Cablegate: Brazil Corruption Scandal Update, Week of 21-25

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 BRASILIA 003106

SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL ECON BR
SUBJECT: BRAZIL CORRUPTION SCANDAL UPDATE, WEEK OF 21-25
NOVEMBER 2005

REF.: BRASILIA 03001 AND PREVIOUS

1. SUMMARY. The long-awaited dismissal of Deputy Jose
Dirceu from the House of Deputies was delayed again, and it
is now at least plausible that he may not be dismissed at
all. After receiving a favorable decision from the
Constitution and Justice Committee that postponed one more
time the final vote on his impeachment, Dirceu may win a
reprieve from the Supreme Court that could delay the final
disposition of his case into 2006. In a November 25
conversation with Poloff, Dirceu said he now gives himself
a 50 percent chance of surviving (vs. a 25 percent chance
before the Supreme Court's decision). The opposition
adopted a tougher stance after the demise of the Vote-
Buying Scheme CPI, although they agreed to invite, rather
than summon, Finance Minister Palocci to testify before the
Bingos CPI. The latest poll released on November 22 shows
Lula's approval ratings reaching record lows. END SUMMARY.

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DIRCEU CASE: CONGRESS VS. SUPREME COURT
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2. Former Lula Chief of Staff Jose Dirceu scored two
important victories in the Chamber and the Supreme Court
(STF) this week, improving his chances of avoiding
impeachment, and firing up an institutional crisis between
the Legislature and the Judiciary. On November 22, as
expected, the Chamber's Constitution and Justice Committee
(CCJ) approved the report of Deputy Sergio Miranda (PDT-
MG), which requested the postponement of Dirceu's judgment
by the Chamber until his appeal pending before the Supreme
Court had been decided. By a 34 to 15 vote margin,
Dirceu's victory in the CCJ reflected the opposition's fear
that, if his case were declined and the plenary had voted
on his expulsion on November 23, as previously scheduled,
the Supreme Court would vote in favor of Dirceu and
invalidate the process. Since the Supreme Court decision
was supposed to be released on November 23, the Chamber
postponed the final vote on Dirceu's expulsion to November
30.

3. The Supreme Court decision, however, was not what the
deputies expected. Dirceu's appeal to the court was based
on the fact the one of the accusation witnesses, the
manager of Banco Rural, Katia Rabello, testified after
Dirceu had presented his defense, making it impossible for
him to properly defend himself from her accusations. Ten
of the 11 Justices voted on the appeal, 5 in favor and 5
against, leaving the final decision in the hands of
Minister Sepulveda Pertence, the only Justice not present
in the session. Pertence will announce his decision on
November 30, just a few hours before the Chamber is
scheduled to vote on Dirceu's impeachment.

4. Pertence may vote against Dirceu's appeal, in which
case the Chamber would be free to start procedures to expel
him. He may also decide to exclude the testimony of Rabelo
from the final report, ostensibly giving Dirceu just a few
more days before being impeached, but this would mean
eliminating evidence, and Dirceu may use the resulting lack
of evidence as the basis for another appeal. Pertence's
last possibility would be to request the Ethics Committee
to summon more defense witnesses, reintroduce the report
and vote on it again. In this case, Dirceu's impeachment
vote might be put off until early 2006, which will delay
the other 13 impeachment cases pending before the Ethics
Committee. In a November 25 conversation with Poloff,
Dirceu said he now gives himself a 50 percent chance of
surviving (vs. a 25 percent chance before the Supreme
Court's decision).

5. Following the Supreme Court vote, the president of the
Ethics Committee, Deputy Ricardo Izar, sent a memo to all
of the Justices explaining how the impeachment process was
conducted and why Rabelo was the last witness to testify.
He has also requested a meeting with the Supreme Court
Justices, in an attempt to persuade them to alter their
decision. However, many congressmen, both in the Chamber
and in the Senate, have been criticizing the Supreme
Court's "undue interference" in Legislative affairs, and
raising concern about an institutional crisis. "The
Judiciary is politically interfering in Congressional
affairs" stated Senator Jefferson Peres (PDT-AM) before
senators from opposition parties announced that they will
not vote on the 2006 Budget until Dirceu's case is
finalized.
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OPPOSITION GETS TOUGH IN REMAINING CPIS
---------------------------------------

6. The abrupt end of the Vote-Buying Scheme CPI, regarded
by some as an absolution of the Lula administration,
prompted the opposition to get tougher in the other two
committees. In the Bingos CPI, the governing coalition and
the opposition agreed not to summon, but to invite,
Minister Palocci to testify. The date has not yet been
determined, but should be sometime before December 10.
During the past few days, the Minister appeared before
three different Congressional Committees: the Senate's
Economic Affairs Committee, on November 16; the Chamber's
Finance Committee, on November 22; and a public hearing in
the Chamber, also on November 22. Septel to follow will
examine Palocci's situation more in depth.

7. While the government and the opposition came to
agreement in the Bingos CPI, in the Postal Service CPI,
disputes prevented a vote on the preliminary report of the
Sub-Committee on Financial Activities, which recommends the
prosecution of former PT treasurer Delubio Soares and PT
"bagman" Marcos Valerio. The governing coalition demanded
the inclusion of the case of Deputy Eduardo Azeredo --
former PSDB leader whose treasurer confessed receiving
money from Marcos Valerio -- in the sub-committee's report,
while the rapporteur, Deputy Gustavo Fruet (PSDB-PR), has
refused to include the case, arguing that it has already
lapsed. PT representatives in the committee stated they
will either refuse to vote on the report, propose an
alternative report or present amendments. The report can
only be sent to the competent authorities if the committee
approves it.

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LULA'S APPROVAL RATINGS REACH RECORD LOWS
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8. The Lula administration's popularity has dropped to new
lows and his re-election chances are looking dimmer,
according to the most recent CNT/Sensus poll released on
November 22. President Lula's personal approval rating
declined by 3.3 points compared to September figures, and
is now 46.7%. The government approval ratings also
suffered a similar drop, from 35.8 to 31.1%. Moreover,
besides showing him losing to Sao Paulo Mayor Jose Serra in
a second-round run-off, the new poll shows that the margin
of victory Lula would enjoy against other prospective
candidates is also diminishing.

CHICOLA

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