SERRA ANNOUNCES CANDIDACY FOR GOVERNOR OF SAO PAULO

UNCLAS SECTION 01 OF 03 SAO PAULO 000355

SIPDIS

SIPDIS

NSC FOR CRONIN
STATE PASS USTR FOR SULLIVAN/LEZNY
TREASURY FOR OASIA, DAS LEE AND FPARODI
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DOL FOR ILAB MMITTELHAUSER

E.O. 12958: N/A
TAGS: PGOV PINR BR
SUBJECT: SERRA ANNOUNCES CANDIDACY FOR GOVERNOR OF SAO PAULO

REF: (A) SAO PAULO 316; (B) SAO PAULO 278;

(C) SAO PAULO 206; (D) SAO PAULO 102;
(E) SAO PAULO 73

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SUMMARY
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1. On March 31, Sao Paulo Mayor Jose Serra announced his
resignation and his candidacy for Governor of Sao Paulo state.
After agonizing for months over whether - and how - to break his
2004 promise to voters to serve a full four-year term as Mayor in
order to run for President of Brazil, Serra hesitated for only about
two weeks before resigning to run for the lesser office of Governor.
The critical difference, from his perspective, is that in his
gubernatorial bid he will have what was so sorely lacking in his
wished-for presidential campaign - the near-unanimous support of his
party. Polls show he has a good chance of winning in the first
round. End Summary.

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ANNOUNCEMENT
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2. As expected, late in the afternoon of March 31, Jose Serra, Mayor
of Sao Paulo for the past fifteen months, announced his resignation
and his candidacy for Governor under the banner of the Brazilian
Social Democracy Party (PSDB). He made the announcement at a press
conference at the Anhembi Convention Center in northern Sao Paulo,
and also sent a letter of resignation to the City Council. In his
announcement, Serra dealt head-on with the issue of his written
pledge of September 14, 2004, that "if elected Mayor of the City of
Sao Paulo in the contest of October 2004, I commit myself to
complete the entire four years of the mandate, without resigning the
Mayor's office to become a candidate for any other elective office."
In attempting to defuse the expected criticism, Serra could not
resist taking yet another swipe at his predecessor in City Hall,
Marta Suplicy (2001-04) of President Lula's Workers' Party (Partido
dos Trabalhadores - PT). "The opposing team...has no moral standing
to open its mouth to talk about public works and everything and
anything else [i.e., except Serra's broken promise]. They do not
have and will not have anything else to say. After the mess they
left City Hall in...and in the face of their lack of proposals and
the path Brazil is on now, really there won't be anything else for
them to talk about except this." He went on to say that resigning
was "a difficult decision, the most difficult of my life. But it
was a decision, which, though risky, was necessary. I am convinced
it was the correct decision. I believe the people of Sao Paulo will
understand my reasons."

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GOVERNOR ALCKMIN MAKES IT OFFICIAL
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3. On the evening of March 30, Governor Geraldo Alckmin sent a
letter to the President of the state Legislative Assembly
communicating his own resignation, effective March 31, "in light of
my decision to be a candidate for elective office in the upcoming
contest of October 1, 2006." Under Article 14 of the 1988
Constitution, holders of Executive Branch offices - Governors,
Mayors, Ministers, State and Municipal Secretaries - must resign six
months prior to any election in which they plan to run for
government office. The only exceptions are Mayors, Governors and
Presidents seeking re-election; for example, President Lula does not
have to resign in order to run this year.

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NOT A BAD CONSOLATION PRIZE
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SAO PAULO 00000355 002 OF 003




4. Per refs B-C and E, Serra, who as the PSDB presidential candidate
in 2002 lost to Lula, was long considered the front-runner for the
party's presidential nomination this year, but was defeated by a
determined Alckmin. A large part of Serra's problem was his
reluctance to announce his candidacy absent strong party consensus
behind him, a consensus that was denied him by Alckmin and his
supporters. His promise to serve out his term required him not to
appear too eager to leave; only a strong appeal from the whole
party, it seemed, would offer him a graceful way out of his pledge.
Alckmin, barred by term limits from seeking re-election, was not so
handicapped.


5. As momentum swung towards Alckmin in the contest for the
presidential nomination - the party leadership named him on March 14
(ref B) -- Serra supporters began to discuss the possibility of his
running for Governor instead. The idea was to keep this key
position of leader of Brazil's largest state (with 40 million
people, an annual budget of about USD 40 billion, and a 2004 GDP of
USD 190.9 billion) out of the hands of the PT, whose two candidates,
Marta Suplicy and Senator Aloisio Mercadante, are to face off in a
primary on May 7 (though Suplicy would reportedly like to hold it
earlier). The notion of a Serra candidacy gained momentum with the
March 20 publication of a "Datafolha" poll (ref A) showing that
Serra could win the race in the first round with 58 percent of the
vote if Mercadante were the PT candidate and with 50 percent if
Suplicy were the PT candidate. In either scenario, the nearest
other challenger, former Governor Orestes Quercia of the Brazilian
Democratic Movement Party (PMDB),would get at most 15 percent,
according to the poll. None of the other prospective PSDB
candidates appeared to resonate with voters. Under those
circumstances, a Serra candidacy became all but inevitable. Several
Alckmin supporters told us (ref A) that his candidacy would
strengthen the ticket and be good for the party. PSDB State
Deputies and Mayors visited him at City Hall to ask him to run.
Representatives of other parties met with him to discuss possible
alliances.

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KASSAB TAKES OVER, PROMISES CONTINUITY
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6. Serra is succeeded by Vice-Mayor Gilberto Kassab (see ref D) of
the Liberal Front Party (PFL),who will serve the remaining two
years and nine months of his term. Kassab has pledged to continue
Serra's policies. For the time being, Serra's Secretary of
Municipal Government, Aloisio Nunes Ferreira, will remain in
position to help Serra keep his fingers on the pulse of municipal
affairs even while on the campaign trail. Also staying on is
Secretary of Services Andrea Matarazzo, who will become Secretary in

SIPDIS
charge of coordinating the city's 31 Assistant Mayors' Offices
("Subprefeituras"),replacing Walter Feldman, who resigned to run
for Congress. Matarazzo, a Serra loyalist, former Minister and
Ambassador under Fernando Henrique Cardoso, and long-time Consulate
contact, had expected to play a key role in Serra's presidential
campaign (ref E).

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COMMENT
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7. Serra's gubernatorial candidacy has the potential to be a win/win
for the PSDB. Political observers note that his strength in Sao
Paulo will enable Alckmin to leave the campaign here in his hands
and devote more attention to the critical northeast. Another clear
winner is the PFL, which, in addition to the Mayorship, will hold
the Governorship for the next nine months in the person of Claudio
Lembo. Post will report in further detail septel on departure of
important personnel at the state and local levels and other

SAO PAULO 00000355 003 OF 003


election-related developments. End Comment.


8. This cable was coordinated with Embassy Brasilia.

MCMULLEN