What Now After Lula's Conviction Upheld? QuickTake Q&A

(Bloomberg) -- Former president Luiz Inacio Lula da Silva’s hopes of a return to power were dealt a severe blow after a three-judge appeals court unanimously upheld his conviction for corruption on Jan. 24. Brazilian assets soared following the decision as investors now see little chance of the left-wing leader vying for the presidency. However, his lawyers are challenging the verdict and Lula himself accepted the Workers’ Party’s nomination as its presidential candidate the day after the court ruling.

1. Can Lula really run for president? 

His acceptance of the Workers’ Party nomination is purely symbolic at this point, as candidates do not formally register until Aug. 15. At that stage, the Superior Electoral Court would likely rule his candidacy ineligible under the Clean Record law, and his party would have to find another candidate by Sept. 17. But an injunction by the Superior Court of Justice or the Supreme Court before that deadline could allow Lula to run.

2. So he’s not in jail?

No. After the appellate court -- the Fourth Federal District Court -- issues a written report of its verdict, Lula’s lawyers have up to two days to request a clarification of the ruling. But they can’t challenge it on merit. On average the court issues a ruling on these types of motions within two months, according to Jota Info, a Brazilian legal news website, and the defense can still appeal to a full session of the court to suspend the effects of Lula’s conviction. If that fails, lower court Judge Sergio Moro is responsible for carrying out the prison sentence.

3. What exactly did the appeals court decide?

The judges voted 3-0 in favor of upholding Lula’s conviction for corruption and money laundering. All three also agreed to extend his original prison sentence from nine years and six months to 12 years and one month. Under Brazilian law, the former president would be obliged to serve at least part of his sentence behind bars, rather than under house arrest. Eurasia Group, a political consulting firm, described the ruling as the "worst possible" outcome for Lula as there was very little discrepancy between the three judges’ opinions, leaving his lawyers little room to challenge the decision.

4. What are Lula’s options now?

He has a few. Though imprisonment and disqualification from running for office kick into effect when he has no more appeals left at the Fourth Federal District Court, he could still file a special appeal to the Superior Court of Justice, as well as an extraordinary appeal to the Supreme Court. The Superior Court would look at any abuse of process, while the Supreme Court would examine whether any constitutional principles have been violated. There would be no deadline for a decision on these appeals. His lawyers have also applied for a preventative habeas corpus to stop him from going to jail. In theory a single judge on either court could suspend the effects of Lula’s sentence, though it is much more likely a full session of either court would make a decision of this magnitude.

Registration of presidential candidates with Brazil’s top electoral court ends on Aug. 15. If the Superior or Supreme Courts fail to rule on Lula’s case before then, the electoral court is expected to deny his registration based on the Clean Record law, according to Jota Info. But Lula could then appeal an electoral court decision at the Supreme Court. Political parties have up until Sept. 17 to finalize their presidential and vice-presidential candidates.

5. If Lula can’t run, who benefits?

Eurasia puts the chance of Lula being disqualified from this year’s presidential race at 70 percent. No single leftist candidate is likely to pick up the bulk of Lula’s support, which currently stands at around 36 percent of voter intentions, meaning ultimately right-wing or centrists candidates may benefit more. Polls by Ideia Big Data, commissioned by Jota Info, found that approximately 10 percent of Lula voters would vote for whoever he eventually throws his weight behind. About 5 percent would migrate toward Jair Bolsonaro, a far-right deputy who positions himself as anti-establishment. Other left-wing candidates, such as Ciro Gomes, Marina Silva and Manuela D’Avila, stand to gain less.

6. How messy could it get?

While the Constitution prohibits inmates from running, prisoners who have not exhausted their appeals process can in theory run for office. There’s also a possibility that he could run for election, win, and then have his candidacy invalidated. Such scenarios are unlikely, however, given that the judges on these courts are conscious of the need to ensure a transparent electoral process and will seek a decision before the election. Whatever happens, however, Lula will loom large over the elections, either as a candidate or as the ghost at the feast. Some have even called for civil disobedience, but so far there have been no reports of significant political unrest.

The Reference Shelf

  • A QuickTake explainer on Brazil’s highs and lows.
  • Bloomberg interviews Brazil’s President Michel Temer.
  • A 2015 report by the Center for Economic and Policy Research says Brazil’s slump resulted more from policy choices than external conditions.
  • A 2016 Congressional Research Service report provides background on Brazil’s politics.
  • A Businessweek web comic on the Petrobras corruption scandal.

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