Lula Ordered Arrested After Defeat at Brazil Supreme Court

(Bloomberg) -- Brazil’s former President Luiz Inacio Lula da Silva has been given an arrest warrant on a corruption conviction and must turn himself in by 5pm on Friday, according to court documents.

Federal Judge Sergio Moro’s decision follows a ruling by the Supreme Court that rejected Lula’s request to remain free while he continued to appeal a 12-year prison sentence for corruption and money-laundering. Lula’s lawyers said they will try to reverse the prison order. In it, Moro specifically vetoed the use of handcuffs by the arresting officers and wrote that a special detention area had been set aside for the former president.

Lula Ordered Arrested After Defeat at Brazil Supreme Court

Lula said that the decision was "absurd" and that it was a "dream come true" for Moro, in a phone interview with a local journalist he gave while traveling to the Sao Bernardo metalworkers’ union, the birthplace of his Workers’ Party, or PT. A large crowd gathered outside the building late on Thursday evening, and images published on the party’s social media showed the ex-president waving to supporters. Earlier, PT Senator Lindbergh Farias published a video calling on the ex-president’s followers to hold a vigil outside his house from 5 a.m. on Friday morning.

"Brazil is a mature democracy where the institutions work fully," said Rodrigo Maia, the speaker of the lower house of congress, in a statement. "Every and any demonstration in relation to the prison order needs to respect the institutional order."

The arrest of one of the most iconic leaders in Brazilian history, though widely anticipated, is rocking Latin America’s largest nation. After leaving office in 2010 with sky-high approval ratings, the former trade unionist became a deeply divisive figure, beloved by the left for his social policies, and reviled by many on the right who blame him for the corruption that flourished under 13 years of Workers’ Party rule. While his hopes of a return to power are almost certainly shattered, the key question now is to what extent his imprisonment will influence October’s elections.

"What we are seeing is absurd," said Carlos Zarattini, a senior lawmaker from Lula’s party. "It is an obsessive attempt by Judge Sergio Moro to stop Lula from competing in elections."

Fireworks and car-honking broke out in downtown Sao Paulo and Curitiba, the seat of Moro, after the arrest order became known. The iShares MSCI Brazil ETF rose to $44.60 after closing at $44.08 during regular trading hours in New York. Earlier, a Brazilian asset rally on Thursday morning had largely fizzled out by the afternoon as investors realized October’s presidential election still remained highly uncertain even without Lula.

The former factory worker was convicted of receiving benefits from a construction company -- including the upgrade of a beach-front apartment -- as a reward for government favors. He has denied wrongdoing and said the ruling is part of a strategy to stop him from becoming president again. He also faces a handful of other corruption charges.

Lula symbolically launched his presidential bid one day after an appeals court unanimously upheld his conviction in January, and his jailing does not completely rule him out of the running. Yet it now seems far-fetched to imagine his return to power.

While remaining hugely popular among the millions of Brazilians he helped lift from poverty during the commodities boom that characterized his years in office, Lula has alarmed investors by promising to undo the market-friendly measures implemented by President Michel Temer.

Yet his absence in the elections isn’t enough to ensure a market-friendly candidate will win, cautioned Christopher Garman, Eurasia Group’s director for the Americas. “There’s no clear pro-reform candidate who’s also aligned with the public opinion,” he told Bloomberg in a recent interview.

©2018 Bloomberg L.P.