Which Lula Will Investors Get?

Brazil’s former president made Wall Street lots of money. Locals have mixed memories

- Felipe Marques and Vinícius Andrade

Days after Luiz Inácio Lula da Silva exited the presidential palace in Brasília, Mohamed El-Erian, then chief executive officer of powerhouse bond shop Pacific Investment Management Co., published what was in essence a love letter to him. This was January 2011, the world was in the midst of a torrid commodities boom, Brazil’s economy was soaring, and Pimco—along with scores of other investors—had just made a fortune investing in the country’s bonds.

Lula’s management style had proved so successful, El-Erian gushed in a column for Bloomberg Opinion, that it could influence political leaders everywhere, allowing “hundreds of millions of people around the world” to benefit from his presidency. “Generations of Brazilians will remember their popular president for far exceeding even the most optimistic expectations about what Brazil could achieve,” he wrote.

This was the zenith of Lula as cult figure. The following decade would deliver blow after blow to his reputation: His handpicked successor was impeached; the economy tanked; poverty soared; and a corruption scandal rocked the country, ultimately landing him in jail for 580 days.

Now, as the leftist leader inches closer to pulling off a stunning political comeback—almost all polls have him leading the incumbent, the fiery nationalist Jair Bolsonaro, before the first-round vote on Oct. 2—investors are split into two camps: locals who loathe him and foreigners who welcome his return.