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UNCLAS SECTION 01 OF 03 BRASILIA 001934 

SIPDIS 

SENSITIVE 
SIPDIS 

DEPT FOR GMANUEL AND JMIOTKE 
PLEASE PASS TO DOE SLADISLAW AND KFREDRIKSEN 

E.O. 12958: N/A 
TAGS: TRGY SENV ENRG KSCA ETRD EAGR BR
SUBJECT: ETHANOL FORUM - PREPARATORY MEETING OUTCOMES 

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¶1. (U) Summary: Brazil hosted the first preparatory meeting to the Ethanol Forum on September 5 in Brasilia. Five delegations attended including India, South Africa, China, the EU, the U.S. and Brazil. The USG delegation was headed by State's Greg Manuel and included Sarah Ladislaw from the Department of Energy, Morgan Perkins of USDA and Matthew Golden from Embassy Brasilia. The Forum acted as a reaffirmation of the delegations' desire to facilitate, in a yet to be defined manner, an international biofuel market and provided a platform from which to begin its work. Upon concluding, the delegations unanimously agreed to meet again before the end of the year and U/S Patriota, chairing the meeting for the GoB, assigned a set of tasks which each country should complete by October 30. End Summary 

¶2. (U) The GoB hosted the first preparatory meeting of the Ethanol Forum on September 5 at the Itamaraty Palace in Brasilia, Brazil. U/S Patriota of the Brazilian MFA hosted the meeting on behalf of Tereza Campello, a member of the Casa Civil and Dilma Rousseff's deputy Chief of Staff. Patriota opened by emphasizing the intergovernmental nature of the proceedings and the benefits of ethanol, including environmental friendliness, third-world development, energy security and job creation. He also made clear that Brazil's objective in creating the Ethanol Forum is not to sell anything, but to promote an idea. Moreover, he identified as the underlying driver for this forum, the GoB belief that an international market for ethanol would not develop as expeditiously as the GoB would like without government intervention. True to its free-form beginnings, Patriota clarified that the GoB had no view on how to structure the debate except to bring together producers and consumers to promote economic expansion and map a path to make biofuels available on a global scale. The meeting produced neither minutes nor a statement. The ultimate goal was to have each of the parties present their views on the subject and agree to meet again before the end of the year. 

¶3. (U) In opening the debate, the Casa Civil's Tereza Campello and Ricardo Dornelles of the Ministry of Mines and Energy each gave brief presentations outlining Brazil's current biofuel outlook from a political and technical standpoint. Campello highlighted that the Forum is key to Brazil's energy strategy and that an interministerial group composed of the Ministries of Agriculture, Science and Technology, Mines and Energy and External Relations was created to discuss the issue. It is important to note that Dilma Rousseff and the Casa Civil are and will continue running Brazil's biofuel/ethanol strategy. Dornelles, for his part gave a view of Brazil's biofuel matrix, emphasizing Ethanol, Biodiesel and H-Bio. The GoB's current energy policy is to guarantee internal supply of ethanol, stimulate private investment, provide a tax model to promote increased use and production, and to maintain free prices throughout the production and supply chain. 

¶4. (U) Following this overview, Patriota proffered four questions with which to structure the discussion: 1) In which way can our governments cooperate to create an international market for biofuels taking into consideration environmental and food security aspects; 2) What should be the scope of an intergovernmental partnership to promote an international market for ethanol; 3) Which are the core elements of a common agenda; 4)Agreement on a date and venue of an additional meeting (before the end of 2006) to pursue further dialogue. Minister Antonio Simoes, director of the MFA's Energy Division, opened the dialogue. 

¶5. (U) Simoes posited that each of the representatives needed to think about production to ensure adequate supply of fuel, while taking into account environmental and food security. He reiterated the concept that Brazil is promoting an idea on renewable fuels and not trying to sell anything. Noting each country's unique environment and experience he emphasized the need to democratize the production process and create more producers, making money available to help developing countries via AID agencies, technical assistance bilateral and trilateral means. He also highlighted the GoB desire to focus on rules and regulations and to define concrete standards. In terms of the intergovernmental scope, Brazil would like to work on this project bilaterally, trilaterally, and plurilaterally (through multiple governments outside the fora of the UN). Finally, the GoB deems an ideal core agenda to include an analysis of ethanol production aspects, its current and potential use as a fuel and a presentation of perspectives of promoting ethanol in an international market. 

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¶6. (U) The EU represented by Ambassador Pacheco followed, agreeing to the concept of an ethanol forum and to the commoditization of ethanol. The EU reiterated the need to discuss technological standards and proposed that the conference adopt a more holistic Biofuel Forum. This would, according to Pacheco, more adequately address the unique situation in a variety of countries/regions. In closing, the Ambassador added that the EU will host an international Biofuel Conference in early 2007 (invitations will be sent shortly) and will also host a more technical conference in January of 07 to discuss biofuel technical standards. 

¶7. (U) India, represented by Ambassador Puri welcomed the initiative as timely and overdue. He underscored the need to shore up ethanol supplies, noting that while India produces nearly as much sugar as Brazil, it needs to import additional sugar to support its immense population. Puri proffered that the principal mechanism to affect public policy change on a global scale is to make raw materials available. Under core concepts, India agreed with the EU proposal to expand the focus of the forum from ethanol to biofuels. 

¶8. (U) The South African delegation, led by Ambassador Zulu, declared itself a nation with a biofuels program in its infancy. As its program develops, South Africa's principal concern will be to ensure that biofuel development is somehow tied into food security, and the delegation emphasized the import of creating ethanol from food sources. South Africa also recommended focusing on the electricity generating potential of biofuels and the need to harmonize standards in order to facilitate increased trade. The delegation asserted that the Forum's core concepts must include sustainable production and job creation in developing countries. It also underlined the need to evaluate current biofuel endeavors so as to not duplicate existing efforts. 

¶9. (U) China, for its part, agreed verbatim to the talking points set forth by the GoB and Simoes, agreed to expand the breadth of the Forum to include biofuels and agreed to cooperate with the consensus decision regarding a time to meet before the end of the year. 

¶10. (U) Greg Manuel rounded out the discussion elaborating on the USG's two key principals: 1) any cooperation that promotes production and consumption benefits collective interests and 2) the private sector should be involved in the discussion early and often. He posited that the immense economic opportunity represented by biofuels mean that the private sector will be the natural engine driving the globalization of the product. Manuel underscored this, alluding to the fact that the private sector in the U.S. is responsible for the large majority of investment into biofuels. He also emphasized tool sets with which the collective could obtain the Ethanol Forum's goal. The USG perspective is that governments should play a strong role in orienting and assembling public and private institutions toward production and consumption, and should utilize diplomatic persuasion and foreign assistance to assist transitional economies via development assistance, technology transfer, etc. 

¶11. (U) Following the aforementioned comments, Patriota stepped back into the fray. Noting the convergence of body as a whole, he suggested holding the next meeting in the second half of November. He also presented the delegations with a list of taskers to finish by October 30. Itamaraty's Energy Division will act as a clearing house for the collection and dissemination of the aggregate data. The tasks include creating a 5-6 page paper outlining each delegation's view of intergovernmental action especially in light of the USG view that future modalities should include the private sector. Other tasks include mapping current research to avoid repetition, drawing up a survey of national and international institutions relevant to the discussion (generating resources for country development), and outlining each countries own structure and procedure in dealing with biofuels: i.e. who generates policy, responsible for execution. 

¶12. (SBU) Comment: Brazil's own internal debate or struggle to formulate policy was the most salient factor to come out of this meeting. From U/S Patriota's deferential treatment of the Casa Civil's Campello, to his allusion that a policy shake-up is due, it is clear that Dilma Rousseff and the Casa Civil are in charge Brazil's biofuel policy. It is also obvious that the exact nature of the GoB's biofuel executing mechanism is not yet certain. 

BRASILIA 00001934 003.2 OF 003 

Patriota was unwilling to divulge Brazil's organic make-up noting that Brazil is still deciding how to organize and noting that a change is likely following Brazil's October election. 

¶13. (SBU) On a whole, the meeting produced no substance. It did, however, provide a backdrop for the USG to present its views on the Forum; most importantly, the necessary role that the private sector needs to play in its development. It also proved that, at least initially, tariff and trade would not be incorporated into the Forum's substantive discussions. In a side conversation with Patriota and Simoes, the USG expressed concern about the existence of two international biofuel forums, GBEP and Brazil's Ethanol Forum. The USG stressed the need for Brazil to find a way to reconcile the two groups in terms of scope and purpose, perhaps by talking with the Italians. Otherwise, the USG would have difficulty participating in the Ethanol Forum. The ultimate achievements of the meeting were the universal agreement that the Ethanol Forum should include biofuels, opening more doors to develop regions unsuitable for ethanol production and greater private sector participation, and the decision to meet prior to the end of the year. End Comment 

SOBEL