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Brazil's President Dilma Rousseff reacts during a news conference on the 2014 World Cup in Brasilia, July 14, 2014. REUTERS/Ueslei Marcelino


By Brian Winter

SAO PAULO (Reuters) - When opposition party Senator Aecio Neves officially kicked off his presidential campaign last week, he posted a video on Facebook calling for a "fairer, more efficient, and more generous Brazil."

"Efficient" struck some as an odd rallying cry in a tropical country known for its, well, un-Swiss-like approach to time.

But Neves' campaign strategists say it was an overt appeal to voters in what looks like the most important battleground in October's election: Sao Paulo, Brazil's biggest city, whose residents tend to think of themselves as more business-like and buttoned-down than the rest of the nation.

With 20 million people in the metropolitan area, accounting for about a tenth of Brazil's population and a much greater share of its wealth, Sao Paulo has always been a key source of votes and campaign financing.

This time, though, the stakes are higher. Both Neves and President Dilma Rousseff, who is seeking re-election, believe the city's voters are more up for grabs than they have been in decades, and could very well decide the winner nationwide.

Sao Paulo used to be a reliable bastion of Neves' centrist Brazilian Social Democracy Party (PSDB). The party took the city and surrounding state, which has the same name, by 5 million votes when it last won a presidential election in 1998.

Since then, Rousseff's left-leaning Workers' Party has steadily eroded that advantage. She lost the state by just 2 million votes in a runoff for the presidency in 2010, and her party then won Sao Paulo's mayorship in 2012, a high-profile office it previously held between 2001 and 2004.

A poll last month showed Rousseff with a 4 percentage-point advantage over Neves among voters in the metro area for this year's election, on Oct. 5.

Nationwide, recent polls have given Rousseff a lead of about 15 to 18 percentage points.

But PSDB leaders believe that, despite their recent setbacks here, Sao Paulo's large pool of relatively well-educated voters plus the city's recent economic troubles make it their best opportunity to close the gap.

"It's critical for us to recover our advantage here," said Fernando Henrique Cardoso, who was president from 1995 to 2003 and remains the PSDB's honorary leader. "Without it, a victory (for Neves) is probably difficult."

That explains why Neves' first official campaign event on July 6 saw him wearing an oriental-style yellow robe - at an event celebrating Sao Paulo's large Japanese community.

Neves believes he can beat Rousseff handily in Sao Paulo, especially if the election goes to a run-off vote between the two, which seems likely.

Rousseff has also stepped up her appearances in the city, aiming to keep a lead here that could seal her re-election.

The third-place candidate, Eduardo Campos, has also made it his headquarters even though he hails from Pernambuco state, some 1,600 miles (2,600 km) away.


A look at Sao Paulo's economy explains why Rousseff is leading - but also why the opposition thinks she's vulnerable.

Almost half of the city's residents are members of Brazil's so-called "C Class" - the group that was lifted out of poverty into the lower middle class during an economic boom last decade.

Poorer neighbourhoods have seen many "favela" shanytowns replaced by more modern, brightly painted apartments. The number of cars in the city has doubled since 2001 as incomes rose. Many voters give the credit to Rousseff and her predecessor Luiz Inacio Lula da Silva, who governed from 2003 to 2010.

"Nobody cared about the working class in this city until Lula won," said Moyra Silva, a shopkeeper in Diadema, a working-class suburb.

However, the city is hardly a slam-dunk for Rousseff.

Only 23 percent of voters in Sao Paulo state, where the city is located, rated her government as "great" or "good" in a June poll by Datafolha - 10 points below the nationwide figure.

When the World Cup's opening match was held in Sao Paulo last month, thousands of fans jeered and cursed Rousseff when video screens showed her image. The city was also the starting point for anti-government street protests that swept Brazil last year.

Rousseff's allies blamed both incidents on voters who were richer than the national average, and tend to vote PSDB.

But Sao Paulo has been hit hard by the economic troubles that have characterized Rousseff's presidency.

With growth stagnant for the past three years, the city's industrial base has suffered and 96,000 factory workers were laid off in Greater Sao Paulo in the year through May.

Those still working have less spending power as prices rise at a 6.5 percent annual clip. Inflation hits harder in Sao Paulo than the national average because workers here tend to spend more of their income on services, where prices are increasing at about 9 percent a year.

Cardoso says Neves can win votes in Sao Paulo by emphasizing the PSDB's strong record against inflation - and by appealing to the city's straight-laced self-identity.

"You will hear him talk about efficiency, and talk against corruption - those are issues that tend to weigh more in Sao Paulo than in other regions," said Cardoso, 83.


The Workers' Party has its own designs.

Lula, 68, recently told reporters that Rousseff has "a great chance" of winning Sao Paulo. He also pointed out that Neves, unlike the PSDB's candidates in the last six presidential elections, does not have roots in the state.

Lula even stated, in a potential preview of campaign rhetoric to come, that Sao Paulo was Neves' "big enemy."

"If you take everything he has said about Sao Paulo ... the truth is, he has antagonistic thoughts against" the city, Lula said. Lula did not provide details, although his spokesman said he might have been referring to Neves' thorny relations with some PSDB leaders in the city.

More than debates about birthplace, the biggest vulnerability for the PSDB in Sao Paulo is probably rain.

A historic drought has depleted reservoirs. The state government, which is run by the PSDB, is responsible for water management and has been widely accused of leaving the area vulnerable by not investing enough in new dams.

The state government has delayed water rationing in part because it fears voters would lash out in both state and national elections, party leaders privately admit.

Neves vowed in June that a "tsunami would sweep" the Workers' Party from power. Lula sardonically replied that the party must be hoping for a tsunami to fill Sao Paulo's lakes.

(Editing by Todd Benson and Kieran Murray)

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