Return of the Lula

When Luiz Inácio “Lula” da Silva won Brazil’s presidential elections in 2002, the country’s downtrodden finally had a champion in Brasilia, a former union leader who had known poverty before power. Riding the expansive global economy and a commodities boom, Lula’s Workers’ Party would go on to champion effective social programs, helping pull 30 million Brazilians into the middle class. When Dilma Rousseff, his hand-picked successor, won office in 2010, the country crafted under his aegis was more equitable, its economy growing. The Workers’ Party, known by its Portuguese acronym PT, seemed unstoppable.

Now, a year into Rousseff’s second term, Brazil is sliding ever deeper into recession. Dozens of its political and economic leaders — many of them PT luminaries — are falling to the widest-ranging graft scandal in the country’s history. Centered on the state-controlled oil company Petrobras, the scheme took shape during Lula’s presidency, while Rousseff served as chairwoman of the company’s board.

Then, on Dec. 2, a constitutional crisis erupted, adding to the country’s political and economic woes. On that day, Eduardo Cunha, head of the Chamber of Deputies, Brazil’s lower house, initiated impeachment proceedings against Rousseff, following an audit court decision that found she had masked a budget shortfall of $27 billion, violating the country’s fiscal responsibility law. Days later, the Supreme Court gave Rousseff a reprieve, voting against the secret ballot by which the Chamber of Deputies had selected the impeachment committee and clarifying that the Federal Senate has the right to veto the process.

But this offers scant respite for the president. Two out of three Brazilians think she should resign, independent of what the National Congress does. Her governing coalition is unraveling. Her vice president is reportedly preparing his own play for her position. And her party, battered on multiple fronts, is fighting to save itself — even if that means sacrificing Rousseff.

The man behind this political hedging, analysts say, is Lula, Rousseff’s former mentor and predecessor. For him, the political calculus is equal parts simple and perilous: rally behind Rousseff and risk going down with her or cut her loose to muster strength for his own defense and political future, risking the party’s integrity for now, but perhaps salvaging enough of its popular appeal for future battles.

“It is a chess game in which the queen is being sacrificed to save the king,” said David Fleischer, a social scientist at the University of Brasília and seasoned political observer. “Rousseff can be sold as a martyr and used as leverage by Lula” to bolster his own position and perhaps stage a comeback in 2018.

The political challenges he faces are steep. The PT and the rest of its governing coalition remain deeply tangled in the still-unraveling Petrobras scandal. Prosecutors charge that the nation’s largest construction firms paid over a billion dollars to politically appointed executives of the state-run oil firm, who in turn enriched themselves and channeled funds to their political sponsors and the governing PT (though Rousseff herself has not been charged).

To further complicate matters, if the weakened PT limped away from her now, it could cost Brazil dearly. The ensuing political uncertainty could further destabilize the Brazilian economy. Last week, Fitch Ratings joined Standard & Poor’s in cutting Brazil’s credit rating to junk status, citing efforts to impeach the president as one of the factors distracting lawmakers from dealing with the plunging economy. The further erosion of Rousseff’s support could paralyze the government, preventing her from passing necessary reforms and intensifying calls for her resignation.

And yet, Lula has shown signs of pulling away from Rousseff for months. In June, he lambasted her before a gathering of religious leaders. He criticized her distance from the people, spoke of her unfulfilled campaign promises, including her vow not to meddle with workers’ rights, and recounted the avalanche of bad news flowing from her government: a hike in inflation, a slew of corruption charges, and numerous additional belt-tightening measures. By October, he and the PT leadership were publicly criticizing the austerity measures she had proposed to help close the budget gap. These included hiking interest rates, capping civil servant salaries, increasing taxes, and cutting back on housing, education, and other social programs.

Rousseff, however, had to act. The economy was weathering a storm of negative economic data: Inflation is running at more than 10 percent; prices for the commodities it exports are in a slump; and GDP is expected to fall by up to 3.5 percent in 2015. But after running on a platform to expand social programs, her support for measures that would hit poor people the hardest alienated her from her base.

Lula saw an opportunity in the brewing popular dissatisfaction and promptly called for the resignation of Joaquim Levy, Rousseff’s finance minister. Those demands, in turn, led to rumors of Levy’s impending departure, which knocked down Brazil’s currency and forced Rousseff to make a public statement supporting Levy and reassuring investors. Lula’s play: By voicing his disapproval of Rousseff, he could rally the PT’s traditional electorate and strengthen his connection to that base while avoiding association with the worsening economy and the necessary pain of Levy’s policies. On Dec. 18, Rousseff finally succumbed, replacing Levy with Nelson Barbosa, her leftist planning minister.

These are not isolated incidents of a former president venting his frustration over a successor’s failures. Consider the events leading up to Cunha’s impeachment campaign.

Cunha, a conservative evangelical and one of highest-ranking politicians of the powerful Brazilian Democratic Movement Party, himself faces charges of taking $5 million in bribes. He has also been charged with money laundering in Brazil and Switzerland. A probe into his alleged misdeeds by the lower house’s ethics committee, where the PT holds key votes, could cost him his congressional seat. Would the PT strike an ugly political compromise, protecting the tainted Cunha in exchange for safeguarding Rousseff? Or would it fall in line with public opinion and recommend action against him, protecting its own image?

The impasse broke on Dec. 2, when, with the party president’s public blessing, PT congressmen voted to proceed with the investigation against Cunha. Three hours later, Cunha opened impeachment proceedings against Rousseff. The message from the PT leadership was startling: Rousseff was on her own.

Speaking on national television that evening, Rousseff stressed that she, unlike Cunha, has not been charged with crimes or with funneling away public money. Lula, for his part, had nothing to say publicly about the impeachment proceedings until the next day, when he accused Cunha of “thinking of himself, not thinking of the country.” Since then, federal police has ransacked Cunha’s homes and a federal prosecutor asked him to step down, saying he “used his position in his own illicit interest, to prevent the investigations … into his criminal conduct.” The speaker of the lower house retorted he has no intentions of leaving.

At the core of Lula’s strategy is his own “desperate self-interest,” as Fleischer called it. Lula himself is linked to several corruption scandals and is the target of a formal inquiry into influence-peddling; as a result, he has become increasingly discredited. If he ran today against Aécio Neves, the center-right candidate Rousseff defeated narrowly last year, he would lose, according to a recent survey.

But with the PT’s implosion, Lula may be its most viable option.

“With respect to Lula, it makes sense to maintain an ambivalent double game,” said Joao Augusto de Castro Neves, a Brazil expert at the Eurasia Group.

For the PT, the stakes are high: its reputation, achievements, and perhaps its very survival. The party has survived colossal scandals in the recent past, particularly a cash-for-congressional votes exchange that sullied Lula’s time in office. But this investigation is the widest-ranging such inquiry in the country’s history and has led to the arrest of some of Brazil’s wealthiest and most influential people. Perhaps more damning, the PT under Rousseff lost control of the economy, a cardinal sin that has brought down presidents in Brazil.

“There is talk of the PT transforming itself,” Fleischer said. “But that might be too much to expect — a trick like a magician pulling a rabbit out of a hat.” Whether Lula can be that magician remains to be seen.

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