US embassy cable - 04BRASILIA3063

UNCLAS SECTION 01 OF 02 BRASILIA 003063 
 
SIPDIS 
 
SENSITIVE 
 
STATE PLEASE PASS TO USTR AND OPIC 
NSC FOR MIKE DEMPSEY 
DEPT OF TREASURY FOR FPARODI 
USDOC FOR 3134/USFCS/OIO/WH/EOLSON 
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD 
 
E.O. 12958: N/A 
TAGS: EINV, PGOV, BR, Macroeconomics & Financial 
SUBJECT:  PARANA STATE GOVERNOR REQUIAO AND FINANCE 
MINISTRY SQUARE OFF OVER CONTRACT STABILITY 
 
REF: A) BRASILIA 2921, B) 2003 SAO PAULO 1404, C) 2003 SAO 
PAULO 1302, D) 2003 RIO 321 
 
1. (U) To highlight the differences between the GOB and 
Parana Governor Requiao on investment issues, notably in 
the SANEPAR case (reftel A), Post is transmitting a 
December 11 article from the second largest circulation Sao 
Paulo Daily "O Estado de Sao Paulo", which reports on a 
recent public confrontation between Requiao and the 
Executive Secretary (Vice-Minister equivalent) of the GoB's 
Finance Ministry. 
 
2. (U) UNOFFICIAL TRANSLATION 
 
HEADLINE: FOR REQUIAO, RESPECTING CONTRACTS IS NONSENSE 
 
SIDEBAR:  The Governor presses the Executive Secretary of 
Finance in public, terming a speech by the latter in 
defense of respecting contracts between the public and 
private sectors as "ladainha" (i.e., rambling talk, 
tiresome recital, rigamarole). 
 
ARTICLE TEXT:  The Governor of Parana, Roberto Requiao 
(PMDB), yesterday embarrassed the Executive Secretary of 
the Finance Ministry, Bernard Appy, when he criticized 
[GOB] economic policy and labeled Appy's speech 
"rigamarole." 
 
"The stability of these contracts is nonsense," affirmed 
Requiao. 
 
At the opening of the ordinary meeting of the National 
Council of Tax Policy (Confaz) in Foz de Iguacu, Appy had 
highlighted the good performance of the economy and the 
consolidation of a more stable institutional framework for 
private investment.  Right afterwards, he was confronted 
directly face to face by Requiao in front of the Finance 
Secretaries. 
 
SIPDIS 
 
"I was surprised by the Executive Secretary's remarks.  The 
impression I have is that Parana isn't part of the country 
described by Mr. Appy", he stated.  "Growth in Brazil is 
anything but sustainable.  We are following the old neo- 
liberal model".  At this point, Requiao compared Appy's 
speech in favor of the stability of contracts to the theory 
developed by ex-president Fernando Henrique Cardoso during 
the 60's, on the role of international capital in the 
development of Latin America.  "This is where we get the 
rambling talk of security for investors with respect to 
contracts," said Requiao, calling FHC's (Fernando Henrique 
Cardoso) most famous academic text, written in partnership 
with Enzo Faletto - "Dependency and Development in Latin 
America" - an insignificant "little book". 
 
He also complained about the editorials in "O Estado de Sao 
Paulo" regarding his decisions to question and break 
contracts signed by predecessors.  "Here in Parana, 
contracts that consecrate theft are questioned.  If there 
is a contract that should be respected, it is the contract 
with the people." 
 
Clearly bothered, Appy sought to respond, but Requiao 
rapidly interrupted, preventing him from doing so.  "If you 
reply, I'll just rebut what you say."  End Unofficial 
Translation. 
 
3. (SBU) Comment. Requiao's reported comments at the Confaz 
meeting are consistent with other public and private 
comments he has made regarding foreign investment and 
respect for contracts since taking office in January 2003. 
Requiao told Sao Paulo Consul General Duddy in April 2003 
that it was his responsibility as Governor to suspend 
contracts that were "clearly not in the interest of the 
State or its consumers."  He cited in particular the 
suspension of payment by Copel, the Parana parastatal 
energy company, to privately owned generating plants as an 
example of a "corrupt" contract subject to suspension.  In 
other conversations with mission officials and in public 
statements, Requiao has also made it clear that he opposes 
in principle the privatization of most essential public 
services, such as energy, sanitation, and roadways (reftels 
B and C).  Requiao's public criticism of Executive 
Secretary Appy's remarks is also consistent with his style; 
 
SIPDIS 
our interlocutors across the political spectrum in Parana 
universally describe him as intentionally polemical and 
thriving on controversy. End Comment. 
 
DANILOVICH