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C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 000931 
 
SIPDIS 
 
E.O. 12958: DECL: 07/23/2019 
TAGS: PGOV KCOR BR
SUBJECT: BRAZIL: SENATE SCANDAL TAKES A BREATHER...BUT IT'S 
NOT OVER 
 
REF: A. BRASILIA 799 
     ¶B. RIO DE JANEIRO 190 
 
Classified By: DCM Lisa Kubiske, reasons 1.4 B and D 
 
¶1. (C) Despite weeks of attacks and a continuous drip of 
negative stories in the media, former Brazilian president and 
current Senate President Jose Sarney (Brazilian Democratic 
Movement Party, PMDB- Amapa) remained in place as Congress 
left for a two week recess July 17.  Although papers are 
carrying new revelations almost daily, Sarney may yet manage 
to remain atop the Senate leadership.  If he does, it will 
thanks in large part to the vigorous lobbying by President 
Lula on his behalf and Sarney's own political maneuvering in 
the Senate to mollify the opposition.  Lula and, somewhat 
grudgingly, Lula's Labor Party (PT) have stood behind Sarney 
in an effort to maintain the cohesiveness of the PT-PMDB 
coalition heading into the October 2010 presidential 
elections, when PMDB support will be essential if the PT 
candidate, almost certainly Minister Dilma Rousseff, is to 
succeed.  Although Sarney and the coalition may survive, the 
high-profile series of scandals has further weakened the 
congress as an institution and made it even less likely that 
major legislative priorities will be achieved in the next 18 
months, as election politics dominates the political scene. 
End summary. 
 
------------------------------- 
New Scandals Surface for Sarney 
------------------------------- 
 
¶2. (U) For weeks, Senator Sarney has been staving off attacks 
and calls to step aside from the Senate presidency due to 
various ethics charges in the Senate (ref a), as well as 
complaints of mismanagement, nepotism, and malfeasance, 
saying that the crisis was "the institution's crisis, not 
his."  However, the week of July 13, influential daily Estado 
de Sao Paulo added to Sarney's woes by revealing last week 
that the Sarney Foundation -- a Maranhao-based institute and 
museum dedicated to preserving his presidential papers -- 
received a donation from Petrobras for 1.3 million reais 
(about USD 650,000) in 2005, some 40 percent of which was 
intended for a project that never got off the ground. 
Instead, the money was allegedly siphoned off to various 
entities linked to the Sarney family, including TV Mirante 
and two radio stations owned by Sarneys. 
 
¶3. (U) After these revelations, Sarney spoke on the floor of 
the Senate to claim he had no role whatsoever in the running 
of the Foundation.  Two days later, Estado de Sao Paulo 
published the Foundation's charter and other administrative 
documents which indicated that Sarney was the Foundation's 
"president-for-life," was formally involved in various 
decision-making structures of the organization, and had veto 
power over decisions of the Council of Curators, over which 
he presides.  The Council counts as members Sarney's son, 
brother, and son-in-law, as well as Sarney cronies from his 
time as president of Brazil.  These revelations contradicted 
Sarney's floor statements and might result in a Senate 
investigation for ethics violation and breach of Senate 
decorum.  Brazilian Social Democracy Party (PSDB) caucus 
leader Senator Arthur Virgilio filed papers with the Attorney 
General's Office to seek an investigation of the issue. 
 
¶4. (U) A Federal Police (DPF) investigation into his son, 
Fernando, for money laundering has also embarrassed the 
Senate President, as photos of his son's and 
daughter-in-law's arrests made front-page news.  To make 
matters worse, in the course of the investigation the DPF 
intercepted communications that revealed the Senate 
President's efforts to place the boyfriend of one of his 
granddaughters into a Senate staff slot that had previous 
been occupied by another Sarney family member through a 
secret act approved, Senate director Agaciel Maia, appointed 
by Sarney in a previous term as Senate President and recently 
forced to resign as a result of the broader corruption 
scandal. 
 
BRASILIA 00000931  002 OF 003 
 
 
 
----------------------------- 
Sarney Strategy: Misdirection 
----------------------------- 
 
¶5. (U) Reacting to pressure on two fronts -- scandals and 
political pressure to install the CPI to investigate 
Petrobras -- Sarney on July 9 agreed to establish the CPI, 
but kept control of it by having a supermajority of members, 
as well as the president and rapporteurs, be from the 
governing coalition. The governing base is also counting on 
the two-week recess that began July 17 to let the crisis cool 
down.  The PMDB strategy in installing the CPI is to take the 
focus away from Sarney.  There is speculation that the 
controlling faction of the CPI will only allow a real 
investigation if attacks against Sarney continue, as a way to 
divert attention away from Sarney; if the attacks taper off, 
the CPI will remain toothless. 
 
¶6. (U) On July 13 Sarney also annulled all 544 secret acts 
taken by the Senate in the past 14 years, which had benefited 
senate employees with overly generous overtime and had hidden 
blatant cases of nepotism.  For example, one of the secret 
acts dealt with the resignation of a member of Sarney's 
family from the office of Senator Epitacio Cafeteira 
(PTB-MA).  His resignation was handled as a secret act to 
avoid revealing the nepotism involved in the original hiring. 
 
 
------------ 
PT vs. PMDB 
------------ 
 
¶7. (U) The Sarney troubles are creating tension within a 
Workers Party (PT)-PMDB alliance that is crucial if President 
Lula is to elect his successor.  Lula made a public, 
personal, and vigorous defense in Sarney's favor, ensuring 
that the PT Senate caucus leadership and the PT continued to 
support Sarney, although grudgingly.  Even so, some PT 
senators, as well senators from the smaller parties in the 
governing coalition, have broken ranks and called for Sarney 
to step down.  Pedro Simon (PMDB-RS), Cristovam Buarque 
(PDT-DF), and Eduardo Suplicy (PT-SP), among other senior 
senators, have &suggested8 Sarney step aside temporarily. 
 
--------- 
Comment: 
--------- 
 
¶8. (C) Lula's support for Sarney, and the fact that some PT 
members are refusing to follow suit, is principally about 
election politics heading into 2010.  Lula and the PT need 
the PMDB's support to win.  Although the PT has never had any 
great affection for Sarney -- who in his past supported the 
military regime and in the most recent election for senate 
president defeated the PT candidate ) the primary reason 
some PT senators are breaking ranks with Lula has an 
election-related cause, also:  two-thirds of them face 
re-election and fear alienating constituents by supporting 
the allegedly corrupt status quo in the Senate.  The 
principal negative repercussion for the PT from its dissident 
senators is that it could fray a PT-PMDB alliance already 
tenuous in various states, such as Mato Grosso do Sul, Bahia, 
Minas Gerais, Santa Catarina, Parana, and Para, heading into 
the 2010 elections. 
 
¶9. (C) Establishment of the Petrobras CPI and the revocation 
of the secret acts could buy Sarney and the PMDB time and 
take some of the momentum away from the opposition by 
acceding to their biggest demand and leading the media frenzy 
away from his own problems.  If so, Sarney, the PMDB, and 
Lula have a good chance of accomplishing their strategy, 
bringing dissidents back into the fold, and smoothing over 
any tension between the PMDB and the PT in time to repair the 
alliance well before the election heats up.  However, the 
almost daily revelation of new illegal or unethical behavior 
by Sarney, his family, other senators, or senate staff 
 
BRASILIA 00000931  003 OF 003 
 
 
continues, and could still undermine these efforts.  The 
least disruptive result would be Sarney's resignation and 
replacement with, almost certainly, another PMDB stalwart. 
But a prolonged crisis could split the PT-PMDB coalition, 
throwing wide open the political alliances taking shape in 
advance of the October 2010 national (presidential, senate, 
chamber, governor, and local legislator) election. 
 
¶10. (C) On a broader scale, this latest crisis, one of a 
series over the last few years, appears unlikely to undermine 
Brazil's solid democratic institutions.  But it has weakened 
congress vis--vis both the courts and the presidency.  In 
particular, this weakness has played into the hands of a 
popular president who, under the 1989 constitution, already 
exercises greater weight than either the courts or the 
legislature and who has not hesitated to exercise his powers 
(e.g., to issue provisional measures and to withhold 
authorized spending) to advance his agenda.  At the same 
time, the crises have created a distraction that has 
prevented congress from taking steps to strengthen the 
legislature's hand or from acting on badly needed political 
and economic reform measures.  With the 2010 elections 
already dominating the political agenda, the possibility of 
passing any politically charged legislation over the next 18 
months -- anti-terrorism legislation, for example -- has 
become slight. 
 
SOBEL