Brazil ex-leader, Lula leaves prison

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As he walked out of the jail that held him for 19 months on a bribery conviction, Lula raised a defiant fist in the air to the cheers of a crowd of supporters from his Workers Party who waved red flags and held “Free Lula” banners.

His release is expected to further polarize a country that elected far-right President Jair Bolsonaro last year in a vote that Lula said on Friday was “robbed” from his Workers Party, which governed the country from 2002 to 2016.

Investors were jolted by the prospect of Lula returning to the political stage and uniting opposition to the market-friendly government, although he is barred from running in upcoming elections.

Brazil’s currency and benchmark Bovespa stock index both fell 1.8% on Friday, weighed down first by a Supreme Court ruling paving the way for Lula’s release and deepening losses after the formal court order letting him go.

“This will strengthen the Workers Party, but also anti-Lulismo and that will strengthen Bolsonaro’s movement too,” said Lucas de Aragao at ARKO political risk consultancy in Brasilia.

The Workers Party’s weak coalition in Congress may limit the immediate impact on the government’s proposed economic reforms, but Lula’s presence could strengthen the Brazilian left ahead of next year’s municipal elections.

“The big question for markets is whether he can run in 2020, and that is very unlikely,” D’Aragao said.

A charismatic speaker and formidable campaigner, Lula is ineligible under Brazil’s Clean Record law to seek elected office until 2025. While he can otherwise engage in politics, his release from prison is pending appeals that may continue winding through the courts for years.

In his first speech to supporters outside his jail in the southern city of Curitiba, Lula vowed to fight to establish his innocence, accusing “rotten” police, prosecutors and judges of “working to criminalize the left.