• Mushrooming allegations of bribery in President Luiz Inácio “Lula” da Silva’s administration are part of a wave of corruption charges sweeping through the Brazilian government.

• The accusations are sapping Lula’s personal reputation, as well as the spirit of Brazilian democracy. Thus, Washington is likely to find it markedly easier to rein in Brazilian defiance in the areas of economic integration, oil policy and Lula’s friendship with Venezuela’s Chávez. The U.S. is also less likely to tolerate Brazil’s leadership of regional economic and political initiatives that do not resonate with those of the U.S.

• In order to ensure his reelection, Lula must defend his reputation by proving that the legislature’s investigative probes have found their marks when their deliberations conclude. However, he must also push through a number of economic and social reforms to award his original constituency – the poor – from whom he is seen to have strayed. There will not be enough time in the current legislative session to do both; Lula must pick his poison.

On July 27th, an investigative committee of the Brazilian Chamber of Deputies called for the arrest of publicity agent Marcus Valerio de Souza. De Souza was implicated in the growing corruption scandals assaulting President Luiz Inácio “Lula” da Silva’s government, specifically his left-leaning Worker’s Party (PT). The source of many of the allegations is Congressman Roberto Jefferson, head of the Labor Party (PTB), whose testimony before the legislature’s Ethics Committee directly accused Souza, along with Lula’s former chief of staff Jose Dirceu, former PT leader Jose Genoino and former PT treasurer Delubio Soares of participating in a scheme to collect at least $12,000 in bribes from private companies on a regular basis. This money was then distributed monthly to individual members of the Progressive Party (PP) and the Liberal Party (PL) in return for their support of the PT’s legislative initiatives. Dirceu, Genoino, and Soares have since resigned in separate attempts to protect Lula from the splattering mud. Despite his lame assertions that, since assuming the presidency, he “no longer took part” in the PT’s operation, Lula is at the helm of an administration that is rapidly losing its reputation for probity and honesty.

Payback?
Vote-buying schemes are not the only instances of alleged corruption in the upper tiers of the Brazilian government, and Jefferson’s accusations may have been motivated partially by vengeance. On May 14, at the beginning of the recent raft of investigations, the national Brazilian weekly news magazine Veja published a report accusing Jefferson, a federal deputy who helped manage a number of state companies, of overseeing an embezzlement scheme involving the Correio, the Brazilian national post office, in which he demanded donations for the PTB from. Jefferson’s PTB had been a longstanding congressional ally of Lula’s PT until the latter called for an investigation into Jefferson’s alleged wrongdoing on May 19. Soon after, Jefferson came out with his vote-buying allegations against his former legislative allies. These latest charges against Jefferson are not surprising in light of allegations last year that the congressman demanded $180,000 monthly from the PT in return for his legislative support; Jefferson appears to have been an active participant in the very scheme he is now exposing.

Damage Control
In response to the allegations, which help constitute the most flagrant political scandal since Lula came to power in 2003, the president has reshuffled his cabinet. Lula’s new Chief of Staff assumed her post on June 16, and further changes occurred on July 6 as the ministers for telecommunications, health, and energy and mines were replaced by members of the centrist Democratic Movement Party (PMDB). On July 8, a new minister of labor was appointed, and on July 12, the new ministers of education and science and technology took over. Finally, on July 21, the towns and social security ministries received new leaders.

Lately, the PT won control of the parliamentary investigative commission (CPI) set up by the legislature to probe the post office allegations involving Jefferson. Lula will need to make absolutely certain the committee’s findings are authentic and credible.

Domestic Popularity Remains High
Lula has been revered as a genuine people’s reformer since his election in 2003. His Zero Hunger Program and other social initiatives have contributed to his domestic popularity; a recent poll by the Datafolha Institute indicates that, if presidential elections were held today, Lula would win easily. Sam Logan of the InfoAmericas group ascribes the president’s appeal to a perception that he has “a desire to fight for Brazil’s poor.” Since Lula’s inauguration, fiscally conservative policies have kept the country’s economy growing, providing new funding for the president’s ambitious social programs and keeping Brazil attractive to international investors. As the Brazilian stock market has been demonstrated, its daily tally and the value of the currency rides on day-to-day developments in the corruption investigation.

Latin American Ties
Since his election, Lula has been a strong proponent of political and economic integration among Latin American nations. Brazil is a leader of MERCOSUR, the Southern Cone’s free trade bloc that also includes Paraguay, Uruguay and Argentina as well as a number of associate members. Lula also demonstrated strong support for the December launch of the South American Community of Nations project, which aims to integrate MERCOSUR and the Andean Community into a continent-wide free trade area.

Concurrently, Lula has been pursuing closer ties with Venezuela’s Hugo Chávez and Argentina’s Nestor Kirchner. The three leaders held a summit on May 11 in Brazil to discuss the formation of Petrosur, a regional oil company that would integrate the state-controlled companies of Petrobras, PDVSA and Enarsa. In addition, Lula and Chávez have signed a number of trade agreements that are predicted to increase bilateral trade between the two nations from $1.6 billion in 2004 to $3 billion in 2005, according to a Latinnews interview with Fernando Portela, president of the Venezuela-Brazil Chamber of Commerce.

Behind these regional negotiations seems to lie a challenge to U.S. hegemony in the region. Chávez has openly challenged U.S. “imperialism” in the region, threatened to cut off Venezuelan oil supplies, and allied himself with longtime U.S. enemy Fidel Castro. Chávez thrives in his new role as Latin America’s uncrowned firebrand. The outspoken president represents the radical wing of the region’s shift to the left, while Lula has been seen as a moderating influence. The Brazilian president occasionally has been called on to act as a middleman to persuade Chávez to abandon stances that Washington views as belligerent and radical. On the other hand, he also has defended Chávez’s inflammatory rhetoric against U.S. critics, observing at a summit in late March that "Venezuela has the right to remain a sovereign nation and to make its own decisions.” This kind of defense, along with sales of Brazilian arms to his wayward ally, has added to Washington’s regional anxieties. It would seem that Lula has been walking a tightrope between affirming regional solidarity and placating the U.S. Now, however, in light of the corruption allegations, Lula’s own credibility is at stake, and the U.S. may find it easier to defuse his challenge to U.S. regional hegemony.

Washington’s Unease
As the U.S. endeavors to promote the linkage between free trade and democracy around the globe, the potential for political instability in Brazil adds to Washington’s list of anxieties over what is happening in the region. Lula’s friendship with Chávez and support for regional economic initiatives as alternatives to the Free Trade Agreement of the Americas (FTAA) have created rifts in Brazil’s ties with Washington. Rampant corruption in the Lula administration not only threatens democracy’s good name in Brazil, but adds to the country’s list of transgressions, including financial misdeeds, environmental lapses and mistreatment of its aboriginal population.

International Ambitions
Lula’s mid-July visit to Paris for Bastille Day highlighted growing ties between the two countries. France is currently supporting Brazil’s bid for a permanent seat on the United Nations Security Council, and the South American behemoth could be poised to make an explosive entrance onto the international stage. In pursuance of this goal, Brazil took on the leadership of the UN peacekeeping force attached to the UN Stabilization Mission in Haiti (MINUSTAH) in June 2004. Brazil is the largest contributor of troops to the now controversial mission, and has acquired a reputation for countenancing the perpetration of atrocities against Haitian civilians by the soldiers under its command, simply because these Haitians support the overthrown leader, Jean-Bertrand Aristide. The latest installment of violence was on July 6, 2005, when MINUSTAH troops commanded by Brazil lurched out of control and proceeded to massacre 23 Haitians in Port-au-Prince’s Cite Soleil neighborhood.

Lula’s Quandary
Unfortunately for Lula, a June Datafolha poll showed that 77 percent of the Brazilian public believes that Lula is at least partially responsible for the recent corruption scandals, and the perception of his personal guilt can only increase as the allegations multiply. However, another recent poll by Instituto Sensus shows the president’s personal approval rating stands at 60 percent. In order to salvage the PT’s credibility with the population, which has shown volatile opinion swings over the issue, the investigation of the corruption cases will have to occupy a good deal of the legislature’s time in the coming months. According to Jonathan Wheatley of Business Week, this means that “Lula would likely have to shelve plans to reform rigid labor laws, overhaul a dysfunctional judiciary, and streamline a bewildering tax system.” Though government officials have begun negotiating a “governability pact” that would determine the agenda of the legislature and guarantee that important reform legislation would receive a hearing in the chamber of deputies, it is doubtful that the competing demands of reform and investigation can be effectively managed by an already divided government. The reforms, which are essential to Lula’s legislative agenda and his prospects of regaining political equilibrium, must be passed if he is to ensure his popularity before the upcoming election. The popular president seems to find himself precariously situated between the horns of an intractable dilemma: only by completing both the investigations and the reforms can he maintain his high approval ratings, but due to time constraints, one of these initiatives will probably fall by the wayside. As much as he attempts to distance himself from his floundering PT, Lula must stand by the party he helped create during its great travails, or risk being accused of opportunism and cynicism.