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### Viewing cable 06BRASILIA1659, BRAZIL INTERNAL POLITICS UPDATE, 7-11 AUGUST 2006.

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06BRASILIA1659 | 2006-08-11 19:27 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Brasilia

`

    VZCZCXRO8612
    RR RUEHRG
    DE RUEHBR #1659/01 2231927
    ZNR UUUUU ZZH
    R 111927Z AUG 06
    FM AMEMBASSY BRASILIA
    TO RUEHC/SECSTATE WASHDC 6325
    INFO RHEHNSC/NSC WASHDC
    RUEHRG/AMCONSUL RECIFE 5263
    RUEHSO/AMCONSUL SAO PAULO 7716
    RUEHRI/AMCONSUL RIO DE JANEIRO 2646
    RUEHBU/AMEMBASSY BUENOS AIRES 4190
    RUEHMN/AMEMBASSY MONTEVIDEO 6396
    RUEHAC/AMEMBASSY ASUNCION 5583
    RUEHSG/AMEMBASSY SANTIAGO 5677

` `

    UNCLAS SECTION 01 OF 02 BRASILIA 001659

    SIPDIS

    SENSITIVE
    SIPDIS

    E.O. 12958: N/A
    TAGS: PGOV PREL ECON BR
    SUBJECT:  BRAZIL INTERNAL POLITICS UPDATE, 7-11 AUGUST 2006.

    REF: BRASILIA 1441 AND PREVIOUS

    ¶1.  (SBU) SUMMARY. The Parliamentary Inquiry Committee (CPI)
    investigating the so-called "blood suckers" (Sanguessugas)
    corruption scandal issued a report on August 9 that implicated 69
    federal deputies and three federal senators, calling for their
    removal from politics.  The scale of the accusations, 12 percent of
    the congress, is unprecedented in Brazil, even following a year of
    scandalous revelations of large-scale corruption.  Corruption was
    also the subject of intense questioning directed at President Lula
    on a 10 August TV Globo interview.  Contradicting earlier
    presidential statements, Lula claimed he fired former ministers Jose
    Dirceu and Antonio Palocci for their alleged roles in earlier
    scandals.  END SUMMARY.

    ------------- -----------------------------------
    SANGUESSUGAS: CPI ACCUSES 69 DEPUTIES, 3 SENATORS
    ------------- -----------------------------------

    ¶2.  (U) The preliminary report of the Parliamentary Inquiry
    Committee implicated 69 federal deputies and three federal senators
    in the "Sanguessugas" corruption scandal, which involved payments to
    legislators to support overpriced purchase contracts for ambulances
    and medical supplies. The scheme involved a ten percent kickback for
    congressmen who introduced the purchases as amendments to the
    federal budget.  The CPI called for the removal of the 72 from
    politics ("cassacao"); the CPI's findings are not yet final and are
    subject to further investigation.  Eighteen legislators under
    suspicion were exonerated.  The vast majority of the accused, 63 of
    72, are from parties in the governing coalition, especially the
    Liberal Party (PL) and the Brazilian Labor Party (PTB), while the
    other 9 are from the opposition. One member of President Lula's
    party, the Workers Party (PT), was accused.  Several of the accused
    are members of the so-called evangelical bloc; Band News said thirty
    percent are evangelicals.  The accused constitute 12 percent of the
    congress. Many of these same parties were implicated in the
    "mensalao" scandal (i.e., the systematic monthly bribery of
    legislators by PT operatives in exchange for votes) that rocked
    Lula's PT party and governing coalition over the past year.

    ¶3.  (U) The CPI's findings were based largely on the testimony of
    Luiz Antonio Vedoin, one of the owners of the Planam firm that sold
    the ambulances, as well as telephone wiretaps and bank records
    showing payments to legislators.  The total amount of payoffs is
    around 9 million reais (about USD 4 million); the CPI said the
    largest amount to an individual was about a third of the total, paid
    to Lino Rossi (Progressive Party, of Mato Grosso state.)   The CPI
    said 19 of the accused received over 100,000 reais each (about USD
    45,000).

    ¶4.  (U) The next step involves a congressional decision on each
    case, leading either to exoneration or expulsion from congress and a
    permanent ban on political activity by that individual.  This will
    probably happen in 2007, during the next congress.

    ------------------------------------ -------------------
    LULA CONTRADICTS EARLIER STATEMENTS: "I FIRED DIRCEU AND PALOCCI"
    ------------------------------------ -------------------
    ¶5.  (SBU) President Lula appeared on TV Globo's Jornal Nacional, the
    main evening news program, on August 10 in TV Globo's series of
    candidate interviews.  Globo anchors William Bonner and Fatima
    Bernardes questioned him so aggressively on corruption scandals that
    Lula could scarcely talk about anything else, staying on the
    defensive and unable to control the interview.  The most significant
    revelation in the interview was Lula's claim that he fired his
    former head of the civil household Jose Dirceu and Finance Minister
    Antonio Palocci for their roles in earlier scandals.  Previously,
    Lula and the presidential palace (Planalto) had maintained that both
    had resigned. (Comment: It is not clear whether Lula sought to show
    himself in a new, decisive light, or was so befuddled by the
    aggressive questions that he misspoke and inadvertently contradicted
    himself.  End comment.)

    -------------------------------
    LULA UP, ALCKMIN DOWN, IN POLLS
    -------------------------------

    ¶6.  (SBU) Two major national polls this week showed President Lula
    increasing his lead over opponent Geraldo Alckmin, and gains by far
    left candidate Heloisa Helena.  Others are in single digits.  The
    Datafolha polling firm reported that Lula's lead widened from 16 to
    23 points over Alckmin since a poll conducted in mid-July, from 44
    percent to 47 percent, while Alckmin slipped from 28 to 24 percent
    of first round voting intentions.  Far left candidate Heloisa Helena

    BRASILIA 00001659  002 OF 002

    went from 10 to 12 percent in the same period, essentially unchanged
    since it is within the margin of error for the poll.  The same poll
    showed a second round match-up between Lula and Alckmin resulting in
    a 54 to 37 percent victory for Lula.  A poll by CNT/Sensus this week
    showed Lula at 47.9 percent, Alckmin at 19.7, and Helena at 9.3
    percent.  Lula's lead over Alckmin in the Datafolha poll is greater
    than that of Fernando Henrique Cardoso over Lula at the same time
    before the 1998 elections, according to Folha de Sao Paulo.
    Television campaign advertising is permitted beginning only next
    week, and since most voters get their information from TV, the
    relative positions of candidates could shift, depending on the
    effectiveness of their TV messages.  However, at this early stage,
    there is a growing body of polling indicating that Lula could win a
    first round victory.

    SOBEL

`