Lula free to run

The report is political, and thus is not a court order. But it will circulate throughout the judicial apparatus, including in the Supreme Court, which in March reversed the corruption conviction of former President Luis Inacio Lula da Silva. Lula left jail and is now free to run again for the presidency in 2022.

These amount to an onslaught that Bolsonaro has sought to dismiss with smiles, jokes and disdain. He termed the Senate report a "comedy." The past has in fact caught up with him in two ways.

During the peak of the pandemic in 2020, the president had already floated the idea of state aid for Brazilians worst hit by the subsequent economic crisis, especially in north-eastern Brazil. Some 60 million Brazilians came to receive aid, paid promptly every month, which made up for jobs lost and businesses closed in the pandemic. But the government ordered those payments halted in January 2021.

He termed the Senate report a "comedy."

Throughout 2020, Bolsonaro managed to garner support levels exceeding 40%, though these have fallen to 30% today, with a 65% rejection rate. The Senate's report will likely make that worse, though this does mean automatic gains for Lula.
The reasons for Bolsonaro's troubles are entirely real.

Annual inflation is well above 10%, while 14% of the workforce is now jobless. In addition, the country's biggest private bank, Banco Itaú, expects a recession for 2022, with the economy shrinking by 0.5%. The worst part is it all confounds the government's cheery promises of 2.5% growth for that period — precisely in the run-up to the elections set for October 2022.

Pandemic price

The government's turnabouts are unnerving the country's top tier of political power. Until recently, markets considered Guedes an impeccably orthodox economist, yet he is the one who decided to ditch the constitutional cap on public spending and finance a social program costing an extra five billion dollars. He wasn't deceiving anyone. He said that in an electoral year "obviously everyone wants to spend," adding that this was intended to help Bolsonaro keep the presidency. In his plan, politics trumps balancing the books.

But that immediately raised the dollar price in Brazil, with the Sao Paulo securities index falling over 7% in a week. Four senior economy ministry officials resigned in protest. Disruptions in business and finance will have repercussions in politics. Important economic players are worried that Bolsonaro's antics with the pandemic and a whiplash spending policy will pave the way for Lula's return. They do not like his erratic positions, which they feel have wasted the golden opportunity of Lula's jail time and absence of a substitute.

This business sector fears in Lula, perhaps exaggeratedly, the return of the interventionist and spendthrift left. Stock markets indices fell and the dollar rose when he was freed from jail and when certain polls suggest his support is growing.

Center decides

Observers are wondering: Is this sector in parliament and corporations working to overthrow Bolsonaro to block Lula's return? It's not a simple maneuver, as there's no parliamentary majority for it, but reveals the doubts at the apex of the Brazilian power structure on whether or not Bolsonaro's reelection makes sense.

A conservative movement rejecting both Lula and Bolsonaro may have fizzled out, allowing the president to base a strategy on the absence of alternatives. The only possible contender — the former justice minister and anti-corruption judge Sergio Moro — is far behind the two main candidates as of now.

Bolsonaro has another chance too, in that Lula lacks the overwhelming support he enjoyed a decade back. He is also unable to shake off the burden of corruption that sank his party under his successor, Dilma Rousseff. This might explain why polls have shown Lula's shrinking lead in recent months, though he still precedes Bolsonaro in voting intentions.

Cardoso's blessing

A factor being overlooked is that Lula has some support in the business sectors now turning on Bolsonaro. The Banco Itaú gave Lula its backing ahead of his first victory in 2002. And it wasn't a foolish move, as the first Lula government surprised all: Sundry with its careful economics, this period ensured record profits for the private banking sector.

That presidency was also able to manage debts inherited from the preceding, center-right government led by Henrique Cardoso. But those were booming years for commodities and the Chinese market boosted Brazil's economy. Today, Lula would have to be far more creative amid diminished revenues and volatile prospects for the world economy.

It may precisely be faith in his creativity and sensible pragmatism that recently led the veteran Cardoso to give his blessing to Lula's presidential run. That may give Lula crucial support from the political center, and might even help him form a competent government.