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

UNCLAS SECTION 01 OF 02 SAO PAULO 000021 
 
SIPDIS 
 
SENSITIVE 
 
NSC FOR MIKE DEMPSEY 
 
DEPARTMENT ALSO FOR WHA/PD 
 
E.O. 12958: N/A 
TAGS: PGOV BR
SUBJECT: SERRA'S HONEYMOON CUT SHORT 
 
 
¶1.  (U) SUMMARY.  Jose Serra of the Brazilian Social 
Democratic Party (PSDB) was inaugurated as Mayor of Sao 
Paulo on January 1, in a ceremony that took on the tone of a 
PSDB political festival.  Virtually all the stars of the Sao 
Paulo wing of the PSDB party, including former President 
Fernando Henrique Cardoso, were in attendance.  The party 
was cut short, however, as the newly inaugurated Sao Paulo 
city council handed Serra his first defeat the same 
afternoon, when his choice for city council president was 
defeated by a PSDB dissident with the support of the Workers 
Party (PT) and other opposition parties.  End Summary. 
 
¶2. (U) Jose Serra, who defeated outgoing PT Mayor Martha 
Suplicy in the October 31 municipal run-off election, took 
office January 1 in a two-stage inaugural ceremony.  He was 
officially sworn in at the City Council chambers, along with 
the 55 city council members; the formal, public ceremony 
took place immediately afterwards at City Hall.  Breaking 
normal protocol, Serra gave a short speech at the city 
council ceremony, stressing the need for the executive and 
legislative branches of the city government to work together 
in the public interest and the priority his administration 
would place on ethical behavior.  His remarks reportedly 
were greeted with enthusiastic applause by council members 
from allied parties and stony silence from the opposition. 
 
¶3.  (U) The Sao Paulo PSDB leadership was out in force at 
the public inaugural ceremony at City Hall.  Many were 
recognized from the podium, giving the event an air of a 
PSDB homecoming celebration (though the PSDB has never 
before governed Sao Paulo city).  In addition to former 
President Fernando Henrique Cardoso, Sao Paulo Governor 
Geraldo Alckmin, several members of the Sao Paulo 
Congressional delegation and several members of President 
Cardoso's cabinet, including former Foreign Minister Celso 
Lafer, Education Minister Paulo Renato Souza and Social 
Communications Minister Andrea Matarazzo, were in 
attendance.  Former President Cardoso was enthusiastically 
cheered by the partisan audience.  The PFL also sent several 
of its local stars, including Vice Governor Claudio Lembo, 
the president of the Sao Paulo PFL.  Serra's vice mayor is 
PFL Federal Deputy Gilberto Kassab.  Justice Minster Marcio 
Thomas Bastos represented the Lula administration. 
 
¶4. (U) A number of local PSDB stars also found a home in 
Serra's cabinet, which was sworn in at the same ceremony, 
and among his senior subcabinet level advisors.  PSDB 
Federal Deputies Walter Feldman and Aloysio Nunes Ferreira 
were named to the key positions of Coordinator for Regional 
Deputy Mayors and Secretary for Government, respectively. 
Three former Cardoso Cabinet Ministers were named to senior 
advisory positions.  Andrea Matarazzo will oversee the 
continued revitalization of Sao Paulo's historic center as 
regional deputy mayor for the downtown region; former 
Minister of Justice and National Human Rights Secretary Jose 
Gregori will head the municipal Commission on Human Rights, 
and former Sports Minister Caio Luiz de Carvalho will head 
Sao Paulo's tourist and convention bureau.  Two key 
municipal cabinet slots -- Housing and Education -- went to 
Vice Mayor Kassab's PFL.  The Popular Socialist Party (PPS) 
and Green Party (PV), which supported Serra in the second 
round of the election, each got one seat.  Environment 
Secretary Eduardo Jorge (PV) served as Health Secretary 
 
SIPDIS 
during the first two years of the Suplicy administration. 
Retired diplomat Helena Maria Gasparian was named as 
International Relations Secretary, a position Serra had 
initially said he would abolish.  Serra's 20 member cabinet 
includes three women and one Afro-Brazilian. 
 
¶5.  (U)  Within hours of his inauguration, Serra was faced 
with the first political crisis of his administration when 
the city council rejected his preferred candidate for city 
council president.  By a razor thin margin -- 28 to 26 -- 
the council elected PSDB maverick Roberto Tripoli over the 
PSDB's own nominee, Ricardo Montoro.  In last minute 
maneuvering, Tripoli garnered support for his candidacy from 
the PT caucus along with that of the loose coalition of 
council members from the PMDB, PP, PTB and PL parties that 
calls itself the Centrao, or Big Center.  Tripoli, who 
reportedly was passed over for a cabinet seat or as 
government leader, insisted that he agreed to stand for 
election only after being told by opposition members that 
Montoro could not attract enough opposition votes to win the 
election. (NOTE.  The PSDB and the PT each have 13 seats on 
the council.  In addition to the PSDB, Serra's governing 
coalition includes the PFL and 5 smaller parties with a 
total of 10 additional seats.  The 18 members of the Centrao 
thus are well positioned to act as power brokers on key 
issues; four Centrao members broke ranks to support Serra's 
candidate.  END NOTE.)  The outraged PSDB caucus has 
demanded Tripoli's expulsion from the PSDB.  According to 
press reports, Tripoli is expected to join the Green Party, 
which is allied with the PSDB in the governing coalition. 
The Sao Paulo city council controls the fourth largest 
public budget in Brazil, after the federal government and 
the states of Sao Paulo and Minas Gerais. 
 
¶6.  (U) While Serra's team has downplayed the significance 
of Montoro's defeat at the hands of Tripoli and the 
opposition, publicly observing only that the legislature is 
an independent branch of government, the press has 
highlighted it as a major defeat for the new administration. 
The story trumped coverage of the inauguration itself; the 
front page headline in major daily Estado de Sao Paulo on 
January 2 was, "Serra Begins with Defeat."  Press reports 
have focused on the city council election result as an 
indication of fissures within the local PSDB party, which 
could complicate Serra's relationship with the City Council 
and the effectiveness of his administration.  This is the 
first time since the start of Mayor Luiza Erundina's term in 
1987 that the City Council has not ratified the incoming 
mayor's choice as council president; Luiza Erundina (then- 
PT) had a notoriously stormy relationship with the city 
council. 
 
¶7. (U) In one of his first official acts, Serra ordered the 
suspension of all procurement actions initiated by the 
Suplicy government, and a review of all on-going service 
contracts signed by her government.  Serra indicated that 
this was an austerity move, intended to bring municipal 
expenditures into line with resources. 
 
¶8. (SBU) COMMENT.  The turn out of the PSDB party glitterati 
at Serra's inauguration, and the presence of a number of 
nationally prominent PSDB and PFL figures among Serra's 
senior advisors suggests that the Sao Paulo wing of the PSDB 
sees Serra's win in Sao Paulo as both partial vindication 
for his and the party's loss to Lula in 2002 and as an 
important step in reestablishing the party as the principal 
alternative to the PT nationally.  With control of the state 
and city governments and a PSDB president in the state 
assembly, the party also will likely use Sao Paulo as a 
launching pad for its 2006 national campaign.  While 
Governor Alckmin continues to publicly demur about his own 
plans for a presidential run, others in the party are far 
less discrete, and the Governor is clearly enjoying being 
the object of speculation.  The city council's rejection of 
Serra's candidate for council president put a damper on the 
PSDB festivities.  While it could prove to be momentary and 
localized set-back, it could also prove to be an early 
warning sign that the Sao Paulo wing of the party needs to 
ensure its own house is in order before setting out on the 
national campaign trail.  END COMMENT. 
 
DUDDY