BRAZIL'S OPPOSITION PSDB POSITIONING FOR 2008 AND 2010

UNCLAS SECTION 01 OF 03 SAO PAULO 000882

SIPDIS

SENSITIVE
SIPDIS

NSC FOR TOMASULO
TREASURY FOR JHOEK
SOUTHCOM FOR POLAD
USAID FOR LAC/AA

E.O. 12958: N/A
TAGS: PGOV PINR ECON EFIN BR
SUBJECT: BRAZIL'S OPPOSITION PSDB POSITIONING FOR 2008 AND 2010

REF: (A) SAO PAULO 878; (B) SAO PAULO 780;
(C) SAO PAULO 777; (D) 06 SAO PAULO 1012;
(E) 06 SAO PAULO 980; (F) 06 SAO PAULO 676

SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY


1. (SBU) Summary: It is not true, according to Sao Paulo city
official Andrea Matarazzo, that the Sao Paulo State Social Democracy
Party of Brazil(PSDB) is divided between allies of Governor Jose
Serra and supporters of former Governor (and 2006 presidential
candidate) Geraldo Alckmin. Matarazzo, one of Governor Serra's top
advisors, believes Alckmin wants to run for Mayor of Sao Paulo in
2008 for the job's own sake, and not as a stepping-stone to another
run for the presidency in 2010. Though Minas Gerais Governor Aecio
Neves, considered a strong Serra rival for the PSDB's 2010
presidential nomination, is "a factor" to be dealt with, Matarazzo
is confident that Serra will be the nominee, perhaps with Neves as
his running mate. He outlined some of the challenges facing the
PSDB, including the high political cost of attacking a very popular
President Lula. In Matarazzo's view, PSDB President Tasso
Jereissati has provided no leadership, and the party has suffered as
a result. He expects no surprises at the PSDB's National Congress
in November, and predicts Senator Sergio Guerra of Pernambuco will
be elected to replace Jereissati. At the same time, former
President (1995-2002) Fernando Henrique Cardoso (FHC) still has a
great deal of influence within the party. End Summary.

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SERRA'S "DIFFERENT MANAGEMENT MODEL"
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2. (SBU) Consul General (CG) and Poloff met October 22 with Andrea
Matarazzo, Assistant Mayor of Sao Paulo. Matarazzo (see refs D and
F),a former Minister and Ambassador under Fernando Henrique Cardoso
(FHC),noted that the Sao Paulo State Social Democracy Party of
Brazil (PSDB) had held its convention over the weekend and elected a
new state President. While many believe the state PSDB is divided
between those loyal to Governor Serra and followers of former
Governor Alckmin, this is nonsense, according to Matarazzo. In
fact, the state PSDB is divided between pro-Serra and anti-Serra
factions. Serra has a "different management model," in Matarazzo's
words, that involves "doing what has to be done," with no favors, no
special interests, and no half-measures. Not everyone appreciates
his management style; even some from within his own party disapprove
of the way Serra does business. Per ref D, Matarazzo also
understands that Serra's abrasive personal style often causes him
problems with other politicians. Also, "the banks detest Serra"
because they believe - wrongly, in Matarazzo's view - that he has
nationalizing and interventionist tendencies. As Health Minister
under FHC, Serra asserted Brazil's right to break the patents on
HIV/AIDS medications. See Ref A for Matarazzo's description of
Serra's role in the municipal government.

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THE DOWNSIDES OF OPPOSING LULA
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3. (SBU) The PSDB is going through difficult times, Matarazzo
acknowledged. Outgoing president Tasso Jereissati, Senator from
Ceara, has provided "no leadership." President Lula remains popular
and his government is largely unopposed. Lula is very intelligent
and a great communicator but also very primitive and simplistic,
appealing to the common people, Matarazzo said. Under his
administration, the rich have gotten richer and the poor also saw
their income grow. Lula has garnered all the credit for the "Bolsa
Familia" (BF) cash transfer program, even though FHC created it.
Lula removed the conditions of eligibility, which enabled him to
expand it to where now about a quarter of the population receives a
BF stipend. The polls show, Matarazzo said, that attacks on Lula
will backfire.


4. (SBU) The Lula administration, in Matarazzo's view, also
benefits from a climate of political correctness - "Anti-Americanism
is a part of it, too" - in which people are afraid to criticize the

SAO PAULO 00000882 002 OF 003


government for fear of being accused of right-wing tendencies.
Recent efforts by elements in the business community to articulate
conservative positions have been puny and ineffective, he said,
recalling the Civic Movement for Brazilians' Rights, aka "Cansei"
(ref C),which has faded from view, and a recent demonstration
organized by Paulo Skaf, President of the Sao Paulo State Federation
of Industries (FIESP),against renewal of the Provisional
Contribution on Financial Movements (CPMF - financial transactions
tax). Organizers had hoped to attract 2 million protesters to
downtown Sao Paulo on October 16 but got a turnout of about 15,000.
Matarazzo commented that though the CPMF is unpopular in the
business community, the federal government could not function
without it. Thus, Governor Serra, who wants to be president, will
not speak out against it. In fact, he was recently quoted as saying
that "there are worse taxes" than the CPMF. The PSDB bloc in the
Chamber of Deputies is working with Lula's Workers' Party (PT) and
the government coalition on a compromise measure that would extend
the CPMF with some modifications.

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RE-ELECTION: EXTEND IT OR END IT?
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5. (SBU) Between now and 2010, Lula will work indirectly towards a
third term, Matarazzo said. This will involve creating the
political conditions to amend the Constitution via either plebiscite
or Congressional action to allow him to run again. If that doesn't
work, he will find someone to support and then plan to run again in

2015. This scenario presupposes a different Constitutional
amendment, which the PSDB would support, repealing the 1997
re-election amendment and limiting the president to one five-year
term (up from four years as is currently the case). Matarazzo
thinks Lula will support Ciro Gomes of the Brazilian Socialist Party
(PSB),his former Minister of National Integration now serving as a
Federal Deputy. If elected president, Gomes would be a "nightmare"
for the PSDB, Matarazzo opined, because he is "pathologically
insane, sick." (Note: Others of our interlocutors, including FHC,
have expressed similar opinions of Gomes, albeit in not quite the
same language. See refs B and E. End Note.)


6. (SBU) Matarazzo acknowledged rivalries within the PSDB but does
not think they pose a serious problem. Serra will most likely be
the candidate in 2010, though Minas Gerais Governor Aecio Neves is a
factor and could oppose him. Most likely, Neves will end up as
Serra's running mate, Matarazzo predicted in what might have been
wishful thinking, under an amendment banning re-election or an
agreement by Serra not to run again, leaving the way clear for Neves
in 2014 or 2015. The PSDB and its main ally, the Democratic Party
(DEM),will "walk together" in 2010 as they did in 2006, he said
confidently.

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"WE CAN'T CAMPAIGN AGAINST ALCKMIN"
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7. (SBU) The 2008 municipal elections pose a different problem.
Matarazzo is sure former Governor Geraldo Alckmin wants to run for
Mayor of Sao Paulo. Matarazzo, no fan of Alckmin, who defeated
Serra for the 2006 presidential nomination, doubts that Alckmin is
seeking a platform from which to run for president again in 2010.
"I think he really wants to be Mayor. And quitting the office
halfway through the term to run for another office won't work."
The incumbent Mayor, Gilberto Kassab (DEM),is gaining popularity
and wants to be re-elected, but, as Matarazzo put it, "The city
government is probably 80 percent PSDB," including all 31 Assistant
Mayors. "Kassab is doing well in a PSDB administration, but we
can't run a campaign against Alckmin." In other words, if Alckmin
wants to run, he will be the PSDB/DEM candidate, and Kassab will
have to look for other work.


8. (SBU) Assessing the other side's chances, Matarazzo said PT
former Mayor (2001-04) Marta Suplicy doesn't really want to run for
Mayor in 2008. "There's too much disenchantment with her,"
especially after her ill-fated advice to travelers to "relax and

SAO PAULO 00000882 003 OF 003


enjoy" Brazil's aviation crisis and she wouldn't have an easy time
of it. More likely, he predicted, Suplicy will wait until 2010 and
run for Governor or Senator. "We have no name for Governor in
2010," he explained, referring to the PSDB/DEM coalition, unless
Serra is for some reason unable to run for President and decides to
seek a second term as Governor. But Serra is well positioned in the
national party, Matarazzo said, and is developing a good record as
Governor to run on. He is privatizing Nossa Caixa, the state-owned
bank, and some state highways, and is working to improve
transportation infrastructure. As reported ref A, Matarazzo praised
Serra's non-nonsense approach to public security, focused on both
prevention and repression.

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NO SURPRISES AT UPCOMING PSDB NATIONAL CONGRESS
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9. (SBU) Looking to the PSDB National Congress, scheduled for late
November in Brasilia, Matarazzo foresaw no surprises. Sergio
Guerra, Senator from Pernambuco who was Alckmin's national campaign
coordinator in 2006, will be elected PSDB president, replacing
Jereissati, without serious opposition, he predicted confidently.
But he also noted that PSDB Honorary President FHC retains "great
influence" within the party, even though he's spending much of his
time teaching at Brown University and traveling abroad as part of a
range of international activities.

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COMMENT
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10. (SBU) After Serra resigned as Mayor to run for President,
Andrea Matarazzo stayed behind in City Hall to ensure Serra's
influence in the Kassab administration. Everything he says must be
viewed through the prism of his long-standing friendship with Serra,
to whom he is extremely loyal. He also remains close to FHC and
undoubtedly knows much more than he is telling us about internal
PSDB machinations. The PSDB/DEM coalition appears to be in a strong
position in Sao Paulo for the 2008 elections and nationwide for
2010, if the PSDB can avoid the sort of destructive internecine
dissension that hurt it last year. End Comment.


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

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