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Brazil’s Supreme Court Rules Against Ex-President Lula … Again

Supporters of ex-president Luiz Inacio Lula da Silva got their hats handed to them yet again on Tuesday.

The Supreme Court ruled 3-to-2 in favor of upholding his 12-year prison term, lending a brutal blow to Lula, his lawyers and some media activists who thought for sure that recent revelations of political bias by top prosecutors and the judge who first sentenced Lula would render his case illegitimate. It did nothing of the sort. Lula still has eight more cases filed against him in the massive Petrobras “Car Wash” bribery scandal.

In a knee-jerk reaction yesterday, Brazil’s stock market fell on the news that the Supreme Court might let Lula loose. The MSCI Brazil is expected to start the morning on a high note.

The Petrobras crime spree upended Brazil’s politics and nearly destroyed the Workers’ Party. Lula, the party’s founder, is likely to be found guilty on other charges later this summer. His early release, however, would have given his supporters the momentum to frame the entire investigation of Lula as tainted and politically motivated.

At least two chief executives from construction giants like Odebrecht told police investigators that they paid Lula directly or indirectly for lucrative public works contracts related to Petrobras.

For the Workers’ Party, this kind of bribery schematics are simply business as usual in Brazil. Until one gets caught. The party and their allies got caught, with many of them now paying the price in prison or under house arrest.

By and large, Brazilians have rejected corrupt politicians and support the Petrobras investigations.

Petrobras’ market cap collapsed by as much as 80% and is only now just starting to recover. The company continues to pay out hundreds of millions of dollars in class action claims to U.S. investors due to the scandal.

Lula’s lawyers and his staunch supporters have claimed since the get-go that the investigation was a political witch hunt designed to stop the two-term president from seeking another shot at the presidency last year. His party lost handedly, despite them all making it a referendum on Lula’s freedom.

The Lula-as-political-prisoner narrative was dormant for months. But it got a shot in the arm two weeks ago when American journalist Glenn Greenwald revealed narrative-supporting hacked messages from the Telegram messaging app between chief Lula prosecutor Deltan Dallagnol and star Federal lower court judge, Sergio Moro. The article was published on The Intercept in Brazil and made the rounds worldwide immediately upon publication. Matt Drudge had it red-lined on The Drudge Report.

The messages showed two men adamant about locking Lula up. Greenwald’s article revealed a bias against Lula, corrupting Moro’s judgement. It was quite “the get,” in journalistic parlance. And the local media were set ablaze by the news. Lula was surely closer to freedom.

On cue, Lula’s supporters up and down the Americas, including Brazilian academics in New York, took to social media to denounce Moro and the entirety of the Car Wash investigation.

To them, Car Wash is like the Russian investigation to Trump supporters.

The only difference is that Moro was not the final judge and jury. And he had real evidence.

Lula’s lawyers appealed all the way to the Supreme Court and lost each time, a sidebar many of his supporters neglect to mention.

Greenwald says he has a trove of other damning evidence against Moro, so investors should not be surprised by more noise coming out of Brazil because of this in the months ahead.

Moro told a congressional panel last week that the messages were out of context. He did not deny them. He said that the case was held within the parameters of the law and that he had case evidence to support his verdict.

Here in the States, Wall Street is mostly focused on pension and tax reform in Brazil. Any sell-off due to Lula’s early exit from his single-bedroom holding cell in a Curitiba, Parana, federal penitentiary would be short-lived so long as new president Jair Bolsonaro keeps on the reform agenda.

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