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UNCLAS SECTION 01 OF 02 SAO PAULO 000551 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/BSC 
 
E.O. 12958: N/A 
TAGS: PINR PGOV PREL KPAO BR
SUBJECT: LEADING PSDB PRESIDENTIAL CONTENDERS STEER AWAY 
FROM PRIMARY SPLIT 
 
¶1.  (SBU) Summary: In the past week, potential candidate 
for the Democratic Socialist Party of Brazil (PSDB) 
presidential nomination and current Minas Gerais Governor 
Aecio Neves -- though still a candidate for the PSDB 
nomination 
-- has backed off from his former insistence that 
the party must hold a presidential nominating primary, a 
key demand that had been the cornerstone of Neves' 
challenge to PSDB nomination front-runner, Sao Paulo State 
Governor Jose Serra.  Neves' re-positioning is probably 
driven in part by recent polling that shows Serra with a 
commanding lead over likely PT nominee Dilma Roussef.  His 
sudden flexibility is good news for Serra and for the 
PSDB.  The party can now avoid a debilitating knock-down, 
drag-out fight for the nomination and concentrate on honing 
its emerging message, which would appear to be an appeal 
for greater decentralization in the administration of the 
country.  End Summary. 
 
No Primary Needed 
 
¶2.  (SBU) For the last year, Minas Gerais Governor Neves 
has insisted that the PSDB had to hold a primary to pick 
its presidential nominee.  Such a mechanism represented 
Neves' best and perhaps only hope to challenge PSDB 
nomination front runner Jose Serra and, thereby, emerge as 
the principal opposition candidate to ruling Workers' Party 
(PT) candidate Dilma Rouseff.  Serra is widely viewed a 
taciturn technocrat who enjoys the support of the PSDB 
leadership, while Neves, the young, charismatic governor of 
one of Brazil's most economically and historically 
significant 
states, has demonstrated a great ability to excite the party 
base and reach out to those outside the PSDB.  The contest 
between these two PSDB heavyweights worried some in the party 
who feared a debilitating intra-party struggle that reminded 
them of 2002, when then-candidate Jose Serra failed to pull 
together all elements in the PSDB and subsequently lost the 
election to President Lula.  What's more, the PSDB has 
never held a primary, and guidelines and standards for such 
a national event would have had to be drawn up from 
scratch.  Finally, until recently, some had speculated that 
Neves might bolt the PSDB entirely and seek the PMDB 
nomination, splitting the anti-PT vote and significantly 
damaging PSDB chances in the 2010 presidential contest. 
 
Insiders Talk of a Deal 
 
¶3.  (SBU) In contrast to surface tensions, in recent weeks 
political insiders have spoken of the growing possibility 
of an agreement between Serra and Neves, where Serra would 
get the PSDB presidential nod and Neves the Vice 
Presidential spot.  Journalist William Waack stated at a 
lunch 
with the CG on September 4 that Serra and Neves had already 
sealed the deal, agreeing to run together with Serra at the 
top of the ticket.  A second participant at the event, 
Fernando 
Henrique Cardoso (FHC) Institute Director Sergio Fausto 
expressed 
surprise at Waack's assertion, but added that FHC would not 
permit the Serra-Neves rivalry to split the party. 
A Serra-Neves combination would unify the PSDB and could 
prove 
formidable.  Both governors are highly popular in their 
respective states (recent polls give Serra 77 percent 
approval in SP and Neves has over 90 percent approval in 
MG) and they have contrasting, but potentially 
complementary political styles. 
 
Neves Shifts Rhetoric 
 
¶4.  (U) In an interview in Belo Horizonte September 9, 
Neves indicated that while he continues to prefer a PSDB 
primary, other "instruments" for choosing a candidate 
exist, including polls and other mechanisms for consulting 
the party base.  Since his interview, Neves has made 
 
SAO PAULO 00000551  002 OF 002 
 
 
several statements emphasizing his good relations with 
Serra.  In a joint appearance September 14 in Sao Paulo 
with former President Fernando Henrique Cardoso, Serra and 
Neves spoke of party unity and their willingness to offer 
support to each other, whichever candidate wins the 
eventual PSDB nomination.  Neves reiterated his preference 
for a party primary, but did not make it an absolute 
demand.  Both emphasized the importance of their respective 
states in maintaining autonomy relative to a central 
government that they said is too centralized and collects 
too much in taxes. 
 
Neves Looking to the Future? 
 
¶5.  (SBU) While the press buzzes about a "pact" between Serra 
and Neves, local analysts point to a more subtle but still 
significant understanding.  Consultant Thiago d'Aragao told 
Poloff that Neves had "no choice" but to become more 
accommodating 
to Serra and the PSDB.  The PMDB is hurt by recent scandals 
and 
cannot provide an adequate platform for Neves' future 
ambitions. 
The Minas Governor has excellent chances of becoming Brazil's 
President some day, but he must bide his time.  Political 
Scientist Rogerio Schmitt of the Center for Public Leadership 
agreed, stating that he and other SP analysts regard Neves' 
new 
line as laying the groundwork for a graceful exit from his 
campaign for the PSDB nomination, should his challenge not 
prosper. 
 
Comment: Not a Pact, But A Most Productive Understanding 
 
¶6.  (SBU) While it could be too much to call the new 
relationship between Serra and Neves a pact, it would appear 
that Neves has walked back from a potentially 
party-splitting confrontation with the Sao Paulo Governor. 
Neves' re-positioning comes on the heels of a late August 
IBOPE poll that gave Serra a commanding lead over PT 
leading candidate Dilma Roussef in a potential second round 
run-off (57-23).  This, plus the logistical challenges of 
organizing a first-ever PSDB primary, probably 
convinced the Minas Governor to moderate his position.  As 
things now stand, Neves can continue his quest for the 
party's nomination, but do so within bounds that would not 
foreclose reconciliation at the end of the process. 
WHITE