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Cablegate: Sao Paulo Leaders Outline Concerns with Gob to Wha a/S

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DE RUEHSO #0667/01 3631654
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R 291653Z DEC 09
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC 0266
INFO RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAC/AMEMBASSY ASUNCION
RUEHBR/AMEMBASSY BRASILIA
RUEHBU/AMEMBASSY BUENOS AIRES
RUEHLP/AMEMBASSY LA PAZ
RUEHMN/AMEMBASSY MONTEVIDEO
RUEHRI/AMCONSUL RIO DE JANEIRO
RUEHSG/AMEMBASSY SANTIAGO
RUEHSO/AMCONSUL SAO PAULO
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C O N F I D E N T I A L SAO PAULO 000667

SIPDIS
AMEMBASSY BRASILIA PASS TO AMCONSUL RECIFE

E.O. 12958: DECL: 2019/12/29
TAGS: PGOV PREL ECON EFIN BR
SUBJECT: SAO PAULO LEADERS OUTLINE CONCERNS WITH GOB TO WHA A/S
VALENZUELA

CLASSIFIED BY: Thomas J. White, Consul General; REASON: 1.4(B), (D)

1. (C) SUMMARY: On the final leg of his week-long visit to the
Southern Cone, Western Hemisphere Affairs Assistant Secretary
Arturo Valenzuela met with leading political and economic observers

in Sao Paulo, who expressed concern with Brazil's foreign policy,
public spending, and political maneuvering in the run-up to the
October 2010 elections. In a subsequent private meeting with A/S
Valenzuela, Sao Paulo Governor and presidential front-runner Jose
Serra warned that corruption and radicalization was growing in the
ruling Worker's Party (PT) and suggested that as president he would
push for a foreign policy more in tune with the United States. END
SUMMARY.

Sao Paulo Political and Economic Observers

--------------------------------------------- --------

2. (C) Concluding his visit to the region with a stop-over in Sao
Paulo on Saturday, December 18, A/S Valenzuela attended a lunch
hosted by the Consul General with the ChargC) and nine leading
political and economic experts including former Foreign Minister
Celso Lafer, former Brazilian Ambassador to the United States
Rubens Barbosa, and former Science and Technology Minister Jose
Goldemberg. A/S Valenzuela provided an overview of his trip and
emphasized the high USG priority placed on the bilateral
relationship. He identified cooperation with Brazil on regional
issues, including Honduras, as being of critical importance.

3. (C) All of the Brazilian invitees criticized the Lula
Administration's foreign policy, voiced concern over the increasing
radicalization of the governing Worker's Party (PT), and stressed
the deterioration of public accounts. Former FM Lafer described
Brazil's stance toward Iran as the "worst mistake" of Lula's
foreign policy, while Ambassador Barbosa cited Brazil's role in
Honduras as a prominent failure. All agreed that the GOB is
focusing on international issues (Iran, the Israeli-Palestinian
conflict, Honduras, etc.) in which Brazil has few national
interests and little influence, at the expense of ignoring issues
closer to home, including relations with Mercosur.

4. (C) Vice Chairman of the Brazilian Center for International
Relations (CEBRI) Roberto Teixeira da Costa and Professor
Goldemberg particularly questioned the GOB's interest in Iran,
given a paucity of commercial prospects and unlikelihood of civil
nuclear cooperation. [NOTE: In an aside with ChargC), Goldemberg,
who is also a renowned nuclear physicist, said Brazil has nothing
to offer Iran on nuclear fuel issues as Iran is already well ahead
of Brazil in centrifuge capacity. Moreover, he said he fully
appreciated Secretary Clinton's recent statement about countries
working closely with Iran and that the GOB should take it
seriously. END NOTE.] A/S Valenzuela emphasized that an
increasingly isolated Iran is looking for any opportunities like
the one offered by the Lula Administration to try to cover up its
lack of cooperation and unpopularity with the international
community.

5. (C) Domestically, the Brazilian participants described the PT's
strategy to make the upcoming national elections a referendum on
the Lula administration as an improvement over the Cardoso
administration and emphasized the party's intention to run an
aggressive campaign. Taking this tack, they argued, could portray
Jose Serra as Cardoso's candidate and help transfer some of Lula's
popularity to Dilma Rousseff, who has never run for public office
before and has demonstrated little charisma as a candidate so far.
Folha de Sao Paulo Ombudsman Carlos Eduardo Lins da Silva
highlighted the PT's unprecedented financial strength to run a
campaign after eight years in government, while political scientist
Bolivar Lamounier said an increasingly radicalized PT would likely
run a very negative campaign against the opposition. Lins da Silva

added that, in the event the PT loses the 2010 presidential
election, it could use its new wealth to serve as a very
troublesome opposition.

6. (C) Economically, Teixeira da Costa said that public perceptions
about Brazil were overly optimistic and that markets could shift
downward quickly if the international situation deteriorates
further. Ricardo Sennes, Director of international affairs'
consulting firm Prospectiva, echoed the assessment, saying that GOB
public accounts were under increasing strain and the Brazilian
economy remained uncompetitive over the long-term due to weak
infrastructure, high tax burdens, and rigid labor policies. All
agreed, however, that Brazil's strong economic performance over the
last eight years and current recovery from the global crisis would
help Dilma Rousseff's campaign. Regarding Brazil's recent
high-profile involvement in the Copenhagen Climate Conference
(COP-15), Professor Goldemberg said President Lula's performance
was mediocre, and jockeying by the GOB left the perception that
Brazil developed its position in the last two weeks. Conversely,
he praised Secretary Clinton's presentation and said that major
country players should meet in small groups (vice the G-77) to
foster progress on issues such funding and verification.

SP Governor and Presidential Front-runner Jose Serra

--------------------------------------------- ----------------------
-

7. (C) In a 90-minute one-on-one meeting at the Governor's Palace,
Jose Serra expressed a number of the same concerns in regards to
Brazil's national political currents, rising corruption, public
spending and foreign policy. Serra told A/S Valenzuela that the
ruling Workers Party (PT) is making every effort to build a
long-term power base while in government. Serra claimed Brazil is
reaching previously unseen levels of corruption as the PT and its
coalition allies use rising public expenditures to construct a
political machine for the 2010 elections. In the face of such
efforts, and what he described as the comparatively weak apparatus
of his own PSDB party, Serra was not firmly confident he could win
the presidency in October 2010.

8. (C) Beyond domestic politics, Serra criticized the Lula
Administration's foreign policy and indicated that he would take
Brazil in a more internationalist direction if elected president.
Serra cited Honduras specifically as a Lula Administration failure,
blaming the GOB stand and Honduran President Zelaya for impeding a
resolution. Conversely, he highlighted his engagement with the
State of California on climate issues as an example of
opportunities to work together on difficult issues. However,
reiterating his public position on biofuels, Serra criticized the
U.S. tariff on imported Brazilian ethanol as economically
illogical.

9. (C) Referring to rising populism in the region, Serra said he
found Argentine President Cristina Kirchner "cordial and smart" and
suggested that if the USG has concerns about Kirchner's populist
politics, that PT presidential candidate Dilma Rousseff should
cause greater concern. He also warned that USG references to a
"special relationship" with President Lula do not resonate well
with all segments of Brazil and could be manipulated by the PT.
[COMMENT: Beyond Argentina, Serra appeared generally uninformed of
recent developments in the Southern Cone, including Paraguayan
President Lugo's political situation, and seemed primarily immersed
in Brazilian domestic politics. END COMMENT.] Finally, Serra said
he was working on several articles and op-eds that would publicly
articulate his criticism of the Lula Administration's foreign
policy in the coming months.


10. (U) WHA A/S Valenzuela has cleared this cable.
White

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