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### Viewing cable 07SAOPAULO560, A PSDB INSIDER'S EARLY LOOK AT THE 2008 MUNICIPAL ELECTIONS

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07SAOPAULO560 | 2007-06-25 16:49 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Sao Paulo

`

    VZCZCXRO5227
    PP RUEHRG
    DE RUEHSO #0560/01 1761649
    ZNR UUUUU ZZH
    P 251649Z JUN 07
    FM AMCONSUL SAO PAULO
    TO RUEHC/SECSTATE WASHDC PRIORITY 7170
    INFO RUEHBR/AMEMBASSY BRASILIA 8269
    RHEHNSC/NSC WASHDC
    RUCPDOC/USDOC WASHDC 2821
    RUEHMN/AMEMBASSY MONTEVIDEO 2374
    RUEHBU/AMEMBASSY BUENOS AIRES 2789
    RUEHSG/AMEMBASSY SANTIAGO 2080
    RUEHLP/AMEMBASSY LA PAZ 3389
    RUEHPE/AMEMBASSY LIMA 1162
    RUEHCV/AMEMBASSY CARACAS 0516
    RUEHRG/AMCONSUL RECIFE 3653
    RUEHRI/AMCONSUL RIO DE JANEIRO 8179
    RUEHAC/AMEMBASSY ASUNCION 3043
    RUEATRS/DEPT OF TREASURY WASHDC

` `

    UNCLAS SECTION 01 OF 04 SAO PAULO 000560

    SIPDIS

    SENSITIVE
    SIPDIS

    DEPT FOR WHA/BSC, INR/IAA, INR/R/AA
    STATE PASS TO USTR FOR SCRONIN
    STATE PASS EXIMBANK
    STATE PASS OPIC FOR MORONESE, RIVERA, MERVENNE
    NSC FOR TOMASULO
    USDOC FOR 4332/ITA/MAC/OLAC
    USDOC FOR 3134/USFCS/OIO
    TREASURY FOR JHOEK
    AID/W FOR LAC/AA

    E.O. 12958:  N/A
    TAGS: PGOV PINR ECON BR
    SUBJECT: A PSDB INSIDER'S EARLY LOOK AT THE 2008 MUNICIPAL ELECTIONS
    AND THE IMPLICATIONS FOR NATIONAL POLITICS

    SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY

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

    ¶1.  (SBU) In a recent conversation with Poloff, Walter Feldman, a
    leader of the Brazilian Social Democracy Party (PSDB) currently
    serving as Sao Paulo Municipal Secretary of Sports, Leisure, and
    Recreation, shared his views on local government, next year's
    municipal elections, and the broader Brazilian political scene.
    Feldman, who has served as a city councilman, state legislator, and
    federal deputy, is close to both Sao Paulo's PSDB Governor Jose
    Serra and Mayor Gilberto Kassab of the allied Democratic Party.  He
    said that while Serra would like to see Kassab run for re-election
    as Mayor, and Kassab would like to run, it will be difficult for the
    PSDB to avoid nominating former Governor and 2006 presidential
    candidate Geraldo Alckmin if he is serious about running, as appears
    likely.  Feldman also opined that though Serra's gubernatorial term
    has gotten off to a rocky start, he remains the best qualified among
    likely presidential candidates in 2010 and the front-runner for the
    PSDB nomination.  End Summary.

    ¶2.  (U) Poloff and Political Assistant met June 21 with Feldman, who
    had just returned from a trip to Shanghai to visit an important
    sports/recreation center there.  He was animated and energetic as he
    and Poloff discussed China's role in the global economy; U.S.-Brazil
    relations; U.S. views of Latin America, especially Venezuela and
    Bolivia; the Middle East situation (a prominent member of the local
    Jewish community, Feldman was extremely concerned about the
    Palestinian crisis and the Iraq war; he also commented that the 2006
    Lebanon conflict had caused the first breach in cordial relations
    between Sao Paulo's Jewish and Muslim communities, though he said
    tensions have since eased); the 2008 presidential election in the
    U.S.; and the environment and climate change.  He also cited his
    strong ties with the United States, including time spent living with
    a U.S. family as an exchange student in Nebraska.

    -------------------------------------
    JOCKEYING FOR THE MUNICIPAL ELECTIONS
    -------------------------------------

    ¶3.  (SBU) Feldman believes Gilberto Kassab is doing a "beautiful"
    job as Mayor, turning in a "surprising" performance.  He has shown
    strong leadership on urban renewal, as evidenced by his "Clean City"
    initiative (prohibition of billboards and strict limits on the
    number and size of store signs and marquees); removal of squatters
    from run-down, abandoned downtown buildings; and closure of bingo
    and slot-machine parlors.  He wants to run for re-election in 2008
    but may not be able to, since Geraldo Alckmin shows every sign of
    wanting the job.  Kassab's Democratic Party (DEM, formerly Liberal
    Front Party) is closely allied with the PSDB in Sao Paulo city and
    state, and the two parties are unlikely to run separate candidates.
    If Alckmin, the 2006 opposition presidential candidate, wants to run
    for Mayor, the PSDB can hardly say no to him.  Feldman is fairly
    sure Alckmin wants to run: "Being Mayor of Sao Paulo is like having
    your own country," and a local victory could put Alckmin back in the
    running for president in 2010.

    ¶4.  (SBU) Feldman confirmed that Governor Serra would like to see
    Kassab re-elected; the two of them "work as an inseparable team, the
    most effective Governor-Mayor combination in recent memory."  Kassab
    was elected Vice-Mayor on Serra's ticket in 2004, and succeeded him
    in April 2006 when Serra resigned to run for Governor.  Even while
    demonstrating that he's his own man with his own ideas and political
    style, Kassab has continued many of Serra's policies and kept a
    large part of his team in place at City Hall.  Good relations
    between local and state government are critical, as metropolitan Sao

    SAO PAULO 00000560  002 OF 004

    Paulo comprises almost half the state's population of about 41
    million.

    ¶5.  (SBU) If Alckmin does run, Feldman predicted, Minister of
    Tourism and former Mayor (2001-04) Marta Suplicy may decide to sit
    the election out.  Alckmin, who was a popular Governor with high
    approval ratings, would be difficult to beat, and Suplicy might do
    better to wait and instead run for Governor in 2010.  Considered by
    many in President Lula's Workers Party (PT) the party's most
    attractive possible successor to Lula, Suplicy has considerable
    support in the city but also has many detractors.  2008 is right
    around the corner, Feldman noted, and opponents and media will still
    be replaying her recent gaffe at every opportunity.  At a June 13
    public event to launch the government's National Tourism Plan,
    Suplicy was asked what message she had for travelers inconvenienced
    by Brazil's seemingly unending civil aviation crisis.  "Relax and
    enjoy," she replied, "because afterwards you'll forget all about"
    the long delays, flight cancellations, and general chaos in the
    airports.  She compared the challenges of air travel in Brazil to
    the rigors and pains of giving birth.  If Suplicy does decide not to
    run, Feldman said, any other candidate from President Lula's Workers
    Party (PT) will have a hard time defeating Alckmin, but the party
    will look for someone who can rally the faithful and enable the
    party to elect a decent number of candidates to the City Council.
    (Note: Many observers believe that the PT's Arlindo Chinaglia,
    President of the federal Chamber of Deputies, is positioning himself
    to run.  End Note.)

    ---------------
    SERRA'S WOES...
    ---------------

    ¶6.  (SBU) At the state level, Feldman noted that Governor Serra has
    had a "very difficult" first six months in office.  In January, a
    cave-in at the construction site of a new subway line - promoted by
    the state government as Brazil's first Public-Private Partnership
    (PPP) project - caused seven deaths.  There have also been sporadic
    strikes by public transportation workers with concomitant traffic
    nightmares.  A group of students at the public, state-run University
    of Sao Paulo (USP), accusing the state government of trying to
    interfere in the university's operations and to undermine its
    independence, occupied the Rectory on May 3 and refused to vacate
    it.  Serra, himself a former leader of the National Students' Union
    (UNE), has been reluctant to send in police even as authorities'
    patience runs out.  (Note: On June 21, students agreed to a
    negotiated settlement with the Rector and ended the occupation the
    following day.  End Note.)  University faculty and staff briefly
    went on strike, ostensibly to show solidarity with the students but
    also to demand higher salaries.  Serra managed to push through
    legislation altering pension benefits for state employees, but at
    considerable political cost.  If problems persist and Serra fails to
    show strong leadership, it will impact negatively on his 2010
    presidential aspirations.  In some respects, his principal rival for
    the PSDB nomination, Minas Gerais Governor Aecio Neves, appears to
    have an advantage because he can show more accomplishments in
    office.

    ----------------
    ...AND STRENGTHS
    ----------------

    ¶7.  (SBU) Nevertheless, Feldman is convinced that Serra will
    ultimately achieve his goals for the state and will capture his
    party's presidential nomination as well.  The state's public
    security situation has been relatively calm.  Serra is focused on
    infrastructure improvements: expanding the public transportation
    system, completing the freeway around the city, creating
    "development clusters," and improving access to the Port of Santos.

    SAO PAULO 00000560  003 OF 004

    (The port itself is operated under a federal concession with little
    state government involvement.)  Serra, in Feldman's view, is the
    best-prepared of any potential candidate to be President.  Unlike
    Lula and Fernando Henrique Cardoso (FHC), Serra (who has a PhD in
    Economics from Cornell) actually understands macroeconomics and
    would not just "sit back and let the Central Bank do what it wants."
     He would enunciate a clear interest rate policy and a clear
    exchange rate policy and would ensure they were implemented.

    ----------------------------
    WANTED: POLITICAL LEADERSHIP
    ----------------------------

    ¶8.  (SBU) The country is doing reasonably well economically, Feldman
    said, but this performance is not being matched on the political
    side.  What Brazil needs, in his opinion, is courageous leadership
    to push through necessary but unpopular reforms.  Reforming Social
    Security will be painful, but it must be done to rein in its huge
    deficits.  Brazil's labor legislation, enacted in 1943 by Getulio
    Vargas's regime, needs to be overhauled completely to be viable in
    today's economic system, to untie the hands of business.  The tax
    burden must be reduced and the tax regime simplified to allow the
    economy to grow.  Feldman noted that when Mayor Kassab first told
    his staff of his plans for "Cidade Limpa," his senior political
    advisors were dismayed and tried to dissuade him, arguing that a
    fight with the advertising industry and the business community
    promised nothing but trouble; despite this opposition, Kassab
    insisted on following through and achieved a great success.
    (Comment: The prohibition on billboards and restrictions on other
    outdoor advertising have generated more than 100 legal actions and a
    number of judicial restraining orders; so far, the city seems to be
    winning in court more often than it loses.  The advertising industry
    claims the law has cost many jobs, and small business owners
    complain that customers have a hard time finding stores due to the
    limitations on signs.  End Comment.)  Feldman wishes national
    politicians would show similar determination.

    ¶9.  (SBU) Feldman acknowledged that his own PSDB is in a difficult
    position.  The Lula administration has co-opted so much of the PSDB
    agenda, on social as well as economic issues, that the party cannot
    easily mount effective opposition.  How (and why), he asked
    rhetorically, should the PSDB oppose the very efficient Minister of
    Education after he put forth the Plan for Education Development
    (PDE) to correct systemic problems?  Or the Health Minister, the
    best of the four Lula has appointed?  And Feldman acknowledged that
    the administration's Growth Acceleration Program (PAC), if ably
    implemented - a big if - will help stimulate the economy.
    Ultimately, Feldman said, the only real divergence between the PT
    and the PSDB is in the area of ethics.  In contrast to the constant
    scandals involving the PT and the Lula administration, the PSDB
    would provide clean, transparent, efficient government, he asserted.
     (Comment: The PT over the past few years has clearly forfeited its
    image as the "party of ethics" and the one that is going to change
    the way business is done in Brazil, but FHC's two terms in office
    were hardly scandal-free.  End Comment.)

    ¶10.  (SBU) Feldman sees the 2006 elections as having brought to a
    close the political cycle that began in 1985 with the restoration of
    democracy.  For the first time, Lula will not be a presidential
    candidate.  Feldman predicts that Lula will support someone from the
    PT who is close to him - he mentioned Civil Household Chief Dilma
    Rousseff and Bahia Governor Jaques Wagner but not Justice Minister
    Tarso Genro - but will not be terribly disappointed or even
    surprised if the opposition wins.  This will serve both Lula's
    personal interests - leaving him in a better position to run again
    in 2014 - and will be consistent with his political belief that
    alternation in power is good for the country.  Feldman confirmed
    recent media reports that both Lula and Serra would like to abolish

    SAO PAULO 00000560  004 OF 004

    presidential re-election, limiting presidents to a single five-year
    term (versus the current four years with the possibility of two
    consecutive terms), and that the two parties had discussions about
    working together to accomplish this goal, but that the talks were
    suspended after they leaked.

    ¶11.  (SBU) Real political change remains elusive, Feldman lamented,
    pointing to the recent debate in Congress over the government's
    political reform proposal, in which proponents of a "closed party
    list" voting system withdrew the initiative when opposition by PT
    dissidents and the PSDB rendered its passage impossible.  Like FHC
    and many others in the PSDB, Feldman would prefer a single-district
    voting system as opposed to proportional representation, in which
    candidates run at large to fill (for example) Sao Paulo's 70 seats
    in the Chamber of Deputies and are elected based on a combination of
    the party and personal vote, but he acknowledged that the many
    politicians who benefit from the current system are unlikely to
    allow it to change fundamentally. Like Lula and FHC and their
    predecessors, the next president will likely have to deal with a
    Congress of 17-18 political parties, many of them "dwarfs" and
    "rent-a-parties" that offer little of a constructive nature but are
    good at obstruction and distortion.

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

    ¶12.  (SBU) Feldman is shrewd political operator who has influence
    far beyond his modest post in the city government.  His decision to
    run for Federal Deputy and then, having won, to relinquish his seat
    almost immediately to return home as Sao Paulo Secretary of Sports
    suggests that he aspires to bigger things locally, perhaps as
    Vice-Mayor in 2008.  His insights into internal PSDB politics and
    the challenges facing the party track with what other observers have
    told us.  Like his PSDB colleague Assistant Mayor and Municipal
    Secretary Andrea Matarazzo, he is loyal to Governor Serra.  At this

    SIPDIS
    early date he sees Serra as the front-runner for 2010, and probably
    envisions a major role for himself in the campaign and in a Serra
    administration.  End Comment.

    ¶13.  (U) This cable was coordinated with Embassy Brasilia.

    MCMULLEN

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