reserves amid the ongoing
global financial crisis. According to Brazilian
Emboffs, as part of their expanded cooperation, CDB
will open an office in Brazil and BNDES will open an
office in China. Two further MOU's were signed
between Brazil's largest financial Institute Itau
BBA and CDB and between Banco do Brazil and CDB to
provide additional financing for further Chinese
projects in Brazil.
Potential Chinese investment in Santos Port
-------------- --
8. The Chinese Ministry of Transport signed an MOU
for cooperation in planning and building ports in
Brazil. In particular, the Chinese government
expressed interest in investing in the expansion
project for Santos Port, Brazil's busiest container
port.
Satellite Cooperation
-------------- --
9. China and Brazil signed an MOU to provide free
satellite images to three ground stations located in
South Africa, Egypt and the Canary Islands. China
and Brazil have been cooperating on satellite
projects for over 20 years. The China-Brazil Earth
Resources Satellite (CBERS) program is a 50/50
partnership, dividing all expenses evenly from
manufacture to launch. Brazilian Emboffs stressed
two important developments in this cooperation --
the decision to continue and expand the partnership
and the steps to internationalize the program by
providing both free images and technical know-how to
African nations.
Trade Imbalance and Trade Data
-------------- --
10. Brazilian Emboffs reiterated that Brazil
continues to seek diversification of its exports and
an increase in Chinese investment in Brazil. They
reported that the two sides reached an agreement on
the methodology for calculating trade statistics.
Currently Brazilian and Chinese trade data vary
significantly due to different methods of
calculating freight. However, Brazilian Emboffs are
confident that they have found a way to standardize
their data. Details of the new methodology should
be available in July.
Other Notable Investments
-------------- --
11. Brazilian Economic and Commercial Officer noted
a few of the agreements reached by the visiting
business delegation. Wuhan Iron and Steel signed an
MOU with Brazilian iron ore producer MMX Mineracao e
Metalicos SA to build a steel plant in Brazil with
an annual capacity of 5 million tons. Chongqing
Loncin, one of China's largest motorcycle companies,
committed to building 200,000 units of motorbikes in
Manaus, and Chinese automaker Chery announced plans
to open a factory in Brazil.