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

UNCLAS SECTION 01 OF 03 BRASILIA 003031 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV PREL BR
SUBJECT: TWO PARTIES BOLT FROM LULA'S COALITION 
 
REF: A. BRASILIA 2802 
 
     ¶B. BRASILIA 2763 
 
¶1. (SBU) SUMMARY.  In the past few days, two political 
parties --the large PMDB and medium-sized PPS-- have decided 
to depart the governing coalition of President Lula da Silva. 
 In both cases, the decisions were taken at hotly-disputed 
party meetings, and in both cases it appears that the parties 
may fracture over the decision.  These decisions are rooted 
in internal party catfights and the need to create daylight 
between the parties and Lula's PT party in order to run 
against the PT in the 2006 elections.  The effect on the 
administration's legislative agenda is difficult to gauge 
because pro-Lula members of both the PMDB and PPS are likely 
to change parties in the coming days in order to remain in 
the coalition or to continue to vote for administration bills 
in some cases.  The most likely outcome is that Lula will 
lose a few supporters in both houses of Congress but will 
continue to be able to put together narrow majorities on key 
issues with a combination of arm-twisting and pork barrel. 
The PMDB and PPS together hold three cabinet seats and have 
insisted that their cabinet representatives step down or be 
suspended from their party activities --but Lula is likely to 
wait for the dust to settle before he shakes up his cabinet. 
END SUMMARY. 
 
PMDB FINALLY MAKES A MOVE 
------------------------- 
¶2. (SBU) The Party of the Brazilian Democratic Movement 
(PMDB), a large and fractious member of President Lula's 
governing coalition, decided at a party convention on 
December 12 to pull out of the coalition (ref A).  The 
decision followed weeks of intense lobbying inside and 
outside the party, including lawsuits to try to prevent the 
convention and attempts by both sides to stack the vote.  At 
bottom, the decision reflected the wish by "oppositionist" 
leaders --mostly in the large southern states (notably Rio, 
Sao Paulo, and Parana)-- to create more daylight between 
their party and President Lula's PT-led coalition.  This will 
allow them to run a PMDB presidential candidate against Lula 
in the 2006 elections and also to position their 
gubernatorial and congressional candidates against PT 
opponents.  The "oppositionists" are led by party president 
Michel Temer, a Federal Deputy from Sao Paulo.  Former-Rio 
Governor Anthony Garotinho hopes to be the party's 
presidential nominee in 2006. 
 
¶3. (SBU) The party's pro-Lula "governist" faction includes 
those delegations from states where the PMDB and PT work well 
together, plus most of the PMDB's sitting Senators and 
Federal Deputies (who benefit from being in the coalition by 
getting federal pork spending for their constituents).  The 
PMDB's two cabinet ministers (at the Ministries of 
Communications and Social Security) as well as powerful 
Senate President Jose Sarney are all "governists". 
 
¶4. (SBU) At the December 12 convention, the "oppositionists" 
won the vote to pull out of the coalition and passed a 
separate motion insisting that the party's political nominees 
(including notably the two cabinet ministers) step down from 
their posts or be suspended from party activities.  However, 
the convention split hairs by deciding to become 
"independent" of the administration without actually moving 
into the opposition.  This means that the party will continue 
to support Lula on the floor of Congress when "it is in the 
party's interest".  In fact, this may mean only a small 
change from the past, when Lula could rarely count on more 
than two-thirds of the party's votes on any given issue. 
Further, while the PMDB is a uniquely malleable institution 
in Brazilian politics, able to shelter both pro- and 
anti-government factions, some in the party will want to 
remain formally in the coalition and so will jump to other 
parties in the coming months. 
 
¶5. (SBU) Thus the math of the Congressional majority will be 
an evolving dynamic.  On paper, the governing coalition 
previously held 381 of the 513 Chamber seats (74%), of which 
78 were PMDB.  If half of the PMDB Deputies continue to vote 
with the administration, Lula can continue to cobble together 
narrow majorities, depending on the issue.  In the Senate, 
the picture looks more difficult.  The coalition held 47 of 
81 Senate seats (58%), of which 23 were PMDB.  But PMDB 
Senators tend to be more "governist" and supportive of the 
administration.  Again, depending on the issue, Lula should 
be able to find narrow majorities.  It must be borne in mind 
that the other coalition parties (including the PT) are also 
fractious and do not fully support the administration on 
every vote, which further erodes Lula's majority.  Also, some 
of the administration's legislative priorities require 
constitutional amendments, meaning 60% votes in both houses, 
and these bills will be in more danger than ordinary laws. 
 
PPS PARTY ALSO BOLTS 
-------------------- 
¶6. (SBU) The Popular Socialist Party (PPS) is the vestige of 
the old Communist Party and is still run with an iron hand by 
Roberto Freire, a bellicose Federal Deputy from Pernambuco 
who clings to radical leftist positions developed over thirty 
years ago.  In 2002, the party attracted Ciro Gomes to its 
banner.  Gomes, from Ceara, has a national profile and was 
looking for a party to launch what turned out to be a failed 
presidential bid.  In the wake of the elections, the PPS 
joined the governing coalition and Gomes accepted Lula's 
offer to become Minister of National Integration, where he 
has been a pleasant surprise as one of the administration's 
steadiest cabinet ministers.  Meanwhile, Freire chafed at 
having been eclipsed by Gomes within his own party and the 
coalition.  For over a year, he has instigated a series of 
bitter fights with Gomes and has repeatedly threatened to 
take the PPS out of the coalition.  On December 11, Freire 
forced a vote of the PPS governing board and finally made 
good on that threat.  Afterward he delivered a blunt message 
to Ciro Gomes, "Either leave the cabinet or leave the party". 
 
¶7. (SBU) Gomes may do both.  He has put his cabinet seat "at 
Lula's disposal", which is somewhat less assertive than 
actually resigning.  It seems likely that he will leave the 
PPS and move either to the coalition's centrist PTB or to 
Lula's PT.  Gomes's current close association with the 
administration means he is unlikely to run another 
presidential campaign against Lula in 2006.  If Gomes departs 
the PPS, he will take his faction with him --variously 
estimated at both of the PPS's Senators and one-third of its 
20 Federal Deputies.  Freire will remain in charge of the 
rump PPS and is feverishly looking for an alliance with the 
leftist PDT (or even the newly independent PMDB) and may be 
successful in luring PT Senator Cristovam Buarque to the 
party to run as its 2006 presidential candidate. 
 
LULA'S CABINET SHUFFLE HANGING FIRE 
----------------------------------- 
¶8. (SBU) The impact on Lula's cabinet remains to be seen.  In 
the wake of the October municipal elections and last month's 
resignation by DefMin Jose Viegas and his replacement by Vice 
President Alencar (ref B), it was assumed that Lula would 
make a few cabinet changes in January or February.  Lula was 
reportedly willing to offer the PMDB a third cabinet post and 
may be looking to reward outgoing Chamber Speaker Joao Paulo 
Cunha with a promotion.  The splits in the PMDB and PPS have 
moved the cabinet shuffle to the back burner for the time 
being.  For example, Lula may want the two PMDB cabinet slots 
back so he can offer them to other allies, or he may leave 
those ministers in place as a way to continue to appeal to 
the PMDB's "governist" wing --which would also be a way to 
exacerbate the PMDB's internal rifts.  Similarly, Lula may 
leave Ciro Gomes in place because of his competence, in spite 
of his divorce from the PPS.  Thus the cabinet shuffle will 
wait until the administration can assess how best to salvage 
maximum political advantage from this week's events. 
 
COMMENT 
------- 
¶9. (SBU) It is too early to assess the damage to Lula's 
administration from the actions of the PMDB and PPS.  It is 
unlikely to be crippling, but will range from minimal to 
significant.  While the PMDB and PPS formally withdrew from 
the governing coalition, we cannot simply subtract their 
combined 98 Deputies and 25 Senators from Lula's column, 
because many of these congresspersons never reliably voted 
for Lula in the past, while many who did vote for Lula before 
will continue to do so in the future.  Thus, it is more 
accurate to say that the majority wings of these two parties 
formalized their opposition to the administration, leaving 
the minority wings to search for their own futures.  The 
story will continue to unfold through the holidays and into 
February, when Congress returns to session and elects new 
leadership in both houses and in all its committees. 
DANILOVICH