Identifier
Created
Classification
Origin
06SAOPAULO428
2006-04-24 17:54:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Sao Paulo
Cable title:  

ALCKMIN THE BETTER MANAGER, SAO PAULO BUSINESS TELLS A/S

Tags:  PGOV PREL ECON ETRD BR 
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DE RUEHSO #0428/01 1141754
ZNR UUUUU ZZH
P 241754Z APR 06
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 4898
INFO RUEHBR/AMEMBASSY BRASILIA 6043
RUEHRG/AMCONSUL RECIFE 2858
RUEHRI/AMCONSUL RIO DE JANEIRO 7015
RUEHAC/AMEMBASSY ASUNCION 2516
RUEHBU/AMEMBASSY BUENOS AIRES 2171
RUEHMN/AMEMBASSY MONTEVIDEO 1923
RUEHLP/AMEMBASSY LA PAZ 2727
RUEHSG/AMEMBASSY SANTIAGO 1665
RUEHCV/AMEMBASSY CARACAS 0250
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 2378
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC
RHMFISS/CDR USSOUTHCOM MIAMI FL
UNCLAS SECTION 01 OF 03 SAO PAULO 000428 

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/BSC AND EB/IFD/OMA K.MOSS
STATE PASS USTR FOR SULLIVAN/LEZNY
STATE PASS USAID FOR LAC
NSC FOR CRONIN
TREASURY FOR OASIA - DAS LEE AND FPARODI
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
USDOC FOR 3134/ITAUSCS/OIO/WH/RD/DDEVITO/SHUPKA
SOUTHCOM ALSO FOR POLAD

TAGS: PGOV PREL ECON ETRD BR
SUBJECT: ALCKMIN THE BETTER MANAGER, SAO PAULO BUSINESS TELLS A/S
WAYNE

REFS: (A) Sao Paulo 415; (B) Brasilia 608

SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY.

-------
SUMMARY
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UNCLAS SECTION 01 OF 03 SAO PAULO 000428

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/BSC AND EB/IFD/OMA K.MOSS
STATE PASS USTR FOR SULLIVAN/LEZNY
STATE PASS USAID FOR LAC
NSC FOR CRONIN
TREASURY FOR OASIA - DAS LEE AND FPARODI
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
USDOC FOR 3134/ITAUSCS/OIO/WH/RD/DDEVITO/SHUPKA
SOUTHCOM ALSO FOR POLAD

TAGS: PGOV PREL ECON ETRD BR
SUBJECT: ALCKMIN THE BETTER MANAGER, SAO PAULO BUSINESS TELLS A/S
WAYNE

REFS: (A) Sao Paulo 415; (B) Brasilia 608

SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY.

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


1. (SBU) E. Anthony Wayne, Assistant Secretary of State (A/S) for
Economic and Business Affairs, visited Sao Paulo April 5-6 to
participate in the World Economic Forum on Latin America. While
here, A/S Wayne also had several meetings with Sao Paulo business
leaders. They indicated a general disappointment in the Lula
Administration's lost opportunities for improving the economy over
the last four years, particularly the failure to make headway on the
microeconomic reform agenda, and conveyed a preference for leading
opposition presidential candidate Geraldo Alckmin. Despite trailing
substantially in the opinion polls, political and financial analysts
claimed Alckmin has a fighting chance to win the presidency in
October. Alckmin, who recently resigned his post as governor of Sao
Paulo state to run for president, is seen in the business community
as a better manager and more likely to favor trade agreements with
the United States. END SUMMARY.

-------------- --------------
IF YOU CAN'T CHANGE GOV'T POLICY, CHANGE THE GOV'T
-------------- --------------


2. (SBU) In general, the business leaders with whom A/S Wayne met
in Sao Paulo expressed dissatisfaction with the state of the
Brazilian economy and the way it has been managed by the Lula
Administration (Ref A). On April 5, A/S Wayne met with the
president and several directors of the Industry Center of Sao Paulo
State (CIESP),a non-profit trade organization providing technical,
legal and other support services to 9,700 member companies. A/S
Wayne was told that the GoB has wasted many opportunities to spur
greater economic growth and has fostered policies, including high
interest rates and an appreciated currency, that have had the effect

of favoring commodity exports at the expense of the manufacturing
sector. While several CIESP directors remained circumspect
regarding the upcoming presidential election and which candidate the
business community likely would support, President Claudio Vaz
pointedly said he had no qualms stating that most industrialists he
knows want to see a change in Brazil's leadership. "Knowing we
cannot expect change from the Lula government," said Vaz, "we would
prefer a change in government."


3. (SBU) When asked at lunch about former Sao Paulo state governor
Geraldo Alckmin's (Brazilian Social Democracy Party - PSDB) chances
for success in the presidential race, former journalist and current
political consultant Carlos Eduardo Lins da Silva said Alckmin is a
viable candidate and has a solid chance of beating Lula. While a
string of corruption scandals have toppled major players in the
governing Workers' Party (Partido dos Trabalhadores - PT) and the
Lula Administration, all agreed that Lula himself is still a strong
political figure, especially among the poor. Even with lackluster
economic performance (see Ref A),Lula will be hard to beat, said
Silva. He elaborated that, unlike in years past, Brazil is in a new
era where political scandals do not rattle the economy; without
severe economic shocks, the government remains stable and the
Brazilian people appear satisfied with the status quo. Political
consultant Joseph Tutundjian added that while many Brazilians were
expecting much more from Lula in terms of poverty elimination and
promotion of socio-economic equity, there has been a net gain of
"formal" jobs in Brazil over the last three years. (NOTE: Some
analysts believe Brazil's informal sector, in which many people hold
jobs of limited duration, benefits and pay, comprises more than 40%
of the economy as a whole. END NOTE.)

SAO PAULO 00000428 002 OF 003



-------------- --------------
NEW STYLE BUT NO POLICY SHIFTS EXPECTED FROM ALCKMIN
-------------- --------------


4. (SBU) The business leaders with whom A/S Wayne met over two days
almost unanimously agreed that if Alckmin were elected, they would
see immediate and important changes in how the GOB operates, and
consequently, in Brazil's business environment. At CIESP, Boris
Tabacof, an entrepreneur originally from the Northeast of Brazil
with experience in electronics, chemicals and banking, said, "We
expect that with a new president, we will see change on the first
day." Yet, all the business leaders and analysts cautioned that
they would not expect to see major economic policy shifts with
Alckmin as president, especially regarding macro-economic
management. Rather, the business leaders suggested, based on
Alckmin's solid state-level record, that the government under
Alckmin would simply be more effective in carrying out policy.

--------------
ALCKMIN, THE DISCIPLINED MANAGER
--------------


5. (SBU) The consensus among business leaders and analysts was that,
with 12 years aggregate experience as vice-governor and governor of
Sao Paulo state, Alckmin, who is also a medical doctor, has simply
proven to be a better manager than Lula. CIESP president Vaz noted
that Alckmin better understands how to make public-private
partnerships work, and that as an experienced state executive, he
could harmonize policies and priorities between states more
effectively than Lula. Likewise, almost all the business leaders
consulted said they expected Alckmin to improve trade relations
between Brazil and the United States, especially in regard to
bilateral and sectoral agreements. Former journalist Silva tried to
bolster this assertion by pointing out that as governor, Alckmin
regularly convened a well-received council on trade to boost export
opportunities for companies in Sao Paulo state.


6. (SBU) During the lunch session, consultant Tutundjian further
described Alckmin as "incredibly objective and effective," and as "a
man of action." Tutundjian said Alckmin has been able to reduce
taxes in Sao Paulo state and still grow the economy by effectively
raising residents' incomes. Tutundjian added that Alckmin has been
the only Brazilian governor to do so, and wondered aloud why other
politicians in Brazil have not tried to replicate this model. He
noted that Alckmin would be likely to cut government spending as a
means to refocus government priorities and spur investment.
According to Tutundjian, "all he has to do is spend less, and that
alone will help the economy tremendously." Even a one percent
reduction in Brazil's deficit would have a huge impact on Brazil's
government and economy, because it would force agencies to make
better choices, and it would free up bank money now used to finance
the government for private loans.

--------------
IMAGE VS. SUBSTANCE
--------------


7. (SBU) To illustrate the difference between Lula and Alckmin,
Tutundjian recounted a comment he had heard from someone who has met
both men. According to this source, "When you meet Lula, he will
entice you in two minutes; but when you meet Alckmin, he will change
your mind in 30." Thus, the problem for Alckmin will be that Lula
has the warmer, more gregarious image, and generally speaking,
Brazilians are more taken with image than with substance.

--------------
PARTY ALIGNMENTS

SAO PAULO 00000428 003 OF 003


--------------


8. (SBU) Tutundjian raised a concern that Alckmin might be swayed by
advice from party associates who are less inclined to support market
driven economic policies. He explained there are two main schools
of economic thought in Brazil based in two major universities: the
Catholic University of Rio de Janeiro school advocates reduced
tariffs and market driven economics, while the University of
Campinas (Sao Paulo State) school remains more interventionist and
protectionist. Many of Alckmin's PSDB predecessors and close
advisors have aligned in the past with the Campinas school, as has
the PT. But Tutundjian said Alckmin has not fostered Campinas-like
policies as governor. Franklin Feder, President of Alcoa Aluminum
of Brazil, added that he had been told by Pedro Malan, Finance
Minister under Lula's predecessor Fernando Henrique Cardoso and
long-time PSDB member and advisor, that Alckmin has no interest in
resurrecting interventionist government policies, and would follow
market-driven policies.


9. (SBU) The CIESP leaders also predicted that if elected, Alckmin
would be able to attain a power base rather quickly because of new
rules regarding electoral counts. A political party now needs to
achieve a threshold level of five percent of the votes in elections
for the Chamber of Deputies in order to retain its privileges, such
as holding leadership positions in Congress. Many smaller parties
are expected to fall short. Thus, surmised CIESP leaders, we should
see a consolidation of parties down to as few as five, and any
alliance between Alckmin's PSDB and another leading party will be
all the more powerful.

--------------
COMMENT: HOPE SPRINGS ETERNAL
--------------


10. (SBU) The business leaders A/S Wayne met with in Sao Paulo were
mostly open about their preference for Alckmin over Lula for
president, but they also could not help but acknowledge that, to
their general dismay, Lula remains strong in the polls despite what
one consultant called the "worst corruption scandal in Brazil's
history." These business leaders based in Sao Paulo, some Brazilian
and some expatriate, have grown familiar with Alckmin's style of
executive leadership and his support of business interests. (NOTE:
One Brazilian noted almost mockingly that Alckmin has a very
"American" style of starting meetings on time, dispensing with
opening remarks, sticking to an agenda, and closing with specific
action items on which he will follow up. END NOTE). We will need
to watch closely who Alckmin chooses as his key economic advisors,
and determine how open he will be to discussions. But given the
charismatic Lula's continued strength in the polls, Alckmin will
need to add some warmth and folksiness to his "ethical manager"
persona if he wants to gain ground on Lula, especially in the
Northeast. END COMMENT.


11. (U) This cable was coordinated/cleared with Embassy Brasilia and
with EB A/S Wayne.

MCMCULLEN