Brazil's former president down, but not out after graft verdict upheld

The Brazilian appeals court that upheld a corruption conviction against former president Luiz Inacio Lula da Silva has dimmed his chances of running for office again but not killed them.

The ruling issued Wednesday means Lula -- the barrel-chested former steel workers union boss who rose to make Brazil the poster child of emerging economies and lifted millions out of poverty -- could be disqualified from the October election he is strongly favored to win.

But the final decision on Lula's eligibility to seek another term at the head of the now economically struggling giant will not come until shortly before the vote -- casting uncertainty over Brazil's future.

Candidates must announce by August that they are officially in the race.

On Thursday Lula's Worker's Party (PT) closed ranks the man who was Brazil's president for two terms, from 2003 to 2011.

"We are here to reaffirm the candidacy of ," said Senator Gleisi Hoffmann at a meeting of the party leadership in Sao Paulo. A poster on the door read, "In defense of democracy and of Lula."

"Without meaning to be arrogant," Lula said, "I want to tell you that I want to be the candidate, to win the elections. We're not lowering our heads!"

Lula was due to travel to Ethiopia on Thursday to take part in a conference organized by the UN Food and Agriculture Organization, but authorities rescinded his passport after a complaint was filed alleging he posed a flight risk, preventing him from leaving the country.

Complicated re-election plan

As expected, three judges sitting in the southern city of Porto Alegre agreed Wednesday that Lula, 72, was guilty of corruption by being bribed with a posh seaside condo, even though Lula insists he never even got the keys to the place.

The judges extended Lula's original prison sentence of nine and a half years, handed down in July, to 12 years and one month.

The ruling was undoubtedly bad news for Lula, but the question is how bad.

"It complicates his plans to run for the presidency this year but it doesn't finish them altogether," said market analysts Capital Economics.

"The unanimous verdict is important since it reduces the avenues of appeal that are now open to Lula. That being said, it does not close them off completely."

Pro- and anti-Lula forces, who demonstrated in Porto Alegre but mainly in Sao Paulo, are at loggerheads over whether the court decision is fair.

Lula's supporters say they smell a rat, and accuse the courts of acting with suspicious speed, and on the basis of slim evidence that came from a leak.

His critics argue that he and the PT are rotten with corruption and that he deserves to go to prison. Lula has six other legal cases pending, also essentially for alleged corruption.

"The issue of the condo is far from the most serious one," said one of the appeals court judges, Leandro Paulsen.

Lula's defeat in court will have a big impact on the presidential campaign and marks the start of what will probably be a long legal battle, with less than nine months to go until the election.

"It is an unprecedented situation in Brazil," said Fernando Schuler of Insper, a higher education institution focusing on business, economics and engineering.

"Lula is the frontrunner in the election and his candidacy is by no means assured. It is a dramatic situation for democracy."

30 percent chance

"If pushed, we would say that there is still something like a 30 percent chance that he ends up on the ballot," Capital Economics said.

Lula's lawyers can keep appealing the corruption conviction all the way up to the Supreme Court.

The faster the courts and electoral bodies move, the bigger the risk that Lula might be disqualified.

The latest polls say that more than a third of Brazilians support Lula, putting him far ahead of his closest competitor, far right lawmaker Jair Bolsonaro, who has 17 percent backing.

Conservative President Michel Temer is not running for re-election and there is no clear candidate in the middle of the political spectrum.

"Lula is likely to remain in campaign mode regardless of the outcome of the legal dispute, and will continue to appeal until all possibilities are exhausted," said Thomaz Favaro of Control Risks.

Lula's supporters will take to the streets and there is a risk of clashes with security forces, said Favaro.