VZCZCXRO6131
PP RUEHRG
DE RUEHSO #0722/01 1811218
ZNR UUUUU ZZH
P 301218Z JUN 06
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 5340
INFO RUEHBR/AMEMBASSY BRASILIA 6430
RUEHAC/AMEMBASSY ASUNCION 2650
RUEHBU/AMEMBASSY BUENOS AIRES 2326
RUEHMN/AMEMBASSY MONTEVIDEO 2053
RUEHSG/AMEMBASSY SANTIAGO 1782
RUEHLP/AMEMBASSY LA PAZ 2884
RUEHRI/AMCONSUL RIO DE JANEIRO 7229
RUEHRG/AMCONSUL RECIFE 3011
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 2505
RUEHC/DEPT OF LABOR WASHDC
RHMFISS/CDR USSOUTHCOM MIAMI FL

UNCLAS SECTION 01 OF 03 SAO PAULO 000722 
 
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 ETRD EPET BR
SUBJECT: SAO PAULO MAYOR DISCUSSES PCC VIOLENCE, ELECTIONS, BOLIVIA 
 
 
REF: (A) SAO PAULO 708; (B) BRASILIA 1266; 
     (C) SAO PAULO 689; (D) SAO PAULO 573 AND PREVIOUS; 
     (E) SAO PAULO 106 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY 
 
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SUMMARY 
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¶1.  (SBU) Sao Paulo Mayor Gilberto Kassab told the Consul General 
(CG) June 29 that the recent gang violence in the city was a wake-up 
call to the public, which has responded in solidarity with the 
police.  Kassab believes opposition candidate Geraldo Alckmin will 
have a hard time catching up with President Lula; therefore, the 
Liberal Front Party (PFL) is focusing its attention on helping 
former Mayor Jose Serra win the election for Governor of Sao Paulo. 
He predicted that, if re-elected, Lula will continue his orthodox 
economic policies and resist pressures for a turn to the left, and 
may even become more accommodating towards the U.S. in his approach 
to foreign policy.  Kassab expected the political scene to change 
for the better as small parties disappear and large center-left and 
center-right coalitions are formed.  Asked about Bolivia, he 
acknowledged concerns about Sao Paulo's heavy dependence on Bolivian 
gas, but ruled out any serious disruption.  END SUMMARY. 
 
-------------------------------- 
SOLIDARITY WITH EMBATTLED POLICE 
-------------------------------- 
 
¶2.  (SBU) CG noted the morning's news of the killing of a prison 
guard, allegedly by the criminal gang First Capital Command (PCC) in 
the aftermath of the recent killing of 13 PCC members by state 
police (ref A).  Kassab commented that the criminal gang problem had 
been brewing in Sao Paulo for years before erupting in the May wave 
of violence (ref D).  It was a difficult time, both he and Municipal 
Secretary for International Relations Helena Gasparian noted, 
 
SIPDIS 
because the PCC was able to identify and kill individual police 
officers in their homes, putting enormous pressure on the police. 
Yet he also noted that the violence, while terrible in its own right 
and damaging to the city's image, had one positive outcome.  The 
show of force by the PCC had frightened the citizenry, which, when 
forced to choose sides, had shown solidarity with the police.  Now 
everyone is more aware of the need to fight organized crime, though 
this remains a challenge due in large part to the weakness of 
federal law enforcement. 
 
¶3.  (SBU) CG described his recent meeting with state public security 
officials (septel) and the USG interest in exploring ways we might 
be able to help the state improve its ability to combat organized 
crime and mitigate the PCC's ability to control the state prison 
system.  Over the longer term, Kassab expressed confidence that 
improved technology would assist authorities in combating crime more 
effectively.  At the same time, he agreed with his PFL colleague, 
Sao Paulo Governor Claudio Lembo, that Brazil's elites need to 
provide more education and do more to combat economic inequality as 
part of the war on crime. 
 
------------------------------ 
GRIM VIEW OF ALCKMIN'S CHANCES 
------------------------------ 
 
¶4.  (SBU) CG asked Kassab, a PFL insider, how he viewed the 
presidential election.  Kassab acknowledged that from an opposition 
perspective, it wasn't going well.  He frankly did not see at this 
point how Geraldo Alckmin was going to overcome President Lula's 
large lead, estimated at nearly 30 points in some recent polls (ref 
 
SAO PAULO 00000722  002 OF 003 
 
 
B).  Though they continued to work for Alckmin, Kassab said he and 
his PFL colleagues are focusing more on ensuring Jose Serra's 
election as Governor.  After failing to negotiate an alliance with 
the centrist Brazilian Democratic Movement Party (PMDB), Serra had 
chosen as his running mate PSDB Federal Deputy Alberto Goldman.  But 
the PSDB-PFL alliance remained strong.  Later that day, Kassab 
planned to attend the official launching of the Senate campaign of 
his friend and PFL colleague, Guilherme Afif Domingos, President of 
the Sao Paulo Chamber of Commerce, who is running with PSDB support 
against incumbent Eduardo Suplicy of Lula's Workers' Party (PT). 
 
-------------------------- 
LULA AS PRAGMATIC MODERATE 
-------------------------- 
 
¶5.  (SBU) CG asked Kassab for his views on what we could expect from 
a second Lula term if he is re-elected.  Kassab noted that many 
political analysts expect that Lula, unencumbered by conservative 
allies and ineligible to run for re-election, would begin to pay 
more attention to the leftist elements of the PT and govern in more 
populist fashion.  He, Kassab, did not agree.  People don't change, 
he said, and Lula is ultimately conservative at heart, a trade 
unionist who worked pragmatically within the system for modest, 
incremental advances.  He has won plaudits from around the world for 
his responsible management of Brazil's economy.  He has never really 
paid much attention to the PT's leftist economists and is not likely 
to begin now.  Kassab did not say what will become of the labor 
unions, landless movement (MST), and other leftist social movements 
that comprise the PT's core constituency; presumably they will 
continue to agitate from the left, but without much effect. 
 
¶6.  (SBU) On the trade front, Kassab opined, Lula may never support 
the FTAA, but he may eventually become more accommodating on trade 
issues.  Many of the problematic foreign policy positions 
articulated by Lula and the MFA, especially those at odds with U.S. 
policy objectives, have been taken for electoral reasons; when these 
political imperatives disappear, he may become more moderate, 
including in his approach to bilateral relations with the United 
States.  He may even move closer in some of his policies to the 
PSDB.  Though Kassab did not say so explicitly, he hinted that the 
PSDB and PFL may be prepared to offer some support in Congress to 
such a "moderate" Lula to avoid political gridlock and keep the 
country on track. 
 
----------------- 
BIPARTISAN BRAZIL 
----------------- 
 
¶7.  (SBU) Kassab reiterated his view (see ref E) that the entry into 
force this year of the "Barrier Clause" will change Brazil's 
political panorama.  After the smaller parties lose their viability 
when they fail to garner the required five percent of the national 
vote for the Chamber of Deputies, only five or six parties will 
remain.  Lula's PT will be forced into a center-left alliance with 
the PMDB, which in return for its support will demand control of 
several Ministries to be used to advance the ambitions of their 
supporters.  Meanwhile, the PSDB and PFL will form their own 
center-right coalition as a counter-weight.  Any other surviving 
parties will eventually gravitate to one bloc or another, and Brazil 
will again have something resembling a two-party system.  Kassab 
suggested this would have a salutary and stabilizing effect on 
Brazilian politics. 
 
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BOLIVIAN GAS 
------------ 
 
¶8.  (SBU) CG expressed interest in Kassab's perspective on Bolivia's 
 
SAO PAULO 00000722  003 OF 003 
 
 
nationalization of its hydrocarbons sector.  Kassab acknowledged 
that although a national issue, this was extremely worrisome for Sao 
Paulo, which remains heavily dependent on Bolivian gas to meet its 
energy needs.  The city and the private sector were already 
exploring alternatives with a view to reducing that dependency, 
though it may have to pay higher prices in the short term. 
Ultimately, Brazil and Petrobras had the stronger negotiating 
position and would find an acceptable solution.  Gasparian 
interjected that the 200,000 Bolivians residing illegally in Sao 
Paulo constituted a serious headache for the city. 
 
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COMMENT 
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¶9. (SBU) For the leader of a mega-city that recently suffered a 
major trauma and continues to confront challenges in the areas of 
crime, pollution, health care, the informal economy, and a large 
marginalized population, Kassab seemed remarkably relaxed, cheerful, 
and optimistic.  Even the prospect of four more years of Lula, which 
dismays some leaders of the business community, did not appear to 
give him pause.  Indeed, he volunteered that he sees no crises, 
political or economic, on the horizon.  He expressed interest in 
maintaining close contact with the Consulate and having city 
officials participate in several upcoming USG-sponsored events.  END 
COMMENT. 
 
¶10.  (U) This cable was coordinated/cleared with Embassy Brasilia. 
 
MCMULLEN