What Lula’s Return to Politics Could Mean for Brazil
(Bloomberg) -- Brazil’s political landscape was upended by the decision of a Supreme Court justice March 8 effectively tossing out the criminal convictions of former President Luiz Inacio Lula da Silva. The ruling gives the leftist leader widely known as Lula a chance to run again for president in the 2022 election against the incumbent Jair Bolsonaro, a right-winger. The judge’s move surprised his peers on the top court and even Lula himself, according to local media. The news initially sent stocks and the currency plummeting on fears that campaigning for next year’s vote may start earlier than expected, distracting lawmakers and potentially derailing the approval of investor-friendly reforms.
1. What was the decision based on?
Lula was found guilty of corruption and money laundering in 2017 by then-federal judge Sergio Moro. Based in the southern city of Curitiba, Moro was in charge of cases uncovered in an investigation called Carwash involving a giant bribery scheme at the state-owned oil company, Petroleo Brasileiro SA, known as Petrobras. After Lula’s convictions were upheld on appeal, he was disqualified from serving in political office, and he ended up spending more than 500 days in jail. Nearly four years later, Justice Edson Fachin ruled that Moro had no jurisdiction in the case. Fachin argued that Moro was only supposed to decide cases in which Petrobras was harmed and that these didn’t include Lula’s. The justice didn’t rule on whether Lula is guilty or not; his decision focused solely on procedures that led to the ex-president’s conviction, not on the merit of the charges against him.
2. So is Lula completely in the clear?
Not necessarily. The prosecutor general’s office is expected to appeal Fachin’s decision, likely taking the case to the full Supreme Court, where the other 10 justices would make a final decision. If they overrule him, the convictions will be reinstated and he will again be disqualified from office. If Fachin’s decision is confirmed by his peers, the charges against Lula that were prosecuted in Curitiba will be transferred to another court in the capital, Brasilia, where they’ll be assigned by a lottery system to a new judge. That judge would have two options: to deem the evidence gathered so far valid, which would speed up a new ruling, or to nullify it, forcing prosecutors to start from scratch.
3. Can Lula run for president?
For now, yes, although the 75-year-old former president stopped short of saying he’d do so in a press conference March 10. Under Brazilian law, a person needs to be convicted by a judge and have that ruling confirmed by an appeals court to become ineligible for public office. It’s possible that could happen again, as it did to Lula before the 2018 election, in the year and a half between Fachin’s ruling and the vote in the final quarter of 2022. But Lula’s trial in Moro’s court took a year and seven months, and the appeals court took another six months to confirm the conviction. Debora Santos, a political analyst at XP Investimentos, estimates that as it stands, the probability Lula will be able to run in 2022 is 80% to 90%. And there’s a possibility his chances will improve.
4. How might his chances improve?
A five-member panel of the Supreme Court is analyzing whether Moro was an impartial judge of Lula’s case. After serving as the public face of the Carwash crackdown, which ensnared some of the nation’s top politicians and chief executive officers, Moro became the Justice Minister in Bolsonaro’s government but resigned from the position in April 2020. Since then, private messages exchanged by members of the Carwash task force have emerged, suggesting the judge had guided prosecutors’ hands to secure Lula’s conviction. Moro has denied any wrongdoing. The work of the Supreme Court panel, which had been on the back burner for months, resumed on March 9. If the justices decide that Moro acted partially, that could upend many of the convictions he oversaw while in charge of Carwash cases.
5. Is Lula still popular?
Yes. While many Brazilians say he is a symbol of corruption and economic mismanagement, the former president remains revered for launching social programs that lifted millions of citizens out of poverty. Recent opinion polls from different research institutes put him either first or second in a possible presidential race against Bolsonaro. The current president, who rode an anti-Lula wave in the 2018 election, responded to Fachin’s ruling by saying the justice has strong ties to Lula’s Workers’ Party; he was appointed to the court by Lula’s handpicked successor, Dilma Rousseff. Bolsonaro said of Lula, “Brazilians don’t want someone like this to run in 2022. It was a catastrophic government.”
6. Why did markets fall on the news?
Investors were already dumping Brazilian assets as Bolsonaro’s commitment to an austerity agenda showed signs of wavering, and they saw Fachin’s ruling as another complicating factor. For one thing, it essentially kicks off the 2022 presidential campaign way ahead of schedule. That leaves less political space for debates on structural reforms, including an overhaul of the country’s archaic tax system and a plan to reduce spending on civil servant salaries, which take up an ever-growing portion of the public budget. A comeback by Lula also presents the risk that Bolsonaro may completely abandon the austerity measures sought by Economy Minister Paulo Guedes in order to increase his chances of winning re-election, though political consultancy Eurasia says that’s unlikely to happen.
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