US embassy cable - 05BRASILIA792

UNCLAS SECTION 01 OF 03 BRASILIA 000792 
 
SIPDIS 
 
SENSITIVE 
 
TREASURY FOR OASIA PARODI 
STATE PASS USTR 
 
E.O. 12958: N/A 
TAGS: PGOV, PINR, PREL, ECON, BR, Domestic Politics 
SUBJECT: IRRITATED WITH PRESSURES, LULA PUTS OFF MOST OF 
HIS CABINET SHUFFLE 
 
REF: BRASILIA 0767 
 
1. (SBU) SUMMARY.  Irritated by incessant clamoring from his 
allied parties as they jockeyed for cabinet posts, Brazilian 
President Lula da Silva dug in yesterday and put most of the 
cabinet shakeup on hold.  The final straw for Lula was a 
challenge from the new Speaker of the Chamber, Severino 
Cavalcanti, who insisted that if his PP party did not get an 
important ministry, he would take the party into the 
opposition.  Lula balked, and instead of announcing the broad 
shakeup that had been expected for months, he made only two 
small changes.  The new cabinet ministers are Federal Deputy 
Paulo BERNARDO (PT-Parana) who will take over the Planning 
Ministry, and Senator Romero JUCA (PMDB-Roraima) who takes 
over at Social Security (bio info at paras 6-9).  Lula's 
occasional fits of pique are well-known here, but this one 
ultimately could serve him well.  By putting at least a 
temporary end to the unseemly bargaining for cabinet posts, 
Lula has stood up to rebellious parties and may have 
reinforced the coalition discipline that has slipped away in 
recent weeks.  Given that dozens of names and as many as 
eight cabinet slots have been in play, Lula's abrupt decision 
leaves many winners and losers waiting to see if more changes 
are in the offing.  END SUMMARY. 
 
CABINET SHUFFLE - SLOW TRAIN COMIN' 
----------------------------------- 
2. (SBU)  The cabinet shuffle began in November 2004, when 
Vice-President Alencar put on a second hat and took over the 
Defense Ministry while Planning Minister Guido Mantega was 
moved to the national development bank, BNDES.  A few weeks 
later, two allied parties (PMDB and PPS) were riven by 
uncertainty over whether to remain in his coalition.  This 
made obvious the need to change the cabinet both to swap out 
weak performers and to reward loyal allies with ministerial 
posts.  Initially, Lula seemed determined not to drag out the 
process as he did in 2004.  But it did drag out, 
excruciatingly.  For the past four months, rumors have 
swirled with names of several ministries, ministers and 
parties in play, putting great pressure on the administration 
and slowing the work of ministers deemed lame ducks.  Last 
month, Severino Cavalcanti of the coalition's PP party was 
elected Speaker of the Chamber in a surprise (reftel), 
forcing Lula to consider buying his loyalty by giving the PP 
the Ministry of Communications. 
 
LULA GETS TICKED 
---------------- 
3. (SBU) Lula has a stubborn streak and can be sensitive to 
outside pressure (witness his irritation with a critical NY 
Times article in May 2004, when he nearly expelled the 
journalist from Brazil).  The final straw came on May 21 when 
Cavalcanti, whose childlike glee at becoming Speaker has led 
him to explore the outer limits of his authority, announced 
to the press that unless Lula gave an "important ministry" to 
the PP, he would carry the party into the opposition.  Lula 
balked.  For weeks now, it has been assumed that Lula would 
name Cavalcanti's PP crony, Federal Deputy Ciro Nogueira to 
be Minister of Communications.  Had Cavalcanti only kept his 
mouth shut, the PP likely would have gotten its "important 
ministry".  Instead, in a curt press release on May 22, Lula 
announced only two minor cabinet moves:  PT Federal Deputy 
Paulo Bernardo will take over the Planning Ministry, and PMDB 
Senator Romero Juca will take over at Social Security.  There 
was no announcement on when, or if, further changes will be 
made. 
 
WINNERS AND LOSERS 
------------------ 
4. (SBU) The biggest losers are the PP and Ciro Nogueira, who 
will remain in the Chamber waiting to see if Lula thaws.  The 
PP holds 51 Chamber seats including the Speakership but has 
no cabinet post (though Ag Minister Rodrigues is associated 
with the party).  This leaves the PP, which tends to be more 
conservative than Lula and the Workers' Party, reluctant to 
support the administration's agenda in Congress.  Another 
loser is Federal Deputy Joao Paulo Cunha (PT), the former 
Chamber Speaker who was hoping to get a post in order to 
launch his bid for Sao Paulo's governorship next year. 
Similarly, Senator Roseana Sarney --who switched from the 
opposition PFL to the PMDB when her father, Senator Jose 
Sarney, got her a promise of a cabinet slot-- will cool her 
heels in the Senate.  Meanwhile, many of those predicted to 
be sacked will stay in place (at least until further changes 
are announced), including: Humberto Costa at Health, Aldo 
Rebelo as Lula's Political Coordinator, Olivio Dutra at 
Cities, and even Vice President Jose Alencar, who announced 
recently that he saw himself out of place as Defense Minister. 
 
COMMENT - LULA GETS PRESIDENTIAL 
-------------------------------- 
5. (SBU) Lula faced a crossroads this week.  He could have 
caved into his allies' incessant clamoring for perks and 
Cavalcanti's audacious challenge for an "important ministry", 
all in the name of consolidating the coalition.  Or he could 
have done what he did: call Cavalcanti's bluff and reassert 
authority --both his as President and the PT's leadership of 
the coalition.  After Lula's announcement, Cavalcanti 
immediately backed down and said the PP would remain in the 
coalition with or without a ministry.  Lula scored a little 
victory this week, saving face and at least temporarily 
reasserting some discipline in the coalition, while putting 
an end to Cavalcanti's five-week joyride.  This will not be 
the final word, and in short order the allied parties will 
likely begin complaining again.  Coalition management is a 
journey in Brazil, not a destination.  But for a few days at 
least, Lula is back in the driver's seat. 
 
MINISTER OF PLANNING - PAULO BERNARDO 
------------------------------------- 
6. (SBU) The new Minister of Planning is Paulo Bernardo, a 
Federal Deputy from Lula's Workers' Party (PT).  The Planning 
Ministry came open last November, when Lula asked respected 
Minister Guida Mantega to take over at the national 
development bank, BNDES.  The PT will keep Planning because 
other parties shunned it, calling it a "technical" ministry, 
i.e., one that requires professional competence but does not 
bring a big discretionary budget. 
 
7. (SBU) Bernardo, 53, is a Lula loyalist with a background 
in banking and public finance.  He spent his early career 
with the Bank of Brazil before being elected to two terms in 
Congress (1991-1999) from the southern state of Parana.  As 
chair of the Oversight Committee, he was one of the first to 
utilize new accounting software to closely monitor 
expenditures of the Cardoso administration.  In 1999-2000, he 
served as state Finance Secretary of the neighboring state of 
Mato Grosso do Sul, in the administration of his PT friend, 
Governor Zeca.  Returning to Parana, he was elected to his 
third congressional term in 2002.  In 2004, he chaired the 
high-profile Joint Budget Committee, which brought him to the 
attention of Finance Minister Antonio Palocci who championed 
his name for the Planning Ministry. 
 
MINISTER OF SOCIAL SECURITY - ROMERO JUCA 
----------------------------------------- 
8. (SBU) The new Minister of Social Security is Romero Juca, 
a Senator from the coalition's PMDB party.  He will be the 
third Social Security Minister under Lula.  The first was PT 
stalwart Ricardo Berzoini, who was replaced by PMDB Senator 
Amir Lando in the January 2004 shakeup --one of two PMDB 
members given cabinet posts as that party was brought into 
the coalition.  Lando's tenure has been uninspired, and the 
deficit in the public sector pension system has increased and 
could reach US$14 billion this year.  Thus Lando is being 
replaced by another PMDB member for performance and not 
political reasons.  The second PMDB minister, Eunicio 
Oliveira at Communications, will keep his post. 
 
9. (SBU) Romero Juca, 50, is from the state of Pernambuco and 
spent much of his life there, studying economics and working 
in a variety of management positions in state government.  In 
1985, he moved to Roraima in the Amazon region when 
then-President Sarney appointed him to head a development 
project called the "Rondon Foundation".  Sarney later named 
him Director of the National Indian Foundation (FUNAI) and 
then appointed him the first civilian Governor of the 
then-territory (now state) of Roraima (1988-1991).  (Juca has 
remained close to Sarney, who is now in the Senate and 
remains a skilled king-maker.)  Juca, then with the PFL 
party, was elected to the Senate (1995-2003) from Roraima and 
served on the Social Affairs, Infrastructure, and Budget 
Committees.  He later switched to the PMDB and was reelected 
to a second term (2003-2011).  In 2004, while Deputy Paulo 
Bernardo (above) chaired the Joint Budget Committee, Juca 
drafted and sponsored the actual budget bill that went 
through the committee.  He has been the subject of several 
corruption allegations over the years: that he allowed 
illegal logging on Indian lands while heading FUNAI, that he 
embezzled funds from a Roraima social assistance fund, and 
that he skimmed off government funds earmarked for civil 
construction projects in Roraima.  All of the allegations 
were shelved.  He is married to Tereza Juca, the Mayor of 
Roraima's capital, Boa Vista. 
DANILOVICH