VZCZCXRO5227
PP RUEHRG
DE RUEHSO #0560/01 1761649
ZNR UUUUU ZZH
P 251649Z JUN 07
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 7170
INFO RUEHBR/AMEMBASSY BRASILIA 8269
RHEHNSC/NSC WASHDC
RUCPDOC/USDOC WASHDC 2821
RUEHMN/AMEMBASSY MONTEVIDEO 2374
RUEHBU/AMEMBASSY BUENOS AIRES 2789
RUEHSG/AMEMBASSY SANTIAGO 2080
RUEHLP/AMEMBASSY LA PAZ 3389
RUEHPE/AMEMBASSY LIMA 1162
RUEHCV/AMEMBASSY CARACAS 0516
RUEHRG/AMCONSUL RECIFE 3653
RUEHRI/AMCONSUL RIO DE JANEIRO 8179
RUEHAC/AMEMBASSY ASUNCION 3043
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 04 SAO PAULO 000560 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/BSC, INR/IAA, INR/R/AA 
STATE PASS TO USTR FOR SCRONIN 
STATE PASS EXIMBANK 
STATE PASS OPIC FOR MORONESE, RIVERA, MERVENNE 
NSC FOR TOMASULO 
USDOC FOR 4332/ITA/MAC/OLAC 
USDOC FOR 3134/USFCS/OIO 
TREASURY FOR JHOEK 
AID/W FOR LAC/AA 
 
E.O. 12958:  N/A 
TAGS: PGOV PINR ECON BR
SUBJECT: A PSDB INSIDER'S EARLY LOOK AT THE 2008 MUNICIPAL ELECTIONS 
AND THE IMPLICATIONS FOR NATIONAL POLITICS 
 
 
SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECT ACCORDINGLY 
 
------- 
SUMMARY 
------- 
 
¶1.  (SBU) In a recent conversation with Poloff, Walter Feldman, a 
leader of the Brazilian Social Democracy Party (PSDB) currently 
serving as Sao Paulo Municipal Secretary of Sports, Leisure, and 
Recreation, shared his views on local government, next year's 
municipal elections, and the broader Brazilian political scene. 
Feldman, who has served as a city councilman, state legislator, and 
federal deputy, is close to both Sao Paulo's PSDB Governor Jose 
Serra and Mayor Gilberto Kassab of the allied Democratic Party.  He 
said that while Serra would like to see Kassab run for re-election 
as Mayor, and Kassab would like to run, it will be difficult for the 
PSDB to avoid nominating former Governor and 2006 presidential 
candidate Geraldo Alckmin if he is serious about running, as appears 
likely.  Feldman also opined that though Serra's gubernatorial term 
has gotten off to a rocky start, he remains the best qualified among 
likely presidential candidates in 2010 and the front-runner for the 
PSDB nomination.  End Summary. 
 
¶2.  (U) Poloff and Political Assistant met June 21 with Feldman, who 
had just returned from a trip to Shanghai to visit an important 
sports/recreation center there.  He was animated and energetic as he 
and Poloff discussed China's role in the global economy; U.S.-Brazil 
relations; U.S. views of Latin America, especially Venezuela and 
Bolivia; the Middle East situation (a prominent member of the local 
Jewish community, Feldman was extremely concerned about the 
Palestinian crisis and the Iraq war; he also commented that the 2006 
Lebanon conflict had caused the first breach in cordial relations 
between Sao Paulo's Jewish and Muslim communities, though he said 
tensions have since eased); the 2008 presidential election in the 
U.S.; and the environment and climate change.  He also cited his 
strong ties with the United States, including time spent living with 
a U.S. family as an exchange student in Nebraska. 
 
------------------------------------- 
JOCKEYING FOR THE MUNICIPAL ELECTIONS 
------------------------------------- 
 
¶3.  (SBU) Feldman believes Gilberto Kassab is doing a "beautiful" 
job as Mayor, turning in a "surprising" performance.  He has shown 
strong leadership on urban renewal, as evidenced by his "Clean City" 
initiative (prohibition of billboards and strict limits on the 
number and size of store signs and marquees); removal of squatters 
from run-down, abandoned downtown buildings; and closure of bingo 
and slot-machine parlors.  He wants to run for re-election in 2008 
but may not be able to, since Geraldo Alckmin shows every sign of 
wanting the job.  Kassab's Democratic Party (DEM, formerly Liberal 
Front Party) is closely allied with the PSDB in Sao Paulo city and 
state, and the two parties are unlikely to run separate candidates. 
If Alckmin, the 2006 opposition presidential candidate, wants to run 
for Mayor, the PSDB can hardly say no to him.  Feldman is fairly 
sure Alckmin wants to run: "Being Mayor of Sao Paulo is like having 
your own country," and a local victory could put Alckmin back in the 
running for president in 2010. 
 
¶4.  (SBU) Feldman confirmed that Governor Serra would like to see 
Kassab re-elected; the two of them "work as an inseparable team, the 
most effective Governor-Mayor combination in recent memory."  Kassab 
was elected Vice-Mayor on Serra's ticket in 2004, and succeeded him 
in April 2006 when Serra resigned to run for Governor.  Even while 
demonstrating that he's his own man with his own ideas and political 
style, Kassab has continued many of Serra's policies and kept a 
large part of his team in place at City Hall.  Good relations 
between local and state government are critical, as metropolitan Sao 
 
SAO PAULO 00000560  002 OF 004 
 
 
Paulo comprises almost half the state's population of about 41 
million. 
 
¶5.  (SBU) If Alckmin does run, Feldman predicted, Minister of 
Tourism and former Mayor (2001-04) Marta Suplicy may decide to sit 
the election out.  Alckmin, who was a popular Governor with high 
approval ratings, would be difficult to beat, and Suplicy might do 
better to wait and instead run for Governor in 2010.  Considered by 
many in President Lula's Workers Party (PT) the party's most 
attractive possible successor to Lula, Suplicy has considerable 
support in the city but also has many detractors.  2008 is right 
around the corner, Feldman noted, and opponents and media will still 
be replaying her recent gaffe at every opportunity.  At a June 13 
public event to launch the government's National Tourism Plan, 
Suplicy was asked what message she had for travelers inconvenienced 
by Brazil's seemingly unending civil aviation crisis.  "Relax and 
enjoy," she replied, "because afterwards you'll forget all about" 
the long delays, flight cancellations, and general chaos in the 
airports.  She compared the challenges of air travel in Brazil to 
the rigors and pains of giving birth.  If Suplicy does decide not to 
run, Feldman said, any other candidate from President Lula's Workers 
Party (PT) will have a hard time defeating Alckmin, but the party 
will look for someone who can rally the faithful and enable the 
party to elect a decent number of candidates to the City Council. 
(Note: Many observers believe that the PT's Arlindo Chinaglia, 
President of the federal Chamber of Deputies, is positioning himself 
to run.  End Note.) 
 
--------------- 
SERRA'S WOES... 
--------------- 
 
¶6.  (SBU) At the state level, Feldman noted that Governor Serra has 
had a "very difficult" first six months in office.  In January, a 
cave-in at the construction site of a new subway line - promoted by 
the state government as Brazil's first Public-Private Partnership 
(PPP) project - caused seven deaths.  There have also been sporadic 
strikes by public transportation workers with concomitant traffic 
nightmares.  A group of students at the public, state-run University 
of Sao Paulo (USP), accusing the state government of trying to 
interfere in the university's operations and to undermine its 
independence, occupied the Rectory on May 3 and refused to vacate 
it.  Serra, himself a former leader of the National Students' Union 
(UNE), has been reluctant to send in police even as authorities' 
patience runs out.  (Note: On June 21, students agreed to a 
negotiated settlement with the Rector and ended the occupation the 
following day.  End Note.)  University faculty and staff briefly 
went on strike, ostensibly to show solidarity with the students but 
also to demand higher salaries.  Serra managed to push through 
legislation altering pension benefits for state employees, but at 
considerable political cost.  If problems persist and Serra fails to 
show strong leadership, it will impact negatively on his 2010 
presidential aspirations.  In some respects, his principal rival for 
the PSDB nomination, Minas Gerais Governor Aecio Neves, appears to 
have an advantage because he can show more accomplishments in 
office. 
 
---------------- 
...AND STRENGTHS 
---------------- 
 
¶7.  (SBU) Nevertheless, Feldman is convinced that Serra will 
ultimately achieve his goals for the state and will capture his 
party's presidential nomination as well.  The state's public 
security situation has been relatively calm.  Serra is focused on 
infrastructure improvements: expanding the public transportation 
system, completing the freeway around the city, creating 
"development clusters," and improving access to the Port of Santos. 
 
SAO PAULO 00000560  003 OF 004 
 
 
(The port itself is operated under a federal concession with little 
state government involvement.)  Serra, in Feldman's view, is the 
best-prepared of any potential candidate to be President.  Unlike 
Lula and Fernando Henrique Cardoso (FHC), Serra (who has a PhD in 
Economics from Cornell) actually understands macroeconomics and 
would not just "sit back and let the Central Bank do what it wants." 
 He would enunciate a clear interest rate policy and a clear 
exchange rate policy and would ensure they were implemented. 
 
---------------------------- 
WANTED: POLITICAL LEADERSHIP 
---------------------------- 
 
¶8.  (SBU) The country is doing reasonably well economically, Feldman 
said, but this performance is not being matched on the political 
side.  What Brazil needs, in his opinion, is courageous leadership 
to push through necessary but unpopular reforms.  Reforming Social 
Security will be painful, but it must be done to rein in its huge 
deficits.  Brazil's labor legislation, enacted in 1943 by Getulio 
Vargas's regime, needs to be overhauled completely to be viable in 
today's economic system, to untie the hands of business.  The tax 
burden must be reduced and the tax regime simplified to allow the 
economy to grow.  Feldman noted that when Mayor Kassab first told 
his staff of his plans for "Cidade Limpa," his senior political 
advisors were dismayed and tried to dissuade him, arguing that a 
fight with the advertising industry and the business community 
promised nothing but trouble; despite this opposition, Kassab 
insisted on following through and achieved a great success. 
(Comment: The prohibition on billboards and restrictions on other 
outdoor advertising have generated more than 100 legal actions and a 
number of judicial restraining orders; so far, the city seems to be 
winning in court more often than it loses.  The advertising industry 
claims the law has cost many jobs, and small business owners 
complain that customers have a hard time finding stores due to the 
limitations on signs.  End Comment.)  Feldman wishes national 
politicians would show similar determination. 
 
¶9.  (SBU) Feldman acknowledged that his own PSDB is in a difficult 
position.  The Lula administration has co-opted so much of the PSDB 
agenda, on social as well as economic issues, that the party cannot 
easily mount effective opposition.  How (and why), he asked 
rhetorically, should the PSDB oppose the very efficient Minister of 
Education after he put forth the Plan for Education Development 
(PDE) to correct systemic problems?  Or the Health Minister, the 
best of the four Lula has appointed?  And Feldman acknowledged that 
the administration's Growth Acceleration Program (PAC), if ably 
implemented - a big if - will help stimulate the economy. 
Ultimately, Feldman said, the only real divergence between the PT 
and the PSDB is in the area of ethics.  In contrast to the constant 
scandals involving the PT and the Lula administration, the PSDB 
would provide clean, transparent, efficient government, he asserted. 
 (Comment: The PT over the past few years has clearly forfeited its 
image as the "party of ethics" and the one that is going to change 
the way business is done in Brazil, but FHC's two terms in office 
were hardly scandal-free.  End Comment.) 
 
¶10.  (SBU) Feldman sees the 2006 elections as having brought to a 
close the political cycle that began in 1985 with the restoration of 
democracy.  For the first time, Lula will not be a presidential 
candidate.  Feldman predicts that Lula will support someone from the 
PT who is close to him - he mentioned Civil Household Chief Dilma 
Rousseff and Bahia Governor Jaques Wagner but not Justice Minister 
Tarso Genro - but will not be terribly disappointed or even 
surprised if the opposition wins.  This will serve both Lula's 
personal interests - leaving him in a better position to run again 
in 2014 - and will be consistent with his political belief that 
alternation in power is good for the country.  Feldman confirmed 
recent media reports that both Lula and Serra would like to abolish 
 
SAO PAULO 00000560  004 OF 004 
 
 
presidential re-election, limiting presidents to a single five-year 
term (versus the current four years with the possibility of two 
consecutive terms), and that the two parties had discussions about 
working together to accomplish this goal, but that the talks were 
suspended after they leaked. 
 
¶11.  (SBU) Real political change remains elusive, Feldman lamented, 
pointing to the recent debate in Congress over the government's 
political reform proposal, in which proponents of a "closed party 
list" voting system withdrew the initiative when opposition by PT 
dissidents and the PSDB rendered its passage impossible.  Like FHC 
and many others in the PSDB, Feldman would prefer a single-district 
voting system as opposed to proportional representation, in which 
candidates run at large to fill (for example) Sao Paulo's 70 seats 
in the Chamber of Deputies and are elected based on a combination of 
the party and personal vote, but he acknowledged that the many 
politicians who benefit from the current system are unlikely to 
allow it to change fundamentally. Like Lula and FHC and their 
predecessors, the next president will likely have to deal with a 
Congress of 17-18 political parties, many of them "dwarfs" and 
"rent-a-parties" that offer little of a constructive nature but are 
good at obstruction and distortion. 
 
------- 
COMMENT 
------- 
 
¶12.  (SBU) Feldman is shrewd political operator who has influence 
far beyond his modest post in the city government.  His decision to 
run for Federal Deputy and then, having won, to relinquish his seat 
almost immediately to return home as Sao Paulo Secretary of Sports 
suggests that he aspires to bigger things locally, perhaps as 
Vice-Mayor in 2008.  His insights into internal PSDB politics and 
the challenges facing the party track with what other observers have 
told us.  Like his PSDB colleague Assistant Mayor and Municipal 
Secretary Andrea Matarazzo, he is loyal to Governor Serra.  At this 
 
SIPDIS 
early date he sees Serra as the front-runner for 2010, and probably 
envisions a major role for himself in the campaign and in a Serra 
administration.  End Comment. 
 
¶13.  (U) This cable was coordinated with Embassy Brasilia. 
 
MCMULLEN