SAO PAULO LEADERS OUTLINE CONCERNS WITH GOB TO WHA A/S

C O N F I D E N T I A L SAO PAULO 000667 SIPDIS AMEMBASSY BRASILIA PASS TO AMCONSUL RECIFE E.O. 12958: DECL: 2019/12/29 TAGS: PGOV PREL ECON EFIN BR SUBJECT: SAO PAULO LEADERS OUTLINE CONCERNS WITH GOB TO WHA A/S VALENZUELA CLASSIFIED BY: Thomas J. White, Consul General; REASON: 1.4(B),(D) ¶1. (C) SUMMARY: On the final leg of his week-long visit to the Southern Cone, Western Hemisphere Affairs Assistant Secretary Arturo Valenzuela met with leading political and economic observers in Sao Paulo, who expressed concern with Brazil's foreign policy, public spending, and political maneuvering in the run-up to the October 2010 elections. In a subsequent private meeting with A/S Valenzuela, Sao Paulo Governor and presidential front-runner Jose Serra warned that corruption and radicalization was growing in the ruling Worker's Party (PT) and suggested that as president he would push for a foreign policy more in tune with the United States. END SUMMARY. Sao Paulo Political and Economic Observers -------------- -------------- ¶2. (C) Concluding his visit to the region with a stop-over in Sao Paulo on Saturday, December 18, A/S Valenzuela attended a lunch hosted by the Consul General with the ChargC) and nine leading political and economic experts including former Foreign Minister Celso Lafer, former Brazilian Ambassador to the United States Rubens Barbosa, and former Science and Technology Minister Jose Goldemberg. A/S Valenzuela provided an overview of his trip and emphasized the high USG priority placed on the bilateral relationship. He identified cooperation with Brazil on regional issues, including Honduras, as being of critical importance. ¶3. (C) All of the Brazilian invitees criticized the Lula Administration's foreign policy, voiced concern over the increasing radicalization of the governing Worker's Party (PT),and stressed the deterioration of public accounts. Former FM Lafer described Brazil's stance toward Iran as the "worst mistake" of Lula's foreign policy, while Ambassador Barbosa cited Brazil's role in Honduras as a prominent failure. All agreed that the GOB is focusing on international issues (Iran, the Israeli-Palestinian conflict, Honduras, etc.) in which Brazil has few national interests and little influence, at the expense of ignoring issues closer to home, including relations with Mercosur. ¶4. (C) Vice Chairman of the Brazilian Center for International Relations (CEBRI) Roberto Teixeira da Costa and Professor Goldemberg particularly questioned the GOB's interest in Iran, given a paucity of commercial prospects and unlikelihood of civil nuclear cooperation. [NOTE: In an aside with ChargC),Goldemberg, who is also a renowned nuclear physicist, said Brazil has nothing to offer Iran on nuclear fuel issues as Iran is already well ahead of Brazil in centrifuge capacity. Moreover, he said he fully appreciated Secretary Clinton's recent statement about countries working closely with Iran and that the GOB should take it seriously. END NOTE.] A/S Valenzuela emphasized that an increasingly isolated Iran is looking for any opportunities like the one offered by the Lula Administration to try to cover up its lack of cooperation and unpopularity with the international community. ¶5. (C) Domestically, the Brazilian participants described the PT's strategy to make the upcoming national elections a referendum on the Lula administration as an improvement over the Cardoso administration and emphasized the party's intention to run an aggressive campaign. Taking this tack, they argued, could portray Jose Serra as Cardoso's candidate and help transfer some of Lula's popularity to Dilma Rousseff, who has never run for public office before and has demonstrated little charisma as a candidate so far. Folha de Sao Paulo Ombudsman Carlos Eduardo Lins da Silva highlighted the PT's unprecedented financial strength to run a campaign after eight years in government, while political scientist Bolivar Lamounier said an increasingly radicalized PT would likely run a very negative campaign against the opposition. Lins da Silva added that, in the event the PT loses the 2010 presidential election, it could use its new wealth to serve as a very troublesome opposition. ¶6. (C) Economically, Teixeira da Costa said that public perceptions about Brazil were overly optimistic and that markets could shift downward quickly if the international situation deteriorates further. Ricardo Sennes, Director of international affairs' consulting firm Prospectiva, echoed the assessment, saying that GOB public accounts were under increasing strain and the Brazilian economy remained uncompetitive over the long-term due to weak infrastructure, high tax burdens, and rigid labor policies. All agreed, however, that Brazil's strong economic performance over the last eight years and current recovery from the global crisis would help Dilma Rousseff's campaign. Regarding Brazil's recent high-profile involvement in the Copenhagen Climate Conference (COP-15),Professor Goldemberg said President Lula's performance was mediocre, and jockeying by the GOB left the perception that Brazil developed its position in the last two weeks. Conversely, he praised Secretary Clinton's presentation and said that major country players should meet in small groups (vice the G-77) to foster progress on issues such funding and verification. SP Governor and Presidential Front-runner Jose Serra -------------- -------------- - ¶7. (C) In a 90-minute one-on-one meeting at the Governor's Palace, Jose Serra expressed a number of the same concerns in regards to Brazil's national political currents, rising corruption, public spending and foreign policy. Serra told A/S Valenzuela that the ruling Workers Party (PT) is making every effort to build a long-term power base while in government. Serra claimed Brazil is reaching previously unseen levels of corruption as the PT and its coalition allies use rising public expenditures to construct a political machine for the 2010 elections. In the face of such efforts, and what he described as the comparatively weak apparatus of his own PSDB party, Serra was not firmly confident he could win the presidency in October 2010. ¶8. (C) Beyond domestic politics, Serra criticized the Lula Administration's foreign policy and indicated that he would take Brazil in a more internationalist direction if elected president. Serra cited Honduras specifically as a Lula Administration failure, blaming the GOB stand and Honduran President Zelaya for impeding a resolution. Conversely, he highlighted his engagement with the State of California on climate issues as an example of opportunities to work together on difficult issues. However, reiterating his public position on biofuels, Serra criticized the U.S. tariff on imported Brazilian ethanol as economically illogical. ¶9. (C) Referring to rising populism in the region, Serra said he found Argentine President Cristina Kirchner "cordial and smart" and suggested that if the USG has concerns about Kirchner's populist politics, that PT presidential candidate Dilma Rousseff should cause greater concern. He also warned that USG references to a "special relationship" with President Lula do not resonate well with all segments of Brazil and could be manipulated by the PT. [COMMENT: Beyond Argentina, Serra appeared generally uninformed of recent developments in the Southern Cone, including Paraguayan President Lugo's political situation, and seemed primarily immersed in Brazilian domestic politics. END COMMENT.] Finally, Serra said he was working on several articles and op-eds that would publicly articulate his criticism of the Lula Administration's foreign policy in the coming months. ¶10. (U) WHA A/S Valenzuela has cleared this cable. White