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R 051859Z APR 07
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INFO RUEHAC/AMEMBASSY ASUNCION 6039
RUEHBU/AMEMBASSY BUENOS AIRES 4700
RUEHMN/AMEMBASSY MONTEVIDEO 6836
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RUEANHA/FAA NATIONAL HQ WASHDC
RUEAYVF/FAA MIAMI ARTCC MIAMI FL
RUEWMFU/TSA HQ WASHINGTON DC
RHMFISS/HQ USSOUTHCOM MIAMI FL

C O N F I D E N T I A L SECTION 01 OF 02 BRASILIA 000598 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 04/05/2017 
TAGS: PGOV EAIR BR
SUBJECT: OPPOSITION DEPUTY BLAMES LULA FOR AIR TRAFFIC 
CRISIS 
 
REF: A. BRASILIA 485 
 
     ¶B. BRASILIA 564 (NOTAL) 
     ¶C. 06 BRASILIA 2564 (NOTAL) 
     ¶D. 06 SECSTATE 198917 (NOTAL) 
 
Classified By: POLITICAL COUNSELOR DENNIS W. HEARNE FOR REASONS 1.4 B/D 
 
¶1.  (C) Summary.  Federal Deputy Antonio Carlos Magalhaes 
Neto ("ACM Neto"), of the Democrats party ("DEM," formerly 
called the Liberal Front Party, PFL), of Bahia believes 
President Luiz Inacio Lula da Silva defused a ticking bomb in 
the military this week by reversing his decision not to 
punish insubordinate air traffic controllers who shut down 
air traffic on March 30.  ACM Neto (protect) told poloff on 
April 4 there are other such "bombs" in the military because 
some in the lower ranks -- corporals, sergeants, and even 
lieutenants -- are unhappy about a number of things, starting 
with salaries.  ACM Neto, a staunch opponent of Lula's 
administration, said opposition figures have obtained 
documents going back four years, to the time Lula took 
office, that proving the Lula administration knew of problems 
in the Brazilian air traffic control system.  He said he 
believes a congressional investigation into the air traffic 
crisis will reveal serious corruption and incompetence in 
Infraero, the government body that runs the country's 
airports, under the management of Carlos Wilson, a Lula 
appointee.  He said rumors are circulating that government 
officials took bribes to favor two major airlines and 
channeled the funds into political campaigns.  End summary. 
 
Lula "Contained" the Problem in the Military, For Now 
--------------------------------------------- -------- 
 
¶2.  (C) ACM Neto condemned the Lula administration's 
"complete lack of leadership" on the air traffic crisis.  He 
told poloff on April 4 that opposition politicians have 
obtained documents going back four years ) the time frame 
covering Lula's first term ) showing that the Lula 
administration was aware of serious deficiencies in air 
traffic.  ACM Neto harshly criticized Lula's handling of the 
March 30 strike by air traffic controllers.  He said Lula's 
decision to reverse himself and support punishment and even 
prosecution of rebellious sergeants "contained" the problem 
) for now - and defused a "bomb."  But, he stressed, the 
"lack of hierarchy is dangerous," and there are pockets of 
unhappiness; "other bombs," ARE out there among the lower 
enlisted ranks, and even among lieutenants, and they could go 
off.  ACM Neto said he was not suggesting a revolt by the 
armed forces, but rather that some in the lower military 
ranks are unhappy with salaries, long hours (in the case of 
air traffic controllers), and other conditions.  This, 
coupled with uncorrected disobedience, is a dangerous 
formula, he said.  ACM Neto said the air traffic strike on 
March 30 was the most serious revolt by the military since 
¶1963.  He said the DEM does not and should not support the 
controllers' action, but they have grievances and the 
government has done absolutely nothing.  He accused the Lula 
administration of a complete lack of leadership to address a 
problem they have known about for four years. 
 
Rumors That Airlines Paid Bribes That Went to Government 
Campaigns 
--------------------------------------------- ----------- 
 
¶3.  (C)  ACM Neto told poloff that the Parliamentary 
Committee of Inquiry ("CPI"), if it is created, is likely to 
become a wide-ranging investigation and no one can predict 
what its eventual scope will be.  He revealed that there are 
unsubstantiated rumors in the Congress ) which any CPI on 
air traffic would undoubtedly investigate ) that after the 
collapse of Varig, administration officials took bribes to 
ensure that the two remaining large national airlines, TAM 
and Gol, were ensured a dominant position in the market.  He 
said the government is impeding market access and expansion 
by smaller companies to fill the void left by Varig, leaving 
TAM and Gol the lion's share of the commercial aviation 
business.  These payments, according to the rumors, were 
channeled into campaign coffers.  ACM Neto did not say which 
parties in the government coalition might have benefited from 
 
BRASILIA 00000598  002 OF 002 
 
 
these illegal payments. 
 
Parliamentary Inquiry Will Reveal Corruption 
-------------------------------------------- 
 
¶4.  (C) ACM Neto said that he expected a CPI would also 
reveal irregularities in contracting carried out by Infraero, 
the state company that runs the airports, especially while it 
was managed by Carlos Wilson, a Lula appointee.  (Note: 
Carlos Wilson is now a Federal Deputy from the Workers Party, 
representing Pernambuco.  He was president of Infraero from 
2003 to 2006, and oversaw new construction and major upgrades 
at several airports, including Recife, Congonhas, Belo 
Horizonte, and others.  End note.)  ACM Neto said there had 
been all manner of contractual malfeasance for these 
projects.  Moreover, he said, Infraero was negligent in its 
duty to maintain runways and equipment, while it proceeded to 
"turn the airports into shopping malls."  He said the "black 
holes" in air traffic control, such as the location where Gol 
flight 1907 and an Embraer Legacy jet collided last September 
29, resulting in Brazil's worst air disaster and the loss of 
154 lives, were an example of the government's overall 
failure - both on the part of the Air Force, which is wholly 
responsible for running the air traffic control system, as 
well as Infraero, the civilian agency that runs and maintains 
the airports - to address persistent technical deficiencies. 
 
Comment 
------- 
 
¶5.  (C)  Comment.  ACM Neto is in the opposition and it is 
natural for him to allege wrongdoing, lack of leadership and 
incompetence.  Clearly there is a political agenda behind his 
statements.  But the allegations of corruption in Infraero 
that he described would fit squarely within a pattern of 
corruption in Lula's first term, and is entirely plausible. 
Even if true, Lula could probably get away with saying he did 
not know, as he successfully did with past scandals.  The 
allegation that bribes were taken and recycled into political 
campaigns presents a far more serious danger to the 
administration, since it could strike the PT and/or the 
government at a very senior level, and Lula would have to 
clean house (again), while claiming he did not know.  It 
could generate another far-reaching CPI with an unpredictable 
outcome, even if it is never substantiated. 
 
¶6.  (C)  Comment, continued.  ACM Neto's tour d'horizon of 
the air traffic crisis also echoes our conviction that Lula's 
government continues to suffer from a profound lack of 
decisive executive competence, rendering it incapable of 
dealing simultaneously with routine policy making and looming 
crises.  It can carry out a major income redistribution 
program, but it is utterly incapable of addressing the major 
structural problems that have resulted in six months of air 
havoc.  In a country the size of Brazil, where air travel is 
essential to business and livelihoods, this represents a huge 
failure of Lula's leadership. 
 
Chicola