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January 29, 2018

Ex-President Lula's Corruption Conviction Upheld in Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The big news in Brazil last week was the reaffirmation of ex-president Luiz Inacio Lula da Silva's corruption conviction by a vote of 3-0 by an appeals court in southern Brazil. Not only did they confirm that the evidence of his guilt was overwhelming, they added a few extra years to his impending jail term (12 years).

Prior to the announcement of the appeals court last Wednesday in the city of Porto Alegre, which is the capital of the state of Rio Grande do Sul, an estimated 70,000 of his supporters flooded the main square of the city in a show of support for Lula. Porto Alegre is a very left-leaning city and it is also the home of ex-president Dilma Rousseff. The fear was that if the judgement went against Lula, there would be violence in the street and across the country, but that did not happen. After the announcement, his supports just went home and there were only a few small protests around the country, but nothing significant.

With a unanimous 3-0 decision, most of his supporters have reluctantly accepted the fact that any further appeals would probably not be successful. In an effort to avoid violent protests, the local judicial authorities did not haul Lula off to jail, which would be the normal practice, but instead allowed him to remain free while further appeals proceed.

But, now is when it gets complicated. Lula still has two more appeals to go through and that is going to take months to play out. In the meantime, his political party (the Workers Party) still plans to nominate him as their candidate for the presidential elections in October. Even though he has already served two terms as president, he is eligible to run again if he sits out one term. He is currently leading in the polls with about 35% support. His lead is probably due more to not having serious opposition than it is to his overall popularity.

Brazilian law stipulates that you cannot run for high office if you have been convicted of a serious crime. His supports contend that his conviction is not final until all the appeals have been exhausted and that may take many months. They stipulate that he is still eligible to be a candidate until the last appeal is completed and that may not happen until after the election is over. His odds of becoming Brazil's next president is a long shot, but it remains to be seen how all this plays out.

The law in Brazil stipulates that a candidate may not actively campaign (advertisements on TV for example) until several months prior to the election. Brazil also does not have a primary process such as the U.S. There are multiply political parties in Brazil and each party chooses their candidate. Since there are going to be multiple candidates, it is difficult for one candidate to get 50% or more of the vote on the first round. Therefore, the top two vote getters in the first round then go on to a second round of voting.

Currently, there are about a dozen potential candidates for president and over the next few months each party will choose their candidate and the race will be on. The current president, Michel Temer, is not eligible to run due to prior campaign finance violations. It does not make much difference since his approval rating is in the single digits.