Brazil has lost its love for Lula
Scandal engulfs former leader and successor, writes Raymond Colitt
LUIZ Inacio Lula da Silva, one of the most popular politicians in the history of Brazil, has been caught up in corruption probes sweeping the country.
HE WAS celebrated as the architect of an economic miracle — the man who would finally turn Brazil into a fair and prosperous nation. But now Luiz Inacio Lula da Silva has been caught up in corruption probes sweeping the country and besieging his successor and protégé, President Dilma Rousseff.
It is a remarkable turnabout for Mr Da Silva, known the world over as Lula. One of the most popular politicians in the history of Brazil, he ushered in an era of optimism that captivated global investors and set Ms Rousseff on course to the presidency.
Now Lula is being drawn closer to the scandal involving some of Brazil’s most powerful business and political figures. Ms Rousseff, facing calls for her impeachment, is struggling to contain the damage.
The issue gained new urgency on Monday with another arrest tied to the longrunning kickback scheme at the state-run oil company, Petrobras. Only days after federal prosecutors said they were opening an investigation into claims of influence peddling by Lula, police arrested Jose Dirceu, the former president’s chief of staff.
The economic and political fallout of the Petrobras scandal has hit Brazil hard. Once a Wall Street darling, the country is now shunned by many bond investors, and its currency, the real, has slumped this year.
Neither Lula nor Ms Rousseff have the support to win a race for the presidency and a comeback by the former union leader seems unlikely, says Mauro Paulino, head of Datafolha, a Sao Paulo-based polling company. Their left-wing Workers’ Party, or PT, has the lowest support since the 1980s.
“There’s rejection in all segments and regions of the country,” he says. “There’s a lack of leadership.”
With her mentor and political guardian on the defensive, Ms Rousseff is more vulnerable to opposition attempts to oust her. Legislators are increasingly balking at austerity measures designed to shore up Brazil’s financial health.
Even junk bond investors are staying on the sidelines until the prices fall more, says Klaus Spielkamp, head of fixed-income sales at Bulltick.
A decade ago Lula, 69, weathered a cashfor-votes scandal that threatened his presidency. But that was when the economy was booming and millions of Brazilians were emerging from poverty. Those economic strides helped Lula to get Ms Rousseff elected and to keep her allies united.
Now the economy has stalled and prosecutors are investigating whether Lula used his influence to help construction company Odebrecht win contracts in Panama and Venezuela from 2011 to last year. Lula denies the charges.
But as Lula’s popularity dwindles, so does his ability to protect Ms Rousseff politically. He has even publicly blamed her for fast inflation and failing to maintain worker rights since her re-election last October.
With Lula and others in the PT distancing themselves from cuts in pension and labour benefits designed to safeguard the nation’s credit rating, Ms Rousseff looks increasingly forsaken and paralysed, according to Alexandre Schwartsman, for- mer central bank director and managing partner at Schwartsman and Associates.
“She’s isolated, abandoned even by her own party,” Mr Schwartsman says.
Much of the support Ms Rousseff and Lula have lost comes from newly middleclass voters struggling to make car or bond payments because of high interest rates. Even low-income people, the PT’s traditional bulwark, have become disillusioned as inflation eroded their purchasing power.
Brazilians are also revisiting Lula’s legacy after indications the PT administrations mismanaged public funds and struck questionable deals with politicians.
Kickbacks involving Petrobras contractors have led to the investigation of at least 70 politicians and executives. Many of the claims date back to the Lula administration, when Ms Rousseff was chairwoman of Petrobras. Roughly two-thirds of Brazilians now say Ms Rousseff and Lula are responsible for the corruption scandal, according to a July 12-16 MDA poll.
Ms Rousseff has denied wrongdoing and says she never saw signs of corruption. The press offices of Lula and Ms Rousseff declined to comment for this article. The Workers’ Party did not respond to an e-mail seeking comment.
The more Lula is drawn into the scandal, the more the former president may criticise Ms Rousseff, opening a rift within the PT and making an impeachment more likely, according to Eurasia Group, a political risk consulting company. Last month, Eurasia put the odds of Ms Rousseff failing to finish her term at 30%.
A weakening economy and rising unemployment will only add to the political worries facing Lula and Ms Rousseff, says Mr Paulino.
The country is shunned by many bond investors, and its currency has slumped