Amid party graft, Brazil's leader loses his luster

RIO DE JANEIRO -- Three years ago, when Brazil's first elected leftist leader was swept to power in a landslide vote, he promised a new era in national politics: a clean government in a country plagued by corruption.

Today, Luis Inacio Lula da Silva's party is embroiled in the worst Brazilian corruption scandal in more than a decade, a wide-reaching payoff scheme that has tarnished his reputation, imperiled his policies and chances for reelection, and dealt a severe blow to his Workers' Party.

Beyond the fortunes of Lula himself, a working-class everyman who rose from metalworker to union leader to the presidency, the collapse of his party would have ramifications not just in the region's most populous nation, but across Latin America.

The party, known here as the Partido dos Trabalhadores, or PT, has long been a moderating force on the Brazilian left.

Lula, whose pro-market policies have reassured Washington, has counterbalanced the regional influence of more radical Latin American leftists, such as the Venezuelan leader, Hugo Chavez.

But Lula's stature at home and abroad has not shielded him from suspicion and scorn since the money-for-votes conspiracy came to light three months ago.

A secret videotape sparked revelations that Lula's top advisers had taken $24 million in undeclared bank loans.

The tape also led to charges that aides had paid legislators from other parties $13,000 per month to secure their support in Congress.

More sordid revelations followed. A PT politician was caught with $100,000 stuffed in his underwear; Lula's public-relations chief confessed to having been paid from slush funds in the Bahamas; and Lula's former chief of staff was accused of involvement in the murder of a mayor, and of links with illegal gambling.

This month, a congressional investigation committee called for the impeachment of 18 legislators in the payoffs scandal; six of them were key figures from the PT. Although no evidence has implicated the president, who asserts his innocence, some critics have begun to call for his removal.

Brazil's Independence Day festivities last week included anticorruption demonstrations led by lawyers, unions, and farm groups, and thousands of former Lula loyalists, in a half-dozen cities.

The president was booed by onlookers at the official parade in the capital, Brasilia.

The steady stream of live congressional confessions has kept Brazilians glued to television sets all summer. But far from being amused, as they are by villains in top-rated soap operas, many ordinary people say they are disgusted and disillusioned. And they say they will vote accordingly in next year's election.

Many longtime PT loyalists see the crisis as a culmination of the party's shift to the political center, and of its efforts to secure support from opposition parties. That campaign, critics say, led the party to abandon the principles of ethics and social justice that it once stood for.

A survey released Aug. 23 by Ibope, a respected polling organization, suggested that Lula would lose in a hypothetical rematch with his 2002 presidential rival, Mayor Jose Serra of São Paulo. In a poll taken hours after Lula's speech a month ago, in which he disavowed responsibility for the scandal, the newspaper O Globo's online service found that almost three-quarters of listeners did not accept his explanation.

Martine Scherer, 40, a Rio de Janeiro teacher and a PT supporter, complained that Lula has not responded quickly to the crisis. ''You can't confront this type of situation pleading ignorance," she said. ''You have to take responsibility and lead, and Lula has not done that."

Many investors and businesspeople, meanwhile, are rooting for Lula to ride out the storm, hoping to avoid the economic turmoil caused by the impeachment battle that convulsed Brazil in 1992, when the president at the time, Fernando Collor de Mello, resigned amid corruption accusations, said Christopher Garman, a political analyst in São Paulo.

Investors and lenders have voiced concern about whether a politically weakened Lula, bereft of congressional support, will have the clout to maintain a tight monetary policy and to implement planned economic revisions, including proposals for tougher tax and labor policies.

A downturn in the biggest economy in South America, and a major US trading partner, would dampen neighboring economies, many of which are only now recovering from their own fiscal shocks.

Meanwhile, the antipoverty agenda that brought Lula to office has fallen by the wayside. Land distribution and anti-hunger programs have been forgotten and economic reforms paralyzed, critics on both sides of the political spectrum say.

''The government can't get any work done," said Andrea Silveira de Souza, a 33-year-old radiologist in Rio.

As the corruption scandal has widened, a power struggle has erupted within the party. Disgruntled members have defected.

''The wrongdoing stems from irregularities and abuses within the party, not within the government of Brazil," acting party president Tarso Genro insisted in a telephone interview.

But even Genro, a politician from the state of Rio Grande do Sul, acknowledges that cleaning up the party will be difficult. He wanted tainted leaders to step aside so the PT could try to regain the confidence of disillusioned supporters.

Genro decided not to run for the presidency after losing a battle with disgraced politicians who refused to withdraw from party leadership elections Sept. 18.

For some PT members, any changes will come too late.

''It's no longer the party I joined and wanted to serve," Andre Costa, a lawmaker from Rio de Janeiro who is quitting the party, said in an interview. ''Many of us were already upset with the government policies," he said of a growing group of disaffected legislators. ''But there is no room for moral abuses."

Luciano Dias, a political analyst with Goes Consultants in Brasilia, said the scandal has exposed the PT to be ''a party like any other party."

''In the past, the PT represented the promise of democratic socialism, the fight against neo-liberal economics, and the fight for ethics. . . Now who can say it has fulfilled any of those? The PT is dead as a force in Brazilian politics," he said.

Dias said that the disintegration of the party, once a moderating ''big tent" for the Brazilian left and a counterbalance to rightist extremism, could spur the radical polarization of politics here.

A more likely, but equally troubling outcome, he predicted, is that the PT's collapse would ''blur the frontiers between parties, creating a huge, messy political center that has no chance of transforming the system."

Globe correspondent Paulo Prada contributed to this report.