Lula Suffers Rocky Start in Brazil Cabinet as Crisis Worsens (1)

It wasn’t an easy first day on the job for Brazilian President Dilma Rousseff’s chief of staff, Luiz Inacio...

It wasn’t an easy first day on the job for Brazilian President Dilma Rousseff’s chief of staff, Luiz Inacio Lula da Silva.

Within an hour of Lula taking office Thursday, a federal judge issued an injunction suspending his appointment. Meanwhile protesters in some of Brazil’s biggest cities demanded he step down over allegations of corruption, just as Congress revived the process to oust his boss. Lula and Rousseff have repeatedly denied any wrongdoing.

The rallies and legal wrangling underscore the volatile political situation in Brazil, where Rousseff is finding it almost impossible to govern as she fights to remain in office.

“The political crisis spilled from the presidential palace to Congress, to the streets and now to the courts,” said Gabriel Petrus, a political analyst at business consulting firm Barral M Jorge. “She made a risky bet by tapping Lula. It doesn’t look like it’s paying off.”

‘Coup Supporters’

Lula joined the cabinet in a ceremony at the presidential palace Thursday morning, where government supporters defied critics of the administration by chanting, “There will be no coup.” Outside the palace in Brasilia, demonstrators demanded Lula’s arrest and Rousseff’s ouster. Rallies continued throughout the day and into the night, while thousands of protesters took to Sao Paulo’s main thoroughfare on Thursday evening.

“Coup supporters won’t bring me to my knees,” Rousseff said at the ceremony.

Yet Judge Itagiba Catta Preta Neto delivered a blow to the president, arguing in a document justifying the injunction that Lula’s nomination could lead to his interference in police and judicial activities. Attorney General Jose Eduardo Cardozo said the government is appealing the decision and that the cabinet appointment was legal. Lula remains a minister, though he can’t perform all functions until legal questions are resolved, he said.

Vice President Michel Temer skipped the swearing-in ceremony, increasing speculation that his PMDB party, the largest in Congress, would leave the ruling coalition ahead of an impeachment vote.

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Impeachment Vote

Lawmakers on Thursday afternoon revived the impeachment process that had been stalled for month by forming a committee that will recommend whether the lower house should vote to remove Rousseff from office. The committee elected its leader, Congressman Rogerio Rosso, and will start meeting next week.

Eduardo Cunha, speaker of the lower house, said he expects lawmakers to vote within 45 days. If approved, the process would advance to the Senate for consideration. Political consulting firm Eurasia Group increased the odds that Rousseff won’t finish out her term to 75 percent.

Financial markets surged for a second straight day Thursday on bets that the president’s ouster will pave the way for a government able to revive growth. The real appreciated 3.2 percent to 3.6280 per U.S. dollar, following a 0.7 percent gain the day before. Tension had surged on Wednesday after Federal Judge Sergio Moro released phone recordings that, according to critics, suggest Rousseff appointed Lula as minister to shield him from a criminal probe. She denies the allegations.

(Updates with congressional vote in ninth paragraph.)

–With assistance from Carla Simoes To contact the reporters on this story: Anna Edgerton in Brasilia at aedgerton@bloomberg.net, Arnaldo Galvao in Brasilia Newsroom at agalvao1@bloomberg.net, Raymond Colitt in Brasilia at rcolitt@bloomberg.net. To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Randall Woods, Robert Jameson

By: Anna Edgerton, Arnaldo Galvao and Raymond Colitt

©2016 Bloomberg News

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