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Cablegate: Elder Statesman Delfim Netto Discusses President

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

C O N F I D E N T I A L SECTION 01 OF 02 SAO PAULO 001372

SIPDIS

NSC FOR SCRONIN
STATE PASS USTR

E.O. 12958: DECL: 12/14/2015
TAGS: PGOV PREL ECON PINR BR
SUBJECT: ELDER STATESMAN DELFIM NETTO DISCUSSES PRESIDENT
LULA AND ELECTION OUTLOOK

Classified By: CONSUL GENERAL CHRISTOPHER MCMULLEN FOR REASONS 1.4 (B,D

)

1. (C) Summary: PMDB Congressman and elder statesman Antonio
Delfim Netto told CG that while President Lula remains
personally popular, he needs to start courting the PMDB and
the smaller &left light8 parties if he hopes to get
re-elected in next October,s elections. Netto said the
PSDB/PFL electoral alliance poses a formidable front that
could defeat Lula in a likely second round, particularly if
the PSDB chooses Sao Paulo Governor Geraldo Alckmin as its
candidate. In contrast to the increasingly united PSDB/PFL
alliance, Netto noted that Lula has not taken any steps to
forge an alliance with the large, though divided, PMDB. (He
downplayed the possibility of the PMDB selecting a viable
presidential candidate from its own ranks.) Netto also
criticized the PT,s political immaturity, pointing to the
recent PT National Directorate,s public manifesto
challenging Lula,s economic policy. Netto said that while
Lula was conservative by nature, he was unlikely to change
his top foreign policy advisers, whom he characterized as
instinctively anti-American. He also ruled out any dramatic
foreign policy changes in a second-term Lula government,
averring that the Foreign Ministry would continue to reflect
the PT,s antipathy towards an FTAA and a more strategic
relationship with the United States. End Summary.

2. (C) CG and Poloff met December 13 with Federal Deputy
Antonio Delfim Netto to discuss Brazil,s political and
economic situation and the upcoming elections. Netto, who
served as Minister of Finance and Minister of Planning in the
1970s and 80s, enjoys a reputation as balanced and credible
elder statesman. While his party forms part of the governing
coalition, Netto was surprisingly candid and critical of the
ruling PT and some key aspects of Lula,s policies.

3. (C) Netto, who in recent months joined the Brazilian
Democratic Movement Party (PMDB) after years as a member of
the Progressivist Party (PP), characterized the PMDB as
&two-headed.8 There is a significant pro-government
faction, as well as an anti-government faction which is
highly critical of the Lula government but which also depends
on the government for favors (The independent-minded Netto
does not fit neatly into either camp). In the face of these
internal divisions, the PMDB must decide whether to select
its own presidential candidate or, if Lula appears a likely
winner, cut a deal to support Lula.

4. (C) Netto opined that after all the scandals it has
suffered, Lula,s Workers, Party (Partido dos Trabalhadores
) PT) will do well to elect 40 deputies in the October 2006
election, he opined (it currently has 90). He said support
from the PMDB would be critical to Lula,s reelection bid
because the PMDB has many strong gubernatorial candidates who
could provide crucial coattails. Netto faulted Lula for not
taking any early steps to forge a strong PT-PMDB alliance. As
a result, some PMDB leaders are pressing for the party to run
its own presidential candidate.

5. (C) Netto dismissed the likelihood of the PMDB fielding a
viable presidential candidate, noting that Supreme Federal
Tribunal (STF)President Nelson Jobim is unlikely to garner
sufficient party support. Similarly, Rio Grande do Sul
Governor Germano Rigotto is &extraordinary8 but lacks the
national exposure needed to make a successful run. Netto
characterized former Rio de Janeiro Governor Anthony
Garotinho as a dangerous populist, whose main support comes
from evangelical Christians.

6. (C) Netto noted that the PSDB and PFL appear increasingly
united and thus pose a credible challenge for Lula. Sao
Paulo Mayor Jose Serra (PSDB) is a tough and seasoned
candidate who has national recognition. Netto, however,
considers Sao Paulo state governor Geraldo Alckmin (also
PSDB) an even greater threat to Lula,s reelection bid.
Alckmin is a respected and able administrator who would be a
very strong candidate, although Netto acknowledged that Serra
would be tough to beat for the PSDB nomination.

7. (C) Netto offered candid opinions on Lula and the PT. The
party,s National Directorate,s recent manifesto criticizing
the government,s economic policy exposed the party,s
political immaturity. The Directorate has always been more
of an academic center or discussion group, creating many
internal fissures and tensions. Lula won the 2002 election
based on his personal popularity and his ability to attract
strong support from outside the PT. He,s not a leftist at
heart, but rather a culturally conservative Catholic labor
leader with good political instincts. In contrast to Lula,s
political pragmatism, others in the PT and government are
&revolutionaries who want to change the world.8

8. (C) According to Netto, Lula is dealing with a difficult
economic situation that he inherited from former President
Fernando Henrique Cardoso: a high tax burden, a fiscal
deficit, and a high debt-to-GDP ratio. The Central Bank has
exacerbated the situation by keeping interest rates too high,
inhibiting growth. These problems are hard to correct in the
short term, particularly with the continuing investigations
surrounding the political scandals, which are a complicating
Lula,s situation. Despite losing some support inside and
outside of his party, Lula will benefit from the &Bolsa
Familia8 welfare program, which should garner crucial blocs
of votes in the impoverished north and northeastern parts of
Brazil. Also, Lula is a charismatic speaker who is able to
capture the popular vote without being a populist.

9. (C) Commenting on the Lula government,s foreign policy,
Netto sharply criticized the Foreign Ministry (Itamaraty) for
ideologically driven policies that do not reflect the
country,s national interests. He attributed these
misdirected policies to leftist, anti-American ideologues in
senior positions, such as MFA Secretary General Samuel
Pinheiro Guimaraes and presidential adviser Marco Aurelio
Garcia. Netto said FTAA is absolutely essential to
strengthening economic ties, stimulating investment and
bringing in partnerships and joint ventures, but believes
there will not be any progress on FTAA as long as Guimarees
and Garcia are directing Lula,s foreign policies. According
to Netto, Garcia and Guimaraes wield tremendous influence
over Lula even though he doesn,t share their political
outlook or temperament. Netto averred that both will likely
continue in their positions should Lula win a second term,
adding that Brazil,s foreign policy is unlikely to change
course with respect to the United States. (He described the
bilateral relationship as &friendly but superficial.8)
Despite these obstacles at the governmental level, Netto said
much can be done in terms of outreach to strengthen
understanding between the U.S. and Brazil, which share many
common interests.

10. (C) Comment: Netto is a prominent economist by training
who has been in public life for over 40 years. He held a
number of senior governmental positions under the military
dictatorship and has been a Federal Deputy since 1987. He is
a well-informed, articulate and candid observer whose views
are not infused with strong political partisanship. However,
he only recently joined the PMDB and does not wield strong
influence in the party. Thus, his (implied) preference for
analliance between the PMDB and Lula may not reflect party
leadership thinking. Other PMDB representatives we have
spoken to recently ) for example, Sao Paulo state party
chairman Orestes Quercia ) strongly favor having the PMDB
run its own presidential candidate, though preferably not
Garotinho. Given the deep divisions in the PMDB at the
national level, it would be difficult for the party to field
a viable presidential candidate. For this reason, Netto
believes it would be more advantageous politically for the
PMDB to strike a strategic deal with Lula and the PT, even if
this means accepting some policies that do not sit well with
the PMDB rank and file. End comment.

11. (U) This message was cleared/coordinated with Embassy
Brasilia.
MCMULLEN

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