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### Viewing cable 06SAOPAULO280, LABOR LEADERS DIFFER OVER LULA GOVERNMENT, BUT MOST WORKERS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06SAOPAULO280 | 2006-03-15 13:28 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Sao Paulo

`

    VZCZCXRO9524
    PP RUEHRG
    DE RUEHSO #0280/01 0741328
    ZNR UUUUU ZZH
    P 151328Z MAR 06
    FM AMCONSUL SAO PAULO
    TO RUEHC/SECSTATE WASHDC PRIORITY 4663
    INFO RUEHBR/AMEMBASSY BRASILIA 5823
    RUEHRG/AMCONSUL RECIFE 2769
    RUEHRI/AMCONSUL RIO DE JANEIRO 6905
    RUEHBU/AMEMBASSY BUENOS AIRES 2098
    RUEHCV/AMEMBASSY CARACAS 0207
    RUEHAC/AMEMBASSY ASUNCION 2449
    RUEHMN/AMEMBASSY MONTEVIDEO 1865
    RUEHSG/AMEMBASSY SANTIAGO 1612
    RUEHLP/AMEMBASSY LA PAZ 2648
    RUCPDOC/USDOC WASHDC 2323
    RUEATRS/DEPT OF TREASURY WASHDC
    RHEHNSC/NSC WASHDC
    RUEHC/DEPT OF LABOR WASHDC
    RHMFISS/CDR USSOUTHCOM MIAMI FL

` `

    UNCLAS SECTION 01 OF 05 SAO PAULO 000280

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE FOR WHA/BSC AND DRL/IL
    NSC FOR SCRONIN
    STATE PASS USTR FOR SULLIVAN/LEZNY
    DEPT OF TREASURY FOR FPARODI
    USDOC FOR 332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWARD
    USDOC ALSO FOR 3134/USFCS/OIO/EOLSON/DDEVITO/DANDERSON
    STATE PASS EXIMBANK
    STATE PASS OPIC FOR DMORONESE, NRIVERA, CMERVENNE
    DOL FOR ILAB MMITTELHAUSER

    TAGS: ELAB ECON PGOV SOCI BR
    SUBJECT: LABOR LEADERS DIFFER OVER LULA GOVERNMENT, BUT MOST WORKERS
    WILL LIKELY SUPPORT HIS RE-ELECTION

    SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY.

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

    ¶1. (SBU)  During his March 6-7 visit to Sao Paulo, Labor Attache met
    with representatives of three major labor organizations and the
    ruling Workers' Party (Partido dos Trabalhadores - PT), as well as
    some academics specializing in labor issues.  With the exception of
    representatives of the influential United Workers' Center (CUT),
    labor leaders expressed concern about workers' economic situation,
    especially the problem of the large informal economy in which
    workers are not protected.  Some unions were prepared to support
    President Lula's re-election; others expressed highly negative views
    of his administration.  One eminent labor consultant was pessimistic
    about the prospects for labor reform.  End summary.

    ---
    CGT
    ---
    ¶2. (U) Labor Attache (Labatt), accompanied by Sao Paulo Poloff and
    Econ Assistant, met with General Confederation of Workers (CGT)
    President Antonio Carlos dos Reis, International Relations Secretary
    Lourenco Ferreira do Prado, and Secretary general Caninde Pegado.
    The CGT is the third largest federation of labor unions in Brazil
    and is close to the centrist Brazilian Democratic Movement Party
    (PMDB).  It is one of six umbrella labor organizations recognized by
    the Brazilian government, and is affiliated with the International
    Confederation of Free Trade Unions (ICFTU).  Ferreira began with a
    brief overview of the CGT's history dating back to the military
    dictatorship.  He stressed the CGT's good relationship with the
    AFL-CIO Solidarity Center, as well as its constructive relations
    over many years with the United States.  Lest there be any
    misunderstanding, he assured Labatt that "we're not crazy leftists"
    and that, in fact, the CGT had grown by attracting into its ranks
    workers and organizations who found the powerful United Workers'
    Center (CUT - Brazil's principal labor federation, which supports a
    socialist political ideology and is closely affiliated with
    President Lula and the PT) to be too far to the left.  The CGT is
    active in the fight against racial discrimination and child labor,
    and in helping to improve conditions for women and old people.

    ¶3.  (SBU) Asked about the CGT's views on the upcoming elections,
    Reis replied that the Confederation has not yet defined a position.
    In 2002, the group supported Ciro Gomes, who ran under the banner of
    the Popular Socialist Party (PPS) in alliance with the Democratic
    Labor Party (PDT) and the Brazilian Labor Party (PTB) and finished
    fourth in the first round with 12 percent of the vote.  (NOTE: Gomes
    serves as Minister of National Integration in Lula's government and
    is considered by some a possible running mate for Lula in this
    year's election.  He was forced to leave the PPS when it broke with
    the government, and is now a member of the Brazilian Socialist Party
    (PSB).  END NOTE.)  The CGT supported Lula in the second round, in
    which he defeated Jose Serra. Though the CGT has not yet taken a
    position on any candidate, none of our three interlocutors is
    inclined to support Lula in this year's election.  They believe he
    has forgotten the workers, and point out that average worker incomes
    have fallen during his administration.  He has created some jobs,
    but not good jobs, not jobs for skilled workers.  Unemployment
    remains high (over 16 percent, for example, in Sao Paulo city,
    though at its lowest level in five years).  The CGT is involved in
    programs to try to organize workers in Brazil's large informal
    sector.  The CGT leaders we spoke to strongly oppose Lula's
    macroeconomic policies, which are a carryover from the
    administration of Fernando Henrique Cardoso, and they believe he has
    brought more misery and corruption to Brazil.

    SAO PAULO 00000280  002 OF 005

    ¶4.  (U) In discussing a list of possible and likely presidential
    candidates, the three CGT leaders acknowledged that, for the most
    part, the candidates do not speak for ordinary workers or address
    their concerns.  One who might, they think, is Senator Heloisa
    Helena of the Socialism and Liberty Party (PSOL), which she founded
    after being expelled from the PT for breaking party discipline.  But
    Helena, while she is expected to run, will be lucky to get five
    percent of the vote.

    ----------
    PT AND CUT
    ----------

    ¶5.  (U) The view was quite different at PT headquarters, where
    Labatt met with Marlene Rocha, National Secretary for Political
    Orientation and a member of the National Executive Committee;
    Ramatis Vacino, adviser to CUT President and PT National Union
    Secretary Joao Felicio, and Angelo d'Agostini Junior, a CUT leader

    SIPDIS
    at the Sao Paulo state level.  Rocha outlined the parallel histories
    of the PT and the CUT, noting that the two organizations were
    founded four years apart (1980 and 1984), but by many of the same
    militants, and had grown together in the struggle against the
    military regime and later in the democratic political system, though
    there is no formal relation between the two.  Polls show the PT has
    the support of 19 percent of the electorate, she said, down from 23
    percent before the political scandal.  The Brazilian Democratic
    Movement Party (PMDB) is second with 14 percent, followed by the
    Brazilian Social Democracy Party (PSDB) with 7 percent and the
    Liberal Front Party in fourth place.  The rest of the numerous
    parties will have trouble reaching the five percent threshold
    required by the so-called "barrier clause" in balloting for federal
    deputies in order to retain government funding, free TV time, and
    committee chairs in the Chamber of Deputies.  (NOTE: This
    requirement will be in effect for the first time in the 2006
    elections and is expected to lead to the disappearance of many small
    parties.  END NOTE.)  Rocha noted that the PDT was once allied with
    the PT - legendary PDT leader Leonel Brizola was Lula's running mate
    in one of his unsuccessful presidential campaigns - but they had
    parted ways after the PT won the presidency.  Likewise, the PPS was
    once part of the PT coalition but is now in opposition.

    ¶6.  (U) The PT's main objectives this year are re-electing Lula and
    registering new members.  The party will be conducting a great deal
    of outreach.  The PT-affiliated Perseu Abramo Foundation will
    organize a series of six seminars between March 24 and the end of
    May to highlight the party's priorities.  The National Directorate
    will meet March 18-19 to approve position papers in preparation for
    the PT's "National Encounter" in late April, at which time the party
    will determine its electoral alliances.  Rocha acknowledged that the
    Lula government had maintained the macroeconomic principles of the
    1995-2002 Fernando Henrique Cardoso administration, but with
    different objectives, since Lula was trying to promote growth in
    order to distribute wealth.  Among the materials she handed out was
    Lula's June 2002 "Letter to the Brazilian People," which, at a
    critical time in the campaign, reassured voters that Lula would
    manage the economy responsibly.  (NOTE: According to press reports,
    some senior advisers are urging Lula to issue a new letter to the
    people as part of his re-election effort.  END NOTE.)

    ¶7. (U) The CUT representatives indicated that although they didn't
    agree with everything the Lula government had done, they were
    generally satisfied and would support Lula's re-election.  They
    pointed to a newly promulgated law protecting domestic employees as
    an example of progress on the labor front.  Though the CUT had
    pushed for a higher minimum wage than the government had delivered,
    and has criticized the government from the left, they indicated they

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    would work for Lula in the campaign while continuing to press for
    more labor-friendly policies.

    --------------
    FORCA SINDICAL
    --------------

    ¶8.  (U) At Forca Sindical (FS), Labatt met with Secretary General
    Joao Carlos Goncalves and International Relations Secretary Luis
    Carlos Motta.  Goncalves described Forca Sindical, founded in 1991,
    as a union of various ideologies in search and defense of democracy,
    and the application of new ideas to the operation and management of
    labor unions through open discussions.  FS developed out of an
    ideological conflict among the major labor unions and has grown to
    be Brazil's second-largest union, comprising 986 workers' entities
    totaling 8.5 million members.  Like the CGT, FS does not
    discriminate against any ideology or party membership, and its
    executive committee has adherents to the PSDB, PFL, PL, and other
    parties across the ideological spectrum.  FS has made significant
    contributions towards changes in the way unions used to operate that
    prejudiced and suppressed some important worker rights and job
    security.  As the fastest-growing labor organization in Brazil, FS
    has representation in all 27 Brazilian states, representing millions
    of workers, principally metalworkers and workers in such other
    sectors as commerce, transportation, construction, engineering,
    footwear and clothing, and services.  The National Union of Retirees
    is also affiliated with FS, which works closely with the Solidarity
    Center, other unions, the government, the private sector and the
    community at large to promote worker rights, racial equality and
    social justice.

    ¶9.  (U) Looking back over the 15 years since FS was founded, its
    leaders believe the labor movement has brought important
    improvements to the quality of life of workers and has made them an
    active part of wage negotiations.  They remain concerned, however,
    about the economic plight
    of workers.  High interest rates have led to growing unemployment
    throughout the country.  Almost 50 percent of workers are not
    registered and thus do not enjoy social benefits (minimum wage,
    health insurance, overtime, pensions, etc.).  They work under
    informal arrangements with employers, outside the reach of labor
    law.  This situation exacerbates inequality and injustice.

    ¶10.  (U) FS is prepared to support Lula in his bid for re-election,
    provided he accepts FS's demands in support of worker rights, labor
    reform, changes to the current system of industrial relations
    ("reforma sindical"), which affects collective labor rights, and
    replacement of the labor tax with a voluntary contribution.  The
    organization will also continue to speak out against high interest
    rates and lack of investment in areas that can create jobs.
    Although Lula says his government created 3 million new jobs, FS
    insists that these jobs are in the informal economy where workers
    are paid below minimum wage.  The FS leaders believe   Lula's
    chances of winning a second term have increased considerably since
    the launching of Bolsa Familia and the recent economic rebound, and
    with the political scandal losing impetus.  The Bolsa Familia
    program gives Lula around 15-20 million "captive votes," since
    impoverished recipients of government handouts are unlikely to vote
    for someone who might reduce or eliminate the program.

    ----------------------------
    EXPERT PESSIMISTIC ON REFORM
    ----------------------------

    ¶11.  (U) Jose Pastore is a consultant, retired professor, and expert
    on labor issues.  He provided Labatt with a status report on labor
    reform and industrial relations reform.  There is a consensus within

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    the Lula administration and union circles that of the two types of
    reform to be done, the current system of industrial relations, which
    affects collective labor rights, needs to be overhauled before
    individual employment rights are addressed.  The former determines
    what kind of unions should exist, how they should be supported, and
    what kinds of collective agreements they can enter into.  It is upon
    this framework that individual rights rest.  Brazil has a form of
    attenuated hybrid corporatism, created in the 1930s by the Getulio
    Vargas regime, that rests on three pillars: monopoly of
    representation; the obligatory union tax of one day's wage per
    worker per year (imposto sindical); and the normative power of the
    labor courts.

    ¶12.  (U) The system is cumbersome and outdated.  It has survived
    several regimes, including the military dictatorship, and was
    slightly modified by the 1988 Constitution which left its main
    pillars intact.  The result has been fragmentation, with thousands
    of unions in existence.  The system is clearly unsuited to
    contemporary economic and social realities.

    ¶13.  (U) Another problem is that 10 percent of the unemployed
    (approximately 8.5 millon workers) plus the 60 percent of workers in
    the informal sector combined represent nearly 50 percent of Brazil's
    total workforce.  These workers don't enjoy social, medical and
    labor benefits, annual leave, insurance protection, or a retirement
    fund.  For these reasons, Professor Pastore believes that reform of
    the industrial relations system and the labor law urgent, both as a
    human necessity and as an economic imperative.  He was disappointed
    that Lula didn't push the two reforms through Congress immediately
    after being inaugurated in 2003, when he had ample Congressional
    support and broad popular support.  Neither initiative will be
    addressed by the Congress in an election year, because both are
    controversial and involve reducing somebody's benefits and
    privileges.  However, the existing anachronistic labor structure
    significantly damages Brazil's global competitiveness.  Real wages
    are smaller than they were ten years ago, but labor costs are high
    because of benefits paid into several different funds that seldom
    benefit the worker.   In Brazil, these costs are 103 percent of
    salary, probably the highest in the world.  Pastore is concerned
    that many multinational companies are moving operations to China and
    other Southeast Asian countries due to high interest rates, the
    strong real, and labor costs.  In addition, companies operating in
    Brazil are disadvantaged by the "Brazil cost," reflecting the
    country's critical infrastructure limitations (bottlenecks at ports
    and airports) and cumbersome bureaucracy.

    ¶13.  (U) Pastore does not believe labor reforms will be passed by
    the new legislature to be seated in 2007 after the elections,
    because there is a strong lobby in the congress against workers
    giving up any of their hard-won rights.  He further opined that Lula
    will be re-elected due to his popular, populist programs.  However,
    he asked rhetorically, "Where will he find the funding for these
    programs if he's elected for four more years?"

    -------
    COMMENT
    -------

    ¶14.  (SBU) President Lula was a worker and a labor leader, and many
    workers and labor leaders like and respect him, and may still
    identify with him.  It is clear, however, that many workers believe
    that as President he has forgotten them and neglected their
    interests in favor of more conventional economic policies.  We
    suspect that the CUT representatives might have voiced similar
    complaints, were they not at PT headquarters in the presence of a PT
    executive.  On the other hand, workers have few alternatives; PSDB
    pre-candidates Geraldo Alckmin and Jose Serra are unlikely to be

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    viewed by many workers as more labor-friendly than Lula, and while
    Rio de Janeiro former Governor Anthony Garotinho may have populist
    appeal, many workers will not take him seriously.  Hence, it appears
    for now that Lula will likely end up with the labor vote, at least
    in the second round.  End comment.

    ¶15.   (U) This cable was cleared/coordinated with Embassy Brasilia.

    MCMULLEN

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