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UNCLAS SECTION 01 OF 04 SAO PAULO 000689 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR FOR MSULLIVAN 
STATE PASS EXIMBANK 
STATE PASS OPIC FOR MORONESE, RIVERA, MERVENNE 
NSC FOR FEARS 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/USFCS/OIO/WH/SHUPKA 
TREASURY FOR OASIA, DAS LEE AND DDOUGLASS 
DOL FOR ILAB MMITTELHAUSER 
SOUTHCOM ALSO FOR POLAD 
USAID/W FOR LAC/AA 
 
E.O. 12958: N/A 
TAGS: PGOV PINR ECON BR
SUBJECT: PMDB CHIEF AFFIRMS PARTY'S POSITION AS POWER BROKER BUT 
BALKS AT PREDICTING PRESIDENTIAL RACE 
 
REF: (A) SAO PAULO 676; (B) BRASILIA 1194; 
 
     (C) SAO PAULO 623; (D) BRASILIA 1136; 
     (E) SAO PAULO 573 AND PREVIOUS; (F) SAO PAULO 30 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY 
 
------- 
SUMMARY 
------- 
 
¶1.  (SBU) Michel Temer, President of the Brazilian Democratic 
Movement Party (PMDB), believes President Lula has done a masterful 
job of disassociating himself from the political corruption scandals 
that have crushed some of his closest advisers.  He also has 
effectively expanded social programs to earn the loyalty and support 
of Brazil's lower-middle and lower classes.  At the same time, 
Lula's opponent, Sao Paulo ex-Governor Geraldo Alckmin, suffers from 
a lack of charisma and a failure to have left a visible mark in five 
years at the helm of Brazil's largest state.  Nevertheless, Temer 
declines to predict what will happen in this race, except to say it 
will go to a second round, in which "anything can happen."  He 
confirmed that his own party will not run a candidate for president 
and will not ally with either Lula's Workers Party (PT) or the 
opposition Brazilian Social Democracy Party (PSDB), at least not 
before the second round.  However, the PMDB will win the governors' 
races in at least ten and possibly as many as fifteen states, and 
will again have the largest bloc in both the Senate and the Chamber 
of Deputies, so that "whoever wins the presidential election will 
have to come to us to get anything done."  END SUMMARY. 
 
---------------------- 
LULA'S SLEIGHT OF HAND 
---------------------- 
 
¶2.  (SBU) In a June 19 meeting with Consul General (CG) and Poloff, 
Michel Temer, Federal Deputy from Sao Paulo,  offered his assessment 
of the balance of forces for the presidential election.  Though 
anything can still happen -- he has seen candidates overcome much 
greater disadvantages than Alckmin currently faces, and win -- it is 
clear that President Lula is in a strong position.  Temer 
dispassionately analyzed how Lula had seen his Chief of Staff and 
the entire leadership of his party disgraced, and prominent 
Congressional members of his party dragged through scandal, and had 
emerged personally more or less untouched.  This was partly because 
other political parties -- Temer mentioned the PSDB and the Liberal 
Front Party (PFL) but not his own PMDB, though his comment could 
just as easily apply to them -- had, at different times, been 
involved in affairs akin to the PT's infamous "mensalao" bribery 
scheme, and were thus not eager to expose the PT's misdeeds to the 
fullest. 
 
¶3.  (U) It was also because Lula had such a strong bond with the 
people, the so-called C, D, and E classes - i.e., the lower-middle 
and lower classes.  Many in these strata, in Temer's view, believe 
that Fernando Henrique Cardoso (FHC) had robbed the poor and given 
to the rich, while Lula robs the rich and gives to the poor.  Lula 
has expanded the "Bolsa Familia" program from 6.5 million families 
in 2004 to 8.7 million in 2005 to 11 million families this year, or 
(assuming two children per family) roughly 44 million Brazilians. 
This, combined with the increase in the minimum wage, the rise of 
the Real against the US dollar, and the fall in the price of certain 
basic food staples, make the poor much better off.  Paradoxically, 
many of the rich, especially bankers and other major financial 
players, have also benefited from Lula's policies. 
 
¶4.  (SBU) It is the middle class that has suffered from both an 
increasing tax burden and the loss of professional-level jobs.  In 
 
SAO PAULO 00000689  002 OF 004 
 
 
truth, Temer continued, it is difficult to be optimistic about 
Brazil's economic future.  The fact of 11 million families eligible 
for Bolsa Familia handouts implies a minimum of 44 million people in 
abject misery in Brazil.  He described a recent event he had 
attended sponsored by the Institute for Industrial Development 
Studies (IEDI), where Minister of Development, Commerce, and 
Industry Luiz Fernando Furlan delivered an upbeat speech.  When 
challenged by a member of the audience with a few hard questions and 
statistics, Furlan, who has himself been at times a tough critic of 
the GoB's economic policies, was at pains to respond.  Brazil faces 
serious challenges in fostering growth, stimulating productivity, 
attracting investment, improving infrastructure, and reducing 
inequality; however, Lula's sleight of hand has made many voters all 
but unaware of these growing problems. 
 
-------------------------- 
ALCKMIN'S LACK OF CHARISMA 
-------------------------- 
 
¶5.  (SBU) Meanwhile, Alckmin is simply stuck.  Temer believes that 
since inheriting the governorship from Mario Covas in 2001, Alckmin 
has provided honest, decent, competent government to Sao Paulo. 
However, in a country that relishes superlatives, he did not 
champion any great works, and his accomplishments are not visible. 
Alckmin is not personally aggressive or charismatic and is not given 
to showmanship, so he didn't leave a distinctive mark on the state. 
By way of comparison, Orestes Quercia (ref C), Governor of Sao Paulo 
from 1987 to 1990, was a controversial (many say corrupt) figure, 
but he definitely left his mark on the state in the many streets and 
highways and prisons and hospitals he built.  (COMMENT: The same 
might be said of colorful, and reportedly equally corrupt, former 
Mayor and Governor Paulo Maluf.  END COMMENT.)  Former President 
Cardoso was another example of a politician who had charisma.  But 
let's wait and see what happens, Temer suggested.  Wait until after 
the World Cup, which could impact on the voters in a variety of 
different and not easily predictable ways, depending on the result. 
Wait until the government-subsidized television advertising begins. 
It will be "a great war" on the airwaves, and it opens up 
innumerable possibilities for the underdog. 
 
¶6.  (U) Temer, a former Sao Paulo state Secretary for Public 
Security, was not certain whether Alckmin would suffer as a result 
of the recent violence on the streets and in the prisons of  Sao 
Paulo (ref E) perpetrated by the criminal gang First Capital Command 
(PCC).  Some of his public criticism of his successor, Governor 
Claudio Lembo, had been unfortunate and not good for his image.  But 
only time will tell how this situation plays out. 
 
------------------------ 
LULA'S TURN TO THE LEFT? 
------------------------ 
 
¶7.  (SBU) CG asked what a second Lula term would look like, assuming 
he is re-elected.  Unlike some of our interlocutors, Temer believes 
Lula may take a more radical (i.e., populist) approach during a 
second term.  The recent incident in which radicals from the 
Movement for the Liberation of the Landless (MLST) stormed the 
Chamber of Deputies (ref D) and committed acts of vandalism was a 
harbinger of things to come.  The group's leader, a member of the 
PT's Executive Committee, had on many occasions over the years been 
seen at Lula's side.  The PT had suspended him, but had taken no 
further action and did not appear particularly upset over the 
episode, Temer noted. 
 
¶8. (SBU) Lula, in Temer's view, was a trade unionist who had done 
well for himself, who, once re-elected, might finally begin to heed 
his friends on the left.  Very possibly he would let himself be led 
 
SAO PAULO 00000689  003 OF 004 
 
 
away from the orthodox macro-economic policies that have dominated 
his first term. (COMMENT: Some other observers have also pointed to 
the GOB's expansion of social spending in recent months as an 
indication that Lula is drifting left.  Thus far, however, this 
spending seems in line with the pump-priming measures of most 
incumbents seeking re-election.  While Temer sees Lula's campaign 
pitting "rich versus poor" as a sign of things to come in a second 
term, many analysts who have followed Lula's career characterize him 
as a "cultural conservative" who is unlikely to succumb to the 
radical leftist/populist temptation.  A more worrisome, and more 
likely, scenario is a second-term Lula government that lacks the 
policy direction, political will, and working majority in Congress 
required to push through essential economic and political reforms. 
END COMMENT.) 
 
------------------------------ 
PMDB - A HOUSE (STILL) DIVIDED 
------------------------------ 
 
¶9.  (SBU) Turning to his own party's fortunes, Temer confirmed 
reports that the PMDB will not run its own candidate for President, 
and will not enter into a formal alliance with either the PSDB or 
the PT.  Any of these options at the national level, he explained, 
would damage the party's chances in some of the states because the 
"verticalization" rule remains in effect during the 2006 elections. 
The recent ruling by the Superior Electoral Tribunal (TSE), which 
would have tightened even further the rules governing party 
alliances (ref B), was probably correct, Temer averred, even though 
it would have been disastrous for the PMDB.  If you're going to 
require parties to replicate their national alliances at the state 
level, it makes perfect sense to go a step further and say that 
parties that don't run or formally support presidential candidates 
may not ally at the state level with parties that do.  Nevertheless, 
as the head of a party whose lifeblood is coalition-building at the 
state level, Temer was relieved when the TSE reversed itself within 
48 hours, and he looked forward to the 2010 elections when the 
Constitutional amendment abolishing the "verticalization" rule 
altogether would enter into force. 
 
¶10.  (SBU) If the presidential election goes into a second round, as 
Temer is sure it will, the PMDB may at that point throw its support 
to one side or the other.  The PMDB remains split almost evenly 
between the pro- and anti-Lula groups.  The former seeks alliances 
with the PT and hopes for several Ministries in Lula's second 
administration.  Temer, who is anti-Lula, was highly critical of the 
pro-Lula faction and commented wryly over some of the party's 
internal contradictions and divisions.  Renan Calheiros, President 
of the Senate, is the leader of the PMDB's pro-Lula faction; yet, in 
his home state of Alagoas (northeast), the PMDB will support the 
PSDB's gubernatorial candidate, Senator Teotonio Vilela.  Another 
pro-Lula leader is Senator (and former President) Jose Sarney, but 
his daughter, PFL Senator Roseana Sarney, will be running for 
Governor of Maranhao (also in the northeast) with PMDB support 
against a PT candidate.  Temer outlined the situation state by 
state, ending with Sao Paulo.  The PSDB, he noted, badly wants an 
alliance with the PMDB, but they want to choose the PMDB candidate 
to be Jose Serra's running mate.  This issue will be resolved within 
the week, since the PMDB holds its state convention on June 24.  The 
party will not hold a national convention June 29 as originally 
planned, since all its issues at the national level were resolved at 
a preliminary June 11 caucus. 
 
¶11.  (SBU) Temer, who himself had strongly favored fielding a PMDB 
presidential candidate (ref F), noted that by relinquishing this 
ambition, the PMDB stands to win the governors' races in ten or 
perhaps even fifteen states, and will again have the largest blocs 
in both the Senate and the Chamber of Deputies.  Thus, whichever 
 
SAO PAULO 00000689  004 OF 004 
 
 
party wins the Presidency will inevitably have to seek an alliance 
with the PMDB in order to govern.  Temer spoke caustically of the 
Lula administration's miserly rewards for its allies in the PMDB. 
They give the job of Minister to a PMDB loyalist, but no real 
control over the Ministry; thus, he can't accomplish anything.  In 
contrast, Temer believes that in return for joining a governing 
alliance, the party should be given control over a sector of the 
economy, agriculture, say, or health, and full responsibility for 
operating that sector, and should receive full credit or blame for 
the successes and failures in that sector.  (COMMENT:  Left unsaid, 
of course, is that the sort of control Temer envisions would also 
give the PMDB, and other allied parties, the opportunity to advance 
their political patronage goals at the taxpayers' expense.  The 
PMDB, which is Brazil's largest political party, is already 
well-known as a vehicle for patronage.  END COMMENT.) 
 
------- 
COMMENT 
------- 
 
¶12.  (SBU) Temer was more charitable in his assessment of Alckmin's 
campaign and his performance as Governor than Alckmin's own PSDB 
colleague, Andrea Matarazzo (ref A). Nevertheless, Temer's critique 
hits home: Alckmin may perform in the coming months, but so far he 
simply has not connected at any level with the electorate.  Lula's 
job performance, on the other hand, may be open to question, but his 
ability to communicate with and relate to the average Brazilian is 
unsurpassed.  Temer is correct that whichever candidate wins will 
need to turn to the PMDB for support in governing.  The real problem 
is that the PMDB has no ideology or policy framework that it could 
bring to the task of formulating and implementing a coherent 
national political agenda.  Despite the party's illustrious history 
as the guiding force that led Brazil from military dictatorship to 
democracy, the PMDB, which now holds the balance of political power, 
has devolved into a loose coalition of opportunistic regional 
"caciques" who for the most part - and there are exceptions - seek 
political power for its own sake. Such a party is hardly suited to 
the task of providing political direction, which would be 
particularly important in a post-election alliance with Lula's 
rudderless PT.  END COMMENT. 
 
¶13.  (U) This cable was coordinated/cleared with Embassy Brasilia. 
 
MCMULLEN