Brazil’s markets boosted by dismissal of Lula corruption appeal

Brazil’s markets boosted by dismissal of Lula corruption appeal

24/01/2018- 18:58 - Benchmark stock exchange at record high as re-election hopes of ex-president weaken

Joe Leahy in São Paulo and Andres Schipani in Porto Alegre

Brazilian stocks hit record highs as a Brazilian court dismissed an appeal by former President Luiz Inácio Lula da Silva against a corruption conviction, undermining his chances of making a comeback in elections this year. 

In the historic decision, the three judges of the so-called TRF4 appeals court in the southern city of Porto Alegre ruled unanimously to dismiss the appeal and to increase the former president’s sentence to 12 years and one month in jail, from nine years and six months. 

The Ibovespa benchmark stock index ended up 3.7 per cent at 83,680 points, a record high, as investors betted the decision would knock the populist leader known for his firebrand leftist rhetoric out of the October elections. 

“Lamentably, Lula gave in to corruption,” the prosecutor in the case Maurício Gerum told the court, which was heavily guarded with sharpshooters and drones as thousands protested in the city for and against the former president. 

Mr Lula da Silva was convicted last July for accepting favours including a beachfront apartment and free storage for his belongings from a construction company in exchange for helping with contracts at state-owned oil company, Petrobras. 

The left as a whole is in a bad place, and the rest of Brazil too Matias Spektor, political analyst Under Brazilian election rules, a person convicted of a crime, in this case corruption and money laundering, which is upheld on appeal, cannot run for public office. 

Although Mr Lula da Silva is likely to file further appeals in higher courts, he has limited time to overturn the ruling in Brazil’s slow-moving justice system before the country’s election tribunal announces the official candidates in August. 

Analysts say the former president could possibly face jail as early as June or July once his limited avenues for appeals on the technicalities of the ruling within the TRF4 court are exhausted.  “The only thing of which I am certain is that only on the day that I die will I stop fighting,” a defiant Mr Lula da Silva tweeted during the trial. 

Supporters of the former president gathered in Porto Alegre shed tears as they received news of the decision.  Many chanted “the fight will continue” before the arrival of torrential summer rains.  “This whole process is a case of political persecution,” said Mário Madureira, a leading leftist lawyer. 

The likely removal from Brazil’s election of Mr Lula da Silva throws open the presidential race. A recent simulation of the vote by pollster Datafolha found the former president had 36 per cent support, double his nearest rival, extreme-right politician Jair Bolsonaro. 

The election is already promising to be one of the most unpredictable in Brazil’s modern democratic history, with no strong centre-right or centre-left candidates yet visible.  Mr Lula da Silva’s Workers’ party, or PT, has promised to continue backing him rather than apologise for past misdemeanours, or try to find a new leader, said Matias Spektor, a political analyst from the Getulio Vargas Foundation in São Paulo.  “The left as a whole is in a bad place, and the rest of Brazil too,” Mr Spektor said. 

The real climbed as much as 1.7 per cent against the dollar to R$3.1830, a three-month high, ahead of the ruling.  Brazilian bonds also bucked the wider global sell-off in government bonds. The yield on the country’s dollar denominated 10-year note -— which moves inversely to price — fell 4 basis points to 4.687 per cent.

The markets, however, might not be providing enough of a discount given the political uncertainty, with the polls still showing no clear centrist candidates, said Neil Shearing, Capital Economics chief emerging markets economist. 

“Unless a credible reform-minded government becomes a serious possibility, the gains in markets will be difficult to sustain,” Mr Shearing said.  With additional reporting by Pan Kwan Yuk in New York 

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