The New York Times
April 4, 2004

Brazilian Efforts at Progress Are Mired in Political Scandal

By LARRY ROHTER
 
BRASÍLIA — A widening corruption scandal in Brazil has all but immobilized the government of President Luiz Inácio Lula da Silva, whose support was already eroding because of the weak performance of the economy during his first year in office.

The crisis began in mid-February when Waldomiro Diniz, then the president's liaison to Congress, was seen on a two-year-old videotape apparently soliciting hundreds of thousands of dollars in campaign contributions from the boss of an illegal numbers game in return for political favors. A government report issued in late March acknowledged that such "administrative improprieties" had continued after the left-leaning Workers' Party took power last year.

Elected on a platform that promised social justice and economic growth, Mr. da Silva, a former labor union leader, is nearly a third of the way through his four-year term. But he has been unable to make progress on either count, and the corruption scandal is seen as making it even less likely that he will succeed in keeping those pledges.

"The sense of dissatisfaction and crisis is growing," said Alexandre Garcia, a former presidential press secretary who is now a political commentator for a television network. "The government seems paralyzed and shocked by developments, the Workers' Party itself is divided and perplexed, and the opposition is worried," he said, about the government's growing weakness leading to further drifting of the economy.

The turmoil has pulled down Mr. da Silva's popularity. In an opinion poll issued in late March, a majority of those surveyed said "the country is on the wrong path," the first time since Mr. da Silva took office in January 2003 that his administration had failed to win majority support.

Mr. Diniz was fired and is under investigation, and attention has shifted to his boss, José Dirceu de Oliveira e Silva, the all-powerful aide whom the president calls "the captain of my team." Several party supporters have come forward to say that they had warned Mr. Dirceu and other party leaders of fund-raising irregularities but that they were either ignored or punished.

Mr. Dirceu said recently that as far as he was concerned, the Diniz matter was "a closed case," because the investigation concluded that "this government doesn't steal or allow stealing." When reporters were not satisfied with that answer and continued to press him, he lashed out, calling them "an ill-bred and uncivilized pack of bad actors," and accused the opposition of trying to "destabilize" Brazil's first elected left-wing government.

But with the news media energized, every week seems to bring new revelations of financial irregularities along the Workers' Party's path to power. The former director of the lottery in Brazil's southernmost state contended that he was forced to press numbers-game kingpins to contribute illegally to the party campaign, and prosecutors are going ahead with their inquiry of what they say is a multimillion-dollar kickback scheme in São Paulo State.

"I don't think he is the only one," said Fernando Ferro, a Workers' Party member of Congress from Mr. da Silva's home state, referring to Mr. Diniz. "Unfortunately, there is a lot of that in the Workers' Party, and there are a lot of people who are still going to create problems for the government."

With Mr. Dirceu forced to spend his time defending himself, the Workers' Party has been forced to look outside its own ranks for a substitute. As a result, the role of the government's chief political coordinator has fallen to the chameleonlike José Sarney, a conservative who was president from 1985 to 1990 and is now president of the Senate.

"Today, Sarney is the center of gravity and "the strongman of the presidential palace," Dora Kramer, political columnist for the daily Jornal do Brasil, wrote recently. "In Brasília, it is said in a joking tone not far from reality that José Sarney has more power now than he ever had when he was the president of the republic."

In that role, Mr. Sarney, part of the governing coalition, has helped block a congressional inquiry, supported even by some dissident party members, that would examine the corruption allegations.

The scandal comes on top of a dismal economic performance that had already undermined the government's credibility and popularity. Mr. da Silva took office promising a "spectacle of growth," but the economy actually shrank last year for the first time in more than a decade. Newly released government statistics show that the money Mr. da Silva invested in development projects in his first year in office was barely one-tenth that of his predecessor the previous year.