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FM AMEMBASSY BRASILIA
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C O N F I D E N T I A L BRASILIA 001127 
 
SIPDIS 
 
E.O. 12958: DECL: 09/10/2019 
TAGS: PGOV PREL PINR BR
SUBJECT: LULA'S ALLIANCE WITH PMDB: MORE TROUBLE THAN IT'S 
WORTH? 
 
REF: A. BRASILIA 1099 
     ¶B. BRASILA 931 
 
Classified By: Charge D'Affaires Lisa Kubiske for reasons 1.4 (b) and ( 
d). 
 
Summary 
------- 
¶1.  (C) The last couple of months have added new challenges 
to President Lula's bid to put his Casa Civil Minister Dilma 
Rousseff into the Planalto Palace as his successor in 2011. 
By leveraging his support for corruption-tainted 
Senate President Jose Sarney to reinforce a core electoral 
alliance backing Rousseff, Lula has for the moment weakened 
his party's long-term prospects by turning the upcoming 
election into a referendum on the alliance between his Labor 
Party (PT) and Sarney's Brazilian Democratic Movement (PMDB) 
-- rather than on himself.  PMDB has successfully used PT's 
weakened position to extract support from them in key state 
races while providing only lukewarm support for Dilma in the 
presidential race.  PT members (petistas) understand that a 
strong alliance with PMDB will erode their identity as a 
principled left-center party.  There are signs that petistas 
will try to take a stronger statist-nationalist line on 
certain issues, such as state ownership of the recent 
"Pre-Salt" offshore oil finds, in order to solidify their 
center-left credibility.  Despite these problems, PT has 
generally maintained party unity, albeit with significant 
grumbling and a couple of high-profile defections.  Senator 
Marina Silva's (PT-Acre) move to the Green Party has grabbed 
headlines but her prospects as a national presidential 
candidate are less than convincing.  With the election still 
over a year away, these latest developments will be overtaken 
by events before most voters have formed their opinions. 
Jose Serra (PSDB) remains the strong frontrunner, but Dilma 
and the PT are almost certainly in a better position than 
recent events suggest.  End summary. 
 
Dilma, Jose, Petrobras, and Pre-Salt 
------------------------------------ 
 
¶2.  (C) As outlined in ref B, Lula spent much of his vast 
political capital over the past two months saving the 
Senate Presidency of Jose Sarney, despite opposition from the 
PT leader in the Senate, Aloisio Mercadante, and much of his 
party base.  The conventional wisdom holds that Lula 
supported Sarney primarily to maintain a base of electoral 
support for Dilma.  On a related note, many also point to 
Lula's need to build allies to shield Petrobras from an audit 
that could prove damaging to his party.  As Dep. Eduardo 
Cadoca (PSC-Pernambuco) told poloff on Sept. 2, "Lula didn't 
save Sarney.  He saved Petrobras so he could save PT from 
auditing.  Petrobras was always part of his election 
strategy."  Even members of the governing coalition 
including, including Foreign Relations Committee Chairman 
Dep. Severiano Alves (PDT-Bahia), have told us that the 
relationship between Petrobras and PT has grown close and 
politicized. 
 
¶3.  (C) Shortly after Sarney's mid-August clearance by the 
Senate's ethics committee, the August 31 Pre-Salt oil basin 
rules announcement provided a perfect photo op of power in 
today's Brasilia: Lula, Dilma, Sarney, and other leading PMDB 
officials standing together after days of public negotiations 
(ref A).  Legislators from various parties told poloff that 
both the statist nature of the proposed rules and the process 
of negotiation can be seen as a template for future PT-PMDB 
partnership.  Dep. William Woo (PSDB-Sao Paulo) called the 
proposal "campaign material for Dilma and PMDB," saying it 
would be impossible to vote on quickly, and, if passed, to 
implement.  Interestingly, he and other opposition politicans 
weren't bothered by its statist nature as much as its 
impracticality.  Dep. Mauricio Rands (PT-Pernambuco) praised 
the proposal but lamented that PMDB-affilated governors in 
Rio De Janeiro and Espirito Santo had succeeded in getting 
Lula to remove his plan to share proceeds evenly with non-oil 
states.  Division of revenues will be dealt with in Congress, 
where it will be fiercely contested.  Even PT politicians 
have been reluctant to predict final passage with confidence, 
mostly because they cannot envision a compromise on division 
of royalties, including within PMDB ranks. 
 
¶4.  (C) PMDB, recognizing its internal conflicts, 
successfully pushed Lula to remove the "Provisional Measures" 
(PM) status of the legislation.  Lula announced the change 
after a September 9 meeting with Chamber of Deputies 
President Michael Temer (PMDB).  According to PM rules, the 
Chamber and Senate would have been forced to approve the 
legislation and bring it to a final vote within 90 work days, 
with virtually no space for amendments.  Speaking with the 
press after the meeting, Temer emphasized that Congress would 
still stick closely to the schedule envisioned by the PM 
rules, with the Chamber vote scheduled for November and the 
 
final vote scheduled for early 2010.  Earlier in the day, 
Senator Valdir Raupp (PMDB-Rondonia) told poloff that Lula 
would recognize the political wisdom of removing PM status, 
arguing that the legislation in itself is popular but the PM 
rules are not.  "Without the (PM rules), PSDB has no angle to 
oppose this except defending Sao Paulo," he said.  Raupp also 
said PMDB is working internally to develop a proposal by 
which producing states would get a larger share of royalties, 
but in which non-producing states like Rondonia would also 
get a significant share. 
 
Marina: The Next Big Thing? 
--------------------------- 
 
¶5.  (C) The Lula-Sarney alliance has provoked such a strongly 
negative public response that it provided the perfect 
environment for Marina Silva to disaffiliate with PT (Aug 18) 
and affiliate with the Green Party (PV)(Aug 31) as a 
prospective presidential candidate.  Marina cited as reasons 
for departing a lack of support during her tenure 
as Minister of Environment and specific disagreements with 
Dilma about economic development policy.  Most leading 
politicians and political analysts see Marina as a serious 
presidential candidate, but probably with limited electoral 
impact.  Senator Romero Juca (PMDB), leader of the governing 
coalition, told poloff that Marina could pull "about ten 
percent of the vote, but it would come equally from PT and 
PSDB."  A top PSDB political advisor grudgingly agreed 
that Marina pulls from both sides, but emphasized that 
Marina's departure hurts Dilma more because Marina,s life 
story 
closely resembles that of Lula -- a reminder to voters of how 
PT has strayed from its roots.  Juca, among others,  said 
that Marina is better served as a national candidate 
promoting environmental issues, which are popular among 
educated voters in major cities, than as a senator from her 
Amazonian province of Acre, where her stands are not always 
popular.  Several Marina sympathizers have told us that they 
like her but question whether she is really presidential 
material or really wants to be -- the same questions Lula 
faced 20 years ago. 
 
PT Chronicles 
------------- 
 
¶6.  (SBU) Despite the departure of Marina and disaffected PT 
Senator Flavio Arns, Lula has been largely successful in 
keeping a united front in a party that was deeply divided on 
protecting Sarney.  As PT Senator Paulo Paim told poloff, "No 
one is happy to make a compromise like that; I was with 
(Mercadante) in voting against him."  He emphasized, however, 
that Dilma embodies the mainline thinking of PT and that 
party enthusiasm for her is high.  Dilma herself has become a 
subject of controversy in the Sarney affair given the 
accusations by former Internal Revenue Service (RF) chief 
Lina Vieira that Dilma pressured her into dropping an RF 
investigation into Sarney's son.  While neither Lina's 
version nor Dilma's is provable at this point, public opinion 
surveys indicate that the vast majority believes the former. 
Meanwhile, several rounds of early September polling indicate 
that Dilma's negatives are rising quickly and she still 
trails PSDB prospective candidate Jose Serra by a solid 20 
points or more.  Even Lula's sky-high numbers have dipped. 
 
¶7.  (SBU) Meanwhile, PT also faces the question of how to 
proceed in the aftermath of the August 29 dismissal by the 
Supremo Tribunal Federal (STF), by a 5-4 margin, of 21 
criminal charges against former Finance Minister Antonio 
Palocci.  Palocci had been accused of breaking the bank 
account privacy of a witness against him in a corruption 
case.  On the following day, Palocci -- still considered the 
primary PT backup choice for President if Dilma's health 
condition worsens -- was nominated as one of a list of 
"pre-candidates" for Governor of Sao Paulo.  The public 
response to the STF Palocci decision has been muted, 
suggesting that his political rehabilitation may well be 
possible -- even though winning in Sao Paulo probably is not. 
 
 
Dealing with the PMDB Devil 
--------------------------- 
 
¶8.  (SBU) Weakened and needing support for Dilma, PT 
leadership finds itself forced to concede support for PMDB in 
gubernatorial and senatorial races in 2010.  Without a viable 
presidential candidate, PMDB still maintains the majority of 
Governor, Senate, Deputy, and state legislative slots -- and 
intends to maintain or even expand that majority.  Lula is 
making the most visible concessions to PMDB in the big-state 
governor races, such as supporting re-election of Sergio 
Cabral in Rio and, more contentiously, backing Geddel Lima 
Vieira, currently Minister of National Integration, in Bahia. 
 In some provinces -- generally smaller ones -- PT and PMDB 
 
have reached an informal agreement for one party to target 
the governorship and the other the senate seat(s). 
Prospective PT candidates, naturally, are not happy about 
this and are often running anyway despite what national 
leadership requests.  In several provinces, including 
Pernambuco and much of the south, there is no agreement 
between PT-PMDB and likely never will be, adding to the 
instability of the national alliance. 
 
¶9.  (C) The big question is what, if anything, do the 
petistas get out of this arrangement?  Senator Juca, 
responding for PMDB, told poloff that PT and PMDB will 
cooperate at the national level for Dilma even if agreements 
are not reached at the state level on other races.  He then 
spent five minutes complaining about Dilma's weakness as a 
candidate.  Senator Juca admitted more frankly that his party 
was split in loyalty between Dilma, Serra, and his personal 
favorite, Aecio Neves of PSDB, who he would like to woo to 
PMDB as a presidential candidate.  Senator Paim of PT also 
spoke confidently cooperation in the presidential race, 
waiving off the historical animosity in his home province of 
Rio Grande do Sul, where PMDB is expected to support Serra. 
Dep. Cadoca, a long-time member of PMDB before defecting to 
PSC in 2007, said there is no way that PMDB will actually 
work to support any presidential candidate.  He emphasized 
that PMDB backed Serra in 2002 against Lula and delivered 
nothing for him while winning many new seats for themselves. 
Dep. Alves, commenting on cooperation in Bahia, said PMDB 
will stick with PT in this presidential race (rather than 
jump back to Serra), but will only really work with PT's 
alliance after the election. 
 
Petista Worries 
--------------- 
 
¶10.  (C) PT has been pilloried in the press for aligning 
itself so closely to a party known for representing nothing 
much more than the desire to stay in power.  They are 
sensitive to the criticism.  PT Dep. Rands spoke to poloff of 
the need to get a few more initiatives in public view that 
will reinforce his party's identity as a competent, 
progressive, center-left party with a vision for the future. 
The Pre-Salt announcement he viewed as a positive first step, 
showcasing that Brazilian government and business had 
developed over recent years to a point that they can now 
manage oil exploration and distribution.  He also expected an 
increased PT emphasis on public education and health in 
upcoming months.  Leading PSDB Senate leadership staff told 
us that they expected a slew of leftish social program 
proposals forthcoming from PT, and that they would be ready 
with their own very similar proposals. 
 
¶11.  (C) Other opposition figures, including Sen. Heraclito 
Fortes (DEM-Piaui) believe that PT's need to distinguish 
itself also extends into foreign policy.  He specified, 
however, that Lula and Dilma would only be taking strong 
left-of-center stands on issues of limited true impact.  Sen. 
Fortes said that he expected PT and PMDB to oppose 
U.S. use of Colombian bases, which puts them in line with 
public opinion and has little practical downside for the 
government.  It would not, however, take a significantly 
different tone -- for or against -- in regard 
to relations with Hugo Chavez. 
 
Comment 
------- 
 
¶12.  (C) Unfortunately for PT, their reliance on PMDB has 
reached such an unprecedentedly high level that they are in 
danger of being trapped by their much larger coalition 
partner's foibles.  Next year's election now looks like a 
referendum on Lula's support for the PMDB at the cost of PT 
principles, rather than the hoped-for referendum on Lula's 
popular government.  And with the PMDB looking out for its 
own interests, its continuous presence in the campaign may 
prevent the taint of the Sarney scandal from fading. 
Nonetheless, Dilma and PT are almost certainly in a much 
stronger position than recent events suggest.  Few here doubt 
the political genius of Lula, and the lack of loyalty among 
the Brazilian electorate means Serra is vulnerable to falling 
from favor again.  PMDB-PT cooperation within 
Congress appears stronger than ever, which might allow for 
passage of legislation that strengthens Dilma -- although the 
paralysis in the Senate caused by its recent Sarney-centered 
crisis could give way to elections-related paralysis. 
Despite Dilma's continued lag in the polls, PMDB does not yet 
appear to be seriously looking for new partners, perhaps 
realizing that PT offers the most favorable pre-election 
deal.  End comment. 
KUBISKE