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UNCLAS SECTION 01 OF 04 SAO PAULO 001192 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR FOR SULLIVAN/CRONIN 
NSC FOR FEARS 
TREASURY FOR OASIA, DAS LEE AND DDOUGLASS 
 
E.O. 12958:  N/A 
TAGS: PGOV ECON PINR BR
SUBJECT: PSDB STATE LEADER: LESSONS LEARNED FROM ALCKMIN CAMPAIGN; 
OPTIMISTIC ABOUT INCOMING STATE GOVERNMENT 
 
 
------- 
SUMMARY 
------- 
 
¶1.  (SBU) Sao Paulo State Deputy Sidney Beraldo told Poloff that 
state leaders of the Social Democracy Party of Brazil (PSDB) have 
been conducting a "lessons learned" exercise to identify what went 
wrong in ex-Governor Geraldo Alckmin's unsuccessful presidential 
campaign.  One conclusion is that the party erred in not making a 
more forceful response to President Lula's assertion that Alckmin 
would privatize all state-owned enterprises, in not touting the 
benefits of privatizations to date and more generally in not 
defending Fernando Henrique Cardoso's record as President.  Beraldo 
also thought that Alckmin and his political advisors had ceded too 
much authority to media consultants, who had done a bad job of 
getting Alckmin's message out to the voters.  Beraldo was optimistic 
about PSDB Governor-elect Jose Serra's ability to move Sao Paulo 
state forward, especially in investing in major infrastructure 
improvements.  The PSDB and its coalition partners will control 44 
out of 94 seats in the unicameral Legislative Assembly that will be 
seated March 15, and the party is reaching out to small parties in 
an attempt to put together a reliable working majority.  End 
Summary. 
 
¶2.  (U) Poloff and Political Assistant met November 7 with Deputy 
Sidney Beraldo, a former president of the Sao Paulo State 
Legislative Assembly (ALESP) and a state PSDB leader, to talk about 
the elections just concluded, prospects for the newly elected 
Governor and ALESP, and the future of the PSDB. 
 
------------------------------------------- 
PSDB: SOUL-SEARCHING AFTER LOSING PRESIDENTIAL ELECTION 
------------------------------------------- 
 
¶3.  (U) From the start, Beraldo said, the PSDB knew they were facing 
a tough election.  President Lula's advantage of incumbency weighed 
heavily throughout; unless he is extremely unpopular, an incumbent 
is always difficult to defeat.  In addition to the exposure he got 
with the help of the campaign's large advertising budget, Lula was 
able to appear on television all the time, announcing new government 
accomplishments and programs.  He also got a lot of propaganda 
mileage out of cash transfer programs (e.g., "Bolsa Familia"), all 
of which, as PSDB loyalists are always quick to point out, were 
begun by Fernando Henrique Cardoso (FHC).  This was Lula's fifth 
national election and he was already extremely well known.  He also 
has genuine mass appeal; many voters feel a close connection with 
him that transcends policy and politics. 
 
¶4.  (SBU) Beraldo also noted that the PSDB and the Alckmin campaign 
had made a number of mistakes.  The party's Sao Paulo State 
Executive Committee (the State Executive, he stressed, not the 
national Executive, which is "a disgrace") had just held a "lessons 
learned" session.  Party leaders concluded that the PSDB had 
suffered from a lack of party unity.  In some parts of the country, 
the local party organizations had simply not done enough to promote 
Alckmin's candidacy.  Beraldo had traveled with the candidates 
around Sao Paulo state and asserted that Alckmin and (successful) 
gubernatorial candidate Jose Serra were in lockstep, and that Serra 
had done everything possible to help Alckmin (who carried the state, 
but by a disappointingly small margin).  He had less direct 
knowledge of how hard Minas Gerais Governor Aecio Neves had worked 
for Alckmin, but noted that Lula was so far ahead in Minas that 
there was ultimately little that Neves could do to help.  He agreed 
that Alckmin's showing in Minas had been disappointing and, combined 
with his poor showing in Rio de Janeiro, fatal to his chances.  But 
then, Minas Gerais is a notoriously difficult state.  The northern 
part of the state is very similar to the northeast and follows the 
northeast's voting patterns. 
 
¶5.  (SBU) This election, Beraldo continued, exposed the PSDB's 
greatest weakness: its failure to make inroads in the populous 
northeast.  The party took a well-deserved beating due to its 
failure to deliver a compelling message to voters in the northeast. 
When Alckmin promised a management shock ("choque de gestao"), 
Beraldo got a call from a party leader in the small northeastern 
state of Paraiba, who said, "Here in Paraiba, a "choque de gestao" 
is what you get when a pregnant woman sticks her finger in a light 
 
SAO PAULO 00001192  002 OF 004 
 
 
socket."  (Note: This is a pun on the Portuguese word "gestacao," 
which means gestation or pregnancy.  End Note.)  Beraldo complained 
that the "marqueteiros" - media gurus - had wielded too much 
influence in shaping the message, and had done a bad job.  The 
candidate and his political consultants should have pushed back and 
insisted on more control over the message.  "Who can talk to the 
people if not the politicians?  But they were frozen out of 
decisions by the "marqueteiros." 
 
¶6.  (SBU) Beraldo also noted that the PSDB's major coalition 
partner, the Liberal Front Party (PFL), is strong in the northeast 
but was not much help in delivering votes from there.  This he 
attributed to the declining influence of the "colonels" or regional 
bosses who used to rule.  In the second round, Lula won 77 percent 
of the valid votes in the northeast, including an amazing 85 percent 
in Maranhao state. 
 
¶7.  (SBU) The PSDB's other failure, Beraldo said, was its 
unwillingness to defend privatizations when Lula began frightening 
the voters with the charge that Alckmin would sell off the country's 
patrimony, and, more generally, its unwillingness to defend FHC's 
record as President.  Privatization (of telecoms, to use just one 
example) had brought many benefits to many voters, including those 
of modest means.  The party's state Executive Committee concluded 
that not defending the accomplishments of FHC's two administrations 
-- curbing inflation with the Plano Real, achieving political and 
economic stability -- was a major mistake. 
 
¶8.  (U) Even while acknowledging the PSDB's mistakes and Alckmin's 
lack of personal charisma as important factors in the campaign, 
Beraldo commented that nobody in the PSDB had anticipated that Lula 
would suffer so little damage in voters' eyes (and in vote totals) 
from the political scandals that plagued his first term, and still 
nobody can understand why this happened. 
 
----------------------------- 
UPBEAT ABOUT STATE GOVERNMENT 
----------------------------- 
 
¶9.  (U) Beraldo was optimistic about prospects for Sao Paulo state 
when former Mayor Jose Serra assumes the governorship.  Serra, who 
served as Health Minister and Planning Minister under FHC and ran 
for President against Lula in 2002, comes to office extremely 
well-prepared both technically and politically, Beraldo said. 
Having a national figure running the state will be beneficial. 
Furthermore, the state is in good shape economically.  Certainly, 
when the national economy doesn't grow -- 2.3 percent in 2005, and 
about 2.8 percent projected for 2006 -- Sao Paulo state suffers as 
well.  But the late Governor Mario Covas (1994-2001) restored the 
state's solvency, and Governors Alckmin and Lembo provided sound 
financial management.  The Law of Fiscal Responsibility prohibits 
the state from incurring debt of more than twice its budgetary 
receipts, and it is currently at 1.8 percent, so there is some small 
room for more investment in infrastructure.  The state is also in an 
excellent position to attract new private investment.  It is moving 
forward with several Public Private Partnership (PPP) projects. 
Priorities include construction of another subway line and the ring 
road around the metropolitan area, as well as a railroad to carry 
goods to the port of Santos. 
 
¶10.  (U) The state's PPP law allows the government to offer 
guarantees to private investors that will enhance their confidence 
and likelihood to invest, Beraldo said.  He outlined plans for a PPP 
to expand the small port of Sao Sebastiao and the roads leading to 
it.  (Note: Sao Sebastiao is a small town about 130 miles northeast 
of Sao Paulo on the state's northern shore.  End Note.)  They hope 
to be able to shift some freight traffic away from Santos, which is 
owned and operated by the federal government and has serious 
management problems.  Due to inefficiencies, it costs USD 300 to 
ship a container from Santos, whereas the cost in the EU is in the 
USD 100-150 range.  The state government also wants to build a 
pipeline to transport ethanol from the sugar mills in the interior 
of the state to Sao Sebastiao, Beraldo said.  Several proposals from 
private investors are under consideration. 
 
-------------------------------------- 
SEEKING A MAJORITY IN THE LEGISLATIVE ASSEMBLY 
 
SAO PAULO 00001192  003 OF 004 
 
 
-------------------------------------- 
 
¶11.  (U) The PSDB did well in the state elections, Beraldo said. 
The party won 24 seats in the Legislative Assembly, compared to 18 
in 2002.  Its coalition partners, the Liberal Front Party (PFL) and 
the Popular Socialist Party (PPS), won 11 and 5 seats respectively. 
The PSDB is also allied on the state level with the Brazilian Labor 
Party (PTB), which won four seats, giving the governing coalition 44 
seats out of a total of 94.  Talks are under way with the Democratic 
Labor Party (PDT) and the Green Party (PV) in the hopes of 
constructing a solid majority.  (Note: The PTB, PPS, and PV are all 
merging with smaller parties to avoid losing their privileges under 
the "Barrier Clause" after failing to meet the 5 percent threshold 
in elections for the federal Chamber of Deputies.  End Note.)  On 
the other side of the aisle, President Lula's Workers Party (PT) won 
twenty seats (down from 22 in 2002), its Socialist allies 4, and 
Heloisa Helena's Socialism and Liberty Party (PSOL) - which, though 
comprised of PT defectors, is unlikely to support the PSDB state 
government -- won 2.  Beraldo said candidacies to succeed Rodrigo 
Garcia (PFL) as the President of the Legislative Assembly had not 
been announced, and he declined to speculate on likely candidates. 
If Governor-elect Serra has a preferred candidate, he has not 
publicly announced it.  (Note: Though he did not say so, Beraldo 
himself may be a candidate, as he is close to Serra.  End Note.) 
Beraldo pointed out that in Sao Paulo, unlike in other states, the 
new Assembly will not be seated until March 15. 
 
-------------------------- 
ALCKMIN'S UNCERTAIN FUTURE 
-------------------------- 
 
¶12.  (SBU) Beraldo did not know what Geraldo Alckmin plans to do 
next.  Alckmin has stated publicly that he does not plan to seek the 
PSDB Presidency next year and also is not interested in running for 
Mayor of Sao Paulo in 2008, though there is time for him to change 
his mind.  For the time being, he seems happy at the prospect of 
running the Teotonio Vilela Institute, the PSDB's policy shop. 
Beraldo speculated that Alckmin could always return to the practice 
of medicine (he is an anesthesiologist), though after years as a 
state and federal deputy, Lieutenant Governor and Governor, this 
would seem a difficult transition to make. 
 
¶13.  (U) Beraldo agreed with Poloff's observation that the PSDB 
needs to be reformed.  He said the perception that the presidential 
nomination had been decided by three party leaders -- FHC, Neves, 
and Senator Tasso Jereissati -- was a media distortion; in fact, the 
three had consulted extensively with the party's base prior to 
making their decision.  However, he acknowledged that the public 
perception of so small a group deciding such an important matter 
among themselves had damaged the party's image, and the PSDB would 
have to change its way of doing business in the future. 
 
¶14.  (U) When asked about the rivalry between Jose Serra and Aecio 
Neves (both of whom are expected to seek the 2010 PSDB presidential 
nomination), Beraldo noted that he was a Serra supporter.  While 
Neves's landslide re-election in Minas Gerais was impressive, he 
said, it came about in large part because Neves faced no serious 
opposition.  Furthermore, even while running under the PSDB banner, 
he somehow managed to be aligned with the Brazilian Democratic 
Movement Party (PMDB) and the PT at the same time. 
 
------- 
COMMENT 
------- 
 
¶15.  (SBU) The PSDB is still feeling its way after Lula's decisive 
victory over Alckmin.  It needs to decide whether to mount a strong 
opposition to Lula as the second term gets underway or take a more 
conciliatory approach.  Though 2010 is a long way off, many 
observers are already watching to see whether Serra or Neves emerges 
as the more likely presidential candidate, and what role Alckmin 
finds for himself.  Some observers have noted that the PSDB and PT, 
the two major poles in Brazilian politics, have come more and more 
to resemble each other ideologically as the PT has begun to look 
less like a leftist party and more like a moderate social democratic 
party.  The PSDB wants to win back some of that space.  End Comment. 
 
 
SAO PAULO 00001192  004 OF 004 
 
 
 
¶16.  (U) This cable was cleared/coordinated with Embassy Brasilia. 
 
MCMULLEN