Lula Backers' Defaced Bills Draw Central Bank Into Election Fray

(Bloomberg) -- Defaced bank notes featuring the image of jailed former President Luiz Inacio Lula da Silva have dragged Brazil's central bank into the country's polarized pre-election debate.

Critics of the ex-president circulated a video on social media showing Lula's supporters stamping bills with his face alongside a plea to set him free ahead of October's presidential elections. An accompanying message claimed stamping the bank notes is illegal and that Brazil's monetary authority had already instructed banks to reject them. Local businesses began boycotting the bills, forcing the central bank to state that the notes remain legal tender.

Even in jail, the star of the leftist Workers' Party who left office with record-high approval ratings continues to lead in the polls. Lula's imprisonment has galvanized his base and laid bare the political division in Latin America's largest democracy, which has been beset by political turmoil since the impeachment of his hand-picked successor, Dilma Rousseff. While his conviction briefly calmed some market jitters, a wide-open field of potential candidates is keeping investors nervous -- and Lula himself may yet try to run for office.

To read more about the campaign to free Lula, click here

Bank notes retain their value even when defaced with “strange marks,” the central bank said in a statement posted on its Facebook page. Its statement did not directly reference the bills emblazoned with Lula's mugshot from his imprisonment during Brazil's military dictatorship. Vandalized bills will be destroyed and replaced, representing a cost to taxpayers, the bank said.

Underneath the monetary authority's statement, a number of commentators said they would not accept the bills in their stores, regardless of the bank's advice.

--With assistance from David Biller

To contact the reporter on this story: Kariny Leal in Rio de Janeiro at kdeoliveira1@bloomberg.net.

To contact the editors responsible for this story: Daniela Milanese at dmilanese@bloomberg.net, Bruce Douglas

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