Serra Seeks `Life Jacket' in Brazil Tax Scandal to Stop Rousseff Landslide

Brazilian presidential candidate Jose Serra, trying to prevent a landslide defeat in next month’s election, is accusing his opponent’s party of using dirty tricks to gather private tax records of his supporters and family.

Serra, speaking to reporters in Sao Paulo yesterday, said the alleged breaking of bank secrecy laws by allies of President Luiz Inacio Lula da Silva resembled the “work of a gang.” He said the “crime” aimed to boost the candidacy of Lula’s hand- picked successor, Dilma Rousseff, and violated the constitution.

The former governor of Sao Paulo state stepped up attacks on Rousseff after the federal police began an investigation in July into whether tax officials leaked records of several people close to Serra, including his daughter Veronica and the vice president of his Social Democracy Party. The strategy is unlikely to erase Rousseff’s commanding lead, analysts said.

“The scandal is Serra’s life jacket to try to get to a second round,” said Andre Cesar, founder of Brasilia-based political risk firm CAC Consultoria. “But there is no evidence yet that the scandal has hurt Dilma’s campaign.”

The winner in the Oct. 3 vote must garner more than half of valid ballots cast to prevent a runoff against their closest rival four weeks later.

Rousseff widened her lead 2 percentage points to 50 percent, compared with 28 percent for Serra, in a Datafolha poll published Sept. 4. Green Party candidate Marina Silva had 10 percent, according to the nationwide survey of 4,314 people. The poll had a margin of error of 2 percentage points.

Tax Officials

The probe centers on whether local tax officials in Sao Paulo and Minas Gerais states, at least one of them alleged to be a member of Rousseff and Lula’s Workers’ Party, violated procedures and committed fraud while accessing the tax records.

Federal Tax Secretary Otacilio Cartaxo said Sept. 1 that someone forged Veronica Serra’s signature to access the records of the candidate’s daughter a year ago. So far, no political motive has been detected in the alleged wrongdoing, according to the tax agency’s internal auditor.

“Leaks happen, and they’ve always happened,” Finance Minister Guido Mantega, who oversees the tax agency, said Sept. 3. “We identify the source of the leaks, punish those responsible and then change the system. Unfortunately, afterwards, the lawbreakers find a way to beat the system and we have to improve the system again.”

Jose Eduardo Dutra, president of the Workers’ Party and head of Dilma’s campaign, wasn’t immediately available to comment when called by Bloomberg News today.

High Approval

Lula, who has a 79 percent approval rating after almost eight years in office, said at a campaign rally for Rousseff on Sept. 3 that Serra was resorting to “cheap tricks” to prevent defeat.

“When someone doesn’t know how to swim, they fall in the water and keep kicking until they drown,” Lula told supporters in Sao Paulo. “That’s what is happening to our adversary.”

Four days later, in a nationally televised campaign ad, he said attempts to slander his protege were a crime against Brazilian women.

Serra’s campaign didn’t immediately respond to an e-mail from Bloomberg News seeking comment.

Lula’s record reducing poverty and stabilizing Latin America’s biggest economy will overwhelm voters’ concerns about possible violation of secrecy laws, said Alexandre Barros, head of Early Warning, a Brasilia-based political risk firm.

Preserving Gains

“The bulk of Dilma’s voters are conservative, because they don’t want changes,” Barros said. “They are poor people who rose in life, who bought property and don’t want to lose what they gained during Lula’s government.”

Under Lula, Brazil created 14 million jobs, helping to raise 19 million people out of poverty from 2003 to 2008. Unemployment fell to a record low of 6.8 percent in December. As cabinet chief, Rousseff oversaw a program to build 1 million homes and was in charge of administering a 500 billion-real ($290 billion) infrastructure drive.

Rousseff, a former member of the Marxist underground that battled Brazil’s 1964-1985 dictatorship, has said that if elected she’ll continue Lula’s policies to spur development without sacrificing economic stability. Under Lula, the annual inflation rate has fallen from 17.24 percent in May 2003 to 4.49 percent in the 12 months through August.

To contact the reporters on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net; Joshua Goodman in Rio de Janeiro at jgoodman19@bloomberg.net

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