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P 171758Z OCT 06
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INFO RUEHBR/AMEMBASSY BRASILIA 6983
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RUEHBU/AMEMBASSY BUENOS AIRES 2506
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UNCLAS SECTION 01 OF 04 SAO PAULO 001105 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
NSC FOR FEARS 
 
E.O. 12958: N/A 
TAGS: PGOV PINR BR
SUBJECT: RIO GRANDE DO SUL: ELECTION RESULTS REFLECT VOTER 
DISENCHANTMENT IN BRAZIL'S SOUTHERNMOST STATE 
 
REF: BRASILIA 2100 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY 
 
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SUMMARY 
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¶1.  (SBU) For the first time in five presidential elections, Luiz 
Inacio Lula da Silva failed to carry Rio Grande do Sul on October 1, 
losing by nearly 1.5 million votes to challenger Geraldo Alckmin. 
At the same time, incumbent Brazilian Democratic Movement Party 
(PMDB) Governor Germano Rigotto narrowly missed qualifying for the 
second round, setting up a confrontation between candidates of 
Alckmin's Social Democracy Party of Brazil (PSDB) and President 
Lula's Workers Party (PT).  These results reflect voter discontent 
over the state of the economy.  The state's agricultural sector has 
suffered from drought, while the footwear sector is priced out of 
international markets by the high Real.  These factors, along with 
the political corruption scandals, have led to voter disenchantment 
with Lula in a state where the PT been strong throughout its 26-year 
history.  Rigotto, meanwhile, was disadvantaged by budget problems 
that made it difficult for the state to invest in infrastructure or 
to attract private investment.  Up to the last minute, polls pointed 
to a second-round contest between Rigotto and PT former Governor 
Olivio Dutra.  On election day, however, PSDB Federal Deputy Yeda 
Crusius surprised everyone by finishing first, with Dutra barely 
edging out Rigotto.  With many voters still disenchanted with the 
PT, most observers expect Crusius to defeat Dutra handily in the 
second round, while Alckmin is expected to maintain his significant 
advantage over Lula.  End Summary. 
 
------------------ 
HISTORICAL CONTEXT 
------------------ 
 
¶2.  (U) After the first round of the elections, Poloff and Political 
Assistant visited Porto Alegre, capital of Rio Grande do Sul, and 
met with academics, political consultants, journalists, and 
representatives of major political parties to discuss the political 
situation and the election results.  Francisco Ferraz, former Rector 
of the Federal University of Rio Grande do Sul, provided a 
historical overview of the state's political rivalries.  Given its 
geographic position as Brazil's southernmost state, bordering on 
Argentina and Uruguay, Rio Grande do Sul has often been isolated 
from the national political scene and at odds with the national 
government.  Politics tend to be polarized and characterized by 
activism and militancy.  The voters are demanding and are 
unforgiving of corruption, and often do not re-elect governors. 
Since the 1985 restoration of democracy, the PT and PMDB have been 
the dominant parties, engaging in an often fierce rivalry.  The PT 
grew gradually into a strong political force, winning the mayoralty 
of Porto Alegre in 1988 and holding it for 16 years, and governing 
other major cities as well.  Even some critics give it credit for 
responsible municipal government, competent and generally 
scandal-free.  Instead of fighting ideological battles, it devoted 
itself to providing municipal services.  The PT has strong support 
among urban voters and the poor, while the PMDB occupies the 
center-right and attracts votes from business and some elements of 
the middle class. 
 
¶3.  (U) The PT's decline began in 1998 when former Porto Alegre 
Mayor Olivio Dutra was elected Governor.  Dutra alienated many 
voters with his heavy-handed, authoritarian style and his 
unwillingness to compromise.  Even PT officials acknowledge that he 
made many mistakes.  His administration was characterized by large 
budget deficits and constant battles with the opposition-controlled 
Legislative Assembly.  Whereas his predecessor had attracted GM and 
Ford to the state, Dutra withdrew the incentives that had been 
promised to Ford and did everything possible to make the company 
unwelcome.  Ford eventually set up operations in Bahia instead, and 
Dutra is remembered as the Governor who cost the state hundreds of 
jobs. 
 
¶4.  (U) In 2002, Tarso Genro defeated Dutra in the PT primary and 
faced off against former Governor Antonio Britto (1995-98), who had 
switched from the PMDB to the Popular Socialist Party (PPS).  Genro 
and PMDB newcomer Germano Rigotto made it to the second round, which 
Rigotto won.  However, his administration was generally regarded as 
mediocre.  He proved to be a good technocrat but not especially able 
 
SAO PAULO 00001105  002 OF 004 
 
 
politically.  Instead of fighting with the PT, he tried to get along 
with them, but derived no benefit from it.  He puzzled voters in 
early 2006 by briefly seeking his party's presidential nomination. 
After that failed, he decided somewhat reluctantly to seek 
re-election as Governor, even though he had previously expressed 
opposition to re-election.  However, he declined to turn the reins 
of government over to his deputy and ran a part-time, lackluster 
campaign.  He adopted a pose of neutrality between Lula and Alckmin, 
a position which, while it may have benefited Lula, made some voters 
think he was indecisive. 
 
------------------------- 
CRUSIUS COMES FROM BEHIND 
------------------------- 
 
¶5.  (U) Nevertheless, until the very end, polls showed Rigotto 
leading, and his failure to make the second round surprised 
everyone.  Even the exit polls were wrong.  The most common 
explanation is that many of his supporters, confident that he was 
safe, switched their vote to PSDB candidate Yeda Crusius in an 
effort to keep Dutra and the PT out of the second round.  Whatever 
the reason, Crusius ended up with 32.9 percent, Dutra with 27.39, 
and Rigotto with 27.12.  Rigotto was eliminated by less than 17,000 
votes.  The momentum now shifts to Crusius.  While Rigotto himself 
has declined to choose sides, the PMDB, led by Senator Pedro Simon 
and Federal Deputy Eliseu Padilha, has decided to support Crusius. 
Several other parties -- the Progressivist Party (PP), the Popular 
Socialist Party (PPS), and the Brazilian Labor Party (PTB) -- are 
also in her camp.  Polls show her leading Dutra by a margin of 64.6 
percent to 30.6.  Even PT officials acknowledge that Dutra faces a 
tough uphill climb. 
 
¶6.  (U) Yeda Crusius is a co-founder of the PSDB who served as 
Minister of Planning in Itamar Franco's administration (1992-94). 
She has served as a Federal Deputy since 1995.  What made her 
election a surprise is that the PSDB, though prominent on the 
national scene, is very small in Rio Grande do Sul.  It elected two 
Deputies to the federal Chamber of Deputies in 2002 and three state 
legislators.  This year it again elected two federal deputies and 
three state deputies.  Its main coalition partners, the PFL and the 
PPS, are not much bigger.  Crusius's strong showing is attributed to 
the fact that she is a new face.  If elected, she will be the 
state's first woman Governor.  In order to govern, she will have to 
ally with the PMDB and other parties.  Even then, many expect her to 
have difficulty due to the same fiscal problems that undermined 
Rigotto.  Seventy percent of the state's budget goes to salaries of 
public employees, and the state's debt with the federal government 
leaves Governors very little room to maneuver.  If Lula is 
re-elected, Crusius will likely have an adversarial relationship 
with the federal government. 
 
¶7.  (U) State PSDB officials Beto Vasconcelos and Lindemar Frajon, 
who seemed as surprised as anyone by Crusius's strong showing, 
attributed the defeat of Rigotto to voter dissatisfaction with 
public services.  During the campaign, the PSDB had ignored Rigotto 
and run against Lula and the PT.  The electorate believed that Lula 
hadn't kept his campaign promises.  Farmers hurt by the government's 
agricultural policies and exporters unable to compete had 
contributed to the Lula's unprecedented defeat, they said. 
 
¶8.  (U) Observers pointed to a number of idiosyncrasies in the 
election.  The PSDB was a partner in Rigotto's government until 
Crusius announced her candidacy, at which point the PSDB Lieutenant 
Governor had to switch parties.  The leading vote-getter for the 
federal Chamber of Deputies, Manuela d'Avila, is a 25-year-old 
Communist woman.  The leading vote-getter for the state Legislative 
Assembly is a local TV weatherman. 
 
--------------------------------------------- --- 
PT LEGISLATIVE LEADER - TRYING TO REGAIN BALANCE 
--------------------------------------------- --- 
 
¶9.  (SBU) Flavio Koutzii, PT leader in the state Legislative 
Assembly, characterized the state PT (in contrast to the national 
party) as inclusive, anti-authoritarian, and internally disciplined, 
with strong intellectual elements.  He noted that the state PT 
continued to gain influence in the 1990s even as leftist ideas were 
falling out of fashion, and said that the PT's municipal government 
created a culture that changed the opposition's thinking.  The state 
PT, he said, could have evolved into a social democratic party with 
 
SAO PAULO 00001105  003 OF 004 
 
 
a strong reformist impulse. 
 
¶10.  (SBU) However, during Dutra's term as Governor, in which 
Koutzii served as Chief of the Civil Household, the Palace was 
besieged, conflict was the order of the day, and the party began to 
lose ground.  Genro's challenge of Dutra in 2002 was "stupid," 
Koutzii said, and the party lost the governorship that year and the 
Mayoralty of Porto Alegre in 2004.  Koutzii attributed Lula's loss 
in the state to people's alienation over the vote buying scandal and 
especially the "dossier" scandal, which he attributed to the 
arrogance of the Sao Paulo PT.  Though he himself did not seek 
re-election to the Assembly, he noted that the party's candidates 
had an unpleasant campaign, being heckled mercilessly over the 
corruption issue.  Unlike in elections past, it was hard to get the 
party faithful out into the streets.  Koutzii admitted that Dutra is 
very unlikely to defeat Crusius.  Nevertheless, he believes that the 
party is in a fair position to regroup and regain its balance. 
Former Agricultural Development Minister Miguel Rossetto got 1.5 
million votes in the Senate race, a good showing against PSDB leader 
Pedro Simon.  Rossetto is widely expected to be the PT's candidate 
for Porto Alegre Mayor in 2008.  The party elected eight federal 
deputies (out of 31) and 13 state deputies (out of 56) and thus 
remains alive and well. 
 
¶11.  (SBU) Many members of the Rio Grande do Sul PT have served in 
senior positions in the party and in Lula's government.  In addition 
to Rossetto and Dutra (who served as Minister of Cities), prominent 
members include Lula's Civil Household Chief, Dilma Roussef, and 
Minister for Institutional Relations Tarso Genro.  The PT's leader 
in the Chamber of Deputies, Henrique Fontana, is also a "gaucho." 
Despite this, state party leaders often act as if they were in 
opposition to Lula's government and to the national party and often 
press them to take a more leftward direction. 
 
----------------------------------- 
RAUL PONT - POLITICAL REFORM NEEDED 
----------------------------------- 
 
¶12.  (SBU) State legislator Raul Pont, former Porto Alegre Mayor 
(1997-2000) and now national Secretary General of the PT, also said 
the scandals had hurt the party and Lula in the elections.  Pont is 
a Trotskyite who leads the PT's Social Democracy faction and ran 
unsuccessfully in 2005 for PT president.  When Lula's Majority 
Faction retained its control of the PT National Directorate, other 
leftists defected, mostly to Heloisa Helena's Socialism and Liberty 
(PSOL) party, but Pont chose to remain in the party and try to 
"refound" it from the left.  He continues to urge the Lula 
administration to pay more attention to the social movements that 
constitute the party's original base and to implement more social 
programs. 
 
¶13.  (SBU) Pont predicted that many of Heloisa Helena and Cristovam 
Buarque's voters would vote for Lula in the second round.  Despite 
the resentments that led both politicians to leave the PT, their 
supporters are ideologically much closer to Lula than to Alckmin, he 
said.  Pont complained that the last 20 days of the first-round 
campaign had been a "massacre" in which the media criminalized the 
entire party, and the campaign in the streets had been brutal.  The 
"dossier" scandal, he asserted, was a case of the Sao Paulo PT 
trying to help their gubernatorial candidate, Aloizio Mercadante, 
but its repercussions were nation-wide.  The PT, he noted, was also 
the only party to be held responsible for the vote-buying scandal, 
even though almost all parties played a role. 
 
¶14.  (SBU) The root of the problem, in Pont's view, is Brazil's 
"perverse" electoral system, which gives small states much more 
representation than large states.  As a result, Lula will be 
re-elected with around 50 million votes, but his party will have 
less than 20 percent representation in the Congress.  Such a 
phenomenon, he complained, almost ensures "ingovernability."  The 
national PT, he said, chose to behave like a traditional Brazilian 
political party and make deals in Congress, with disastrous results. 
 He expects Lula, in a second term, to push hard for political 
reform to address this situation.  The "Barrier Clause," which will 
eliminate parties with less than 5 percent of the nation-wide vote, 
is a small first step, but much more reform is needed.  Pont wants 
the PT to take the lead in pushing for comprehensive political 
reform, and he and his faction will press for this at next year's PT 
National Congress. 
 
 
SAO PAULO 00001105  004 OF 004 
 
 
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COMMENT 
------- 
 
¶15.  (SBU) Lula's unprecedented failure to carry Rio Grande do Sul 
is a sign of how much backlash there is against the PT as a result 
of the corruption scandals.  Nevertheless, just as on the national 
level, where the PT surprised many by electing 83 federal deputies, 
its performance on the state level suggests it remains a force to be 
reckoned with.  While a solid one third of the voters strongly 
opposes the party, another one third still supports it, and it is 
well represented in the legislative sphere.  Meanwhile, if Crusius 
is elected Governor (by no means a sure thing, since polls to date 
have been wrong), it will be interesting to see whether or not the 
PSDB can develop as a third force in Rio Grande do Sul.  End 
Comment. 
 
¶16. (U) This cable was coordinated with Embassy Brasilia. 
 
MCMULLEN