regarding the Brasiguayos and Brazil breaking away from the tradition of
   avoiding hard decisions...
   Can you elaborate what type of decisions he was referring to?  What course
   of action Brazil might take and what would be the tipping point?  I know
   that up until now Lugo hasn't been able to control the issue in Paraguay
   and there is still quite a bit of tensions between locals
   (Paraguayan/guarani) and Brazilians, those of Brazilian descent.  Would
   Brazil need to act before Lugo is replaced in 2013?

     ----------------------------------------------------------------------

   From: "Paulo Gregoire" <paulo.gregoire@stratfor.com>
   To: "watchofficer" <watchofficer@stratfor.com>
   Sent: Wednesday, September 7, 2011 3:49:27 PM
   Subject: INSIGHT -- Several issues about Brazil - BR 707

   CODE: BR 707
   ATTRIBUTION: Confederation Partner
   SOURCE DESCRIPTION:  Chief analyst of a webiste in Brazil especialized in
   Brazilian military intelligence and defense policy
   PUBLICATION: if useful
   SOURCE RELIABILITY: B
   ITEM CREDIBILITY: B
   SPECIAL HANDLING: none
   SOURCE HANDLER: PAULO

   I had lunch with our confed partner. We talked about several issues, I
   will start from some of the issues that Karen had requested about. 
   Source said that the govt will have to import ethanol because due to the
   bad sugar cane harvest and that sugar prices went up many sugar mills
   preferred selling sugar than using it for ethanol. The govt had also to
   decrease the level of ethanol in the gasoline mixture because there is a
   lack of ethanol in the domestic market. The govt, however, has decided to
   give tax exemption  to sugar mills and decrease the cost in order to use
   the sugar cane for the ethanol production. He thinks this is temporary,
   this shortage of ethanol occurred because of the bad harvest and high
   price of sugar in the international market, but he believes the govt will
   continue supporting the ethanol production and next year if everything
   occurs fine with the sugar cane harvest they will not have problems in
   supplying the domestic market and then also be able to export to other
   markets.
   The relationship between Rousseff and the business community is good. He
   said that for the bankers the interest rate of 12% is still very good for
   them to make pretty good money and the big businesses in Brazil tend to
   support more inflationary policies as they want to sell and grow. They
   were the ones who have been pressuring the govt to decrease interest
   rates.
   Source talked to the Argentine Defense Minister Arturo Puricelli about the
   possible cooperation projects between Brazil and Argentina. Source said
   the most advanced one is the production of the KC 390 airplane which parts
   of the airplane are being produced in Cordoba Argentina and the rest in
   Brazil by Embraer. Source said that Argentina is interesting in
   participating in the production of the armored vehicle Guarani, but Brazil
   said that not it is too late as this Brazilian along with the company
   Iveco are already in the latest stages in the development of this tank.
   Another joint production that that is making progress between both
   countries is the Gaucho vehicle, which source said that it is a piece of
   shit but it will be good enough to sell it and make some money. The joint
   space agency is something both countries have an interested in moving
   forward. 
   One interesting thing we discussed was BrazilA's relationship with the
   China. I  asked him why in his opinion there are so many people in the
   press, politicians, academia and even some businesses in Brazil who tend
   to call China a strategic partner if Brazil mostly sells iron ore to them
   and also have conflicting interests like an enlargement of the UN security
   council that could include Brazil and Japan. Source told me I am not
   saying anything, just look at the my hand, his hand was showing money. I
   asked him if the Chinese were bribing people to say nice things about
   China, source did not say anything just nodded his head. 
   I also talked to source about AmorimA's relationship with the armed forces
   and some possible civil-military tension. Source said that the beginning
   of AmorimA's bad relationship with the Armed Forces was when Amorim was
   foreign minister and the govt sent a bill to congress saying that if there
   was any attack to a Brazilian company abroad that could be perceived as an
   attack to the Brazilian territory as well. Amorim accused the military
   people of influencing the govt to send that bill and went public to accuse
   the armed forces. The person who actually told Lula to send that bill to
   Congress at the time was the current President Rousseff and the armed
   forces had asked Amorim to apologize to them. Since then the relationship
   between Amorim has always been bad with the armed forces. Now he is the
   minister of defense and the military people do not like it. I asked then
   if he thought there was going to be some sort of tension. Source said look
   the generals do not want trouble they wanna enjoy their fat salaries and
   have a good life, they do not want to confront the govt, the colonels want
   to be where the generals are and for that they have to play the game, and
   the lower ranks do not know where they stand and just follow the flow.
   Plus, society in general does not support the armed forces so there is
   nothing the military people can do about.
   Source also talked about the Brasiguaios, he said that this is an
   increasingly hot issue and he thinks this is the only issue that he sees
   Brazil breaking away from its tradition of avoiding hard decisions because
   the govt realizes that although they have a good relationship with Lugo,
   Lugo is too weak to impose any sort of control. I even joked saying that a
   possible conflict between Argentina and the UK over the
   Malvinas wouldn A't be an issue Brazil would get involved and he said no.
   He said Brazil would give some sort of rhetorical support and some
   logistical support as well but not really. Source thinks that the issue of
   Brasiguaios would be the main one, which Brazil could break away from its
   tradition of avoiding hard decisions. 
   Source also said that the federal police is increasing the number they
   have been monitoring, now they monitor 40 thousand people. He said that
   the workerA's party has control over the main guys at the federal police
   and use that to monitor their political enemies.