Cablegate: Worker Party Congress Gets Brazil's Next Presidential Race

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FM AMCONSUL SAO PAULO
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RUEATRS/DEPT OF TREASURY WASHDC
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UNCLAS SECTION 01 OF 04 SAO PAULO 000749

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/BSC, INR/IAA, INR/R/AA
STATE PASS USTR FOR KATE DUCKWORTH
NSC FOR TOMASULO
TREASURY FOR JHOEK
USDOC FOR 4332/ITA/MAC/WH/OLAC
USDOC ALSO FOR 3134/USFCS/OIO
DOL FOR ILAB
SOUTHCOM ALSO FOR POLAD
USAID FOR LAC/AA

E.O. 12958: N/A
TAGS: PGOV PINR ELAB ECON BR
SUBJECT: WORKER PARTY CONGRESS GETS BRAZIL'S NEXT PRESIDENTIAL RACE
OFF TO AN EARLY START

REF: (A) SAO PAULO 742; (B) BRASILIA 1670;

(C) SAO PAULO 734; (D) SAO PAULO 91

SAO PAULO 00000749 001.2 OF 004

SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY

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SUMMARY
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1. (SBU) The Workers' Party (PT) National Congress held in Sao
Paulo between August 31 and September 2 - only the third in the
party's 27-year history - set the stage for a marathon presidential
election cycle as the PT looks forward to 2010. A decision to move
internal elections up to December 2007, a resolution calling for a
Constituent Assembly to design a broad political reform package, and
a statement expressing the party's intention to put forward a
candidate for president in 2010 were all designed to position the PT
for its next run. Remarks delivered by President Lula show a
President who is unapologetic for what he sees as the triumphs of
his party and defiant in the face of corruption scandals emanating
from within the PT (ref B). But with Lula constitutionally barred
from running for a third term, PT members are already fretting over
their first national election without him as a candidate, with some
fearing that Lula may abandon the PT to support a candidate from a
coalition party. From the PT's perspective, this would be a
disaster. End Summary.

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TRIUMPHANT AND UNAPOLOGETIC
---------------------------

2. (U) Addressing the Workers' Party (PT) National Congress
September 1, President Lula acknowledged that some party members
were facing charges but nonetheless asserted the PT's moral
superiority over others. He called upon the party faithful to
defend former PT leaders indicted by the Supreme Federal Tribunal
(STF) in the 2005 "mensalao" vote-buying scandal (ref B). "It is
true," Lula said early in his address, "that we could have made
mistakes, and the mistakes are being aired as they need to be.
Nobody in this country has more moral and ethical authority than our
party. We admit that there are some people equal to us, but we
don't admit that there's any better...When one of us makes a
mistake, no matter how good a friend he may be, he will be subject
to the same laws and rules as the 190 million [Brazilians]..." Lula
then reprised the scandal towards the end of his speech: "I know
that some comrades were indicted by the Supreme Court. I don't
usually talk about Supreme Court decisions, but I want 'petistas'
[PT members] to keep one thing in mind: Up to now, none of them has
been acquitted, but neither has any of them been found guilty, up to
now. There is a trial, and only these comrades, not me or you,
knows what happened. These comrades will have time to defend
themselves...What is important is that nothing that happens to us,
those on trial or not, can make us lose heart. We do not have the
right to feel defeated, whatever may be the adversity we are facing.
More important, no 'petista' has to be ashamed of defending a
comrade...In politics, we can't lose our sensitivity or our sense of
comradeship."

3. (U) Lula's enthusiastically received speech had something of a
triumphal tone as he recalled the party's past struggles, the
opposition it has generated over the years, and his electoral
victories of 2002 and 2006. He devoted most of his time to
highlighting his administration's successes, such as low inflation,
job creation, increased exports, sustainable economic growth,
advances in education, liberation from the IMF and the Paris Club,

SAO PAULO 00000749 002.2 OF 004

and the "Bolsa Familia" social program, which Lula called "the
greatest wealth transfer in Brazil's history". Referring to the
party's critics, Lula asserted that "we are more often criticized
for our merits than for our defects. The PT has nothing to be
ashamed of. Don't be afraid to be 'petistas'...We are the ones most
responsible for the country's long strides towards dignity and
justice. We were and are the builders of Brazilian democracy. We
are a party of winners."

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THE PT POSITIONS ITSELF...
--------------------------

4. (SBU) Lula's speech was the highlight of the National Congress,
but not the only noteworthy event. Delegates voted, as anticipated
(ref C), to move forward the date of PT internal elections for
national, state, and local presidents, directors, and other
officials from September 2008 to December 2007. They also adopted a
motion calling for the convocation of a Constituent Assembly for the
sole purpose of designing and approving a broad political reform.
Such an Assembly is the PT's proposed solution to the Chamber of
Deputies' failure to pass the government's political reform
proposals. Details are to be worked out in consultation with social
movements, unions, and other democratic parties. Many in the
opposition oppose such an Assembly, seeing it as a possible vehicle
for a Constitutional amendment permitting Lula to run for a third
consecutive term (see ref D). Lula himself has several times denied
any such intention, saying most recently, "I will pass the sash to
another president on January 1, 2011. And I'm going to make my
roast rabbit, which I haven't made in five years." Many in the PT
recognize that a third-term amendment is a political non-starter in
the current environment, but some see another Lula term as the only
way to ensure the party's continuation in power, and its members and
affiliates stand to lose a great many jobs and considerable funding
if any other party, allied or not, holds the presidency.

------------------------------------
...FOR A 2010 PRESIDENTIAL CANDIDACY
------------------------------------

5. (SBU) Finally, delegates adopted a resolution on electoral
tactics for the 2008 municipal elections and the 2010 national and
state elections. The resolution calls for victories in 2008 to
strengthen the party's base and goes on to state that: "The PT will
present a candidacy for president, to be constructed with other
parties and thus form a programmatic, partisan, and social alliance
capable of being victorious in the 2010 elections and to avoid the
return of neo-liberalism." The language aims to mollify both those
who support a PT candidacy in 2010 and want to begin now to prepare
the way, and those who, like Lula and his Ministers, are concerned
about holding together the 12-party governing coalition.

6. (SBU) Since Lula cannot run for a third term absent a
Constitutional amendment, the question of his succession has been a
hot topic in recent months. The PT is universally perceived as
having few candidates with the charisma, stature or national profile
required to lead the party to another victory. Lula is on record as
wanting the coalition to unite around a single candidate. He is
known to be considering supporting a candidate from his largest
ally, the Brazilian Democratic Movement Party (PMDB), someone who
can attract votes from the middle class and the business community.
He is also known to have great respect for Ciro Gomes, a Federal
Deputy and former Minister from the northeast who is a member of the
Brazilian Socialist Party (PSB). Many commentators consider the PT
candidacy resolution a defeat for Lula and PT President Ricardo

SAO PAULO 00000749 003.2 OF 004

Berzoini. A group of allied parties - the PSB, the Communist Party
of Brazil (PC do B), and the Democratic Labor Party (PDT) and three
smaller entities - responded by announcing the formation of a "Left
Bloc" for the purpose of running their own candidate, possibly
Gomes.

7. (SBU) For many in the PT, especially those on the left who have
never approved of the party's alliances with centrist and
center-right parties, the idea of supporting a candidate from
outside the PT is anathema. They argue that the PT should put
forward its own candidate as early as possible to foreclose Lula's
options. Many doubt that Lula would break with his own party to
support an outside candidate. Rui Falcao, a leader of the "New
Course" faction (ref A) and a supporter of Tourism Minister Marta
Suplicy, doubts that Lula would split with the PT to support Ciro
Gomes. Ricardo Azevedo, President of the Perseu Abramo Foundation,
the PT's think tank, thought that Gomes just might be barely
palatable to the PT faithful, if he positions himself right and if
Lula makes a convincing argument. If, however, Lula decides to
support a candidate from the PMDB (for example, new Defense Minister
Nelson Jobim), it could "tear the PT apart," Azevedo said. Worst of
all, in his view, would be "Operation Aecio," the much-rumored
(albeit unlikely) scenario in which Aecio Neves, Governor of Minas
Gerais, switches from the PSDB - where he faces strong opposition
from Sao Paulo Governor Jose Serra - to the PMDB and runs for
President with Lula's support.

8. (SBU) Even with few strong candidates, the PT is not without
options. Marta Suplicy, if elected Mayor of Sao Paulo next year,
could be a strong presidential candidate in 2010. Jaques Wagner, a
former Minister of Institutional Relations who remains close to
Lula, surprised many in 2006 by being elected Governor of Bahia,
Brazil's fifth largest state. If he can deliver good government, he
may be viable. Azevedo mentioned another name that is only now
beginning to be heard, that of Patrus Ananias. As Minister for
Social Development and the Fight Against Hunger, Ananias is
responsible for the GoB's flagship "Bolsa Familia," a conditional
cash transfer program that currently reaches more than 11 million
families, or about one-fourth of the population. Rui Falcao noted
that Fernando Pimentel, Mayor of Belo Horizonte, has supporters
within the party as well. Many lean towards Lula's Chief of Staff,
Dilma Rousseff, but while considered an able technocrat (she was
previously Minister of Mines and Energy), Rousseff has never before
run for elective office. Justice Minister Tarso Genro wants to run
for president, but he would face opposition from within the PT,
especially from the Majority Camp, whose hegemony he has
challenged.

9. (SBU) Despite the PT's determination to have a candidate of its
own, events will dictate the outcome. Lula will wait until after
the 2008 municipal elections, see how the teams are lined up and
which way the wind is blowing, and choose the individual he
considers best equipped to win the election and to perpetuate his
legacy. While not definitive, his decision will strongly influence
how the race goes.

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COMMENT
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10. (SBU) Comment: The PT is having trouble deciding how to handle
the ongoing scandal involving some of its most prominent members.
Lula's remarks, a shift from his earlier attempts to distance
himself from the accused, represented something of a balancing act
aimed at airing the party's problems and showing strong solidarity

SAO PAULO 00000749 004.2 OF 004

with the defendants, two of whom - Jose Dirceu and Jose Genoino -
are past PT presidents of long association with Lula. On the one
hand, the PT wants to recover its mantle as the "party of ethics".
Indeed, the PT Congress unanimously approved the establishment of a
Code of Ethics for its members, while postponing until 2009
discussion of the formation of a "Corregedoria" or enforcement arm.
On the other hand, Jose Dirceu remains extremely influential, as
does Joao Paulo Cunha, a former President of the Chamber of
Deputies. On the eve of the Congress, about 150 PT members attended
a dinner in honor of Cunha at which those present blamed the
corruption scandal on the media. Although the general public seems
to believe firmly that the accused are guilty, it may not be until
after the 2008 elections that the PT decides whether to take the
high road or stick with its friends.

11. (SBU) Comment continued: The PT Congress got Brazil's 2010
presidential election cycle off to an abnormally early start. And
the PT has a rough road ahead. The criminal trials of the "Gang of
40," including three PT ex-Ministers; the party's former President,
Secretary-General, and Treasurer; and four current and former

SIPDIS
federal deputies, are expected to last at least three years and to
attract constant publicity. Lula can consider himself "absolved" by
the 61 percent vote he received in 2006, but most of his party
comrades are not so fortunate. While the party can still count on
the support of many loyal militants, others have come to perceive it
as just another political organ devoted to no principle other than
the perpetuation of its own power. The PT's challenge now is to
accept its loss of innocence and move past the shock over Lula's
impending departure so that it can focus on fielding strong
candidates in next year's municipal elections and rally behind a
standard bearer and a slate of strong candidates for 2010. End
Comment.

12. (U) This cable was coordinated with Embassy Brasilia.

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