RIO GRANDE DO SUL: ELECTION RESULTS REFLECT VOTER

UNCLAS SECTION 01 OF 04 SAO PAULO 001105

SIPDIS

SENSITIVE
SIPDIS

NSC FOR FEARS

E.O. 12958: N/A
TAGS: PGOV PINR BR
SUBJECT: RIO GRANDE DO SUL: ELECTION RESULTS REFLECT VOTER
DISENCHANTMENT IN BRAZIL'S SOUTHERNMOST STATE

REF: BRASILIA 2100

SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY

--------------
SUMMARY
--------------


1. (SBU) For the first time in five presidential elections, Luiz
Inacio Lula da Silva failed to carry Rio Grande do Sul on October 1,
losing by nearly 1.5 million votes to challenger Geraldo Alckmin.
At the same time, incumbent Brazilian Democratic Movement Party
(PMDB) Governor Germano Rigotto narrowly missed qualifying for the
second round, setting up a confrontation between candidates of
Alckmin's Social Democracy Party of Brazil (PSDB) and President
Lula's Workers Party (PT). These results reflect voter discontent
over the state of the economy. The state's agricultural sector has
suffered from drought, while the footwear sector is priced out of
international markets by the high Real. These factors, along with
the political corruption scandals, have led to voter disenchantment
with Lula in a state where the PT been strong throughout its 26-year
history. Rigotto, meanwhile, was disadvantaged by budget problems
that made it difficult for the state to invest in infrastructure or
to attract private investment. Up to the last minute, polls pointed
to a second-round contest between Rigotto and PT former Governor
Olivio Dutra. On election day, however, PSDB Federal Deputy Yeda
Crusius surprised everyone by finishing first, with Dutra barely
edging out Rigotto. With many voters still disenchanted with the
PT, most observers expect Crusius to defeat Dutra handily in the
second round, while Alckmin is expected to maintain his significant
advantage over Lula. End Summary.

--------------
HISTORICAL CONTEXT
--------------


2. (U) After the first round of the elections, Poloff and Political
Assistant visited Porto Alegre, capital of Rio Grande do Sul, and
met with academics, political consultants, journalists, and
representatives of major political parties to discuss the political
situation and the election results. Francisco Ferraz, former Rector
of the Federal University of Rio Grande do Sul, provided a
historical overview of the state's political rivalries. Given its
geographic position as Brazil's southernmost state, bordering on
Argentina and Uruguay, Rio Grande do Sul has often been isolated
from the national political scene and at odds with the national
government. Politics tend to be polarized and characterized by
activism and militancy. The voters are demanding and are
unforgiving of corruption, and often do not re-elect governors.
Since the 1985 restoration of democracy, the PT and PMDB have been
the dominant parties, engaging in an often fierce rivalry. The PT
grew gradually into a strong political force, winning the mayoralty
of Porto Alegre in 1988 and holding it for 16 years, and governing
other major cities as well. Even some critics give it credit for
responsible municipal government, competent and generally
scandal-free. Instead of fighting ideological battles, it devoted
itself to providing municipal services. The PT has strong support
among urban voters and the poor, while the PMDB occupies the
center-right and attracts votes from business and some elements of
the middle class.


3. (U) The PT's decline began in 1998 when former Porto Alegre
Mayor Olivio Dutra was elected Governor. Dutra alienated many
voters with his heavy-handed, authoritarian style and his
unwillingness to compromise. Even PT officials acknowledge that he
made many mistakes. His administration was characterized by large
budget deficits and constant battles with the opposition-controlled
Legislative Assembly. Whereas his predecessor had attracted GM and
Ford to the state, Dutra withdrew the incentives that had been
promised to Ford and did everything possible to make the company
unwelcome. Ford eventually set up operations in Bahia instead, and
Dutra is remembered as the Governor who cost the state hundreds of
jobs.


4. (U) In 2002, Tarso Genro defeated Dutra in the PT primary and
faced off against former Governor Antonio Britto (1995-98),who had
switched from the PMDB to the Popular Socialist Party (PPS). Genro
and PMDB newcomer Germano Rigotto made it to the second round, which
Rigotto won. However, his administration was generally regarded as
mediocre. He proved to be a good technocrat but not especially able

SAO PAULO 00001105 002 OF 004


politically. Instead of fighting with the PT, he tried to get along
with them, but derived no benefit from it. He puzzled voters in
early 2006 by briefly seeking his party's presidential nomination.
After that failed, he decided somewhat reluctantly to seek
re-election as Governor, even though he had previously expressed
opposition to re-election. However, he declined to turn the reins
of government over to his deputy and ran a part-time, lackluster
campaign. He adopted a pose of neutrality between Lula and Alckmin,
a position which, while it may have benefited Lula, made some voters
think he was indecisive.

--------------
CRUSIUS COMES FROM BEHIND
--------------


5. (U) Nevertheless, until the very end, polls showed Rigotto
leading, and his failure to make the second round surprised
everyone. Even the exit polls were wrong. The most common
explanation is that many of his supporters, confident that he was
safe, switched their vote to PSDB candidate Yeda Crusius in an
effort to keep Dutra and the PT out of the second round. Whatever
the reason, Crusius ended up with 32.9 percent, Dutra with 27.39,
and Rigotto with 27.12. Rigotto was eliminated by less than 17,000
votes. The momentum now shifts to Crusius. While Rigotto himself
has declined to choose sides, the PMDB, led by Senator Pedro Simon
and Federal Deputy Eliseu Padilha, has decided to support Crusius.
Several other parties -- the Progressivist Party (PP),the Popular
Socialist Party (PPS),and the Brazilian Labor Party (PTB) -- are
also in her camp. Polls show her leading Dutra by a margin of 64.6
percent to 30.6. Even PT officials acknowledge that Dutra faces a
tough uphill climb.


6. (U) Yeda Crusius is a co-founder of the PSDB who served as
Minister of Planning in Itamar Franco's administration (1992-94).
She has served as a Federal Deputy since 1995. What made her
election a surprise is that the PSDB, though prominent on the
national scene, is very small in Rio Grande do Sul. It elected two
Deputies to the federal Chamber of Deputies in 2002 and three state
legislators. This year it again elected two federal deputies and
three state deputies. Its main coalition partners, the PFL and the
PPS, are not much bigger. Crusius's strong showing is attributed to
the fact that she is a new face. If elected, she will be the
state's first woman Governor. In order to govern, she will have to
ally with the PMDB and other parties. Even then, many expect her to
have difficulty due to the same fiscal problems that undermined
Rigotto. Seventy percent of the state's budget goes to salaries of
public employees, and the state's debt with the federal government
leaves Governors very little room to maneuver. If Lula is
re-elected, Crusius will likely have an adversarial relationship
with the federal government.


7. (U) State PSDB officials Beto Vasconcelos and Lindemar Frajon,
who seemed as surprised as anyone by Crusius's strong showing,
attributed the defeat of Rigotto to voter dissatisfaction with
public services. During the campaign, the PSDB had ignored Rigotto
and run against Lula and the PT. The electorate believed that Lula
hadn't kept his campaign promises. Farmers hurt by the government's
agricultural policies and exporters unable to compete had
contributed to the Lula's unprecedented defeat, they said.


8. (U) Observers pointed to a number of idiosyncrasies in the
election. The PSDB was a partner in Rigotto's government until
Crusius announced her candidacy, at which point the PSDB Lieutenant
Governor had to switch parties. The leading vote-getter for the
federal Chamber of Deputies, Manuela d'Avila, is a 25-year-old
Communist woman. The leading vote-getter for the state Legislative
Assembly is a local TV weatherman.

-------------- ---
PT LEGISLATIVE LEADER - TRYING TO REGAIN BALANCE
-------------- ---


9. (SBU) Flavio Koutzii, PT leader in the state Legislative
Assembly, characterized the state PT (in contrast to the national
party) as inclusive, anti-authoritarian, and internally disciplined,
with strong intellectual elements. He noted that the state PT
continued to gain influence in the 1990s even as leftist ideas were
falling out of fashion, and said that the PT's municipal government
created a culture that changed the opposition's thinking. The state
PT, he said, could have evolved into a social democratic party with

SAO PAULO 00001105 003 OF 004


a strong reformist impulse.


10. (SBU) However, during Dutra's term as Governor, in which
Koutzii served as Chief of the Civil Household, the Palace was
besieged, conflict was the order of the day, and the party began to
lose ground. Genro's challenge of Dutra in 2002 was "stupid,"
Koutzii said, and the party lost the governorship that year and the
Mayoralty of Porto Alegre in 2004. Koutzii attributed Lula's loss
in the state to people's alienation over the vote buying scandal and
especially the "dossier" scandal, which he attributed to the
arrogance of the Sao Paulo PT. Though he himself did not seek
re-election to the Assembly, he noted that the party's candidates
had an unpleasant campaign, being heckled mercilessly over the
corruption issue. Unlike in elections past, it was hard to get the
party faithful out into the streets. Koutzii admitted that Dutra is
very unlikely to defeat Crusius. Nevertheless, he believes that the
party is in a fair position to regroup and regain its balance.
Former Agricultural Development Minister Miguel Rossetto got 1.5
million votes in the Senate race, a good showing against PSDB leader
Pedro Simon. Rossetto is widely expected to be the PT's candidate
for Porto Alegre Mayor in 2008. The party elected eight federal
deputies (out of 31) and 13 state deputies (out of 56) and thus
remains alive and well.


11. (SBU) Many members of the Rio Grande do Sul PT have served in
senior positions in the party and in Lula's government. In addition
to Rossetto and Dutra (who served as Minister of Cities),prominent
members include Lula's Civil Household Chief, Dilma Roussef, and
Minister for Institutional Relations Tarso Genro. The PT's leader
in the Chamber of Deputies, Henrique Fontana, is also a "gaucho."
Despite this, state party leaders often act as if they were in
opposition to Lula's government and to the national party and often
press them to take a more leftward direction.

--------------
RAUL PONT - POLITICAL REFORM NEEDED
--------------


12. (SBU) State legislator Raul Pont, former Porto Alegre Mayor
(1997-2000) and now national Secretary General of the PT, also said
the scandals had hurt the party and Lula in the elections. Pont is
a Trotskyite who leads the PT's Social Democracy faction and ran
unsuccessfully in 2005 for PT president. When Lula's Majority
Faction retained its control of the PT National Directorate, other
leftists defected, mostly to Heloisa Helena's Socialism and Liberty
(PSOL) party, but Pont chose to remain in the party and try to
"refound" it from the left. He continues to urge the Lula
administration to pay more attention to the social movements that
constitute the party's original base and to implement more social
programs.


13. (SBU) Pont predicted that many of Heloisa Helena and Cristovam
Buarque's voters would vote for Lula in the second round. Despite
the resentments that led both politicians to leave the PT, their
supporters are ideologically much closer to Lula than to Alckmin, he
said. Pont complained that the last 20 days of the first-round
campaign had been a "massacre" in which the media criminalized the
entire party, and the campaign in the streets had been brutal. The
"dossier" scandal, he asserted, was a case of the Sao Paulo PT
trying to help their gubernatorial candidate, Aloizio Mercadante,
but its repercussions were nation-wide. The PT, he noted, was also
the only party to be held responsible for the vote-buying scandal,
even though almost all parties played a role.


14. (SBU) The root of the problem, in Pont's view, is Brazil's
"perverse" electoral system, which gives small states much more
representation than large states. As a result, Lula will be
re-elected with around 50 million votes, but his party will have
less than 20 percent representation in the Congress. Such a
phenomenon, he complained, almost ensures "ingovernability." The
national PT, he said, chose to behave like a traditional Brazilian
political party and make deals in Congress, with disastrous results.
He expects Lula, in a second term, to push hard for political
reform to address this situation. The "Barrier Clause," which will
eliminate parties with less than 5 percent of the nation-wide vote,
is a small first step, but much more reform is needed. Pont wants
the PT to take the lead in pushing for comprehensive political
reform, and he and his faction will press for this at next year's PT
National Congress.


SAO PAULO 00001105 004 OF 004


--------------
COMMENT
--------------


15. (SBU) Lula's unprecedented failure to carry Rio Grande do Sul
is a sign of how much backlash there is against the PT as a result
of the corruption scandals. Nevertheless, just as on the national
level, where the PT surprised many by electing 83 federal deputies,
its performance on the state level suggests it remains a force to be
reckoned with. While a solid one third of the voters strongly
opposes the party, another one third still supports it, and it is
well represented in the legislative sphere. Meanwhile, if Crusius
is elected Governor (by no means a sure thing, since polls to date
have been wrong),it will be interesting to see whether or not the
PSDB can develop as a third force in Rio Grande do Sul. End
Comment.


16. (U) This cable was coordinated with Embassy Brasilia.

MCMULLEN