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 000187 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV PINR ECON PREL SOCI BR
SUBJECT: JOSE DIRCEU - LULA'S WING-MAN GETS BACK ON TRACK 
 
 
¶1. (SBU) SUMMARY.  Jose Dirceu is Chief of Staff and most 
trusted advisor to Brazilian President Lula da Silva. 
Dirceu's legendary, if peculiar, biography is a window on 
Brazil's recent history.  His machiavellian political skills 
and decades of fierce loyalty to Lula and the Workers' Party 
(PT) have been crucial building blocks in their rise to 
power.  But Dirceu is no ideologue, rather he is a skilled 
and sometimes cynical power-broker willing to change course 
as circumstances warrant.  It was he who orchestrated the 
PT's move towards the center in recent years and he who has 
put together the administration's broad coalition in the name 
of governability.  During the 2002 elections and throughout 
Lula's first year in office, Dirceu was seen as a powerful 
Svengali pulling strings in the shadows.  But a scandal in 
Dirceu's office in early 2004, coupled with a reorganization 
of cabinet duties, sidelined him for months and nearly led to 
his resignation.  In the past six months, Dirceu has regained 
his traction, and is once again involved in the 
administration's key projects.  If he has lost some prestige 
and is less often in the spotlight, he remains heavily 
engaged in day-to-day policy making.  Nobody is closer to 
President Lula than Jose Dirceu.  END SUMMARY. 
 
FROM HAVANA TO BRASILIA 
----------------------- 
¶2. (U) The biography of Jose Dirceu, 58, is made-for-TV 
material.  Attending PUC University in Sao Paulo in the 
1960s, he was a leader of the National Student Union until 
his opposition to the military regime (including organizing 
massive demonstrations) got him jailed in 1968.  He was then 
among fifteen political prisoners freed in September 1969 in 
exchange for the release of US Ambassador Charles Elbrick, 
who had been kidnapped and held for three days by an 
opposition group.  Freed from jail, Dirceu went into exile in 
Cuba for six years, studying and training in guerilla 
warfare, befriending Fidel and altering his appearance with 
plastic surgery.  When his enthusiasm for Cuba and armed 
revolution waned, he returned to Brazil clandestinely in 
1975, living underground as a shopkeeper in Parana state.  A 
general amnesty was declared in 1979, so Dirceu restored his 
appearance and gave up his underground life and family (his 
wife, whom he divorced, says she never suspected his true 
identity).  In 1980, Dirceu and Sao Paulo union leader Lula 
da Silva founded the Workers' Party. 
 
¶3. (U) In the early 1980s, Dirceu held PT leadership posts in 
Sao Paulo (the PT's center of gravity) at a time when the 
party was forging its identity amid the many labor, 
religious, and intellectual currents under its umbrella.  He 
was a leader of the opposition "Diretas Ja!" movement in 1984 
that pressed for direct presidential elections and led to the 
regime's handover of power the next year.  In 1989 he 
coordinated Lula's credible but losing presidential campaign. 
 In 1991-1994 he served in Congress and was active in the 
corruption inquiries that led to President Collor's 
resignation.  After losing a 1994 race for Sao Paulo 
governor, he was elected president of the Workers' Party, 
leading a moderate internal faction called "Articulation" 
that remains in control of the party to this day.  This 
period marked the beginning of the PT's evolution away from 
doctrinal rigidity and towards the political center, as 
Dirceu aggressively formed alliances with a range of parties 
--including those on the center and right-- depending on 
local conditions.  (Dirceu noted in a recent interview, "When 
I talked about alliances in 1985, people almost threw me out 
of meetings.  It was me who introduced these ideas to the 
PT".) 
 
"MODERATION IS A VIRTUE ONLY IF YOU HAVE ALTERNATIVES" 
--------------------------------------------- --------- 
¶4. (SBU) Since the founding of the PT, Dirceu has never been 
far from Lula.  They share a deep trust and complementary 
styles:  where Lula is an optimistic and charismatic populist 
with a common touch, Dirceu is a micro-managing politico 
adept at tugging the levers of power.  Both are expert public 
speakers and engaging in meetings.  They share a worldview 
that is pragmatic and moderate, so they have consciously 
steered the PT away from its most radical members in the 
interests of first electability and then governability.  This 
impulse was on display in the 2002 campaign as Lula softened 
his image ("Lula Lite") and made a concerted effort to 
connect with the business community. 
 
¶5. (SBU) In July 2002, as the PT's strong poll numbers 
frightened the financial markets, it was Dirceu who visited 
Washington and New York to calm investors by committing a 
Lula administration to economic orthodoxy.  PT leftists 
grumble that all of this is a sell-out of party traditions, 
but Dirceu has observed that there is no sense in losing 
elections through an insistence on clinging to outdated 
positions.  Dirceu has never worn his personal motivations on 
his sleeve, and it is a challenge to understand what drives 
him.  His explanations for his actions are couched in terms 
of political strategy rather than deep-felt passions: the 
line between the public and private Jose Dirceu has never 
been clearly-drawn. 
 
"PRIME MINISTER" IN YEAR ONE 
---------------------------- 
¶6. (SBU) Before Lula's January 2003 inauguration, Dirceu took 
charge of the transition team's Political Council, putting 
together the coalition and the cabinet.  True to form, his 
behind-the-scenes dealings brought conservative parties (PP, 
PL, PTB) into Lula's camp, and eventually reeled in the large 
PMDB as well.  The coalition is fractious but has a majority 
in Congress and a decent record of delivering Lula's 
priorities (in two years, the administration has passed six 
constitutional amendments requiring three-fifths majorities). 
 
 
¶7. (SBU) As "Minister-Chief of the Civilian Household" (i.e., 
Chief of Staff) and first among equals in the cabinet, Dirceu 
spent the administration's first year with a broad mandate to 
push legislation through Congress, lead the GoB's innumerable 
policy councils (many of which have mercifully faded away), 
sort out turf battles between cabinet ministers, negotiate 
with mayors and governors, and whisper advice into Lula's 
ear.  His portfolio was so broad that by late 2003, the press 
was calling him "Prime Minister", a profile that left him 
vulnerable to jealousies within the government, though the 
only GoB official to rival his stature is Finance Minister 
Palocci.  Dirceu's heavy responsibilities, coupled with his 
tendency to micro-manage, left him overburdened.  So as part 
of a wider cabinet shuffle in January 2004, Lula farmed out 
some of his duties, bringing in a second cabinet-level 
official, Aldo Rebelo, to be "Political Coordinator" (i.e., 
Lula's chief liaison with congress). 
 
WALDOMIRO CHANGES EVERYTHING 
---------------------------- 
¶8. (SBU) The new arrangement lasted only a few weeks. 
Dirceu's world was rocked on 13 February 2004 when a scandal 
broke revealing that a longtime friend and senior advisor on 
his staff, Waldomiro Diniz, had been soliciting bribes from a 
numbers racketeer and possibly funneling cash into PT slush 
funds.  Waldomiro was fired and is still under police 
investigation.  While apparently not involved in the 
misdeeds, Dirceu suffered grievously --both personally and 
politically.  Some pundits pointed out that even if he was 
not implicated, they would not be surprised to find Dirceu 
involved in illicit campaign funding.  (N.b., In a separate 
case, there are still unanswered questions about Dirceu's 
possible knowledge of a corruption scheme in the city of 
Santo Andre, Sao Paulo that led to the murder of Mayor Celso 
Daniel in 2002.  Allegedly, some of the money skimmed off 
city contracts found its way into PT campaigns.)  For seven 
weeks the Waldomiro scandal was front-page news, leaving 
Dirceu anguished.  Lula reportedly turned down his offers to 
resign several times.  Everyone from opposition politicians 
to the Chief Justice of the Supreme Court urged him to step 
down, and the scandal echoed for months, contributing to a 
steep dive in Lula's approval ratings and a series of defeats 
in Congress. 
 
BACK IN THE GAME 
---------------- 
¶9. (SBU) By July, Dirceu got back to work as attention turned 
to the October municipal elections.  He actively stumped for 
PT mayoral candidates (including the son from his first 
marriage, Zeca Dirceu, who was elected mayor of the town 
where Dirceu lived clandestinely until 1979).  His political 
recovery is an ongoing project, but over the past six months 
he has regained influence by a combination of hard work, 
attention to detail, and avoiding the limelight.  As Chief of 
Staff, there are few policy areas in which he is not 
involved.  For example, in late 2004, Dirceu could be found 
meeting with Goldman Sachs officials about Brazil's 
investment climate, assessing the Mideast peace process at 
Arafat's funeral, previewing the restructuring of Varig 
airline debt, and describing plans to create a unified GoB 
tax and collections agency.  For next year, he is already 
pushing for a boost in the minimum wage and heading up a 
working group on agrarian reform (both hot topics here). 
Dirceu will address foreign investors at Davos. 
 
¶10. (SBU) December found Dirceu back on top, taking charge of 
the administration's two key end-of-year political projects: 
negotiations about the schizophrenic PMDB's place in the 
coalition and piecing together the cabinet shuffle expected 
in late January.  IstoE magazine came to the same conclusion 
in naming Dirceu its 2004 Man of the Year, as did journalists 
and pundits with whom we talked.  And Lula --with his love 
for soccer metaphors-- recently called him "Captain of the 
Team".  Despite the New York Times' view in December that 
Palocci has surpassed Dirceu in influence, the two Ministers 
inhabit different spheres that are not really comparable. 
Palocci, the technocrat, steers the macro-economy, including 
controversial issues such as interest rate policy, while Lula 
looks to Dirceu for guidance on everything else.  The 
President's daily agendas reveal that when Dirceu and Lula 
are both in town, Dirceu has up to an hour alone with the 
boss nearly every day, as well as joining in most of his 
meetings.  And he is no shrinking violet.  Though his public 
profile is lower than in the past, Dirceu and PT party 
president Jose Genoino are the two people whom Lula sends out 
to engage in partisan battles and volley opposition barbs. 
 
COMMENT - "TAKING FORTUNE BY THE ARM" 
------------------------------------- 
¶11. (SBU) Jose Dirceu is a key, though controversial, figure 
in modern Brazilian history.  Perhaps best viewed in the 
oblique half-light rather than head-on, somewhere behind 
Lula's surprising trajectory and the unseen machinations of 
party politics.  Dirceu is not personally corrupt, but as 
questions about the Waldomiro and Celso Daniel cases 
illustrate, there is a lingering sense that he will stoop as 
low as necessary to achieve his goals --and the success of 
Lula and the Workers' Party have been his life's work.  One 
observer commented that Dirceu seems blessed by fortune, as 
his choices invariably prove successful.  But this 
oversimplifies: Dirceu often forces fate by simply outworking 
his opponents.  An obsessive planner (he reportedly knew with 
uncanny accuracy which departments in which universities 
supported his 1969 bid to head the National Student Union); 
unsentimental (he jettisoned his first wife and child along 
with the rest of his clandestine identity when he was 
amnestied in 1979); and unafraid of change (Dirceu himself 
says that he has started his life over many times and can do 
it again if necessary).  His success is no accident of fate. 
 
 
¶12. (SBU) Jose Dirceu is clearly happy to be back in the mix. 
 In a December 28 interview, he pronounced himself satisfied 
doing the administration's policy coordination.  In the next 
two years he plans to focus on Lula's national development 
goals.  There is little doubt that he will also be a key 
advisor in Lula's 2006 reelection campaign and in a possible 
second administration.  Longer-term, some who know him say 
that Dirceu harbors presidential ambitions, though at age 58 
and assuming Lula remains in office through 2010, he may be 
squeezed out by the PT's next generation.  Yet nobody would 
count him out: if he is not President, perhaps when Lula's 
era is over, Dirceu will settle into a Congressional seat or 
try another run at Sao Paulo's governorship. 
DANILOVICH