Development: On 31 October President Lula da Silva
instructed his government to go on the offensive against opposition claims of
corruption.
Significance: Lula has sensed an opportunity to draw a line under a
six-month period in which his government has devoted most of its energies to
repelling a series of corruption scandals. His opportunity was created,
ironically, by another allegation: a 29 October report in the weekly magazine Veja
claiming that Lula received funding from the Cuban government for his 2002
election campaign.
The opposition jumped on the Veja story, confident that it finally had
a scandal which would get Lula; hitherto the allegations have tainted almost
everyone in his government but the president has remained untouched. Several
opposition legislators even talked about impeaching Lula and suggested that he
may not finish his term in office.
The Veja story is too flimsy to achieve this. Pro-government
legislators pointed out that the magazine offers no physical evidence of the
money transfer from Cuba to Lula. They have also jumped on disparities in the
testimonies of Veja's two witnesses to the payment: both agree the money
was transported to Brasília in cases of whisky and rum but they don't concur
over the amount. One claimed Lula's Partido dos Trabalhadores (PT) received
US$3m from Cuba; the other put the figure at US$1.4m.
The story's credibility is also diminished by the fact that Veja has
already tried, and failed, to expose irregularities in Lula's campaign for the
last presidential election. In April the magazine, drawing on secret police
sources, reported the PT had received US$5m from the Fuerzas Armadas
Revolucionarias de Colombia (Farc). This story died, eventually, because of a
lack of evidence. As Arlindo Chinaglia, the head of the PT in the chamber of
deputies put it, "All it needs now is for the opposition to say the PT took
money from [Osama] bin Laden."
The president of the PT, Ricardo Berzoini, said on 31 October that the party had
decided to take legal action against 'Veja' for libel. Lula doesn't want the
response to stop there, however. After a meeting between Lula and his inner
circle the government came out fighting its corner in congress.
The opposition Partido da Social Democracia Brasileira (PSDB) called for
Lula's impeachment and demanded that his finance minister, Antonio Palocci, be
interrogated over the Cuban financing as part of the current investigation into
illegal gambling. The government not only said it was absurd that this
investigation be extended to include every accusation of corruption against the
government but also went on the offensive by reviving the Cayman Dossier. This
dossier holds allegations that PSDB ministers held bank accounts in the Cayman
Islands during the presidency of Fernando Henrique Cardoso, Lula's predecessor.
The government is still not out of the woods. Congressional investigations
and impeachment hearings against members of the PT and the government - most
notably Lula's former chief-of-staff José Dirceu - still loom. However, even
before the 'Veja' story broke there were already signs that Lula may be over the
worst: an opinion poll published by Ibope in mid-October showed his approval
rating is on the rebound. Confidence in Lula rose three percentage points in
October to 46% from 43% in September.
More importantly, the economy is beginning to create a feel good factor. The
Fundação Getúlio Vargas published its first consumer confidence index on 31
October. This showed a 1.5% jump compared with September. The direction of the
index is not absolutely certain: the proportion of people expecting things to
improve rose from 24% to 28% while the percentage who feared that things would
get worse fell from 21% to 16%.
The economy is likely to do even better in 2006, as local interest rates fall
and the government's robust fiscal position allows it to spend more money. This
combination, of political and economic momentum, is likely to tempt Lula to run
for, and win, re-election.