Lula was sworn in on Sunday for an unprecedented third term, capping a dramatic turnaround for one of the world's most enduring political leaders, who first ran for president in 1989.

Jailed for graft in 2018 - the year right-wing former President Jair Bolsonaro was elected - Lula's convictions were overturned in 2019, allowing him to oust Bolsonaro in October's election.

As he strives to unite a nation riven by economic woes, a bruising pandemic and Bolsonaro's far-right populism, Lula is looking to his prison days for inspiration, allies and confidants told Reuters.

He learned from three failed presidential bids to tone down his leftist ideals and make peace with Brazil's powerful private sector during his 2003-10 presidency. But Lula 3.0 plans to double down on fighting poverty, ending hunger, and attacking racism, allies said, while also rewarding loyal Workers Party (PT) jail visitors with key cabinet positions.

"Prison reinforced the sense that he has a duty above all to the poor in Brazil," said Tarso Genro, a former PT governor of Rio Grande do Sul and a close Lula associate. "He went to prison strong and came out stronger."

The more ideological Lula who emerged from jail in 2019 should not be a cause for concern, friends and allies said. He is still the same pragmatist who honed his powers of persuasion as a union leader in the Sao Paulo auto plants of the 1970s, they added.
Lula aides have encouraged comparisons with

former South African leader Nelson Mandela, who spent over a quarter of a century behind bars as an opponent of the country's apartheid.

But many on Faria Lima, the so-called "Brazilian Wall Street," who fondly recall the business-friendly Lula of the early 2000s are holding their breath, worried that increased social spending and a loyalist cabinet will damage Brazil's fiscal credibility and usher in a new era of graft-stained statism.

"The initial reaction to Lula 3.0 on Faria Lima is not favorable," said economist Andre Perfeito, referring to the market dip after Lula's spending proposal was announced. "Many investors bet on Bolsonaro winning and they almost got it right, so it is natural they are not happy."

Recent cabinet appointments - including PT leader Fernando Haddad as finance minister - have also troubled some investors.

Lula also recently named PT stalwart and economist Aloizio Mercadante as head of national development bank BNDES, which during previous PT governments lent billions of reais to projects consumed by allegations of waste and graft, though bank officials have said they were transparent.

Lula's spokesman Jose Chrispiniano said the president supported fiscal responsibility and believes that strengthening the economy is the best way to combat poverty.

"He does not see any contradiction between caring for the poorest and promoting growth. On the contrary, he thinks caring for the poor and giving them the opportunity to work and consume is what generates sustainable growth," he told Reuters.

READING BEHIND BARS

Lula's new-found social awareness was ignited by reading books on race, slavery and hunger behind bars, as well as biographies of Fidel Castro and Nelson Mandela, according to his website. He also perused "Lulismo in crisis," a critical review of his movement and its missteps by his former press secretary Andre Singer.

It was augmented by his relationship with Rosangela da Silva, or Janja, a PT activist 20-years his younger whom he married on release and who looks set to be a key political player. Lula became a widower when his first wife Mariza died the year before he went to jail.

Janja - who helped organize Lula's election certification and Sunday's inauguration, as well as advising on cabinet choices - was among hundreds of PT true-believers who camped outside his prison in the southern city of Curitiba.

"Good morning, President Lula," his devotees would chant as the day began, followed by "Good night, President Lula," as he went to bed.

From his 15-square-meter cell on the third floor of the Federal Police headquarters in Curitiba, Lula set about reorganizing the PT and managing his legal defense. It was there he planned the failed presidential campaign of Haddad, a regular visitor who lost to Bolsonaro in 2018.

When he left prison, Lula was determined to set the record straight on his imprisonment and said he wanted to be re-elected to clear his name in the people's court. He called his imprisonment a political witch-hunt, fabricated by the right to keep him from running in 2018.

Another close aide, PT Senator Humberto Costa, said Lula matured politically in jail.

"What drove him to run again was the need to leave his mark, not just politically but historically, by bringing lasting change to Brazil," Costa said.