Nov. 8 (Bloomberg) -- Brazilian President Luiz Inacio Lula da Silva, in his most sweeping defense of corruption allegations since they first surfaced six months ago, said his Workers' Party never paid bribes to legislators to win support in congress.

``I am sure there was no monthly payment,'' Lula, 60, said in an almost two-hour interview with six journalists on TV Cultura that ended early today. ``This monthly payment business smells like folklore within the national congress.''

The interview, Lula's first in Brazil to respond to the corruption claims, left no doubt the president intends to seek a second term, said Carlos Lopes, an analyst at Brasilia-based Santafe Ideias Consultoria. Often interrupting the journalists' questions and pointing defiantly with his right forefinger, Lula defended his former Cabinet Chief Jose Dirceu and lashed out at opposition deputies he said are making unfounded accusations.

``He spoke very much like a candidate,'' Lopes said. ``He went on the offensive. He is trying no longer to be on the defensive.''

Lula, a former union leader, said he won't decide until early next year whether to run for reelection because he wants to ``think seriously'' about it first. His approval rating has slipped to record lows amid a congressional investigation into the graft claims by former lower house deputy Roberto Jefferson.

`Candidate' Lula

Brazil's currency rose 0.7 percent today to 2.1920 per dollar at 2:01 p.m. in New York. The real has climbed 20 percent this year, the best performing currency among 60 tracked by Bloomberg. The benchmark Bovespa stock index dropped 0.4 percent to 30,835.79.

Lula said Jefferson had told him about the alleged bribery scheme before going public with the accusations in June. Jefferson, who was head of the Labor Party, part of Lula's coalition until June, was ousted from the lower house by lawmakers last month after he said he received illegal campaign funds.

``Roberto Jefferson was ousted by congress because he didn't have proof of the vote-buying scheme,'' said Lula, sitting on a red leather straight back chair in the presidential palace in Brasilia and facing the six journalists.

Lula said he expects Dirceu, who resigned amid allegations of corruption and now serves as a lower house deputy, also will be ousted from congress even though there is no evidence his former cabinet chief helped pay the alleged bribes.

`Hilarious'

There is ``political pressure'' to oust Dirceu, Lula said. Dirceu has repeatedly denied the accusations.

Leonel Pavan, a senator from the opposition Social Democracy Party, said Lula squandered a chance to apologize to the nation.

``Lula needs to realize that things aren't good,'' Pavan said. ``There has never been so much corruption in Brazil's history. This interview was a great opportunity for Lula to say `sorry,' and he missed the opportunity.''

Three congressional committees are investigating whether Lula's Workers' Party used more than $30 million of withdrawals from an advertising group's bank accounts to bribe lawmakers from other parties. With the Workers' Party controlling less than a fifth of the lower house, Lula's administration depends on the support of lawmakers from other parties to enact legislation.

The interview, which touched on topics from inflation to foot-and-mouth disease, kept returning to the topic of corruption, what he knew and what effect it may have on his presidency.

Move to Impeach

Lula said he doesn't take speculation seriously that opposition parties such as the Liberal Front Party, known as the PFL, may seek to impeach him.

``I don't know if the PFL has the political authority to seek the impeachment of a president,'' Lula said. ``But I think it'd be hilarious if they did seek it.''

His attacks against the opposition ``may cost him dearly in terms of congressional support'' ahead of the election, Lopes said.

``He is telling voters that the dispute for the presidency next year will be hardly fought,'' Lopes said. ``It may be hard to restore dialogue with congress after this interview.

The Brazilian president's approval rating fell to 28 percent last month, the lowest level since he took office in January 2003, from 31 percent in August, according to a Datafolha poll. Pollster Datafolha surveyed 2,537 Brazilians on Oct. 20-21 for the poll, which has a margin of error of plus or minus 2 percentage points.

Inflation

Lula said he expects the country's inflation rate to remain ``low'' and employers to keep hiring amid a two-year-old expansion in Latin America's biggest economy. Brazil's annual inflation rate dropped to 6 percent in September from 7.6 percent in 2004.

He said the outbreak of foot-and-mouth disease among the country's cattle herd is ``serious and important'' and needs to be contained.

``As we are the world's biggest exporter of beef, we all have great responsibilities,'' Lula said.

Russia, the biggest importer of meat from Brazil, last month joined the European Union and South Africa and Israel in banning some beef imports from Brazil after the government detected at least four outbreaks of the disease in the center-west state of Mato Grosso do Sul last month.

To contact the reporters on this story: Andrew J. Barden in Sao Paulo at at barden@bloomberg.net

Last Updated: November 8, 2005 14:03 EST