CODEL HOYER BRAZIL VISIT PRODUCTIVE ON ENERGY, ENVIRONMENT,

UNCLAS SECTION 01 OF 05 BRASILIA 000497 SIPDIS DEPARTMENT FOR H/CTO, WHA/BSC, WHA/EPSC E.O. 12958: N/A TAGS: OREP SENV KGHG ENRG ECON ETRD EINV EFIN PREL BR SUBJECT: CODEL HOYER BRAZIL VISIT PRODUCTIVE ON ENERGY, ENVIRONMENT, AND MORE REF: BRASILIA 445 ¶1. (U) SUMMARY: Majority Leader Steny Hoyer and a delegation of nine members of the United States House of Representatives visited Brasilia and Rio de Janeiro April 8-10, with a focus on energy, the environment, and climate change. The delegation was granted a rare meeting with Brazilian President Luiz Inacio Lula da Silva (reftel A). Meetings with Minister of Mines and Energy Edison Lobao, members of the Brazilian Chamber of Deputies, the mayor of Rio de Janeiro, U.S. oil and gas executives, Petrobras, and the Brazilian Sugarcane Industry Association (UNICA) consistently highlighted the importance of the bilateral relationship as well as Brazil's key role in current energy and environmental issues. END SUMMARY. -------------- Meeting with Minister of Mines and Energy -------------- ¶2. (U) At a meeting with Minister of Mines and Energy Edison Lobao and his Deputy Minister, Mauricio Zimmermann, Lobao focused on the largely renewable nature of the Brazilian energy matrix. Lobao told the Codel that the matrix was made up primarily of hydropower and Brazil would like to develop more hydro projects to take better advantage of its 150MW of untapped capacity. (Note: Brazil's current focus is away from large hydro power dams in favor of smaller scale, more environmentally friendly projects). ¶3. (U) Brazil is incorporating climate change considerations into its energy plans wherever practical. As an example, Lobao mentioned planting palm in previously deforested areas, to be used for biodiesel. Lobao noted that Brazil has faced financial crises in the past, and though the current economic crisis is a challenge to all countries and their plans for growth and investment, he views the climate change crisis as a bigger threat that cannot be ignored. Lobao told the group that Brazil is making "a huge effort" to expand its use of alternative energy sources such as wind and solar power, in part due to climate change. The primary limitation for Brazil in employing wind and solar power in this effort is cost. Lobao talked about his recent trip to Spain to study more efficient and cost effective wind technology; he is also interested in learning more about U.S. developments in this area. ¶4. (U) Beyond expanding wind and solar programs, Lobao discussed �00A;Brazilian plans for its civilian nuclear energy program which will add four new plants to the two currently operating. (Note: Brazil's announced nuclear plans additionally include completing a partially built reactor in the near future. End Note). He expressed his hope that Brazil would ultimately add up to 50 new reactors. In response to Congressman Hoyer's question regarding how Brazil planned to deal with nuclear waste issues, Lobao described a new technology developed by Brazilian scientists that would mix in metals to transform the waste, allowing for safe disposal. He also highlighted French and Japanese work on a process to completely eliminate the waste. According to Lobao, Brazil is committed to nuclear energy as a source that is "clean and stable." ¶5. (U) Lobao described Brazil's electronic transmission system which integrates 98% of the country into one electronic grid and has the capacity to take electricity from one source and redirect it depending on demand and the supply available. He predicted that the remaining two percent will be integrated into the grid within the next year and a half (Note: The portion not currently integrated into the grid is in the furthermost northern state, Roraima, which gets its electricity from Venezuela. End Note). Regionally, Brazil's supply arrangements with Argentina, Uruguay and Paraguay; purchase agreements with Venezuela; and cooperative hydro projects with Argentina, Bolivia, and Peru were examples Lobao cited of energy integration in the Americas, perhaps as possible models for an Energy Partnership of the Americas. Turning to the social component of the energy program, Lobao mentioned Brazil's rural electrification program, "Luz Para Todos" (Light for All),as a means of bringing electricity and opportunities to all parts of the country. He also pointed to the country's biofuels industry as a major employer for disadvantaged populations. ¶6. (U) Congressman Hoyer, in praising Brazil's efforts in energy, encouraged an exchange of visits between Lobao and Energy Secretary BRASILIA 00000497 002 OF 005 Chu. He also extended an invitation for Lobao to visit the U.S. Congress and meet with other congressional representatives. Representative Cummings, who seconded this invitation, called Brazil's efforts to use energy to improve quality of life impressive and underlined that "we look forward to working with you." -------------- Meeting with Brazilian Legislators -------------- ¶7. (U) The Brazilian Chamber of Deputies hosted the delegation for a meeting and working lunch. (Note: The Brazilian Congress was closed for Easter during the delegation's visit. End Note.) During a wide-ranging conversation, the delegation and the Brazilian legislators exchanged questions and answers and focused heavily on the delegation's interests in energy, the environment, and promoting the U.S.-Brazil relationship. ¶8. (U) Permanent Joint Committee on Climate Change Rapporteur Colbert Martins (Brazilian Democratic Movement Party (PMDB)-Bahia) welcomed the U.S. delegation. President of the Chamber of Deputies Michel Temer (PMDB-Sao Paulo) called to express his desire for closer ties between Brazil and the United States and to offer regrets for having to be out of town. Several deputies encouraged increased legislative ties on the topics of the economy, energy, and the environment. Chairman of the Committee on Science and Technology Eduardo Gomes (Brazilian Social Democratic Party (PSDB)-Tocantins) noted that despite the economic crisis his committee seeks increased funding for science, technology, and promoting innovation. Gomes said the committee vice-chairman, Raquel Teixeira (PSDB-Goias),met in Washington with U.S. Representative Bart Gordon (D-Tennessee),Chairman of the House Science and Technology Committee, to explore areas of cooperation on renewable energies and biofuels. Antonio Thame (PSDB)- Sao Paulo)praised USG and Brazilian efforts to address the sustainability of biofuels and to promote biofuels under the bilateral biofuels Memorandum of Understanding. (Comment: Post notes this is an important indication of Brazilian congressional support for the Executive Branch biofuels MOU. End Comment.) Thame called biofuels a "fantastic fuel" that could be instrumental in the transition to more advanced technologies (hydrogen, hybrid, fuel cells etc). However, he noted that these new technologies would likely not completely replace automotive fuels, rather they will work in concert with biofuels, which he believes will continue to play an important role. ¶9. (U) Deputy Gomes also said that Energy Minister Edison Lobao would soon meet with U.S. Energy Secretary Steven Chu. (Note: Lobao and Chu have spoken about possible visits in the future but have not set any dates. End note) Gomes praised the United States as a leader in renewable energies like wind and said that Brazil has not fully embraced these opportunities, focusing instead on hydropower. He added, however, that Brazil is expanding the electric transmission grid - adding 8,000 kilometers - creating more links to Argentina and Venezuela and expanding into the Amazon. ¶10. (U) Deputy Ilderlei Cordeiro (Socialist People's Party, PPS-Acre),the only legislator present from the Amazon region, raised the subject of deforestation and sustainable development. He said that the intense global focus on protecting forests inappropriately gives "humans less value than standing trees." The challenge is to create sustainable economic opportunities, "not more monitoring and supervising." He noted that it is forbidden to plant crops for biofuels in the Amazon region and called the prohibition absurd. Cordeiro also pointed out that while Brazilians are told not to clear their trees, neighboring countries with forests - Peru, Bolivia, Colombia, and Venezuela - are not held to the same standards. Deputy Antonio Carlos de Mendes Thame (PSDB-Sao Paulo) called the Amazon "an air conditioner" for the world and opined that the world should pay for that service. Majority Leader Hoyer agreed that the world should compensate Brazil for the global benefits derived from the Amazon. He said he expects U.S. climate change legislation to include offsets for forests. ¶11. (U) Deputy Martins discussed the status of women and children in Brazil, touching on the role of women in government and various professions as well as pending legislation to combat child BRASILIA 00000497 003 OF 005 pornography. Deputy Mendes Thame discussed labor concerns (particularly in the sugar cane sector),including child labor. While Mendes Thame defended Brazilian labor laws and their efficient enforcement, he lamented that people working in the grey market are vulnerable to abusive practices. ¶12. (U) Majority Leader Hoyer emphasized the importance of the U.S.-Brazil relationship. Referring to the meeting with President Lula, Hoyer said he would relay Lula's suggestion of legislative exchanges to Speaker of the House Nancy Pelosi and take steps to facilitate it. Such a joint effort should focus on economics, environment, and security, he added. With respect to international climate change negotiations, Hoyer emphasized that the United States cannot resolve problems without engagement from emerging countries - especially China and India. Since emerging countries will not accept emission targets and mandates that could limit their economic growth, Majority Leader Hoyer said, the development of clean, energy efficient technologies will be critical. ¶13. (U) Deputy Mendes Thame proposed bilateral congressional seminars on biofuels to facilitate the exchange of views and information between the two congresses. In a similar vein, Deputy Rodrigo Rocha Loures (PMDB-Parana),Chairman of the Special Committee on Renewable Energy, recommended swift bilateral congressional cooperation to determine the areas in which Brazil and the U.S. can gain synergy, and stressed the need to act quickly due to the December 2009 UN Climate Change Conference (COP-15) in Copenhagen. Majority Leader Hoyer replied that the Administration and the Congress are very focused on Copenhagen and that there has been a significant change in views on the magnitude of the global warming problem. He agreed on the importance of moving quickly. -------------- Meeting with Mayor of Rio de Janeiro -------------- ¶14. (U) Rio de Janeiro Mayor Eduardo Paes was enthusiastic about the future of U.S.-South American relations, in particular the relationship between the U.S. and Brazil. He noted that the apparent personal connection between Presidents Obama and Lula will bring the U.S. and Brazil even closer. The delegation was very interested in discussing the social challenges facing Rio de Janeiro and hearing the Mayor's plans for tackling them. ¶15. (U) Mayor Paes stated that his top priorities are providing access to adequate public health care and implementing an ambitious urban development strategy which is supported by the federal government. Rio's favelas (slums) were built primarily because the city's public transportation system was poor and people wanted to live near where they worked, Mayor Paes explained. In response to a concern raised by Mr. Hoyer about the city's plans to build walls around its favelas, Mayor Paes clarified that the objective is primarily environmental, to prevent people from building beyond a certain point rather than to keep people in or hide them. Paes noted that Rio has the largest urban forest area in the word and that sprawling favelas have endangered them. He called the walls "eco-limits" and said that they were supported by favela residents. ¶16. (U) Regarding public security and drug trafficking, Mayor Paes acknowledged that years of unchecked drug trafficking led to the government's loss of control in some favelas. However, he noted, the city is undertaking various anti-drug programs targeted at youth in response. He also explained that education was a key element of the government's plan to combat poverty and at-risk behavior. Rio de Janeiro has the largest network of public schools in Brazil, Mayor Paes explained, and the federal government's Bolsa Familia program provides conditional cash payments to lower income families as long as they keep their children in school. -------------- Oil and Gas -------------- -Working Dinner with U.S. Oil and Gas Executives ¶17. (U) Several U.S. oil and gas companies (Exxon, Chevron, BRASILIA 00000497 004 OF 005 Devon) briefed the CODEL during a no-host dinner, sharing their perspectives on the challenges and potential of the oil and gas industry in Brazil and the role of the government in the petroleum sector. Executives are eager to explore commercial opportunities associated with the new finds off the coast, and emphasized their viewpoint that whatever new model Brazil adopts to manage these resources should be transparent and in line with market principles. -Petrobras Briefing ¶18. (U) The CODEL continued their discussions on the petroleum industry the next morning in a meeting with Petrobras, Brazil's government-controlled energy company. Samir Awad, Petrobras Executive Manager for International Operations, briefed the CODEL on the company's history and transition from state-owned monopoly to publicly traded international oil company (IOC). He explained that when the government decided to open up the petroleum sector to competition in 1997, Petrobras had to adjust its business strategy in order to compete with other IOC's that were entering Brazil. ¶19. (U) Awad stated that the significant pre-salt oil and gas finds announced by Petrobras starting in 2007 may more than double Petrobras' known reserves of 40 billion barrels, adding that the company is refocusing on domestic operations as a result. Of Petrobras' USD 175 billion budget for strategic investment and infrastructure over the next five years, USD 90 billion has been allocated to the pre-salt area. In response to a question by the CODEL on how the pre-salt finds could affect Petrobras oil exports to the United States, Awad noted that Brazil currently exports little oil to the U.S. because its crude is typically very heavy and requires special refining (most Brazilian oil exports are currently destined for China). Though the pre-salt oil is thought to be lighter, that classification is in respect to what is normally found in Brazil and cannot compare to the light oil from the Middle East. Even pre-salt oil will require significant refining before it is compatible with U.S. standards. ¶20. (U) Petrobras is currently building a new refinery in a 50-50 joint venture with Venezuela PDVSA in Recife, Brazil - a partnership that Awad admitted is "not going very well." In response to a question by the CODEL, Awad clarified Petrobras' position in Iran. He said that Petrobras has completed its one existing service contract with Iran to drill two wells in the Persian Gulf, a venture which did not yield any commercial success. Awad flatly denied Iranian government and media statements that Petrobras is in negotiations for additional contracts and said that the company is not contemplating any future business in Iran at the moment. -------------- Ethanol -------------- ¶21. (U) The Brazil Sugarcane Industry Association (UNICA) briefed the CODEL on the country's sugarcane and ethanol production. Alfred Szwarc, UNICA Senior International Advisor, explained that ethanol accounts for almost 16 percent of the energy matrix in Brazil. The growth of Brazil's ethanol production is mainly driven by the increase of the flex-fuel vehicles market in Brazil and rising global interest in ethanol as an alternative fuel, he said. Szwarc addressed concerns expressed by the CODEL about the effects of increased sugarcane farming on the Amazon rainforest by explaining that sugarcane is grown in the southeast and northeast regions of Brazil, over 2500 km away from the Amazon region. He further noted that conditions in the Amazon rainforest are not suitable for growing sugarcane. ¶22. (U) Szwarc highlighted initiatives under the 2007 United States-Brazil Memorandum of Understanding (MOU) on Biofuels Cooperation. On the global level, the MOU outlines cooperation between Brazil, the United States and the European Union on fuel quality harmonization. UNICA expressed concern over recent feedback that the United States and the EU may not want to continue this effort, noting that standards are very close to being developed (Note: this may be a reference to discussions at a March technical working group meeting of the tri-party group, during which the possibility of allowing the next steps identified by the group to be carried forward under other, already operational, auspices. End BRASILIA 00000497 005 OF 005 note.) With regards to third countries, the MOU sets forth a plan to develop markets in Central America and the Caribbean. Finally, on a bilateral level, the MOU calls for joint research between the United States and Brazil on next generation biofuels. Noting that a few scientists' exchange visits have taken place, UNICA urged that more can be done to further this initiative. ¶23. (U) This message was coordinated with Consulate Rio de Janeiro. ¶24. (U) The Hoyer delegation has cleared this message. SOBEL