July 21, 2005

Brazil’s Lula ends reshuffle amid scandal

By Andrew Hay

BRASILIA, Brazil (Reuters) - Brazilian President Luiz
Inacio Lula da Silva made the final moves in a cabinet
reshuffle on Thursday to shore up crumbling support in Congress
as a bribes-for-votes scandal rocked his government.

With the last two changes, Lula has now reshuffled 10
ministers since June 6 to defend his administration from
accusations in Congress the ruling Workers Party (PT) bribed
lawmakers to back government legislation.

"The team put together now, that team is there until the
end of my mandate," Lula said as he registered the new

Lula has given extra cabinet jobs to allied parties to
salvage his Congressional coalition 16 months before he faces

Congress has launched 3 anti-corruption inquiries in the
last six weeks linked to the Workers Party and government. Lula
vowed to build better relations with Congress and appealed for
"seriousness" in investigations.

Some lawmakers have accused him of wrongdoing in the bribes
scandal, but proof of alleged bribes to lawmakers has yet to
appear. Lula has denied knowledge of any such scheme.

Allegations of PT and government corruption have sparked
Brazil's worst political crisis in over a decade and paralyzed
Lula's legislative agenda.

Markets fear Lula may loosen fiscal and monetary controls
to win back support or become a lame duck president and be
replaced by a less market-friendly leader.

The president's popularity remains high but polls show many
Brazilians believe it could be eroded by an avalanche of
corruption accusations against the PT, the party he helped
found 25 years ago.

Five ruling party leaders have stepped down after being
accused of involvement in the alleged bribery scheme and Lula
has distanced himself from them. He has now cut by nearly half
the number of ruling party ministers in his cabinet since he
took office in 2003.

"It's a reform to improve support for the government, to
defend the government," said political analyst Carlos Lopes at
consultants Santafe Ideias in Brasilia.

As part of Tuesday's moves, the government-allied
Progressive Party (PP) won its first ministry as Cities
Minister Olivio Dutra of the PT was replaced by Marcio Fortes,
executive secretary at the trade ministry.

Lula gave a third seat to the Brazilian Democratic Movement
Party to boost support from his biggest congressional ally.

Government communications chief Luiz Gushiken, who has
faced corruption allegations, will have most of his duties
transferred to presidential secretary Luiz Dulci, Lula said.

Lula also announced he would cut the number of politically
appointed positions in the federal government by nearly 70
percent. The jobs, linked to corruption at state firms, will be
opened up to competition from applicants. (Additional reporting
by Ricardo Amaral, Natuza Nery and Patricia Duarte)