US embassy cable - 05BRASILIA3106

UNCLAS SECTION 01 OF 02 BRASILIA 003106 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, ECON, BR, Domestic Politics 
SUBJECT:  BRAZIL CORRUPTION SCANDAL UPDATE, WEEK OF 21-25 
NOVEMBER 2005 
 
REF.: BRASILIA 03001 AND PREVIOUS 
 
1.  SUMMARY.  The long-awaited dismissal of Deputy Jose 
Dirceu from the House of Deputies was delayed again, and it 
is now at least plausible that he may not be dismissed at 
all.  After receiving a favorable decision from the 
Constitution and Justice Committee that postponed one more 
time the final vote on his impeachment, Dirceu may win a 
reprieve from the Supreme Court that could delay the final 
disposition of his case into 2006.  In a November 25 
conversation with Poloff, Dirceu said he now gives himself 
a 50 percent chance of surviving (vs. a 25 percent chance 
before the Supreme Court's decision).  The opposition 
adopted a tougher stance after the demise of the Vote- 
Buying Scheme CPI, although they agreed to invite, rather 
than summon, Finance Minister Palocci to testify before the 
Bingos CPI.  The latest poll released on November 22 shows 
Lula's approval ratings reaching record lows.  END SUMMARY. 
 
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DIRCEU CASE: CONGRESS VS. SUPREME COURT 
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2.  Former Lula Chief of Staff Jose Dirceu scored two 
important victories in the Chamber and the Supreme Court 
(STF) this week, improving his chances of avoiding 
impeachment, and firing up an institutional crisis between 
the Legislature and the Judiciary.  On November 22, as 
expected, the Chamber's Constitution and Justice Committee 
(CCJ) approved the report of Deputy Sergio Miranda (PDT- 
MG), which requested the postponement of Dirceu's judgment 
by the Chamber until his appeal pending before the Supreme 
Court had been decided.  By a 34 to 15 vote margin, 
Dirceu's victory in the CCJ reflected the opposition's fear 
that, if his case were declined and the plenary had voted 
on his expulsion on November 23, as previously scheduled, 
the Supreme Court would vote in favor of Dirceu and 
invalidate the process.  Since the Supreme Court decision 
was supposed to be released on November 23, the Chamber 
postponed the final vote on Dirceu's expulsion to November 
30. 
 
3.  The Supreme Court decision, however, was not what the 
deputies expected.  Dirceu's appeal to the court was based 
on the fact the one of the accusation witnesses, the 
manager of Banco Rural, Katia Rabello, testified after 
Dirceu had presented his defense, making it impossible for 
him to properly defend himself from her accusations.  Ten 
of the 11 Justices voted on the appeal, 5 in favor and 5 
against, leaving the final decision in the hands of 
Minister Sepulveda Pertence, the only Justice not present 
in the session.  Pertence will announce his decision on 
November 30, just a few hours before the Chamber is 
scheduled to vote on Dirceu's impeachment. 
 
4.  Pertence may vote against Dirceu's appeal, in which 
case the Chamber would be free to start procedures to expel 
him.  He may also decide to exclude the testimony of Rabelo 
from the final report, ostensibly giving Dirceu just a few 
more days before being impeached, but this would mean 
eliminating evidence, and Dirceu may use the resulting lack 
of evidence as the basis for another appeal.  Pertence's 
last possibility would be to request the Ethics Committee 
to summon more defense witnesses, reintroduce the report 
and vote on it again.  In this case, Dirceu's impeachment 
vote might be put off until early 2006, which will delay 
the other 13 impeachment cases pending before the Ethics 
Committee.  In a November 25 conversation with Poloff, 
Dirceu said he now gives himself a 50 percent chance of 
surviving (vs. a 25 percent chance before the Supreme 
Court's decision). 
 
5.  Following the Supreme Court vote, the president of the 
Ethics Committee, Deputy Ricardo Izar, sent a memo to all 
of the Justices explaining how the impeachment process was 
conducted and why Rabelo was the last witness to testify. 
He has also requested a meeting with the Supreme Court 
Justices, in an attempt to persuade them to alter their 
decision.  However, many congressmen, both in the Chamber 
and in the Senate, have been criticizing the Supreme 
Court's "undue interference" in Legislative affairs, and 
raising concern about an institutional crisis. "The 
Judiciary is politically interfering in Congressional 
affairs" stated Senator Jefferson Peres (PDT-AM) before 
senators from opposition parties announced that they will 
not vote on the 2006 Budget until Dirceu's case is 
finalized. 
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OPPOSITION GETS TOUGH IN REMAINING CPIS 
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6.  The abrupt end of the Vote-Buying Scheme CPI, regarded 
by some as an absolution of the Lula administration, 
prompted the opposition to get tougher in the other two 
committees.  In the Bingos CPI, the governing coalition and 
the opposition agreed not to summon, but to invite, 
Minister Palocci to testify.  The date has not yet been 
determined, but should be sometime before December 10. 
During the past few days, the Minister appeared before 
three different Congressional Committees: the Senate's 
Economic Affairs Committee, on November 16; the Chamber's 
Finance Committee, on November 22; and a public hearing in 
the Chamber, also on November 22.  Septel to follow will 
examine Palocci's situation more in depth. 
 
7.  While the government and the opposition came to 
agreement in the Bingos CPI, in the Postal Service CPI, 
disputes prevented a vote on the preliminary report of the 
Sub-Committee on Financial Activities, which recommends the 
prosecution of former PT treasurer Delubio Soares and PT 
"bagman" Marcos Valerio.  The governing coalition demanded 
the inclusion of the case of Deputy Eduardo Azeredo -- 
former PSDB leader whose treasurer confessed receiving 
money from Marcos Valerio -- in the sub-committee's report, 
while the rapporteur, Deputy Gustavo Fruet (PSDB-PR), has 
refused to include the case, arguing that it has already 
lapsed.  PT representatives in the committee stated they 
will either refuse to vote on the report, propose an 
alternative report or present amendments.  The report can 
only be sent to the competent authorities if the committee 
approves it. 
 
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LULA'S APPROVAL RATINGS REACH RECORD LOWS 
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8.  The Lula administration's popularity has dropped to new 
lows and his re-election chances are looking dimmer, 
according to the most recent CNT/Sensus poll released on 
November 22.  President Lula's personal approval rating 
declined by 3.3 points compared to September figures, and 
is now 46.7%.  The government approval ratings also 
suffered a similar drop, from 35.8 to 31.1%.  Moreover, 
besides showing him losing to Sao Paulo Mayor Jose Serra in 
a second-round run-off, the new poll shows that the margin 
of victory Lula would enjoy against other prospective 
candidates is also diminishing. 
 
CHICOLA