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Cablegate: Sao Paulo Race Could Set Stage for 2010 Presidential

VZCZCXRO6102
RR RUEHRG
DE RUEHSO #0606/01 3121856
ZNR UUUUU ZZH
R 071856Z NOV 08
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 8690
INFO RUEHBR/AMEMBASSY BRASILIA 9852
RUEHRG/AMCONSUL RECIFE 4240
RUEHRI/AMCONSUL RIO DE JANEIRO 8916
RUEHBU/AMEMBASSY BUENOS AIRES 3317
RUEHAC/AMEMBASSY ASUNCION 3564
RUEHMN/AMEMBASSY MONTEVIDEO 2804
RUEHSG/AMEMBASSY SANTIAGO 2564
RUEHLP/AMEMBASSY LA PAZ 3973
RUCPDOC/USDOC WASHDC 3201
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHDC

UNCLAS SECTION 01 OF 02 SAO PAULO 000606

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: PGOV PINR ECON EFIN EINV ETRD BR
SUBJECT: SAO PAULO RACE COULD SET STAGE FOR 2010 PRESIDENTIAL
CONTEST

REF: A. SAO PAULO 581;B. Sao Paulo 560

SENSITIVE BUT UNCLASSIFIED--PLEASE PROTECT ACCORDINGLY

1. (SBU) Summary: The October 2008 Sao Paulo mayoral race set the
stage for Brazil's 2010 presidential elections, positioning Sao
Paulo Governor Jose Serra (Social Democrats - PSDB, opposition) to
face off against presidential chief of staff Dilma Rousseff (Workers
Party - PT, government), president Lula's apparent favorite to
succeed him. Serra's PSDB and the PT will now compete for the
support of the PMDB, whose overall national showing (and lack of a
national candidate) makes it an attractive coalition partner for any
grouping that would govern Brazil. Longer term, the Sao Paulo
mayoral race could reveal a trend toward the solidification of
"middle class politics" in middle and upper income Brazilian cities.
Voters proved immune to populist appeals from Workers Party (PT)
candidate Marta Suplicy even while opinion surveys showed their
continued positive impression of President Lula. Nonetheless,
fallout from the global financial crisis could test President Lula's
popularity in the coming months. Economic challenges might also
benefit Serra, who could market himself to both the public and to
business as an economic problem-solver. End Summary.

Sao Paulo Mayor's Race

2. (U) The 10/26 Sao Paulo mayoral runoff resulted in a large
come-from-behind win for incumbent Gilberto Kassab (Democrats Party
-DEM, opposition) and sets the stage for the 2010 presidential
contest (Ref A).

Serra's Wager...

3. (SBU) Serra bet big on supporting Kassab's candidacy against the
candidate from his own party (and stalking horse for Serra rival
PSDB Governor of Minas Gerais Aecio Neves), Geraldo Alckmin. Kassab,
who succeeded Serra as Mayor, is an unassuming figure not noted for
his charisma or oratorical skill. He came from behind and won a
narrow first round victory and then vanquished PT candidate Marta
Suplicy in a 60-40 landslide in the runoff election. Serra's bet
paid off and he has a strengthened third-party ally governing
Brazil's largest city. Right after the election, Kassab, not content
to rest on the laurels of his big victory, promised public works
projects to win over voters in the outskirts of Sao Paulo who voted
heavily for PT candidate Suplicy. The Serra-Kassab team could do
much in two years to lock down greater Sao Paulo for Serra in the
2010 presidential race, including gaining more support for him in
the now pro-PT blue collar suburbs of the city.

Losing Faction Wants To Return to Serra's Good Graces

4. (SBU) Serra's backing of a DEM candidate opposed by a member of
his own party divided the PSDB, but Kassab's landslide confirmed
Serra's judgment, and strengthened his hand. When asked if Serra
would need to "reach out" to pro-Alckmin members of the PSDB in the
wake of the elections, political analyst Rogerio Schmitt laughed and
said that any reaching would likely come from the other direction.
He related how, in a recent TV appearance with various PSDB reps,
the off-camera talk between the Sao Paulo PSDB members revolved
around how eager the Alckmin supporters were to get back into
Serra's good graces.

Rivalry for PSDB Nomination Continues

5. (U) Despite the fact that Serra's man, Gilberto Kassab, beat PSDB
rival Aecio Neves's candidate for Sao Paulo Mayor, Geraldo Alckmin,
in the first round, the rivalry between the two governors continues.
Should Serra stumble, Neves would be next in line for the PSDB
presidential nomination. That said, both face challenges moving
forward. Serra must negotiate an end to a two-month old Civil Police
strike in Sao Paulo state that led to violent pre-election protests
(Ref. B), and Neves has to contend with protests from unhappy
teachers. Right now Serra holds the upper hand in the run-up to
2010. Some in the PSDB have begun to talk about a Serra-Neves "dream
ticket" with Serra at the top of the ticket. Political gossip
columnists have reported that former president Fernando Henrique
Cardoso is urging Serra and Neves to run together.

A New Middle Class Politics? Maybe.

6. (U) Recent studies now classify 51 percent of Brazilians as

SAO PAULO 00000606 002 OF 002


"middle class," the result of strong economic growth and the GOB's
emphasis on programs to aid the poor, most notably the Bolsa
Familia. Sao Paulo voters chose a candidate who had proven to be a
good city manager. Kassab did not promise system-change or
redistribution of wealth, but rather cited his record as a mayor who
could make incremental improvements in health, education, and public
infrastructure. While Sao Paulo voters are more conservative than
the average Brazilian due to the concentration of businesses in this
world-class mega-city, their opting for a pragmatic candidate of
incremental change is likely indicative of the more measured choices
that an increasingly prosperous electorate could make, should
economic growth continue. In the words of one Brazilian
editorialist, Fernando Abrucio, the winners in the most recent
elections were those who showed they knew how to serve the voters.

In Politics, the Local Outweighs Lula

7. (U) Observers have noted that the Sao Paulo mayoral race
indicated that President Lula could not transfer his own sky-high
approval rating (80 percent) to his chosen candidates. Marta Suplicy
lost and, in the nearby working class suburb of Sao Bernardo, Lula's
close ally, Luis Marinho, won only after a very expensive campaign
that went to a second round.
Suplicy's loss means that there is no emerging rival to Lula's
current favorite for the 2010 PT nomination, his chief of staff
Dilma Roussef.

8. The PSDB and the PT will now compete for the support of the
Brazilian Democratic Movement Party (PMDB, a non-ideological party
in the government coalition) whose strong national showing in
mayoral races (and lack of a national candidate) makes it an
attractive coalition partner for any grouping that would govern
Brazil.

Comment: Serra Ahead, and the Economy Could Help

9. (SBU) Though Serra looks the favorite for 2010, nothing is
guaranteed. He faces a stubborn and unresolved police strike (Ref B)
and other outside events could get in his way. That said, he remains
the big bettor and the big winner from the 2008 Sao Paulo mayoral
race. Moreover, Serra's candidacy comes at a time when global
economic problems are starting to hit Brazil. If Team Lula fumbles
during the ongoing financial crisis, look for Serra to market
himself as a leader who will use the state to help both citizens and
business to get through hard times.
10. (U) This cable was coordinated/cleared by Embassy Brasilia.

WHITE

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