US embassy cable - 05BRASILIA2813

UNCLAS SECTION 01 OF 06 BRASILIA 002813 
 
SIPDIS 
 
DEPT FOR EB/IPE SWILSON, AMADAMO AND WHA/BSC 
DEPT PLEASE PASS TO USTR MSULLIVAN, VESPINEL AND MSANDLER 
DEPT PLEASE PASS TO USPTO FOR JURBAN 
USDOJ FOR CCIPS/CMERRIAM 
USDOC FOR 3134/USFCS/OIO/WH/EOLSON 
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD 
NSC FOR SCRONIN 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: KIPR, ETRD, ECON, Piracy 
SUBJECT: SURVEY OF BRAZIL'S EFFORTS TO COMBAT PIRACY 
 
REF: A) Brasilia 487 (notal), B) Brasilia 599 (notal), 
C) 04 Brasilia 1384, D) Brasilia 1978 
 
1. (U) Introduction. Under pressure from the USG's review of 
trade benefits under the Generalized System of Preferences 
(GSP) (ref A) and in response to domestic concerns about 
organized crime, tax losses, and risks for consumers 
associated with illegitimate products, the GoB has over the 
last one and one-half years undertaken efforts to combat 
piracy.  A survey of those efforts, with particular 
attention to copyright enforcement, follows.  End 
Introduction. 
 
2. (U) The information provided below is not exhaustive, but 
provides highlights of actions taken by the GoB to combat 
piracy since the first extension of the GSP review in June 
2004. 
 
Institutional Changes 
--------------------- 
 
3. (U) National Council for Combating Piracy and other IPR 
Crimes (CNCP): On November 24, 2004, the GoB established an 
institutional foundation for combating piracy with formation 
of the permanent public-private sector National Council for 
Combating Piracy and other IPR Crimes (CNCP) (ref B).  The 
CNCP falls under the Ministry of Justice, giving it a law 
enforcement emphasis, and is chaired by the Vice-Minister of 
Justice, an activist, career law enforcement official who 
has kept the CNCP and its work on high-profile.  The 
Ministry of Justice hired an Executive Secretary and staff 
to direct and move forward Council initiatives on a day-to- 
day basis; most private sector reps give the Executive 
Secretary, who hailed from the music industry, high marks 
 
SIPDIS 
for his competence and commitment.  The GoB claims the 
Council is a one-of-a-kind for including private sector 
members - three of which are directly associated with U.S. 
film, music and software industries. 
 
4. (U) The CNCP established a roadmap for tackling piracy 
through a 99-point national action plan which was adopted in 
April, 2005.  The CNCP started working on all items, but 
broke them down according to when they were to be completed, 
in the short-term (6 months), medium-term (1 year), or long- 
term (2 years).  According to CNCP's schedule, 46 action 
items are due for completion by November 1; the Executive 
Secretary claims 11 have been completed and remains 
 
SIPDIS 
confident that implementation of the remaining 35 will 
concluded on time.  The plan is lengthy, and therefore not 
as focused as desirable.  The plan covers three broad 
categories of actions: enforcement; education, and economic 
measures. 
 
5. (U) The CNCP maintains a website 
(http://www.mj.gov.br/combatepirataria/defaul t.asp) that 
provides information on the Council, the national action 
plan, IPR events, article and news items relating to piracy, 
and a link for the public to provide info on pirate activity 
to the CNCP; a hotline has also been established for people 
who do not have access to a computer.  The Ministry of 
Planning approved inclusion of the Council in the federal 
budget, elevating its status and facilitating the 
acquisition of needed resources.  On August 31, 2005, the 
CNCP released the its first semi-annual report on the 
country's anti-piracy efforts entitled "Brazil Against 
Piracy"; the CNCP Executive Secretary emphasized the 
importance of the report since it is the first ever produced 
by the GoB to document anti-piracy actions. 
 
6. (U) To enhance operational effectiveness, the Receita 
Federal (tax and customs) has created a specialized 
"Division for Repression of Contraband, Embezzlement, and 
Piracy" (DIREP) and as well as additional divisions 
regionally and 36 new operational units.  Specialized units 
within the Federal Police and Federal Highway Police are 
operating informally, awaiting formal approval from the 
Planning Ministry.  Receita Federal and Ministry of Justice 
now share information through the "Infoseg" system to better 
identify and interdict smugglers at the borders; the Federal 
Police has launched a new system to increase security at 
ports; and the CNCP has a formal protocol with the 
Department of Consumer Defense and Protection in the 
Ministry of Justice to assist in efforts to educate 
consumers on the risks posed by some counterfeit goods. 
 
Law Enforcement 
--------------- 
 
7. (U) The Receita Federal, Federal Police, and Federal 
Highway Police have undertaken a number of large scale 
operations, principally to crack down on piracy in the 
Brazil-Paraguay border area.  The Cataratas I operation was 
conducted in the last 45 days of 2004 and yielded seizures 
valued at USD 5 million; Cataratas II was extended into 2005 
and produced record seizures in Foz do Iguacu.  Operation 
Leao Dourado (Golden Lion) maintained and intensified 
operations on the Brazil-Paraguay border.  As a result of 
the Hydra Operation coordinated by the Federal Police, one 
of the largest smuggling rings in Brazil was dismantled; 
more than 750 law enforcement agents were involved and 60 
people, including federal, highway, and military police 
officers, were arrested.  (Note. The Federal Police do not 
maintain a database with copyright enforcement statistics.) 
 
8. (U) According to the Association for the Protection of 
Phonographic Intellectual Rights, almost 11.5 million virgin 
CDs and DVDs and 2.9 million recorded CDs and DVDs were 
seized in law enforcement operations in Brazil between 
January and July 2005.  Figures for the year are expected to 
top those for 2004 in which 17.5 million virgin CDs were 
confiscated. 
 
Receita Federal: 
 
9. (U) In the first six months of this year, Receita Federal 
recorded 290 million reais (roughly USD 120.8 million) worth 
of pirated/counterfeit merchandise seized by its customs 
agents, a 45 percent increase compared to the same period in 
2004.  An additional 26 million reais (about USD 10.8 
million) worth of goods were seized in July.  Receita 
Federal's new specialized DIREP division carried out 607 
operations during the first half of 2005.  Throughout 
Brazil, Receita claims that almost 700 buses used to 
transport pirated products across the border have been 
seized in 2004 and 2005; hundreds have been arrested and 
over 7,000 fined. 
 
10. (U) Looking specifically at results for Foz do Iguacu, 
Receita seizures through September were valued at more than 
USD 43.8 million, around a 100 percent increase over the 
value seized during the same months in 2004, and already a 
31 percent increase over that seized in all of last year 
(USD 33.5 million).  Receita Federal estimates that the 
volume of pirated goods and contraband moving through Foz do 
Iguacu has decreased between 60 and 70 percent since the 
beginning of 2004. 
 
11. (U) Receita Federal's seizures in Foz do Igaucu 
specifically of media for music, films and software have 
continued to climb, consistent with the increase it recorded 
for overall merchandise seizures.  In 2003, Receita 
confiscated 2,373,166 units of Virgin CDS/DVDS, recorded 
CDs/DVDs, tapes, and game cartridges of which the vast 
majority (2,255,048) were virgin CDs.  In 2004, the total 
seized in Foz do Iguacu reached 3,872,277 with virgin CDs 
accounting for 3,517,985.  Through July this year, the 
number of units seized totaled 4,165,443, over double the 
amount confiscated in the same period last year.  While 
virgin CDs still accounted for the vast majority 
(4,140,454), the number of virgin DVDs seized jumped from 
14,157 in 2004 to 151,457 so far this year.  Receita efforts 
to stop entry of pirated goods at the border were enhanced 
through the GoB's elimination in September 2004 of the "free 
transit" status that had existed for CD-Rs, and their 
plastic cases entering Brazilian ports for Santos and 
Paranagua, ostensibly bound for Paraguay; free transit had 
been abolished for recorded CDs in 2001. 
 
Highway Police: 
 
12. (U) Brazil's Federal Highway Police have also seized 
record volumes of goods.   Looking just at CDs and DVDs, 1.6 
million units were seized between January and September this 
year, compared with 568,614 and 548,269 seized in all of 
2003 and 2004, respectively. 
 
State and Local Enforcement - Marketplaces: 
 
13. (U) Although federal agencies have significantly stepped 
up seizures, pirated products are still readily available in 
local marketplaces throughout Brazil.  According to the CNCP 
Executive Secretary, the Council's initial focus was on 
coordinating federal agencies in order to stem the tide of 
pirated products entering the country.  Now that 
coordination at the federal level has improved, the CNCP is 
increasing its focus on enforcement at state and local 
levels.  The Council has incorporated IPR crimes into the 
nation's Single Public Security System (SUSP) and the 
Secretary for National Public Security (SENASP) joined the 
 
SIPDIS 
CNCP in August 2005; the CNCP has charged the SENASP with 
mobilizing state and municipal authorities to fight piracy. 
Unlike federal level actions which focus mainly on gangs and 
large scale operations at the border, state and municipal 
actions focus more on the smaller producer of pirated 
products and at point-of-sale enforcement. 
 
14. (U) The CNCP and SENASP are encouraging states to 
establish specialized IPR crime units within their police 
forces and/or tax departments; Sao Paulo and Rio de Janeiro 
already had such units, but have been joined by the states 
of Pernambuco, Rio Grande do Sul (in process), and Santa 
Catarina.  The CNCP's goal is to establish specialized units 
in each state's police force, as well as establish state and 
local anti-piracy councils that mirror the federal-level 
CNCP.  Only the cities of Rio de Janeiro and Porto Alegre 
have so far established such councils.  Some cities have 
established specialized units/offices within their public 
prosecutors' office. 
 
15. (U) On September 21, 2005, the CNCP and SENASP announced 
a National Operation for Combating Piracy, which SENASP is 
coordinating with state police forces.  In the first four 
days of the operation, over 1 million pirated products were 
seized and more than 200 persons detained.  The operations 
were carried out in Rio de Janeiro, Sao Paulo and Minas 
Gerais; they are slated to expand to an additional three 
states in October, and to include at least 10 states by the 
end of the year.  The operations are focusing on producers 
and street vendors in local markets, including some 
identified by U.S. copyright representatives as of 
particular interest. 
 
16. (U) In Sao Paulo city alone, raids conducted September 
20-23 in the Galeria Page, the 25 de Marco avenue, Santa 
Efigenia, Santana, Voluntarios da Patria, Centro da Penha, 
Pinheiros, Largo 13, Sao Mateus, and Sao Miguel resulted in 
the seizure of around 482,000 CDs, DVDS, and tapes worth 2.2 
million reais.  In Rio de Janeiro, actions were taken in the 
camelodromo de Rua Uruguaiana (on list of well-know 
marketplaces), as well as areas in the North and West of the 
city and the Baixada Fluminense.  Local police claim that 
due to actions, piracy in Rio's area of Niteroi has been 
nearly eradicated.  Police actions in Rio de Janeiro between 
January and August resulted in the seizure of 591,931 
pirated products compared to 778,838 in all of 2004.  In 
extensive press reports, the CNCP Executive Secretary noted 
the importance of these raids not only in terms of removing 
pirated products from the streets, but also as a means of 
educating the public that piracy is a crime. 
 
17. (U) Since February 2005, the CNCP has posted over 400 
news articles on piracy, many chronicling local police 
actions.  A sampling of info provided by the GoB and these 
news articles for later 2004 through 2005 reveals the 
following police actions at markets the private sector has 
identified as priorities:  downtown Porto Alegre (11/3/2004) 
(11/18/2004), camelodromos Campinas (12/2/2004);  Rua 
Uruguaiana - Rio de Janeiro (12/16/2004) (1/10/2005) 
(1/19/2005) (1/25/2005), Paje Gallery - Sao Paulo 
(1/6/2005); Rua Santa Efigenia - Sao Paulo (1/19/2005); 
Stand Center Gallery - Sao Paulo (1/27/2005) ; Victoria da 
Conquista - Bahia (2/16-18/2005);  and Paraguay Fair (Import 
Fair) - Brasilia (4/12/2005)(6/7/2005) 
(10/14/2005.  The Portuguese language version of CNCP's 
August 2005 report "Brazil Against Piracy" also contains 
articles detailing police actions in the various states. 
 
Arrests: 
 
18. (U) Overall statistics on arrests are not available. 
According to ADEPI, the Motion Picture Associations' 
enforcement group, this year 182 people had been arrested 
for audiovisual piracy through July 2005, compared with 154 
for the entire year of 2004. 
 
Judiciary 
--------- 
 
19. (U) Although merchandise seizures and arrests are up, 
Brazil's judicial system remains a weak link in its efforts 
to confront piracy.  The prosecution process is slow and 
uncertain; piracy cases have traditionally taken about 5 
years to work their way through the system.  Historically, 
the ratio of convictions to the numbers of police raids is 
less than 1%.  To date, prosecutions have been few and 
penalties are too low to act as effective deterrents. 
 
20. (U) So far this year, 10 people have been convicted for 
audiovisual piracy.  All received a sentence including 
prison time plus fine, although only one is actually serving 
time.  This year marks the first time a person convicted for 
piracy is serving a prison sentence.  Part of the problem 
has been that current cases pre-date a July 2003 stiffening 
of penalties associated with piracy; the change was not 
retroactive.  Under the earlier, lower penalties, Brazilian 
law allows the judge to commute a jail term to a fine, if 
for instance, the defendant is a first-time offender.  For 
crimes committed after July 2003, piracy carries a penalty 
of a 2 to 4 year jail term plus a fine.  (The person serving 
time was caught in the act while on parole.) 
 
21. (U) In compliance with the CNCP's action plan, members 
of the Council have been engaged in a dialog with judges on 
the supreme court and in the federal court system to educate 
them on the seriousness of the crime and the need for 
improved adjudication of piracy cases and stiffer penalties. 
As part of a judicial reform initiative, the Supreme Court 
is planning to establish 183 new federal courts by the end 
of 2005; a total of 400 would be established over eight 
years.  Congressional approval is pending for this 
initiative.  The President of the Supreme Court justified 
the need for additional jurisdictions to increase the 
courts' effectiveness and competency in dealing with the 
worst crimes, listing piracy alongside drug trafficking, 
arms running, and money laundering.  The court is also 
considering establishing some form of IPR expertise within 
the judicial system, either in the form of specialized 
courts or judges with specialized knowledge.  The CNCP has 
limited authority to force changes within the Brazilian 
judiciary, but its Executive Secretary has expressed 
confidence that the conviction of Law Kin Chong (see below) 
and judicial reform initiatives reveal a changing mindset 
within the judiciary. 
 
Law Kin Chong: 
 
22. (U) This year, the notorious smuggler Law Kin Chong was 
sentenced to four years of partial confinement and an 
associate of Chong's received a four and one-half year jail- 
term related to their attempts to bribe the head of a 
Congressional Investigative Committee (CPI) on Piracy in 
2004 (ref C).  While the case against Chong was for bribery, 
not piracy, the GoB counts his conviction as a significant 
accomplishment and a further indication of its commitment to 
combat piracy; in previous run-ins with the law, Chong had 
always managed to work the legal system to avoid 
prosecution.  In April 2005, the Federal Police raided three 
secret depots in warehouses belonging to Law Kin Chong 
 
SIPDIS 
seizing 25 million reais worth of merchandise.  On May 17, 
2005 Receita Federal levied fines of USD 23.2 million and 
USD 6.4 million against two firms belonging to the syndicate 
led by Law Kin Chong; the charges were illegal importation 
and false customs declarations for hundreds of thousands of 
CDs and DVDs. 
 
International Cooperation 
------------------------- 
 
23. (U) In November 2004, Brazil forged an operational 
agreement with its Mercosul partners (Argentina, Uruguay, 
and Paraguay) to provide for establishment of 
joint/coordinated actions to fight piracy.  A June 21, 2005, 
Presidents Lula da Silva (Brazil) and Duarte (Paraguay) 
signed a memorandum of understanding establishing a joint 
intelligence group in the border area for the purpose of 
combating piracy, counterfeiting, and smuggling. 
 
24. (U) Brazil's law enforcement agencies have worked 
closely with Interpol over the last year.  A Federal Police 
Office was seconded to Interpol's IPR Crime Unit in Lyon. 
Ronald Noble, General Secretary of Interpol, participated in 
the Regional Forum for Latin America in the International 
Congress to Combat Piracy that was held in early June in Rio 
de Janeiro.  Noble met with President da Silva and Interpol 
is to provide technical assistance in establishing 
specialized units within state police forces to combat 
piracy.  The GoB worked closely with Interpol on "Operation 
Jupiter - South America," a major anti-counterfeiting 
operation in the tri-border area of Argentina, Brazil and 
Paraguay, that was conducted in a collaborative effort 
between police, customs and industry. 
 
25. (U) In July, USG-GoB bilateral law enforcement technical 
cooperation talks were launched (ref D).  In two meetings to 
date, the GoB interlocutors have displayed an interest in 
strengthening bilateral collaboration and in exploring how 
lessens learned by U.S. law enforcement agencies involved in 
anti-piracy work can be applied in Brazil. 
 
Education Campaigns 
------------------- 
 
26. (SBU) According to the CNCP Executive Secretary, the 
private sector has dropped the ball in this area.  He 
claimed that when discussing priorities within the Council, 
the private sector wanted the GoB to focus on law 
enforcement, which it did, but the private sector had 
committed to taking the lead in the area of education, which 
it has not.  No national education campaign has been 
launched by the CNCP, even though item 22 of its action plan 
calls for one.  The Motion Picture Association's Steve Solot 
also confided to Econoff that the private sector has yet to 
follow through in this area. 
 
27. (U) However, some government groups are moving forward. 
For instance, the National Union for Receita Federal 
technical staff, in cooperation with the Ministry of 
Justice, has launched a national campaign entitled "Original 
- Choose the Guarantee" for schools.  Likewise Brasilia's 
Federation of Industries recently launched its "I Want the 
Original" campaign and is distributing 10,000 leaflets in 
schools.  Public awareness has also been raised through now 
ubiquitous IPR events; there have been 13 major IPR 
seminars/events in the country during the first 9 months of 
the year and more locally.  The week of June 8 was IPR week 
in Rio de Janeiro which hosted the Regional Forum for Latin 
America in the International Congress to Combat Piracy 
meeting, a separate Interpol meeting, as well as training 
for judges and hundreds of police and customs agents. 
 
Legislative Initiatives 
----------------------- 
 
28. (SBU) Building on bills conceived by deputies of the CPI 
on Piracy, the CNCP's Legislation Working Group, with input 
from a private sector forum, has developed draft legislation 
which proposes a number of changes in the country's penal 
code and industrial property law.  Most suggested changes 
are practical in nature, such as providing a right-holder 
with additional time for initiating legal proceedings; 
providing law enforcement agencies with the authority to 
seize maritime and aviation craft, in addition to buses, 
used to transport pirated goods; clarification of procedures 
for seizing and destroying goods, as well as enabling law 
enforcement agencies the ability to retain only samples for 
use in litigation; introducing differentiation in penalties 
between individual offenders (camelo owners) and those 
involved in a larger operation; holding responsible owners 
of media in which advertisements promote buying, renting, 
exporting or importing of goods produced in violation of IPR 
laws; incorporating penalties for software copyright 
violation into the penal code; and stiffening penalties if 
pirated goods are imported. 
 
29. (SBU) The CNCP Executive Secretary and Foreign Ministry 
interlocutors have expressed concern to post that placing 
such a wide array of changes within one piece of legislation 
may hamper speedy consideration within Congress, but note 
that the content and form has been determined largely buy 
private sector council members.  The CNCP as a whole will 
debate the draft legislation October 31, with approval 
expected at its November meeting. 
 
DANILOVICH