The Tarnished Legacy of Brazil's Luiz Inácio Lula da Silva

A vendor displays inflatable dolls of Brazilian President Dilma Rousseff and the 'Pixuleco' of Brazil's former President Luiz Inacio Lula da Silva during a protest against Rousseff's appointment of Lula as her chief of staff in Sao Paulo, Brazil, on March 17. REUTERS/Paulo Whitaker

SAO BERNARDO DO CAMPO/RIO DE JANEIRO (Reuters) - Nine years ago, during Brazil's economic boom, Josemar Vieira Oliveira moved from the historically poor northeast to the sprawling industrial suburbs of São Paulo, the country's economic powerhouse.

He found a job with an auto-parts manufacturer, started a family and moved to a bigger apartment with his wife and two children. "Those were good times," he recalls.

But six months ago, he and 300 colleagues were dismissed.

Now the 33-year-old spends his days knocking on factory doors across São Bernardo do Campo, the cradle of Brazil's labor movement and political base for the leader millions like Oliveira once thought had ended their economic exclusion: Luiz Inácio Lula da Silva.

Six years after he left Brazil's presidency with approval ratings approaching 90 percent, the leftist icon, now 70, is again front-and-center in Brazilian politics.

True, Lula never abandoned the game, strategizing and negotiating on behalf of President Dilma Rousseff, his hand-picked successor, ever since he left office.

But a widening corruption scandal, in which he faces criminal charges, this week led Lula to accept a role as Rousseff's chief of staff, where he is legally shielded from prosecution unless the Supreme Court decides to press a case.

The move, derided by critics as a cynical evasion of prosecutors, surprised admirers who once held Lula in saint-like esteem. Even long-time supporters, disillusioned by ongoing economic and political turmoil, say their allegiance is strained.

"I would not vote for Lula now," says Oliveira, who twice cast votes for the former president and twice more for Rousseff.

Until recently, Lula symbolized a working class whose ascent became a metaphor for Brazil itself. After decades of instability, the story of the metalworker-turned-president represented a transformation in Latin America's biggest country.

Riding a boom in commodity exports, the former union leader presided over a period when 40 million Brazilians left poverty.

So popular was Lula that he convinced voters to elect Rousseff, a lifelong bureaucrat, even though she had never before run for office. Despite her lackluster first term, Lula's imprimatur helped re-elect Rousseff in 2014 and give their Workers' Party a fourth consecutive term.

But an economic slowdown hadn't yet hurt most Brazilians and the corruption scandal had tainted neither leader.

Involving over a billion dollars worth of kickbacks by contractors to executives and party officials in exchange for work with the state-run oil company, the scandal worsened after Rousseff's re-election.

Now, Lula faces fraud and money laundering charges, Rousseff's opponents are aiming to impeach her and Brazil's economy is in recession, shedding 1.5 million jobs last year even as inflation surpassed 10 percent.

Economists at Bradesco, a large Brazilian bank, calculate that 3.7 million people have slipped from the middle class since 2014.

"It had gotten better for everyone," says Waldemir Gonçalves, a 48-year-old doorman in Rio de Janeiro, "but now it's hard to pay even for the basics."


For many, the loss of hard-won gains feels like a betrayal, especially considering daily headlines portraying lavish lifestyles of those charged with pillaging Petróleo Brasileiro SA

<>, the oil company.

The charges against Lula, which he denies, stem from his visits to a beachfront penthouse and country estate near São Paulo that investigators say may have been purchased by companies tied to the scandal.

"People see prices rising and hear about the corruption and they equate them," says Mauricio Prado, managing director at Plano CDE, a research firm that studies Brazil's working class. "They feel like those in power have been robbing, but workers are paying the price."

Those most hurt by the downturn haven't been a big part of demonstrations calling for Rousseff's ouster, including nationwide marches last Sunday by more than a million people.

In São Paulo, according to pollster Datafolha, 63 percent of those marching came from upper-middle and wealthy classes, which historically haven't supported the Workers' Party (PT) or its state-led economics and social policies.

To be sure, support from some long-time Lula loyalists, especially labor unions and other organized leftists, is nearly unconditional. He still draws even with the main opposition candidate in polls simulating the next election in 2018, when Lula may run again.

And Lula has weathered crises before, including a Congressional vote-buying scheme that nearly derailed his first term. But he had the benefit of a healthy economy then.

This government faces more serious institutional challenges.

Impeachment proceedings against Rousseff are wending through Congress because of government budget irregularities. A court is investigating alleged dirty financing of her 2014 campaign. Rousseff denies the charges.

Still, many analysts believe the efforts could lead to her ouster within months.

For some, it can't come soon enough.

"The PT, never again," says Rosane Camargo da Rosa, a housekeeper in the southern city of Porto Alegre.

During the Lula years, the 45-year-old mother of two earned enough with her husband, a security guard, to buy their first car and a new home. Now, she explains, "I go to the grocery store and half my salary stays there."

Back in São Bernardo, Paulo Roberto dos Santos scoffs at Lula's return to government.

"Lula lost the great opportunity to be the most revered president for years to come," says the 62-year-old real estate broker, who blames the recession for six months with no sales. "Instead, he'll go down as a president that misled the people, that was corrupt, that set loose a gang of thieves."