SERRA'S HONEYMOON CUT SHORT

UNCLAS SECTION 01 OF 02 SAO PAULO 000021

SIPDIS

SENSITIVE

NSC FOR MIKE DEMPSEY

DEPARTMENT ALSO FOR WHA/PD

E.O. 12958: N/A
TAGS: PGOV BR
SUBJECT: SERRA'S HONEYMOON CUT SHORT



1. (U) SUMMARY. Jose Serra of the Brazilian Social
Democratic Party (PSDB) was inaugurated as Mayor of Sao
Paulo on January 1, in a ceremony that took on the tone of a
PSDB political festival. Virtually all the stars of the Sao
Paulo wing of the PSDB party, including former President
Fernando Henrique Cardoso, were in attendance. The party
was cut short, however, as the newly inaugurated Sao Paulo
city council handed Serra his first defeat the same
afternoon, when his choice for city council president was
defeated by a PSDB dissident with the support of the Workers
Party (PT) and other opposition parties. End Summary.


2. (U) Jose Serra, who defeated outgoing PT Mayor Martha
Suplicy in the October 31 municipal run-off election, took
office January 1 in a two-stage inaugural ceremony. He was
officially sworn in at the City Council chambers, along with
the 55 city council members; the formal, public ceremony
took place immediately afterwards at City Hall. Breaking
normal protocol, Serra gave a short speech at the city
council ceremony, stressing the need for the executive and
legislative branches of the city government to work together
in the public interest and the priority his administration
would place on ethical behavior. His remarks reportedly
were greeted with enthusiastic applause by council members
from allied parties and stony silence from the opposition.


3. (U) The Sao Paulo PSDB leadership was out in force at
the public inaugural ceremony at City Hall. Many were
recognized from the podium, giving the event an air of a
PSDB homecoming celebration (though the PSDB has never
before governed Sao Paulo city). In addition to former
President Fernando Henrique Cardoso, Sao Paulo Governor
Geraldo Alckmin, several members of the Sao Paulo
Congressional delegation and several members of President
Cardoso's cabinet, including former Foreign Minister Celso
Lafer, Education Minister Paulo Renato Souza and Social
Communications Minister Andrea Matarazzo, were in
attendance. Former President Cardoso was enthusiastically
cheered by the partisan audience. The PFL also sent several
of its local stars, including Vice Governor Claudio Lembo,
the president of the Sao Paulo PFL. Serra's vice mayor is
PFL Federal Deputy Gilberto Kassab. Justice Minster Marcio
Thomas Bastos represented the Lula administration.


4. (U) A number of local PSDB stars also found a home in
Serra's cabinet, which was sworn in at the same ceremony,
and among his senior subcabinet level advisors. PSDB
Federal Deputies Walter Feldman and Aloysio Nunes Ferreira
were named to the key positions of Coordinator for Regional
Deputy Mayors and Secretary for Government, respectively.
Three former Cardoso Cabinet Ministers were named to senior
advisory positions. Andrea Matarazzo will oversee the
continued revitalization of Sao Paulo's historic center as
regional deputy mayor for the downtown region; former
Minister of Justice and National Human Rights Secretary Jose
Gregori will head the municipal Commission on Human Rights,
and former Sports Minister Caio Luiz de Carvalho will head
Sao Paulo's tourist and convention bureau. Two key
municipal cabinet slots -- Housing and Education -- went to
Vice Mayor Kassab's PFL. The Popular Socialist Party (PPS)
and Green Party (PV),which supported Serra in the second
round of the election, each got one seat. Environment
Secretary Eduardo Jorge (PV) served as Health Secretary

SIPDIS
during the first two years of the Suplicy administration.
Retired diplomat Helena Maria Gasparian was named as
International Relations Secretary, a position Serra had
initially said he would abolish. Serra's 20 member cabinet
includes three women and one Afro-Brazilian.


5. (U) Within hours of his inauguration, Serra was faced
with the first political crisis of his administration when
the city council rejected his preferred candidate for city
council president. By a razor thin margin -- 28 to 26 --
the council elected PSDB maverick Roberto Tripoli over the
PSDB's own nominee, Ricardo Montoro. In last minute
maneuvering, Tripoli garnered support for his candidacy from
the PT caucus along with that of the loose coalition of
council members from the PMDB, PP, PTB and PL parties that
calls itself the Centrao, or Big Center. Tripoli, who
reportedly was passed over for a cabinet seat or as
government leader, insisted that he agreed to stand for
election only after being told by opposition members that
Montoro could not attract enough opposition votes to win the
election. (NOTE. The PSDB and the PT each have 13 seats on
the council. In addition to the PSDB, Serra's governing
coalition includes the PFL and 5 smaller parties with a
total of 10 additional seats. The 18 members of the Centrao
thus are well positioned to act as power brokers on key
issues; four Centrao members broke ranks to support Serra's
candidate. END NOTE.) The outraged PSDB caucus has
demanded Tripoli's expulsion from the PSDB. According to
press reports, Tripoli is expected to join the Green Party,
which is allied with the PSDB in the governing coalition.
The Sao Paulo city council controls the fourth largest
public budget in Brazil, after the federal government and
the states of Sao Paulo and Minas Gerais.


6. (U) While Serra's team has downplayed the significance
of Montoro's defeat at the hands of Tripoli and the
opposition, publicly observing only that the legislature is
an independent branch of government, the press has
highlighted it as a major defeat for the new administration.
The story trumped coverage of the inauguration itself; the
front page headline in major daily Estado de Sao Paulo on
January 2 was, "Serra Begins with Defeat." Press reports
have focused on the city council election result as an
indication of fissures within the local PSDB party, which
could complicate Serra's relationship with the City Council
and the effectiveness of his administration. This is the
first time since the start of Mayor Luiza Erundina's term in
1987 that the City Council has not ratified the incoming
mayor's choice as council president; Luiza Erundina (then-
PT) had a notoriously stormy relationship with the city
council.


7. (U) In one of his first official acts, Serra ordered the
suspension of all procurement actions initiated by the
Suplicy government, and a review of all on-going service
contracts signed by her government. Serra indicated that
this was an austerity move, intended to bring municipal
expenditures into line with resources.


8. (SBU) COMMENT. The turn out of the PSDB party glitterati
at Serra's inauguration, and the presence of a number of
nationally prominent PSDB and PFL figures among Serra's
senior advisors suggests that the Sao Paulo wing of the PSDB
sees Serra's win in Sao Paulo as both partial vindication
for his and the party's loss to Lula in 2002 and as an
important step in reestablishing the party as the principal
alternative to the PT nationally. With control of the state
and city governments and a PSDB president in the state
assembly, the party also will likely use Sao Paulo as a
launching pad for its 2006 national campaign. While
Governor Alckmin continues to publicly demur about his own
plans for a presidential run, others in the party are far
less discrete, and the Governor is clearly enjoying being
the object of speculation. The city council's rejection of
Serra's candidate for council president put a damper on the
PSDB festivities. While it could prove to be momentary and
localized set-back, it could also prove to be an early
warning sign that the Sao Paulo wing of the party needs to
ensure its own house is in order before setting out on the
national campaign trail. END COMMENT.

DUDDY