Cable from the Brazilian Embassy in Washington to Foreign Ministry, 'Outer space. Expansion of the international market for spatial services. Brazilian insertion. Entrepreneurial interest. CLA. ECCO. Considerations.'

From: Embassy in Washington                                       To: EXTERIORES

CONFIDENTIAL

No. 1058

DMAE/DCS/

Date: 26/06/97

Classification: MESP

Outer space. Expansion of the

international market for spatial

services. Brazilian insertion.

Entrepreneurial interest. CLA. ECCO.

Considerations.

Summary: The quick evolution of the international market of spatial services requires definitions about questions like the commercialization of launchings at Alcântara and the Project ECCO, in order to keep the advantages of Brazil in a competitive market.

1058  51225 – The realization in the next few years of projects of commercialization of spatial services proposed by large companies from the United States and other countries mainly in the form of consortia, confirms the prospects for the growth of this market and the possibilities for Brazil to utilize the niches in which it has competitive conditions.

2.  The quick evolution of these new initiatives, which often involve companies that already have shown an interest in establishing partnerships with Brazil, highlights the importance of definitions in at least two relevant areas for the insertion of the country in the international market of spatial services: a) the regulation of the process of commercialization of services from the Alcântara launching center and b) the definition of the Brazilian participation in the ECCO project.

3. In what regards CLA, it must be recalled that despite its geographically privileged location and the existence of infrastructure at the site, important investments still need to be made and other centers are gearing up to grab the launching market. In this context, the American government recently authorized the operation of a commercial spaceport in Florida and the French authorities are promoting feasibility studies with a view to commercialize launching services from the Ariane facilities that will be idle after the entry into service of Ariane 5. The recent agreement of Lockheed with Argentina is another illustrative example.

4.  The expected transfer of the administration of CLA to Infraero and the establishment of the related norms will be essential, in my view, to prevent the loss of business in this area. The window of opportunity to obtain the best proposals is already open and proposals of long term “business plans” as those intended for Khourou, or even one-off initiatives will not the indefinitely available.

5.  In what regards Project ECCO, the initial proposal from INPE and AEB of a constellation of satellites at low orbit, at first supported by Telebrás, raised the interest of important American firms, headed by Bell Atlantic (currently Bell Atlantic/Nynex, which controls a large part of the East Coast market) joined in the consortium Constellation Communications International (CCI). However, after having put forward the possibility of association for more than two years, Telebrás moved away from that possibility.  The long wait thus imposed to the initiative at least benefitted the competitors. Nevertheless, subsequent contacts by CCI with INPE, AEB and national companies, point to other opportunities for Brazilian participation in ECCO, which continues to interest those governmental agencies. Doubts on two main areas, however, still remain: a) what are the requirements for Brazilian stock participation in the company ECCO Brazil, whose creation is held up and contingent on that information; b) what is the form of association of INPE/AEB in the project, in the light of the legislation on bids.

6.  Such doubts are natural, especially in a market in which Brazil is taking its first significant steps. But potential partners do not fail to notice the risk that a continuing lack of definitions represents for the enjoyment of the opportunities in the present configuration of the market, the effects of which may still be felt during the coming decades. Obviously, the regulation of new areas requires careful study in order to find the necessary support in the legal-institutional order. However, in the face of the growing drive of the spatial market, it would be convenient, in my view, to widen the scope of the identification of opportunities.

PAULO TARSO