US embassy cable - 04BRASILIA1560

UNCLAS BRASILIA 001560 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV, ECON, SOCI, BR, Domestic Politics 
SUBJECT: LULA FINALLY GETS A BREAK - CONGRESS SUPPORTS HIS 
MINIMUM WAGE HIKE 
 
 
1. (SBU) SUMMARY.  Brazilian President Lula da Silva broke 
his losing streak on June 23 when the Chamber of Deputies 
voted to ratify his Presidential Decree raising the minimum 
wage from R$240 to R$260 (about US$ 87) per month.  This vote 
follows a series of defeats Lula has suffered in Congress, 
caused by a fractured coalition and coming on top of polls 
showing his popularity has slipped.  While this vote does not 
fully restore Lula's political authority, it should help end 
the worst phase of his presidency --a losing streak that 
began on February 13 when the "Waldomiro scandal" broke, 
revealing that one of Lula's advisors had solicited bribes 
from a numbers racketeer.  With municipal elections coming up 
in October, Lula is surely breathing a sigh of relief that he 
may be able to refortify his coalition and begin queuing up 
his legislative agenda for late 2004 and 2005. END SUMMARY. 
 
2. (SBU) On June 23, the Brazilian Chamber of Deputies voted 
272-172 to ratify a Presidential Decree issued by President 
Lula on April 30 that raised the minimum wage from R$240 to 
R$260 per month.  This raise was criticized both inside and 
outside Lula's coalition for being so small it barely covers 
inflation.  Presidential decrees must be approved by 
Congress, and this one had a torturous path to ratification 
that carried the administration on a six-week roller coaster 
ride.  Far more than the numerical level of the minimum wage 
was at stake:  the strength of Lula's eight-party coalition 
was being tested, and the opposition sensed his weakness and 
began pressing to defeat his legislative agenda.  A loss on 
the minimum wage would have called into question the 
President's ability to pass any future bills.  Lula himself 
lobbied hard for passage and deployed his cabinet ministers 
and political advisors to work the corridors of Congress on 
his behalf. 
 
3. (SBU) On June 2, Lula's coalition in the Chamber beat back 
an opposition proposal to raise the wage as high as R$275 per 
month (a raise that Lula calls fiscally impossible).  But 
when the measure went to the Senate on June 17, several 
administration allies either abstained or voted for the 
opposition's R$275 proposal, suggesting Lula had lost 
legislative authority in the upper house.  The measure then 
went back to the Chamber for the final decision, and the June 
23 vote ratifying the Lula-decreed R$260 wage allows the 
administration to breathe a sigh of relief. 
 
4. (SBU) The matter is now closed.  Candidates for Lula's 
Workers' Party (PT) running for local office in the October 
elections are certain to be criticized for not endorsing a 
higher wage, but this had become a must-win battle for the 
administration.  As it stands, Lula's authority in Congress 
is bent but not broken.  His coalition in the Chamber is more 
dependable than in the Senate, and Chamber Speaker Joao Paulo 
Cunha (PT-Sao Paulo) is certain to reap Lula's gratitude 
(pundits say he may get a cabinet slot in the next 
Ministerial shuffle).  Lula will live to fight another day in 
Congress. 
HRINAK