SAO PAULO: WITH AN EYE TO 2010 PRESIDENTIAL ELECTIONS,

1. (SBU) Summary: Avoiding open confrontation, the Social Democracy
Party of Brazil (PSDB) held its municipal convention June 22 and
nominated former Governor Geraldo Alckmin as its candidate for Mayor
of Sao Paulo. In a deal reportedly brokered by Governor Jose Serra,
the faction that favored supporting incumbent Mayor Gilberto Kassab
(Democratic Party - DEM) decided at the last minute not to put
forward an alternative ticket, leaving Alckmin unopposed. Governor
Serra delivered a speech in support of Alckmin, who reciprocated
with remarks implying he will support Serra for President in 2010.
The last-minute agreement represents a tactical retreat by Serra,
who wants to avoid an open schism in the PSDB as he prepares his
presidential candidacy. But most of the leaders of the pro-Kassab
group, including 10 of the 12 PSDB City Council members, were
conspicuously absent from the convention, and even held their own
parallel meeting. Whatever the outcome of this election, much work
will be needed to heal the PSDB's internal rift and restore its
important alliance with the DEMs. End Summary.



2. (U) The PSDB convention itself was an anti-climax at the end of a
week of increasing tension and suspense. On June 14, the Democratic
Party municipal convention, as expected, nominated Gilberto Kassab
as the party's candidate for Mayor. A number of prominent "tucanos"
(PSDB members) attended the DEM convention to advocate maintaining
the PSDB-DEM alliance and nominating Kassab as their own candidate.
Governor Serra was out of the country, but Lieutenant Governor
Alberto Goldman (PSDB) attended in his stead and delivered an
address expressing the hope that "the political alliance be
converted immediately into an electoral alliance... [but] if not, we
will be together in 90 days." The somewhat confused Goldman said at
one point, "We are here to consolidate the candidacy of Geraldo
Alckmin" when he meant Gilberto Kassab, and later referred to the
Mayor as "Geraldo Kassab." For his part, Kassab expressed pride in
the PSDB-DEM alliance and what the two parties have accomplished
together in his administration, and added that if it were up to him,
none of the many PSDB members holding positions in the municipal
government would leave his administration.



3. (U) On June 17, a group including 11 PSDB City Council members
submitted a slate with Kassab as the Mayoral candidate, along with
the signatures of 424 delegates. (There were 1,344 voting delegates
to the convention; 403 were needed to register the slate.) Alckmin
supporters charged that delegates were being pressured to sign on to
the Kassab ticket, and a potentially ugly situation developed with
accusations of fraud and talk of possible legal challenges. Party
leaders and representatives of both factions recognized that an open
clash at the convention would be tantamount to political suicide,
but nobody seemed to know how to avoid it. One Kassab/DEM supporter
said he would back off "only if my commander orders me to," a
reference to Governor Serra. Finally, on the evening before the
convention, after meeting with national and state party leaders and
senior advisors to Serra, the Kassab supporters agreed to desist.
However, many of the dissidents boycotted the convention and held
their own parallel gathering where they complained of Alckmin's
"stubbornness" and talked of the "sacrifice" they had made in the
name of a "larger objective" - Jose Serra's presidential candidacy.



4. (U) Per reftels, Governor Serra has made clear all along his
preference for maintaining the PSDB's alliance with the DEMs by
supporting the re-election of Kassab. In recent press interviews,
however, he indicated he would support Alckmin if the party chose

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him, while adding that he would continue to praise Kassab as
appropriate, both for implementing Serra's programs after he
departed the Mayor's office to run for Governor, and for offering
innovations of his own in governing the city. Serra and Kassab
appear together regularly at ribbon-cutting and other events
involving state and local government. (For example, on June 27, the
Governor and Mayor presided at a high-profile road opening while
Alckmin, in contrast, was campaigning by himself at a trade fair.)
But Serra evidently concluded that a direct challenge to Alckmin's
candidacy, whether it succeeded or not (and it likely would not
have), would carry too high a price.



5. (SBU) Though Serra pledged his support to Alckmin, it is hard to
imagine him campaigning enthusiastically for him, and the most
likely scenario is that he will keep some distance, not opposing him
overtly and more than likely not working behind the scenes to
undermine him. If Alckmin is elected Mayor, Serra will need his
support for his 2010 presidential bid, or, at the very least, he
will need not to have an enemy in the Mayor's office. It is no
coincidence that one key supporter of Alckmin's candidacy within the
national PSDB has been Minas Gerais Governor Aecio Neves, Serra's
main rival for the party's presidential nomination. Serra and
Alckmin worked reasonably well together in 2005-6 when their roles
were reversed - Alckmin was Governor and Serra was Mayor - but that
was before Alckmin defeated Serra for the PSDB's 2006 presidential
nomination (and then went on to lose to Lula), and before Alckmin
insisted on running for Mayor this year, disrupting Serra's plan to
get Kassab re-elected and thereby continue his own strong presence
and influence in Sao Paulo's City Hall.



6. (U) For his part, Mayor Kassab, though no doubt disappointed,
expressed satisfaction that he has so many supporters within the
PSDB. It now appears that at least some of the PSDB Assistant
Mayors and Municipal Secretaries will remain in his administration
while trying, in a very delicate balancing act, to avoid any overt
political activity. Both the Kassab and Alckmin camps continue to
talk about a "non-aggression pact" in which the two candidates
compete without confronting or attacking each other and instead
direct all their fire against Marta Suplicy and the Workers' Party
(PT). (Note: On June 29, the PT formally nominated Suplicy, with
Aldo Rebelo (Communist Party - PC do B) as her running mate.
Following intervention by President Lula, the "Little Left Bloc"
(see ref A) of Communist, Socialist (PSB), Democratic Labor (PDT),
and two smaller parties decided to ally with Suplicy in Sao Paulo.
End Note.) Leaders of both PSDB and DEM, and the candidates
themselves, say they will unite in the second round against her,
though they also recognize that there will be scars from the
campaign. A new IBOPE poll shows Suplicy opening a small lead over
Alckmin, 31 to 25 percent, with Kassab trailing at 13 percent.
Alckmin, however, has by far the lowest rejection rate among the
three main candidates, and would be the favorite in a second round
against either of the other two.



7. (SBU) Comment: This is the second time Jose Serra has been
outmaneuvered in his own party by Geraldo Alckmin. Despite his
considerable political skills, Serra has an abrasive manner and
style of doing business that sometimes turns potential allies into
adversaries. The question remains whether his retreat from this
confrontation and his abandonment of Kassab and the DEMs will be
seen as a sign of weakness, possibly damaging his presidential
prospects, or will put Alckmin and his supporters in his debt and
even turn them into allies in 2010. End Comment.



8. (U) This cable was coordinated with and cleared by Embassy
Brasilia.

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