This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 001144 
 
SIPDIS 
 
E.O. 12958: DECL: 05/11/2014 
TAGS: PGOV ECON SOCI BR
SUBJECT: LULA SUFFERS TWIN SETBACKS IN CONGRESS 
 
REF: A. BRASILIA 0572 
 
     ¶B. BRASILIA 0776 
 
Classified By: POLOFF RICHARD REITER, FOR REASONS 1.4B AND D. 
 
¶1. (C) On May 5, two developments starkly demonstrated the 
Lula administration's reduced authority in Congress and the 
weakness of the coalition's Congressional leadership.  The 
first development was the creation of a joint congressional 
committee to discuss the increase in the minimum wage that 
President Lula recently announced.  Had it been more adroit, 
the PT could have prevented the committee from being formed 
and/or prevented its leadership from being dominated by 
opposition parties.  The coalition parties will now have to 
suffer through criticism of Lula's small increase in the 
minimum wage --amplified by the fact that this is an election 
year.  The second setback was the revocation of Lula's 
earlier ban on bingo parlors, which he issued in response to 
February's Waldomiro Diniz scandal.  Ultimately, neither 
event is likely to have substantive effect, as the minimum 
wage will likely stay at the Lula-decreed level and the bingo 
parlors could well end up either banned or tightly regulated. 
 But the message is clear:  through a combination of 
incompetence and waning authority, the Lula administration's 
control over Congress has been attenuated.  END SUMMARY. 
 
 
MINIMUM WAGE TO BE REVIEWED BY A JOINT COMMITTEE 
--------------------------------------------- --- 
¶2. (C) On May 5, the opposition in the Brazilian Congress 
succeeded in setting up a joint committee to review Lula's 
recent decree (MP 182) that raised Brazil's minimum wage from 
R$240 to R$260 (about USD 87) per month.  That raise is 
barely above inflation and is considered insufficient by some 
in Lula's own PT party.  It has been used by opponents to 
show how Lula's fiscal austerity is hurting Brazilian 
workers.  (N.b., presidential decrees (MPs) must be ratified 
by Congress to remain in force.  Sometimes a joint committee 
first reviews the MP, which then goes to the floor.  However, 
the preference of the government is simply to not appoint a 
committee --thus avoiding messy hearings-- meaning the MP 
goes straight to the floor where it generally gets easy 
approval.) 
 
¶3. (C) The joint committee was formed when several members of 
the governing coalition signed the opposition's petition 
supporting it.  For example, PT Senator Paulo Paim has 
pressed for a larger increase in the minimum wage, and he 
signed in order to register his displeasure with Lula's small 
increase.  On the other hand, Green Party Deputy Sarney Filho 
signed without understanding what he was doing.  He later 
complained that the coalition leadership had failed to stay 
on top of the issue and keep members advised.  Opposition 
members won all of the committee's key leadership posts, and 
Sen. Paim was among several coalition members removed from 
the committee by their party leaders as punishment for their 
mini-rebellion. 
 
¶4. (C) For all the arcane parliamentary tactics, the 
formation of a committee to review MP 182 means there will be 
public hearings, a public report, and public votes, causing a 
political headache for Lula and his loyalists, who will now 
have to put their preference for a smaller increase on 
record.  The opposition will fan the debate for partisan 
purposes in advance of the October municipal elections. 
Ultimately, the minimum wage is unlikely to change 
(especially since Lula has various ways to veto any increase 
over R$260), but these events demonstrate the GoB's weakness 
in Congress, the unhappiness of some members of the PT-led 
coalition, and the organizational failure of the coalition's 
leadership, who should have headed off this development.  The 
minimum wage is a fight that Lula never expected to have to 
wage in Congress, and it is a poor use of his limited 
political capital. 
 
 
BINGO REVERSAL ANOTHER SETBACK FOR LULA 
--------------------------------------- 
¶5. (C) The second May 5 blow to the administration was the 
Senate rejection of another presidential decree:  MP 168 that 
Lula issued in February to ban bingo and slot parlors.  That 
MP was Lula's first and firmest response to the "Waldomiro 
Diniz scandal" (ref A).  MP 168 shut down the 9,000 legal 
parlors around the country, and it has been fiercely opposed 
by the estimated 70,000 gaming employees thrown out of work. 
It is widely believed here that the parlors are linked to 
organized crime, so few public officials have spoken out 
against Lula's decision to close them. 
 
¶6. (C) On March 30, the Chamber of Deputies ratified the MP, 
although coalition squabbling forced Lula to disburse pork 
spending to secure the necessary votes (ref B).  The measure 
should have easily passed into law when it reached the Senate 
floor on May 5, but the opposition simply outsmarted the 
coalition's floor leaders.  In the end, the MP was defeated 
by a 33-31 vote.  Emblematic of their own confusion, 
coalition leaders seemed shocked by the defeat, never 
realizing that they had failed to count noses: the MP failed 
by two votes, yet four PT members were absent, including, 
amazingly, the coalition's floor leader, Sen. Aloizio 
Mercadante.  Six other coalition Senators were absent and 
eight voted against the MP.  The defeat of the bingo MP is 
being called by some Lula's first real defeat in Congress 
since he took office.  The symbolic import of MP 168 --Lula's 
response to an in-house scandal and to organized crime-- 
should have made it a must-win for his congressional 
coalition, but they let him down. 
 
 
DEFEAT HAS A HUNDRED FATHERS 
---------------------------- 
¶7. (C) The bingo ban is being autopsied in the daily 
newspapers, but those most responsible for its death include 
the PT leaders in the Senate, Ideli Salvatti and Aloizio 
Mercadante, who failed to do the necessary whip-work to line 
up and count their votes.  Six of the coalition's 22 PMDB 
Senators voted against the MP, one more example of how the 
divisions in that party are damaging Lula's agenda. 
Delighted gaming operators began reopening the next day, but 
their glee is likely to be short-lived.  Lula is preparing a 
bill that would have the same effect as the defeated MP 168, 
banning bingo and slots.  The opposition --not wishing to be 
perceived as pro-organized crime-- is drafting its own bill 
that would allow some parlors to remain open while banning 
slot machines.  Few in the opposition are pro-bingo, they 
simply saw the opportunity to defeat Lula's disorganized 
coalition on a key bill, and they took it. 
 
 
COMMENT - PT'S CONGRESSIONAL LEADERSHIP IN DISARRAY 
--------------------------------------------- ------ 
¶8. (C) The events in Congress on May 5 highlight three 
dynamics:  abysmal work on the floor by the coalition's 
leadership --and particularly the PT caucus in the Senate; 
displeasure among many in the PT with the small increase in 
the minimum wage, which is a real problem for a labor party; 
and continued divisions in the coalition's large, fractious 
PMDB party.  Last week's events will, and will not, have 
consequences.  The minimum wage will probably stay at the 
R$260 level that Lula decreed, and bingo parlors may well be 
closed down again.  But the bigger picture is that it is no 
longer clear that Lula and the PT exert enough control over 
their own coalition to win key Congressional votes, which 
will limit the administration's ability to pursue its policy 
agenda. 
 
¶9. (C) This is not exactly new.  The coalition relied on many 
opposition votes to pass the pension and tax reforms last 
year and will continue to attract those votes on upcoming 
issues like judicial reform and biotechnology.  But in 
another sense, the coalition has never been weaker.  The PTB 
and PP parties ceaselessly clamor for pork spending and are 
not shy about obstructing the administration's agenda.  The 
large PMDB has never been less reliable, and in addition to 
its normal fractiousness, it is now riven by a dispute 
between two of its leading senators (Jose Sarney and Renan 
Calheiros) over who will be the next Senate majority leader. 
And as noted, the PT's floor leaders in the Senate fell down 
on the job last week, while party dissidents complained about 
the small minimum wage increase.  This dispute will not go 
away, and some PT members may defy party orders and vote 
against the R$260 wage when the MP comes to the floor. 
 
¶10. (C) Finally, the coalition's weakness is causing distrust 
between the two houses.  Last year, the Chamber defied 
difficult publicity and sent tough, responsible pension and 
tax reform bills to the Senate, only to see the Senate water 
them down and get credit from voters.  The Senate is 
inherently less-disciplined than the Chamber, more subject to 
grandstanding and less willing to follow party directives. 
The Senate's maneuvers last week only reinforced the 
perception among Deputies that Senators will steal the glory 
but not share the pain on controversial issues.  If this 
perception is not remedied, it may make the Chamber gunshy 
and unwilling to vote for tough reform bills in the future. 
HRINAK