The almost three-year honeymoon of Brazilian president Luiz Inacio Da Silva—Lula, as fellow Brazilians know him—is clearly over. As his party is deeply embroiled in a corruption scandal, Lula’s prospects for reelection in 2006 are now not as certain as they once seemed.

Lula’s 2002 presidential election landslide was historic. For the first time, the Brazilian people elected a left-wing president, the first leader who could be considered a son of the poor. To millions of Brazilians living in poverty, Lula’s election brought to power someone who understood them and their concerns. In addition, the peaceful transfer of power from a center-right to a left-wing administration reinforced Brazil’s status as a true democracy.

Not everyone was satisfied. The financial markets worried that Lula’s election would bring about costly social reforms and would end economic liberalization. After losing three elections on radical platforms, however, Lula came to the 2002 election as a reinvented candidate. He was still the candidate of the left-wing Workers’ Party, but he had formed a broad coalition including right-of-center parties and the Brazilian Communist Party. Campaigning as “Lula Light,” he advocated not only social reform but also fiscal responsibility. His election put to rest the worries of international financial markets.

The constantly changing Brazilian political landscape—congressmen switch parties on a regular basis—makes governing difficult. Moreover, discontent was growing within the left wing of Lula’s own party over the last few months. Among party hardliners, Lula’s reforms were seen as too moderate; they argued Lula had caved in to international business. However, due to Lula’s enormous popularity, critics remained quiet and his reelection next year seemed inevitable.

All that changed when the corruption scandal began to unfold. Robert Jefferson, a dissatisfied leader of the Brazilian Labor Party, alleged that the Workers’ Party had paid bribes to congressmen of other parties in order to ensure that they would vote with the administration. He also acknowledged that his own party had accepted vast sums of money as campaign contributions in exchange for their votes. The money used for bribing congressmen was taken from publicly owned companies. In a spring 2005 television interview, he singled out Marcos Valerio de Souza, owner of two advertising companies with big government contracts, as the intermediary between the Workers’ Party and the bribed congressmen. During the summer, Lula’s chief of staff Jose Dirceu was forced to resign, and in late summer the whole Workers’ Party leadership stepped down.

Although a few congressmen have called for his impeachment, Lula thus far remains largely untouched by the scandal. In fact, he still enjoys high approval ratings. Though there is no evidence he knew about the bribes, the implications of the scandal on Lula’s presidency are immense. An intra-party struggle is ongoing within the Workers’ Party between the party’s left wing and the more moderate faction to which Lula belongs. The corruption scandal has reinforced the existing disagreements between officials over economic priorities.

If the scope of the scandal expands to include Lula, he might be forced to forgo a second-term election. In that case, the question is whether he still wields enough power within his party to pick his own successor. If he does, he would pick someone from the party’s moderate wing. Even if Lula—who is still favored in reelection—runs as a candidate, he might have to appeal more strongly to his own base—the poor. That would probably force him to adopt a more populist economic policy, giving him less room to maneuver in a political and economic sense. The financial markets remain very sensitive to fiscal irresponsibility. There is a growing unrest within Lula’s own party and a demand for more radical reforms.

Moreover, Lula must be able to govern as well as repel scandal. The public support for the Workers’ Party has plummeted after this summer’s revelations. Even if Lula is reelected, his party is bound to suffer losses in next year’s elections for Senate and Congress. It would be difficult for Lula to push through his agenda.

Lula came to power amidst immense hopes. He can still fulfill those hopes, especially those of Brazil’s poor who played a large role in his election. But he will need to stick with the philosophy that brought him to power. He will need to work not for himself, but for his country.