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UNCLAS SECTION 01 OF 02 BRASILIA 001968 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
C O R R E C T E D COPY (DATE CHANGE - PARAGRAPH 2) 
 
E.O. 12958: N/A 
TAGS: PREL BR
SUBJECT: BRAZIL: AMBASSADOR'S COURTESY CALL ON MINISTER OF 
COMMUNICATIONS - CORRECTED COPY 

BRASILIA 00001968 001.2 OF 002 

¶1. (SBU) Summary. In a wide-ranging and friendly meeting on 14 September, Minister of Communications and leading PMDB party figure Helio Costa told the Ambassador that President Lula da Silva will likely win a first-round victory in October's election, and Lula's PT party, the PMDB and other small parties will form a working majority in congress that will facilitate governance. The PMDB expects to gain control of four or five ministries and a similar number of congressional committees in a second Lula government. In foreign affairs, Costa expressed disdain for Venezuelan President Hugo Chavez, saying "You cannot trust that man," and "He betrayed Lula," -- clear references to Chavez's role in influencing recent nationalization of Petrobras assets in Bolivia by the Morales government. On communication issues in his portfolio, Costa said Brazil seeks technological investments and partnerships, and this approach played a role in the victory in Brazil of the Japanese digital TV standard over the American standard. But he added categorically that the U.S. digital radio system will be the one selected for Brazil. End summary. 

INTERNAL POLITICS ----------------- 

¶2. (SBU) Costa said he believed it is very possible that Lula could win the presidential election in one round of voting on 1 October, but even if a second round is required, Lula would ultimately be victorious. (Note: In the Brazilian electoral system, a candidate must obtain 51 percent of the valid votes (total votes minus nulls and voids) to be declared a clear winner. If this does not occur, a second voting round between the two finalists is required. The second round in this election would occur on 29 October. End note.) Costa predicted his PMDB party would elect at least 90 congressmen, that the PT would "do much better than some are predicting," and that the PMDB, PT and some allied small parties should be able to construct a working majority of about 200 federal congressmen. In such a coalition, the PMDB would expect to have control of four or five ministries, and selection of PMDB congressmen to head key committees, including infrastructure, planning, development, communications, and possibly education and foreign affairs. 

¶3. (SBU) Ambassador asked about predictions by some political commentators that a second Lula mandate could be characterized by legislative gridlock, with the PSDB-led opposition in no mood to meet the government half-way. Costa discounted this scenario, arguing that he believes a consensus can be established across political and party lines on those issues that most Brazilians agree are important, including key institutional reforms in the political system, tax structure, judiciary and social security. 

FOREIGN POLICY -------------- 

¶4. (SBU) Turning to international issues, Costa recalled his many years living in the United States, in New York and Washington, as a journalist for the Globo television network and a translator for the Voice of America, and said he would like to see the U.S. and Brazil continue to strengthen their relationship. Ambassador noted his awareness that foreign affairs seldom are a major factor in Brazilian elections, but asked whether Costa's PMDB party had specific priorities or influence in foreign policy in a second Lula mandate. Costa replied that the PMDB, if it gains the chairmanship of the Senate's foreign affairs and defense committee in a second term, would certainly have a voice in foreign policy matters. Costa, in speaking about whether Foreign Minister Amorim 

BRASILIA 00001968 002.2 OF 002 

would remain in his post in a second Lula term, said he expected either Amorim or another career diplomat would be minister. In response to a query by Ambassador, Costa said he did not expect deputy minister Samuel Pinheiro Guimaraes to be promoted to minister, as he is "too controversial." (Comment: Pinheiro Guimaraes is widely seen as ideologically anti-American and anti-free trade, and has instituted management changes in the foreign ministry that have been extensively criticized. End comment.) 

¶5. (SBU) Costa said it is the view of many Brazilians that Brazil should be "the natural leader of Latin America, or at least of South America," owing to its size, population and economy. Furthermore, the emergence of Lula as a leader "who has moved clearly toward the center" and is a reliable, pragmatic and democratic partner for the United States and others places it in sharp contrast to some countries in the region, Costa added. Asked about Bolivia, Costa said Lula is prudent to attempt negotiated settlements with the Morales government on the status of Petrobras' assets in Bolivia, despite Morales' "aggressive" provocations. On Venezuela, Costa was much more combative: "You cannot trust that man," he said of Venezuelan President Hugo Chavez. Alluding to Chavez's role in supporting Morales' decisions on Petrobras, Costa said flatly that "Chavez betrayed Lula." 

TRADE AND PARTNERSHIPS ----------------------

 ¶6. (SBU) Turning to his portfolio as communications minister, Costa explained his ongoing efforts to bring wireless internet access to more and more areas in Brazil, using many American companies in the process. He said the GOB decision to select the Japanese standard for digital television had been driven in part by the perception that the Japanese would bring investment and technology transfers directly into Brazilian industry, while the American standard's representatives had seemed less open to such cooperation, and less enthusiastic and organized overall in their approach to Brazil. However, Costa was emphatic in saying that the U.S. IBOD digital radio system will be chosen for Brazil, as it offers clear advantages over the Korean, European and other competitors. 

¶7. (SBU) Comment. Costa clearly expects to retain his ministerial portfolio in a second Lula government, and ultimately run for governor in four years. He is a leading figure and interlocutor in the pro-Lula wing of the huge and fractious PMDB party. We believe his assessments of congressional dominance by a PT-PMDB coalition are overly optimistic, given the rifts in the PMDB and uncertainty about PT election results. We expect turbulence and continued corruption allegations in congress in a second Lula term, but even some opposition leaders agree with Costa's forecast that they will try to work with Lula on reforms and other key issues of national interest on which there is broad consensus. Costa was generous with his time, and demonstrates an evident interest in maintaining an open channel of communication with the Ambassador. In fact, he suggested numerous meetings and dinners with leaders in the Senate and leaders within his own party. We will leverage that disposition in gaining access to other PMBD leaders and in promoting and defending U.S. equities in communications and related areas. 

Chicola