![Keep Us Strong](../../../static/gfx/ja-cg.jpg)
![WikiLeaks logo](../../../static/gfx/WL_Hour_Glass_small.png)
Currently released so far... 3954 / 251,287
Articles
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Amsterdam
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Casablanca
Consulate Cape Town
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kigali
Embassy Khartoum
Embassy Kampala
Embassy Kabul
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lagos
Mission USNATO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Maputo
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Montreal
Consulate Monterrey
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate Shenyang
Consulate Shanghai
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
USUN New York
USEU Brussels
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Browse by tag
AF
AM
AE
AG
AR
ASEC
AS
AU
AORC
AJ
AMGT
AGMT
AFIN
APER
ABUD
ATRN
AEMR
ACOA
AEC
AO
AX
AMED
ADCO
AODE
AFFAIRS
AC
AL
ASIG
ABLD
AA
AFU
ASUP
AROC
ATFN
CH
CE
CA
CASC
CU
CLINTON
CO
CI
CVIS
CDG
CIA
CACM
CDB
CS
CBW
CD
CV
CMGT
CJAN
CG
CF
CN
CAN
COUNTER
CIS
CM
CONDOLEEZZA
COE
CR
CY
CTM
COUNTRY
CLEARANCE
CPAS
CWC
CT
CKGR
CB
CACS
COM
CJUS
CARSON
COUNTERTERRORISM
EUN
EG
EAID
ENRG
ETTC
EFIN
ECON
ETRD
EPET
EINV
EMIN
ECIP
ECPS
EINDETRD
EAGR
EU
EN
EZ
ELAB
ER
ET
ES
EUC
EI
EAIR
EIND
EWWT
ELTN
EREL
ECIN
EFIS
EINT
EC
ENVR
ECA
EXTERNAL
EINVETC
ENIV
EINN
ENGR
EUR
ESA
ENERG
EK
ELECTIONS
ECUN
EINVEFIN
IR
IS
IZ
INRB
IAEA
IN
IT
ID
IO
IV
ICTY
IQ
ICAO
INTERPOL
IPR
IRAJ
INRA
INRO
IC
IIP
ITPHUM
IWC
ISRAELI
IRAQI
ICRC
IMO
IF
ILC
IEFIN
INTELSAT
IL
IA
IBRD
IMF
ITALY
ITALIAN
KCOR
KDEM
KNNP
KU
KWBG
KPAL
KN
KS
KZ
KAWK
KISL
KPAO
KCRM
KJUS
KSEC
KIPR
KGHG
KIFR
KTFN
KDRG
KV
KSUM
KWAC
KAWC
KDEMAF
KFIN
KGIC
KTIP
KOMC
KHLS
KSPR
KGCC
KPIN
KG
KBIO
KHIV
KSCA
KE
KFRD
KPKO
KNUC
KMDR
KPLS
KOLY
KUNR
KIRF
KIRC
KACT
KRAD
KCOM
KMCA
KHDP
KVPR
KDEV
KWMN
KTIA
KPRP
KCIP
KCFE
KOCI
KTDB
KMRS
KLIG
KBCT
KICC
KGIT
KSTC
KPAK
KNEI
KSEP
KPOA
KFLU
KNUP
KNNPMNUC
KO
KTER
KHUM
KRFD
KBTR
KDDG
KWWMN
KFLO
KSAF
KBTS
KPRV
KMPI
KNPP
KNAR
KWMM
KERG
KTBT
KCRS
KRVC
KR
KPWR
KMIG
MOPS
MZ
MO
MNUC
MASS
MARR
MY
MEPP
MCAP
MA
MR
ML
MX
MIL
MTCRE
MPOS
MOPPS
MTCR
MAPP
MU
MG
MASC
MCC
MK
MTRE
MP
MDC
MAR
MEPI
MRCRE
MI
MT
MQADHAFI
MD
MAPS
MUCN
PREL
PTER
PGOV
PO
PHUM
PINS
PARM
PK
PINR
PINT
PBTS
PROP
PE
PL
PREF
POGOV
PINL
POL
PBIO
PSOE
PHSA
PKFK
PGOF
PARMS
PA
PM
PMIL
PTERE
PF
PALESTINIAN
PY
PGGV
PNR
POV
PAK
PAO
PFOR
PHALANAGE
PARTY
PNAT
PROV
PEL
PGOVE
POLINT
POLITICS
PEPR
PSI
PU
POLITICAL
PARTIES
PECON
SNAR
SA
SY
SOCI
STEINBERG
SP
SENV
SCUL
SF
SO
SR
SG
SW
SU
SL
SMIG
SN
SHUM
SZ
SYR
ST
SANC
SC
SAN
SIPRS
SK
SH
SI
UNSC
UP
UK
USEU
UG
UNMIK
UV
UZ
UY
UN
US
UNGA
UNO
USUN
UE
UNESCO
UAE
UNEP
USTR
UNHCR
UNDP
UNHRC
USAID
UNCHS
UNAUS
Browse by classification
Community resources
courage is contagious
Viewing cable 06SAOPAULO352, VISIT OF CODEL GRASSLEY TO SAO PAULO: ETHANOL AND FLEXFUEL-ENGINE AUTOMOBILES
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #06SAOPAULO352.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
06SAOPAULO352 | 2006-03-31 17:05 | 2011-01-12 00:12 | UNCLASSIFIED | Consulate Sao Paulo |
VZCZCXRO9155
PP RUEHRG
DE RUEHSO #0352/01 0901758
ZNR UUUUU ZZH
P 311758Z MAR 06
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 4790
INFO RUEHBR/AMEMBASSY BRASILIA 5938
RUEHRG/AMCONSUL RECIFE 2809
RUEHRI/AMCONSUL RIO DE JANEIRO 6956
RUEHBU/AMEMBASSY BUENOS AIRES 2128
RUEHCV/AMEMBASSY CARACAS 0226
RUEHBO/AMEMBASSY BOGOTA 1338
RUEHPE/AMEMBASSY LIMA 0928
RUEHAC/AMEMBASSY ASUNCION 2475
RUEHMN/AMEMBASSY MONTEVIDEO 1889
RUEHSG/AMEMBASSY SANTIAGO 1636
RUEHLP/AMEMBASSY LA PAZ 2680
RUCPDOC/USDOC WASHDC 2344
RUCLRFA/USDA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RHMFISS/CDR USSOUTHCOM MIAMI FL
UNCLAS SECTION 01 OF 04 SAO PAULO 000352
SIPDIS
SIPDIS
STATE FOR EB/ESC/IEC/ENR AND EB/TPP/ABT/ATP
STATE ALSO FOR WHA/BSC, WHA/EPSC, AND WHA/PDA
STATE PASS USTR FOR AUSTR EISSENSTAT AND SULLIVAN/LEZNY
H PASS SENATORS GRASSLEY, CRAPO, ALLARD
H ALSO PASS REPS KING, ENGLISH, CARNAHAN, PETERSON, ISSA NSC FOR CRONIN TREASURY FOR OASIA, DAS LEE AND FPARODI USDOC FOR 4332/ITA/MAC/WH/OLAC/SHUPKA
USDOC ALSO FOR 3134/USFCS/OIO/EOLSON/DDEVITO/DANDERSON TAGS: OREP PGOV PREL EAGR ECON ENRG BR
SUBJECT: VISIT OF CODEL GRASSLEY TO SAO PAULO: ETHANOL AND FLEXFUEL-ENGINE AUTOMOBILES
REF: (A) RECIFE 40; (B) BRASILIA 498
------- SUMMARY -------
¶1. Senator Charles Grassley (IA) - Chairman of the Senate Finance Committee - and his delegation visited Maringa, Parana state and Sao Paulo, March 22-23. Other members of the delegation included Senators Crapo (ID) and Allard (CO); Representatives Peterson (MN), English (PA), King (IA), Issa (CA), and Carnahan (MO); and Assistant U.S. Trade Representative for the Americas Everett Eissenstat. In Maringa the delegation toured a sugar mill and ethanol plant. In Sao Paulo they met with the leadership of the Federation of Industries of Sao Paulo State (FIESP) and the American Chamber of Commerce (AMCHAM), and visited a General Motors facility where they learned about the manufacture and operation of FlexFuel-engine automobiles. This cable addresses the delegation's visit to the sugar mill, ethanol plant and the automobile factory, and discussions concerning ethanol and FlexFuel-engine automobiles. The trade aspects of the visit, and Rep. Issa's separate meeting with the Brazilian-Lebanese community, will be reported septels. End Summary.
--------------------------------------- VISIT TO A SUGAR MILL AND ETHANOL PLANT ---------------------------------------
¶2. On March 22, CODEL Grassley traveled to Maringa, Parana state to visit the Vale do Ivai sugar mill and ethanol plant. The group learned about the mill's operations as well as its business activities, including partnerships in port facilities and a trading company focused on ethanol and sugar exports. Mark Lyons, managing director of Vale do Ivai's American joint venture partner Alltech, described Alltech's activities in Sao Pedro do Ivai. 3. The CODEL took a walking tour of the crushing facilities, distilleries and Alltech's new yeast fermentation facility. Delegation members asked a broad range of questions on such topics as production costs and productivity for sugar and ethanol, use of ethanol in the Brazilian fuels matrix, agricultural production techniques in southern Brazil, and environmental controls in plant operations. After the tour, the delegation, along with the Mayor of Sao Pedro do Ivai, the President and Superintendent of the Parana Sugar and Alcohol Producers' Association, and the Director of Cocamar, a major agricultural cooperative in the region, attended a lunch hosted by the mill.
--------------------------------------------- --- CONVERSATIONS ON ETHANOL AT THE AMCHAM BREAKFAST --------------------------------------------- ---
¶4. During a discussion of trade issues (septel) at the delegation's breakfast meeting at AMCHA, Board Member Joseph Tutundjian suggested that ongress consider forming a U.S.-Brazil Ethanol Cucus as a symbolic gesture with the possibility of aking substantive progress on an issue importantto both sides. This suggestion led to a broaderdiscussion of ethanol. One immediate problem isthat demand is rapidly outstripping supply, drivin prices up. Both countries need to prioritize exanding their production facilities to satisfy grwing demand. In Brazil's case, according to theAMCHAM members, there is a shortage of the invesment capital needed to expand the capacity of refieries. Impediments to investment cited by AMCHAM embers include the high cost of capital in Brazi, caused in part by an extremely high tax burden particularly on industrial production; the burden placed on
SAO PAULO 00000352 002 OF 004
American companies investing and operating in Brazil by the Sarbanes-Oxley Act; and inefficient infrastructure, especially the high cost of transportation and inefficient port facilities.
--------------------------------------------- GENERAL MOTORS - FOCUSING ON EMERGING MARKETS ---------------------------------------------
¶5. CODEL Grassley next visited General Motors do Brasil (GMB) in Sao Caetano do Sul (greater Sao Paulo). GMB President Ray G. Young greeted the delegation and gave an overview of the company's history, followed by a presentation on GMB's experience with FlexFuel (engine systems that run on gasoline, ethanol, or any mix of the two fuels). Young pointed to GMB's extensive experience in the Brazilian market - the company has been operating in Brazil since 1925. Currently, 90 percent of GMB's product is produced locally because Brazil's high tariffs on automobiles (35 percent) discourage imports. GM believes in the BRIC moniker (identifying the key emerging markets as Brazil, Russia, India, and China) and is currently focused on operations in these key markets. Brazil has been a particularly successful market for GMB, precisely because it is so closed to imports. Accordingly, GMB engineers its cars specifically for the Brazilian market, and several of the models produced here are exclusive to Brazil. Because Brazil is still a relatively low-income economy, the key consumer factors in Brazilian auto sales are low price and high resale value - two factors that would later come into play with FlexFuel popularity.
---------------------------- THE RISE AND FALL OF ETHANOL ----------------------------
¶6. GMB has over thirty years of experience with ethanol as an automobile fuel. During the 1970s oil crisis, the GoB began to regulate gasoline usage. In 1976, the GoB banned the use of gasoline in auto races. Race-car engine manufacturers switched to ethanol to use in Brazil's popular Formula 1 races. The racetrack proved a useful testing ground for the technology, and in 1978 when the GoB mandated that all government fleets be run on alternative fuels, GMB stepped in with its ethanol engine technology. Mass ethanol engine production began in earnest in 1979, the year that the GoB began to offer attractive tax incentives for purchasers of alternative fuel cars. Throughout the early 1980s, ethanol technology flourished and consumer demand rose dramatically. By 1986, ethanol-burning cars accounted for 90 percent of Brazilian automobile production. The ethanol heyday was short-lived, however. In 1988-89, sugar prices rose sharply. From one day to the next, ethanol was no longer a cost-competitive fuel. As a result, thousands of Brazilian consumers who had purchased ethanol cars lost their investments and Brazilians generally lost confidence in alternative fuel technologies.
------------------------- THE EMERGENCE OF FLEXFUEL -------------------------
¶7. It wasn't until 1992 that GMB began to run its first FlexFuel studies. Brazilian consumers felt burned by their experience with ethanol engines in the 1980s. GMB, however, still believed in ethanol technology and sought to develop an engine that could serve as a hedge against fuel price fluctuations. FlexFuel engines were developed with this goal in mind, with flexible fuel usage, meaning that the engines can run on gasoline, ethanol, or any combination of the two fuels. The FlexFuel engine system has a fuel sensor that continually monitors the mix of ethanol and gasoline in the tank and instructs the engine to alter performance based on the fuel mix.
SAO PAULO 00000352 003 OF 004
When burning ethanol, for example, pistons need a higher compression ratio, and the fuel sensor instructs the engine to adjust accordingly. The first FlexFuel concept car was built in 1995, and mass production for the consumer market began in 1999.
-------------- FLEXFUEL MANIA --------------
¶8. In 2004, demand for cars with FlexFuel engines began to soar. Because of widespread ethanol use in the 1980s, Brazilian gas stations were still ethanol-capable. Moreover, ethanol distribution networks were still in place. In 2004-05, with ethanol prices half those of gasoline, owners found that their cars were not only cheaper to operate, but that their resale value was at an all-time high. These two factors drove FlexFuel production to higher-than-anticipated levels. Industry estimates in 2003 placed FlexFuel market saturation at 80 percent by 2008. FlexFuel's popularity, however, shattered these estimates, and by 2005 FlexFuel cars accounted for 90 percent of Brazilian new car production. In 2005, GMB's flagship Sao Caetano do Sul plant was 100 percent FlexFuel production, and overall GMB production was 98 percent FlexFuel. All major automotive companies operating in Brazil - Ford, Fiat, Renault, Volkwagen - were producing cars with FlexFuel engines. By all measures, FlexFuel was a hit. Brazil began to draw international attention and kudos for its widespread use of alternative fuel technology.
------------------- FLEXFUEL CHALLENGES -------------------
¶9. FUEL QUALITY - Despite FlexFuel's success, the technology is not without its challenges. One concern is low fuel quality. GMB reports that Brazilian gas stations frequently dilute their fuel (gasoline and ethanol) with water. This can confuse the internal sensor mechanism in the FlexFuel engine and compromise fuel efficiency. Currently, GMB is campaigning against this practice at the fuel distributor level and working to re-engineer the sensor system to detect water in the fuel mix.
¶10. RISING ETHANOL PRICES -
Another concern is the recent increase in the price of ethanol over the first few months of 2006. The popularity of FlexFuel cars and the increasing price of sugar on the international market have constricted ethanol supply in Brazil's internal market and have consequently driven up ethanol prices. Brazil is at the tail end of the 2005 sugar harvest season and is just beginning to process last year's sugar yield. Thus, domestic ethanol supply may pick back up in a few months. In addition to ethanol's higher price, the fuel is also less efficient than gasoline. Although it increases an engine's horsepower by 2 to 5 horses, ethanol offers fewer miles per gallon than gasoline.
¶11. ETHANOL'S BREAK-EVEN POINT -
The break-even point for choosing ethanol over gasoline is 70 percent. This means that as long as the price of ethanol is 70 percent of the price of gasoline at the pump or less, it is more economical for consumers to fill-up with ethanol. If the price of ethanol exceeds 70 percent of that of gasoline, then gasoline is the better choice. Ethanol's 70 percent benchmark represents a trade-off between price and efficiency. In Sao Paulo, the biggest FlexFuel and ethanol market, the price of ethanol is currently 71 percent of that of gasoline, so right now it s more cost-effective for FlexFuel car owners to buy gasoline. If the price of ethanol remains over 70 percent for a long period of time, this may suppress demand for FlexFuel cars.
SAO PAULO 00000352 004 OF 004
¶12. A SILVER LINING - Overall, GMB believes that the spike in ethanol prices can be positive, because it shows the consumer the flexibility of FlexFuel technology. There is no loss to consumers if the price of ethanol spikes - they can simply switch to gasoline. GMB hopes this will go a long way towards restoring consumer confidence in alternative fuels, a confidence that has been lagging since the ethanol spike of the late 1980s.
------- COMMENT -------
¶13. Brazil's successful ethanol fuel model has generated great interest in the United States and throughout the world. FlexFuel technology appears to have solved the problem of gasoline price fluctuations. The main constraints to even greater internal use and exports are problems in expanding the supply of ethanol quickly enough. End Comment. 14. This cable was coordinated/cleared with Embassy Brasilia and with Senator Grassley's office.
MCMULLEN