• Ex-President Lula is accused in Sao Paulo of hiding assets
  • President Rousseff awaiting on Lula's reply to her offer

Brazil’s real fell as speculation mounted that former President Luiz Inacio Lula da Silva would be named a cabinet minister, potentially shielding him from prosecution and lowering expectations of a change in government.

The real tumbled 1.7 percent to 3.7234 per dollar at 9:51 a.m. in Sao Paulo. 

President Dilma Rousseff is waiting for Lula to respond to her offer for him to join the cabinet, according to a government official briefed on the matter. Lula would probably become Rousseff’s chief of staff, helping her ward off impeachment, said the official who requested not to be named because talks are not public.

"The market’s reflex reaction to the news on Lula is clearly negative, because there is this fear that it might weaken the impeachment drive," said Bianca Taylor, a sovereign analyst and strategist at Loomis Sayles & Co. in Boston. "Removing this government would mean a very necessary political and economic change."

State prosecutors have charged Lula with money laundering and hiding assets. Appointing him to the cabinet would help keep him out of jail because only the Supreme Court can authorize a Cabinet member’s imprisonment.

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