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UNCLAS SECTION 01 OF 04 SAO PAULO 000492 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
NSC FOR CRONIN 
STATE PASS USTR FOR SULLIVAN/LEZNY 
DEPT OF TREASURY OASIA, DAS LEE AND FPARODI 
USDOC FOR 4332/ITA/MAC/WH/OLAC/SHUPKA 
USDOC ALSO FOR 3134/USFCS/OIO/EOLSON/DANDERSON STATE PASS EXIMBANK STATE PASS OPIC FOR DMORONESE, NRIVERA, CMERVENNE DOL FOR ILAB MMITTELHAUSER SOUTHCOM FOR POLAD AID/W FOR LAC/AA 

E.O. 12958: N/A TAGS: PGOV PINR BR
SUBJECT: SAO PAULO GOVERNOR CLAUDIO LEMBO TALKS ABOUT ELECTORAL ALLIANCES, ALCKMIN'S PROSPECTS 
REF: (A) SAO PAULO 355; 
(B) SAO PAULO 350; 
(C) SAO PAULO 316; 
(D) 05 SAO PAULO 1181; 
(E) 02 BRASILIA 1392 AND PREVIOUS SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY. 

------- SUMMARY ------- 

¶1. (SBU) Sao Paulo Governor Claudio Lembo told us that despite press reports suggesting otherwise, his Liberal Front Party (PFL) will/will form an alliance with the Brazilian Social Democracy Party (PSDB) and will strongly support the presidential candidacy of PSDB Sao Paulo ex-Governor Geraldo Alckmin against President Lula. Finalizing the alliance is only a matter of time, he said, as the PFL has no other option. Governor Lembo shared his views on the prospects for alliances in various key states, and expressed the hope of obtaining the support of the large but divided Brazilian Democratic Movement Party (PMDB) in vote-rich Sao Paulo state. Lembo, who served as Alckmin's Lieutenant Governor for more than three years, recognized that Lula is the front-runner and that Alckmin faces a serious challenge in trying to unseat him. His predicament is complicated by the PSDB's internal divisions and lack of vision, and tepid support from party leadership, including former President Fernando Henrique Cardoso. Still, Alckmin, unlike Lula, is still relatively unknown and will likely see his support increase as voters nationwide get to know him, Lembo opined. Even if Lula wins, his Workers Party (Partido dos Trabalhadores - PT) will fare badly in the elections, leaving him isolated and impeding his ability to govern. In that case, conservatives may support the government for the good of the country and try their best to ride out the four years of Lula's second term. Governor Lembo's views on the Bolivian gas situation will be reported septel. END SUMMARY. 

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PSDB-PFL ALLIANCE "ONLY A MATTER OF TIME," GOVERNOR SAYS ----------------------------------------- 

¶2. (U) Consul General (CG) - accompanied by Commercial MINCOUNS and Poloff - and Political Assistant had separate meetings over the past week with Sao Paulo Governor Claudio Lembo. In both meetings, Lembo wanted to talk about domestic politics. (Per ref A, Lembo assumed the governorship on March 31 when Geraldo Alckmin resigned as required by law to launch his presidential candidacy.) Post will report septel his comments to the CG in their May 5 meeting concerning Evo Morales's nationalization of Bolivia's hydrocarbons sector and its impact on Brazil. Lembo stated that the PFL and Alckmin's PSDB continue to negotiate the terms of alliances in the various states as part of a larger package to include a "pefelista" (PFL member) as Alckmin's running mate. (NOTE: During Fernando Henrique Cardoso's two terms (1995-2002) as President, PFL Senator Marco Maciel of Pernambuco state in the northeast served as Vice-President. However, in 2002, the PSDB-PFL alliance was ruptured when PFL presidential candidate Roseana Sarney blamed the Cardoso administration and the PSDB for sparking the corruption scandal that forced her to withdraw from the race. See ref E. END NOTE.) The alliance is only a matter of time, he said, as the PFL has nowhere else to go. 

¶3. (SBU) Governor Lembo acknowledged that the inter-party negotiations have encountered some turbulence. In Rio de Janeiro, for example, PFL Mayor Cesar Maia, who had originally planned to run 

SAO PAULO 00000492 002 OF 004 

for President himself, is apparently miffed that the PSDB has launched its own candidate (Federal Deputy Eduardo Paes) for Rio de Janeiro state Governor instead of supporting a PFL gubernatorial candidate. Maia recently stated at a public event in Alckmin's presence that, due to the complications caused by the "verticalization" rule, the PFL might do better in Congressional elections if it eschewed a formal alliance with the PSDB and went its own way. 

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COURTING NORTHEAST POLITICIANS AND VOTERS 

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¶4. (SBU) Lembo confirmed press reports that the front-runner for the Vice-Presidential nomination is Senator Jose Jorge de Vasconcelos Lima (more commonly known simply as Jose Jorge) of Pernambuco, a co-founder of the PFL who served four terms (1983-98) as a Federal Deputy before gaining his Senate seat. For geographic reasons (see ref C), the running mate is almost certain to be from the northeast, and Pernambuco is considered more important and pivotal than Rio Grande do Norte, home of PFL Senator Jose Agripino Maia, who is on most observers' short list of possible candidates, including Lembo's own list (ref D). 

¶5. (SBU) Lembo also believes the two parties may be able to ally in the northeastern states of Bahia and Maranhao. According to his scenario, the PSDB could support Roseana Sarney's gubernatorial candidacy in Maranhao. In Bahia, the PSDB is focused on securing the support of powerful PFL Senator Antonio Carlos Magalhaes, and is reportedly willing in return to support the re-election of PFL Governor Paulo Souto. 

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GETTING THE PMDB ON BOARD 

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¶6. (SBU) The PSDB-PFL alliance is already strong in Sao Paulo state, where 23 percent of the electorate resides and where Lembo succeeded Alckmin and "pefelista" Gilberto Kassab assumed the mayorship of Sao Paulo city when Jose Serra resigned to run for Governor. However, Governor Lembo is trying to bring the Brazilian Democratic Movement Party (PMDB) into the picture as well. He is planning to meet next week with PMDB state chairman and former Governor Orestes Quercia and former President Itamar Franco. Lembo foresees Quercia's running for a Senate seat on Serra's gubernatorial ticket and even believes that Franco might support Alckmin in his home state of Minas Gerais, though he admitted the latter partnership is a bit of a long shot. "Mineiros" [people from Minas Gerais], Lembo observed, referring both to Franco and to Minas Gerais Governor (and PSDB leader) Aecio Neves, "are difficult to deal with. They always want things their own way." He did not rule out the possibility that Alckmin might offer the Vice Presidential nomination to someone from the PMDB, in which case the PFL would back off but continue to support him. The great advantage of an alliance with the PMDB, Lembo, explained, is that, due to the size of the party's vote in the 2002 Congressional election, it is entitled to a great deal of free television time. 

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ALCKMIN CAMPAIGN TROUBLED, BUT HE CAN STILL WIN 

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¶7. (SBU) Lembo recognized that the Alckmin campaign faced many challenges. Allegations that Alckmin's wife had received some 400 

SAO PAULO 00000492 003 OF 004 

dresses free of charge from her couturier were harmful to Alckmin because they highlight the glamour of the ex-Governor's family in contrast to Lula's working-class background. It's the sort of thing voters understand and respond to. He also acknowledged that Alckmin hadn't handled the situation very well. On the other hand, Lembo didn't think the allegations that state-owned bank "Nossa Caixa" had steered advertising business to Alckmin's political allies (ref B) would hurt Alckmin's chances. The real problem, in Lembo's view, is that the PSDB is "lost." The party is internally divided and lacks an affirmative vision. So far, all they've been able to do is criticize the Lula government. The PSDB isn't really a national party; they're a Sao Paulo party with some regional branches. If Alckmin wins, it will be no thanks to his own party but because the PFL brings him victory. There's a cultural clash between former President Fernando Henrique Cardoso, who considers himself a cosmopolitan, international figure, and Alckmin, whom Cardoso views as a "caipira" (hillbilly) because he comes from Pindamonhangaba, a small town in the interior of Sao Paulo state. 

¶8. (SBU) Right now, Lembo conceded, President Lula has to be considered the favorite. His poll numbers remain stubbornly high despite the corruption scandals, largely because of his support from the poor, who tend to see things in black and white. Fortunately, Lembo said, Lula isn't a populist in the mold of Hugo Chavez or Evo Morales, but more a "petit bourgeois." He can still be beaten; in fact, internal PSDB polls showed Alckmin's support will grow as the voters get to know him. Lula, on the other hand, is a known quantity whose numbers are unlikely to improve. Lula may even be better off, in Lembo's opinion, without former Chief of Staff Jose Dirceu, who is a difficult personality with his own agenda, though the loss of Finance Minister Antonio Palocci does hurt Lula. Even if Lula does win the election, Lembo is sure the PT will fare badly, and Lula will be isolated and, lacking support in Congress, will have a "governability" problem. In this scenario, Lembo predicted that even conservatives from the PFL would likely support him to help keep the government afloat, and just wait out the four years until the next election. 

-------------- STATE POLITICS -------------- 

¶9. (SBU) Asked about the May 7 primary for the PT gubernatorial nomination, Lembo expressed the view that former Sao Paulo Mayor Marta Suplicy is likely to defeat Senator Aloisio Mercadante. He was not convinced that Lula was supporting Mercadante, suggesting that the "Machiavellian" Lula may secretly prefer Suplicy as the PT candidate. In either case, Lembo was quite confident that Serra would ultimately win the election. 

------- COMMENT ------- 

¶10. (SBU) Governor Lembo is an Alckmin loyalist who lobbied vigorously (and successfully) to get the then-Governor a Cabinet-level meeting in Washington when Alckmin visited there in February. He also owes his current position to Alckmin. Anything he says about the campaign and possible alliances must be viewed in that light. However, he is also a PFL insider and deal-maker whose assessment of the negotiations between the two parties is probably fairly close to the mark. We believe the PSDB and PFL will eventually reach an agreement and identify a PFL running mate. 

SAO PAULO 00000492 004 OF 004 

Efforts to form a triple alliance with the PMDB, on the other hand, in Sao Paulo or anywhere else, are much more problematic. Lula and the PT continue to court the PMDB arduously, including with an offer of the Vice-Presidential nomination. The PMDB is likely to enjoy the attentions of both sides for some time to come, even as the party tries to figure what to do about its presidential pre-candidate, Anthony Garotinho. END COMMENT. 

¶11. (U) BIOGRAPHIC NOTE: Claudio Lembo, 71, was born in Sao Paulo and educated at the University of Sao Paulo and Mackenzie University, where he later served as Law Professor and Rector. He was President of the National Renewal Alliance (ARENA) during the military dictatorship and later helped found the Brazilian Popular Party (PPB). He served as Sao Paulo Municipal Secretary of Extraordinary Affairs (1974-79), Secretary of Judicial Affairs (1986-89), and Secretary of Planning (1993). On the federal level, he has served as Chief of Staff to the Minister of Education and advisor to Vice-President Maciel. Lembo joined the PFL in 1989 and was the party's Vice-Presidential candidate that year. He was elected Lieutenant-Governor of Sao Paulo state on Alckmin's ticket in 2002. His term as Governor will end December 31, 2006. END BIOGRAPHIC NOTE. 

¶12. (U) This cable was coordinated with Embassy Brasilia and Consulate Recife. 

MCMULLEN