BRAZIL CORRUPTION SCANDAL UPDATE: JOSE DIRCEU

C O N F I D E N T I A L SECTION 01 OF 02 BRASILIA 002219

SIPDIS

TREASURY FOR PARODI, STATE PASS TO USTR AND USAID/LAC/AA

E.O. 12958: DECL: 08/17/2015
TAGS: PGOV PREL ECON BR
SUBJECT: BRAZIL CORRUPTION SCANDAL UPDATE: JOSE DIRCEU
REFLECTS

REF: A. BRASILIA 2082

B. BRASILIA 1979

C. BRASILIA 1874

D. BRASILIA 1973

E. BRASILIA 1631

F. BRASILIA 2025

G. BRASILIA 2150

Classified By: Classified by Political Counselor Dennis Hearne.
Reasons
1.4 (b)(d).


1. (C) Introduction: Per refs, Jose Dirceu, formerly the
most powerful minister in President Lula da Silva's cabinet
and currently a federal deputy subject to possible revocation
of his congressional status, is a central figure in the
ongoing scandals roiling the government and PT Party. As
such, at present he is "too hot" for direct contacts with
mission personnel. However, PolCouns, with COM approval,
decided to capitalize on the visit this week to Brasilia of
WHA Special Advisor Bill Perry -- who was in Brazil in a
semi-private capacity and has known Dirceu for several years
personally -- to gauge Dirceu's views on the political crisis
and his own predicament. Perry agreed to seek out Dirceu,
and met privately with him for breakfast at Dirceu's
apartment in Brasilia on 17 August. Perry subsequently
reported the following points and impressions from that
conversation, and contributed to the comment in para 6.


2. (C) Dirceu seemed well and fit, despite the stress of
recent weeks. He said he had disciplined himself to take
regular exercise and have sufficient contact with his family,
and he is sleeping reasonably well. But Dirceu seemed much
less combative than in a meeting with Perry in late June,
just after his resignation as Minister of the Casa Civil.
Most remarkably, Dirceu claimed he had resigned himself to
the fact that he will be "cassado" -- i.e., suffer the
revocation of his congressional seat and right to run again
for any office for an eight year period -- probably by
November.


3. (C) Dirceu predictably considered this unjust and defended
his own record. His line was that the post-2002 PT leadership
came up with the "hair-brained and perverse" scheme for
illegal financing that is at the center of current
investigations in response to pressures from small, mercenary
allied parties -- the PTB, PL, PP -- and from 2002 campaign
media specialist Duda Mendonca. In this version, Dirceu had
nothing to do with these arrangements. Indeed, ex-PT
treasurer Delubio Soares was "not his guy" -- Soares came
from the labor movement -- and Dirceu never wanted him in
such a sensitive post. Dirceu also criticized as weak both
ex-PT President Jose Genoino and acting PT president Tarso
Genro (who currently is trying to wrest control of the PT
from the powerful Dirceu faction).


4. (C) This defense was interwoven with criticisms by Dirceu
of the Lula government. Lula does not do much on his own
initiative, Dirceu claimed, and he said Lula should have paid
more attention to cultivating legitimate corporate funding
sources in the wake of 2002 elections. He also should have
brought the PMDB and other large, responsible parties into
the government earlier and rewarded them with ministerial
posts. Dirceu said he had wanted to finish up with the
ministerial re-shuffle and go back to Congress long before he
could get the president to do anything about it. Importantly,
Lula is mishandling the current crisis, Dirceu opined.


5. (C) As a result of these failings and the unfolding
debacle, Dirceu now believes that Lula is unlikely to win
re-election next year. Indeed, Dirceu said he thinks Lula
may not run "if he gets depressed." Dirceu views a PSDB
candidate as the probable victor (Sao Paulo Mayor Jose Serra
was his forecast),but he does not think a PSDB-led
administration will be able to govern effectively. Dirceu
was more optimistic about the future of the PT, at least
after a few years of rehabilitation and recovery. Dirceu said
he thinks his faction will win again in the September party
election, thus continuing its domination of the PT.


6. (C) Comment. Dirceu disassociated himself utterly from any
blame for the scandals engulfing his party and Lula
government, and sustained the "I knew nothing" defense of his
recent testimony before the congressional ethics committee.
Both positions are widely regarded as ludicrous by Brazilian
politicians and journalists who have followed Dirceu's career
and understand both the extent of his power within the GOB as
a minister and the iron grip he exerts over the PT even
today. We share in the skepticism. Beyond that, the
sincerity of Dirceu's professions about his own future may be
doubted, given his long and extraordinary personal history of
a single-minded pursuit of power. But, to be fair, perhaps he
is being realistic. It looks highly likely that Dirceu will,
in fact, lose his congressional mandate and political rights.
Further, the wounds inflicted by the crisis on Lula -- who
is Dirceu's creature, in many ways -- together with new polls
that show Lula losing to PSDB candidates, suggest Lula's era
may be waning. For now the only things for Dirceu to do are
try to avoid further serious charges, preserve a measure of
behind-the-scenes influence through domination of the PT by
his faction, and, at 59, make the most of the rest of his
life. On this, he mused on some specific possibilities,
including leaving Brazil for several months to go to the US
for the purpose of learning English and writing a book.
Dirceu's departure from the political scene would be a
watershed, closing out a distinctive chapter in modern
Brazilian politics. Yet we cannot quite bring ourselves to
believe that this ruthless and brilliant chameleon is willing
to go so quietly into the night -- not just yet.

DANILOVICH