VZCZCXRO8229
RR RUEHRG
DE RUEHBR #2087/01 3091700
ZNR UUUUU ZZH
R 051700Z NOV 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 0354
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 5378
RUEHSO/AMCONSUL SAO PAULO 1116
RUEHRG/AMCONSUL RECIFE 7325
UNCLAS SECTION 01 OF 02 BRASILIA 002087
SIPDIS
SENSITIVE
SIPDIS
E.O. 12958:N/A
TAGS: ECON ETRD BR
SUBJECT: BRAZIL: CEO Forum recommendations report to USG and
Brazilian government officials October 11, 2007
1. (U) SUMMARY: The Brazilian and American CEOs participating in
the CEO Forum reported their recommendations to President Lula's
Chief of Staff Dilma Rousseff, Minister of Development, Industry and
Trade (MDIC) Miguel Jorge, Commerce Secretary Carlos Gutierrez and
National Economic Council Director Al Hubbard on October 11. The
CEOs highlighted that their priority recommendation was completion
of a bilateral tax treaty between Brazil and the United States and
development of a "benchmarking" system to evaluate investment
climate improvements. The CEOs also presented recommendations
supporting a rapid conclusion of the Doha WTO round; mechanisms to
settle investment disputes; development of viable infrastructure
projects and modalities; improvement of technology sharing and
communication regarding investment opportunities; partnerships in
education and workforce development; increased joint research and
development; and amelioration of impediments to trade, investment
and travel flows. END SUMMARY
2. (U) Josue Gomes da Silva, President of Coteminas and Chair of the
Brazilian Section, welcomed the government representatives with a
note to "be careful what you wish for" in encouraging Brazilian and
American CEOs together to develop joint recommendations. He
acknowledged the recommendations were ambitious, but noted the CEOs
agreed, "the danger is not to reach too far and miss, but to reach
too near and make it." He highlighted that the most important
priority recommendations for the Forum was to achieve a bilateral
tax treaty. He underlined that the CEOs wished to emphasize that
this treaty would be of enormous reciprocal benefit to both
countries' companies and that CEOs very much want an accord signed
and implemented by May or June 2008 when next the CEO Forum meets.
3. (U) Gomes da Silva continued that the other priority
recommendation the Forum wished to highlight was the development of
"benchmarks" or best practices with particular emphasis on the
regulatory framework. The CEOs would welcome "harmonization" toward
a set of best regulatory practices in order to increase trade and
investment between our countries.
TRADE AND ECONOMIC GROWTH
4. (U) Tim Solso, CEO of Cummins Inc. and Chair of the US Section
underlined that the themes President Lula had offered at the dinner
hosted for the Forum participants - peace, democracy and free, just
trade - were themes the CEOs supported. He noted the importance of
competitiveness in a global market that includes China and India.
In that light, he again emphasized the need for a bilateral tax
treaty and underlined CEO support for conclusion of the WTO Doha
Round. He briefed that CEOs were not prepared to go as far as
recommending a bilateral investment treaty (BIT) or a free trade
area agreement (FTA), but did strongly support international
arbitration of investment disputes. Solso noted Forum desire for
more coherence in tax structures and briefed that the visa
discussion had been very emotional, with CEOs seeing visas as a
barrier to trade and many wishing to do away with the reciprocal
visa system. Finally, he noted CEO calls for tax incentives for
education and technology development. He noted that US CEOs want to
help their partners to be more competitive, but should not have to
"drag" them along ("not our weight to carry"). Gomes da Silva added
that his CEOs believe they must help the other blocks that they work
with (for example, Mercosul), because integration is huge concern
for all society. Jorge Gerdau, CEO of Grupo Gerdau, offered that
in addition, Brazil cannot take on China alone, but if all the
Americas work together, anything is possible. Gerdau welcomed
development of a regional infrastructure initiative that would
include the World Bank, BNDES and the private sector. He
highlighted positive cooperation on biofuels.
COMPETITIVENESS
5. (U) Marco Stefanini, President of Stefanini IT Solutions, noted
Forum recommendations in the area of education (particularly English
language learning), youth skill development and exchange programs.
Craig Barrett, Chairman of the Board of Intel noted information
technology, investment in research and development, infrastructure
(with particular emphasis on spectrum allocation and broadband
development), and harmonization of venture capital standards are all
important.
6. (U) Rick Wagoner, CEO of General Motors turned to biofuels,
welcoming the growing US and Brazilian production, calling for joint
research, particularly in cellulosic technologies, that would yield
more energy and would be better for the environment. A Brazilian
CEO noted the research and development centers in Brazil and
underlined the importance of intellectual property rights
protection.
CEO CONCLUDING REMARKS
7. (U) Josue Gomes da Silva noted that the Forum wanted to meet
every six months with governments to develop metrics and evaluate
progress. Tim Solso noted that the CEOs that have adopted each
subject will develop one or two, only, of the suggestions under each
heading, in order to develop metrics and come back to the
governments to report: "Here is what we are doing; what are you
doing?" Otherwise, CEOs feel nothing concrete will be accomplished.
He emphasized that "the meat is going to be what we do now until
six months from now. The crux is what we can concretely develop to
get done after this too-rushed day."
GOVERNMENT REACTIONS
BRASILIA 00002087 002 OF 002
8. (U) MDIC Minister Miguel Jorge noted the Forum had started an
important, never done before process. The most important factor,
for him, was that companies had engaged to work together and to
speak together to governments. Casa Civil head Dilma Rousseff spoke
at length and with great enthusiasm. She said the Forum
demonstrated the ambition to create progress. She agreed on the
importance of addressing taxes, "whether or not a tax treaty is the
right way." Rousseff noted "we live in similar worlds," and
regulatory issues and investment questions are good objectives to
address, even if the challenge is to find concrete solutions in
practice. She underlined that the Brazilian government wants to
increase competitiveness, although she stressed she would not imply
the Americas are currently incapable of competing against Asia.
Rousseff underlined that, in the next few years, increasing
international investments was definitely in Brazil and the US'
interests. She noted the relationship between Brazil and the US was
a strategic one and she had great hopes for the future.
9. (U) Rousseff lauded the Brazil-US biofuels partnership and agreed
with the Forum on the need to increase cooperative research and to
increase exchanges on bio-combustibles. She highlighted access to
education as one of the most difficult problems a government faces.
She noted that universal education was an important goal for the
Brazilian government, and looked forward to drawing on the expertise
of the United States in this area. She spoke in support of
technological exchange as well. Rousseff noted the importance of
respect for intellectual property rights and affirmed that contracts
must be respected. She concluded by underlining that democracy and
fair trade are linked concepts for the Brazilian government.
10. (U) Secretary Gutierrez welcomed the CEO Forum report and noted
the US continues to learn much from other parts of the world. He
lauded the CEOs' proposal to prioritize and develop specific ideas
from among the report's recommendations. Secretary Gutierrez
affirmed the Forum had been an enormous success because it was
focused on priorities, metrics and further developing results-based
recommendations. Regarding CEO Forum language on "harmonization,"
Gutierrez cautioned CEOs to focus instead on "pragmatic" steps for
regulatory simplification that would be most likely to succeed. He
noted governments did not want to go in the direction of
"harmonization" in the sense that EU internal regulations are
"harmonized" among EU member states. He endorsed "pragmatism with a
strategic view."
11. (U) The Commerce Secretary noted that improving education is not
a short-term goal and noted the United States has its own challenges
in this area. He added that, if we had Americans who spoke
Portuguese in the next generation, this would be a true measure of
success in demonstrating the partnership goes both ways.
12. (U) NEC Director Hubbard said he noted six particular challenges
among the CEO recommendations: 1. Visas - we need to figure out how
to improve within the next six months with given resources; 2. Tax
treaty - he urged CEOs on both sides to continue to pressure
governments, otherwise "the bureaucrats will talk forever;" 3. Doha
- he emphasized business pressure on governments was crucial for
coming to closure; 4. Bilateral investment treaty - Hubbard
acknowledged understanding why CEOs had chosen to focus on dispute
settlement mechanisms rather than a full BIT, but urged them to keep
the BIT idea on the table; 5. Tax systems - he encouraged Brazil
to fix its tax system and noted US tax system problems, including
the highest corporate tax rate outside Japan. He assured CEOs that
the executive branch intended to have a proposal to improve the US
tax system by the time of the State of the Union. "I hope you will,
too;" and 6. Education - he noted this was a knotty challenge for
both sides.
13. (SBU) COMMENT: The Forum was widely viewed as a success among
government and business participants. Embassy was particularly
impressed by the strength of Dilma Rousseff's enthusiastic support,
both in front of the CEOs and with the press after the Forum
concluded. The head of Casa Civil is an influential figure in
deciding priorities and ensuring action in the Brazilian government,
and her support augers well for positive movement on joint private
sector priorities. END COMMENT
14. (U) The delegation has cleared this message.
SOBEL