

Currently released so far... 12553 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
2011/05/01
2011/05/02
2011/05/03
2011/05/04
2011/05/05
2011/05/06
2011/05/07
2011/05/08
2011/05/09
2011/05/10
2011/05/11
2011/05/12
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy Niamey
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sapporo
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
APECO
ASEC
AMGT
AFIN
APER
ACABQ
AORC
AEMR
AF
AE
AR
AGMT
AU
AY
ABLD
AS
AG
AJ
APCS
AX
AM
AMEX
ATRN
ADM
AMED
AFGHANISTAN
AZ
AL
ASUP
AND
ARM
ASEAN
AFFAIRS
AQ
ATFN
AMBASSADOR
AODE
APEC
ACBAQ
AFSI
AFSN
AO
ABUD
AC
ADPM
ADCO
ASIG
ARF
AUC
ASEX
AGAO
AA
AER
AVERY
AGRICULTURE
AIT
AADP
ASCH
AORL
AROC
ACOA
ANET
AID
AMCHAMS
AINF
AMG
AFU
AN
ALOW
ASECKFRDCVISKIRFPHUMSMIGEG
ACS
ADANA
AECL
ACAO
AORG
AGR
BEXP
BR
BM
BG
BL
BA
BTIO
BO
BP
BC
BILAT
BK
BU
BD
BRUSSELS
BB
BF
BBSR
BIDEN
BX
BE
BH
BT
BY
BMGT
BWC
BTIU
BN
CA
CASC
CFED
CO
CH
CS
CU
CE
CI
CM
CMGT
CJAN
COM
CG
CIS
CVIS
CR
CKGR
CHR
CVR
COUNTER
CIA
CLINTON
CY
CPAS
CD
CBW
COUNTERTERRORISM
CITEL
CDG
CW
CODEL
COUNTRY
CLEARANCE
COE
CN
CARICOM
CB
CONDOLEEZZA
CWC
CACS
CSW
CIDA
CIC
CITT
CONS
CL
CACM
CDB
CDC
CAN
CF
CJUS
CTM
CBSA
CARSON
CT
CLMT
CBC
CEUDA
CV
COPUOS
CTR
CROS
CAPC
CAC
CNARC
CICTE
CBE
ECON
ETRD
EIND
ENRG
EC
ELAB
EAGR
EAID
EFIS
EFIN
EINV
EUN
EG
EPET
EAIR
EU
ELTN
EWWT
ECIN
ERD
EI
ETTC
EUR
EN
EZ
ETC
ENVI
EMIN
ET
ENVR
ER
ECPS
EINT
EAP
ES
ENIV
ECONOMY
EXTERNAL
EINN
EFTA
ECONOMIC
EPA
EXBS
ECA
ELN
ETRDEINVECINPGOVCS
ENGR
ECUN
ENGY
ECONOMICS
ELECTIONS
EIAR
EINDETRD
EREL
EUC
ECONEFIN
EURN
EDU
ETRDEINVTINTCS
ECIP
ENERG
EFIM
EAIDS
EK
ETRDECONWTOCS
EINVETC
ECONCS
EUNCH
ESA
ECINECONCS
EUREM
ESENV
EFINECONCS
ETRC
ENNP
EAIG
EXIM
EEPET
EINVECONSENVCSJA
EUMEM
ETRA
ERNG
ETRO
ETRN
EINVEFIN
ICTY
IN
IS
IR
IC
IZ
IA
INTERPOL
IAEA
IT
IMO
IO
IV
ID
IRAQI
IEA
INRB
IL
IWC
ITU
ICAO
ISRAELI
ICRC
IIP
IMF
IBRD
ISLAMISTS
ITALY
ITALIAN
ILO
IPR
IQ
IRS
IAHRC
IZPREL
IRAJ
IDP
ILC
ITF
ICJ
IF
ITPHUM
INMARSAT
ISRAEL
IACI
IBET
ITRA
INR
IRC
IDA
ICTR
IGAD
INRA
INRO
IEFIN
INTELSAT
INTERNAL
INDO
ITPGOV
KWMN
KSCA
KDEM
KTFN
KIPR
KCRM
KPAL
KE
KPAO
KPKO
KS
KN
KISL
KFRD
KJUS
KIRF
KFLO
KG
KTIP
KTER
KRCM
KTIA
KGHG
KIRC
KU
KPRP
KMCA
KMPI
KSEO
KNNP
KZ
KNEI
KCOR
KOMC
KCFC
KSTC
KMDR
KFLU
KSAF
KSEP
KSAC
KR
KGIC
KSUM
KWBG
KCIP
KDRG
KOLY
KAWC
KCHG
KHDP
KRVC
KBIO
KAWK
KGCC
KHLS
KBCT
KPLS
KREL
KCFE
KMFO
KV
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KFTFN
KVPR
KTDB
KSPR
KIDE
KVRP
KTEX
KBTR
KTRD
KICC
KCOM
KO
KLIG
KDEMAF
KMRS
KRAD
KOCI
KSTH
KUNR
KNSD
KGIT
KFSC
KHIV
KPAI
KICA
KACT
KHUM
KREC
KSEC
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KCMR
KPIN
KESS
KDEV
KNAR
KNUC
KPWR
KENV
KWWMN
KWMNCS
KPRV
KOM
KBTS
KCRS
KNPP
KWNM
KRFD
KVIR
KTBT
KAID
KRIM
KDDG
KRGY
KHSA
KWMM
KMOC
KSCI
KPAK
KX
KPAONZ
KCGC
KID
KPOA
KIFR
KFIN
KWAC
KOMS
KCRCM
KNUP
KMIG
KNNPMNUC
KERG
KTLA
KCSY
KJUST
MOPS
MARR
MASS
MNUC
MX
MCAP
MO
MR
MI
MD
MK
MA
MP
MY
MTCRE
MOPPS
MASC
MIL
MTS
MLS
MILI
MAR
MU
MEPN
MAPP
MTCR
MEPI
MZ
MEETINGS
MG
MW
MAS
MT
MCC
MIK
ML
MARAD
MV
MERCOSUR
MTRE
MPOS
MEPP
MILITARY
MDC
MQADHAFI
MUCN
MRCRE
MAPS
MEDIA
MASSMNUC
MC
NZ
NZUS
NL
NU
NATO
NP
NO
NIPP
NE
NH
NR
NA
NPT
NI
NSF
NG
NSG
NAFTA
NC
NDP
NEW
NRR
NATIONAL
NT
NS
NASA
NAR
NV
NORAD
NSSP
NK
NPA
NGO
NSC
NATOPREL
NW
NPG
NSFO
OPDC
OTRA
OIIP
OREP
OVIP
OSCE
OEXC
OIE
OPRC
OAS
OPIC
OTR
OMIG
OSAC
OFFICIALS
OECD
OSCI
OBSP
OFDA
OPCW
ODIP
OFDP
OES
OPAD
OCII
OHUM
OVP
ON
OIC
OCS
PHUM
PREL
PGOV
PINR
PTER
PARM
PREF
PM
PE
PINS
PK
PHSA
PBTS
PRGOV
PA
PORG
PP
PS
PGOF
PL
PO
PARMS
PKFK
PSOE
PEPR
PAK
POL
PPA
PINT
PMAR
PRELP
PREFA
PALESTINIAN
PBIO
PINF
PNG
PMIL
PFOR
PUNE
PGOVLO
PAO
POLITICS
PHUMBA
PSEPC
PTBS
PCUL
PROP
PNAT
PNR
POLINT
PGOVE
PROG
PHALANAGE
PARTY
PDEM
PECON
PROV
PHUMPREL
PGOC
PY
PCI
PLN
PDOV
PREO
PGIV
PHUH
PAS
PU
POGOV
PF
PINL
POV
PAHO
PRL
PG
PRAM
POLITICAL
PARTIES
POLICY
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PGGV
PHUS
PSA
PHUMPGOV
PEL
PSI
PAIGH
POSTS
PBT
PTERE
RS
RU
RW
RM
RO
RP
REGION
RSP
RF
RICE
RCMP
RFE
RIGHTS
RIGHTSPOLMIL
ROBERT
RUPREL
RELATIONS
ROOD
REACTION
RSO
REPORT
SENV
SNAR
SCUL
SR
SC
SOCI
SMIG
SI
SP
SU
SO
SW
SY
SA
SZ
SAN
SF
SN
STEINBERG
SG
ST
SIPDIS
SNARIZ
SNARN
SSA
SK
SPCVIS
SOFA
SAARC
SL
SEVN
SARS
SIPRS
SHUM
SANC
SWE
SHI
SYR
SNARCS
SPCE
SYRIA
SEN
SH
SCRS
SENVKGHG
TRGY
TSPL
TPHY
TSPA
TBIO
TI
TW
THPY
TX
TU
TS
TZ
TC
TH
TT
TIP
TO
TERRORISM
TRSY
TINT
TN
TURKEY
TBID
TL
TV
TNGD
TD
TF
TP
TFIN
TAGS
TK
TR
UNSC
UK
UNGA
UN
US
UNHRC
UG
UP
UNMIK
UNHCR
UE
USTR
UNVIE
UAE
UZ
UY
UNO
UNESCO
USEU
USOAS
UV
UNODC
UNCHS
UNFICYP
UNEP
UNIDROIT
UNDESCO
UNDP
UNPUOS
UNC
UNAUS
USUN
UNCHC
UNCHR
UNCND
UNICEF
UNCSD
UNDC
USNC
USPS
USAID
Browse by classification
Community resources
courage is contagious
Viewing cable 06SAOPAULO229,
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #06SAOPAULO229.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
06SAOPAULO229 | 2006-03-03 12:29 | 2011-03-05 00:00 | UNCLASSIFIED | Consulate Sao Paulo |
VZCZCXRO0555
PP RUEHRG
DE RUEHSO #0229/01 0621229
ZNR UUUUU ZZH ZDK
P 031229Z MAR 06
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 4588
INFO RUEHBR/AMEMBASSY BRASILIA 5741
RUEHBU/AMEMBASSY BUENOS AIRES 2061
RUEHAC/AMEMBASSY ASUNCION 2413
RUEHCV/AMEMBASSY CARACAS 0193
RUEHMN/AMEMBASSY MONTEVIDEO 1829
RUEHLP/AMEMBASSY LA PAZ 2604
RUEHSG/AMEMBASSY SANTIAGO 1576
RUEHRI/AMCONSUL RIO DE JANEIRO 6854
RUEHRG/AMCONSUL RECIFE 2729
RHEHNSC/NSC WASHDC
RHMFISS/CDR USSOUTHCOM MIAMI FL
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 2289
UNCLAS SECTION 01 OF 04 SAO PAULO 000229
SIPDIS
SIPDIS
NSC FOR SCRONIN
STATE PASS USTR FOR SULLIVAN/LEZNY
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
USDOC FOR 3134/USFCS/OIO/EOLSON/DDEVITO/DANDERSON
AID/W FOR LAC/AA
E.O. 12958: N/A TAGS: ECON PGOV PINR ETRD BR
REF: RECIFE 29
SAO PAULO 00000229 001.4 OF 004
¶1. Summary: An informal survey of business leaders from Sao Paulo shows support for Finance Minister Antonio Palocci's macroeconomic policies and a general sense of relief that Lula's presidency has not destroyed the economy as originally feared. Although Lula is no longer seen as a threat to the economy, he still makes many businessmen nervous. If re-elected, they believe he is unlikely to make significant changes to the direction of the economy, as he will have to govern in alliance with such centrist and center-right parties such as the Brazilian Labor Party (PTB), the Liberal Party (PL), and the Brazilian Democratic Movement Party (PMDB). The private sector has developed an agenda of issues it would like the next government to address, including tax reform, labor reform, reduction of public expenditures, and simplification of the regulatory environment. The business community would prefer to see a candidate from the opposition Brazilian Social Democracy Party (PSDB) elected in the October presidential election, and many favor Sao Paulo state Governor Geraldo Alckmin, believing that he would be more capable than Sao Paulo Mayor Jose Serra of advancing their economic agenda. End summary.
-------------------- 2006 ECONOMIC AGENDA --------------------
¶2. The National Confederation of Industries (CNI), a business umbrella organization which represents state Federations of Industries (of which the most influential is the Sao Paulo State Federation of Industries - FIESP), is poised to publish its economic agenda for the post-election period, a guide for whomever is elected the next President. The agenda reportedly has the concurrence of other business organizations. Its main recommendations are: -- Cutting interest rates. While business supports the Lula administration's macroeconomic policy, including its efforts to combat inflation, it believes that a speedier pace of interest rate reductions is possible. -- Control of public expenditures. The Lula government has devoted more resources to social programs while withholding funds for investment. The business community would like to see these priorities reversed. -- Greater public investment in infrastructure and implementation of public-private partnerships (PPPs). The PPP idea was introduced during the government of Fernando Henrique Cardoso (FHC) to spur infrastructure investment. Although the Lula government obtained Congressional approval of enabling legislation, currently the program exists mostly on paper. -- A clear regulatory framework for energy, telecommunications, transportation, and natural gas. -- A framework for environmental regulation that clearly defines the roles of responsible agencies in developing and enforcing the rules. -- Tax reform -- Labor law reform -- Public investment in technology (R&D)
¶3. Of the items listed above, investment in infrastructure is considered the most urgent by many in the business community. As the economy grows, so does demand for energy, roads, railroads, and port facilities. FIESP believes the country's infrastructure is in such a critical state of obsolescence that it is adversely affecting the efficiency and global competitiveness of Brazilian companies.
--------------------- BUSINESS PERSPECTIVES ---------------------
¶4. In 2002, Lula was generally seen by the private sector as a dangerous candidate. With his labor union background and leftist orientation, he seemed to many to pose a threat to foreign investment and private enterprise in Brazil. A turning point in his campaign was his "Letter to the Brazilians," in which he promised to
SAO PAULO 00000229 002.3 OF 004
respect international contracts and commitments and pay Brazil's debts, thus easing private sector fears.
¶5. Four years later, his performance is viewed with amazement. The business community had such low expectations for his presidency that now, though it may not approve of some of his policies, it considers his performance surprisingly good. Nonetheless, some are still nervous, noting that Lula has not been tested by an international crisis and it is impossible to know how he would react under such pressure.
¶6. Another concern among business leaders is what Lula might do if it appears he might lose the election. Would he undertake populist measures in an attempt to turn the tide? Would he be tempted to follow the example of Venezuelan President Hugo Chavez and stifle democratic opposition? Would he abandon fiscal and monetary discipline, possibly re-igniting inflationary pressures? No one is quite sure, which causes unease in the business community.
¶7. Lula has some, albeit not many, supporters among businessmen. One is CNI president Armando Monteiro Neto, a PTB federal deputy from the northeastern state of Pernambuco. Monteiro owns a sugar factory and is extremely dependent on government loans and benefits. Similarly, CNI and other such business organizations are highly dependent on the government for funding, which comes from business taxes paid by companies. If the government were to suspend these mandatory contributions, it would force these organizations to find other sources of funds.
¶8. Other business supporters of Lula include Antoninho Marmo Trevisan (Trevisan Auditores e Consultores), Oded Grajew (founder and former CEO of Troll, a toy company), and Laurence Phi (owner of a large wheat mill), all of whom are progressive businessmen strongly tied to social causes. They believe Brazil is a country lacking in social justice and that Lula is going to change this. Another businessman, Vice-president Jose Alencar - owner of Coteminas, Brazil's largest textile firm - entered into an alliance with Lula more out of political opportunism than commitment to Lula's social agenda. More generally, the banking sector has supported Lula and has contributed generously to the PT; recently released figures show the banks earning record profits.
¶9. Although Lula has succeeded in obtaining the support of traditional elites that generally represent the Brazilian right, on many issues his government has not promoted the core interests of these constituencies. These groups do not agree with the importance he accords to the landless movement and other social movements. They particularly deplore his administration's closeness to the Cuban, Venezuelan, and other left-leaning governments in Latin America, and a foreign policy which appears motivated more by ideology than by economic and commercial interests. The left, for its part, is frustrated with the government's failure to deliver on its promise of new ideas. Where they hoped to see more jobs and income for the poorest classes, Lula abandoned his party's platform to follow the pro-market economic policies of his predecessor.
¶10. Ultimately, while Lula is not, and never will be, a favorite of the business community, he is no longer seen as the threat to economic stability that he once was. If his poll numbers continue to improve as the electoral season progresses, he will likely attract more business interests (and contributions) to his side. The more likely it appears that he will win, the more companies will want to jump on his bandwagon, and the less onerous his fund-raising challenge will be.
----------------------------------- EXPECTATIONS FOR A LULA SECOND TERM -----------------------------------
¶11. During the last several months of 2005, polls showed that Lula could lose the election, and many speculated he might even decide not to run. There was deep concern that, even if re-elected, he would face an extremely difficult second term. His party was
SAO PAULO 00000229 003.3 OF 004
expected to be punished for corruption with a loss of Congressional seats, and there was general disillusion with his government. More recent polls, however, show him recovering his popular support, and his government's approval ratings are returning to pre-scandal levels. In part, this is due to recent positive economic figures. The GoB is also heavily investing in advertising: the President is announcing new social programs and investments (and trumpeting the success of existing ones) almost every day, and appearing on major network television every night (reftel).
¶12. Expectations for a Lula second term, should he win one, depends how he wins the elections. There are three scenarios: -- Lula could win but still find himself in a weak position, with no strong political allies and a small cadre of PT deputies and senators. In addition, he would face many difficulties, with little maneuvering room in Congress and a hard time getting legislation passed. He would be unable to attract high-quality people to his cabinet. In such a situation, he could turn to the social movements for support and begin to employ leftist rhetoric and populist measures. Although unlikely, this is considered the most dangerous scenario. -- Lula could win by a large margin, with a working majority in the Congress, mainly from centrist small parties and the large PMDB. Since the PT isn't expected to do well in the congressional elections, Lula would be dependent on other parties in his electoral alliance. Still, the large margin could provide him with some political capital and an ability to set an agenda and press for some important reforms. One result would be a more centrist economic policy, without large or disruptive changes. -- Finally, there is a middle scenario, in which Lula wins but without enough support to guarantee a comfortable majority in Congress. In this case, his second term would be very similar to his first one. Without a consistent majority, Lula would have to negotiate the vote for each piece of legislation sent to the Congress and deal with difficult deputies from his own party and allied groups. Under this scenario, a change in economic course is unlikely, as is a reform agenda. The business community fears this eventuality, as it could lead to drift, deadlock, and stagnation. Many observers believe this is the most likely scenario.
--------------------------------------------- THE PRIVATE SECTOR AND THE OPPOSITION TO LULA ---------------------------------------------
¶13. The majority of the private sector feels comfortable with the opposition PSDB because of its "neo-liberal" economic program. However, there is no consensus about which PSDB candidate should replace Lula. Sao Paulo governor Geraldo Alckmin is by far the favorite among companies within the state. One major supporter is Antonio Ermirio de Moraes, CEO of Votorantim Group, which owns banks, cement firms, and other enterprises. FIESP President Paulo Skaf has also expressed support for Alckmin as the PSDB's "natural candidate." During his administration, Alckmin has worked closely with the private sector and implemented some business-friendly policies, including tax cuts. Accordingly, the local business community knows and trusts him.
¶14. Sao Paulo Mayor Jose Serra, on the other hand, still carries the stigma of being considered unpredictable and strong-willed. He made enemies in the private sector while Health Minister under FHC. Serra opened the market for generic medicines, harming traditional pharmaceutical companies, and asserted Brazil's right to break patents on some HIV medications. He also fought the tobacco industry.
¶15. In the economic arena, Serra seems to be more to the left than Alckmin - even more than Lula, say his opponents. During the FHC administration, Serra was part of the so- called "developmentalist" group of advisers in opposition to the "monetarist" group of Finance Minister Pedro Malan and Central Bank President Arminio Fraga.
SAO PAULO 00000229 004.2 OF 004
Thus, he faces some opposition from the financial sector and from some parts of industry, such as pharmaceuticals. At the same time, he's considered very bright, well-educated, and determined. What remains uncertain, and therefore a source of concern, is his economic management and the direction of his policies.
------------------------------- THE PRIVATE SECTOR AND THE PMDB -------------------------------
¶16. The centrist PMDB is well-connected to the private sector. Most of its members in Congress were elected with help from one or another industry. With no strong ideology, the PMDB could provide the political balance for either Lula or Serra, if one of them were to prevail in October.
¶17. The PMDB has two pre-candidates running for President - Anthony Garotinho, former Governor of Rio de Janeiro, and Germano Rigotto, Governor of Rio Grande do Sul. Garotinho is considered by many business leaders to be a dangerous, populist candidate with strong ties to evangelical churches, and a relative newcomer to the PMDB. Rigotto is more mainstream but is unknown outside his own southern state. However, if polls show Garotinho to be a viable candidate, Rigotto could become the party's alternative to the former Rio governor. The PMDB is expected to participate in the next government one way or another, either with its own candidate or via an alliance with either the PT or the PSDB. Even if the PMDB does not make an alliance to enter the next government, the party is expected to win enough seats in Congress to influence government policy through its parliamentary power. Its presence in key Cabinet posts would give the private sector confidence that radical changes in financial and economic policy are unlikely. Historically, the PMDB has kept the government in the center of the political spectrum, reassuring the economic players. That's why both the PT and the PSDB are willing to negotiate alliances for the second round with the PMDB.
------- COMMENT -------
¶18. Though we are still seven months from the election, the campaign has in some respects already begun and is generating attention. What is striking, however, is how little the opposition pre-candidates have talked about policy - economic or any other - and, when they do, how little their proposals differ from each other. Everyone wants lower interest rates and more growth. Since Lula's macroeconomic policy has been a continuation of FHC's policies, the PSDB candidates haven't explained how they would change or improve it, only that they would implement it better and do a better job of fighting corruption. In the meantime, the PMDB, which hopes to offer the voters a third way, an alternative to the two main contending parties, has yet to say anything new. While there is a consensus in the business community that the next government needs to tackle long-standing and vexing problems - tax, labor, and regulatory reform - there is little confidence in the private sector that any new government (PT or PSDB) will have the political will and clout to push through the necessary legislation. End comment.
¶19. This cable was cleared/coordinated with Embassy Brasilia.
McMullen