Don't Panic, Lula's Not a Radical, Party Chief Tells Wall St

(Bloomberg) -- Former president Luiz Inacio Lula da Silva is no threat to Brazil’s financial stability and investor nervousness about his possible victory in October’s elections is unjustified, the leader of the Workers’ Party said in an interview.

Senator Gleisi Hoffmann said that Lula is currently working on a second "letter to the Brazilian people," repeating a tactic he used ahead of his 2002 election victory, to reassure financial markets he was committed to fiscal responsibility.

"Lula could be considered anything, except a radical," Hoffmann said in the Brasilia office of Bloomberg News. "Everyone won under Lula, including the financial sector."

The former trade unionist currently leads opinion polls for this year’s presidential elections, despite a criminal conviction that could bar him from running. Whether or not an appellate court upholds Lula’s sentence, his party will launch his candidacy. Many investors have expressed concern about the prospect of the 72 year-old Lula returning to power, given his vocal opposition to the market-friendly reforms of the current administration of President Michel Temer.

The Negotiator

Lula has always acted as a "negotiator", Hoffmann said, and he would do the same thing if re-elected. As the former president is well known to the Brazilian people, his letter will be different from the one written in 2002, which sought to counter the impression he was a dangerous radical intent on undoing hard-won economic stability.

"It is a letter about economic policy and the economy, about Lula’s ideas for Brazil," she said.

After years of damaging revelations about the vast scale of graft in public life, Brazilians are deeply disillusioned with their politicians. A sweeping overhaul of the country’s constitution would reform its politics, Hoffmann said, and to that end Lula would call for a constituent assembly if elected.

No Austerity

The PT remains opposed to much of the austerity agenda pursued by Temer, including his flagship pension reform proposal. Hoffmann said the party understood the need for reform, but argued it could be done by cutting public sector benefits. She was also skeptical of the need to introduce a minimum retirement age, a cornerstone of the current plan.

"We are not against pension reform as such, just this pension reform," she said. The party would also seek to roll back a labor reform and a constitutional cap on public spending implemented by the Temer government.

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Hoffmann acknowledged that the party had made mistakes during its 13 years in power but argued that the financial crisis that sunk the country into a deep recession from 2014-2016 was due to a loss of tax revenue rather than excessive public spending.

The PT will only accept the result of next week’s court ruling if it completely exonerates the ex-president, Hoffmann said. Contrary to wide-spread expectations, Lula cannot be officially barred from running until he registers as a candidate in mid-August, and even then he may have several weeks to appeal any adverse decision by the electoral authorities.

"The judiciary does not just want to stop Lula from running, it wants to block part of Brazilian society from voting," she said. "What right do they have to do that?"

--With assistance from Mario Sergio Lima

To contact the reporters on this story: Simone Iglesias in Brasília at spiglesias@bloomberg.net, Samy Adghirni in Brasilia Newsroom at sadghirni@bloomberg.net.

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Bruce Douglas, Raymond Colitt

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