Brazil's Cardoso hit by protests as scandal simmers

BRASILIA, July 25 (Reuters) -- Brazil's President Fernando Henrique Cardoso faced the beginning of a four-day protest against his government on Tuesday as thousands of workers demanded an investigation into high-reaching corruption allegations.

Carrying banners reading "Enough Corruption!," workers lashed out against a multi-million dollar embezzlement scheme that analysts say could be the most damaging scandal to hit the Cardoso administration since it first came to power in 1995.

Protesters in Brasilia called for Congress to launch an inquiry into accusations that Cardoso's cabinet members, including his former chief of staff, helped steal up to $100 million during the construction of a Sao Paulo courthouse.

"Brazil's biggest problem is corruption," said Adilson Schio, a leader of the march in Brasilia by 1,200 agricultural workers. "How can anything get done, like land reform, when you have theft of public money."

In South America's largest urban sprawl of Sao Paulo, protesters knocked down barricades and stormed the hollow courthouse, hanging banners from the side of the abandoned building calling for Cardoso's resignation.

Organizers claim the protest will grow during the week, amassing at least 500,000 followers by Friday.

The scandal has already led to the first-ever impeachment of a Brazilian senator in June over accusations his construction company benefited from the embezzlement scheme.

Observers said the protests could be the beginning of a yet-deeper plunge in the Cardoso government's popularity, as Brazilians -- having just gone through two years of economic hardship -- find another reason to distrust the government.

"A month ago, analysts were saying Cardoso's approval ratings had hit the basement floor," said an analyst in Brasilia. "I think his ratings will now discover new lows."

While analysts say Cardoso's government will not fold because of the allegations, the political fallout ahead of Brazil's October municipal elections could bleed the administration of local and federal support needed to push painful pro-market economic reforms.

But they say it will continue to erode faith in Brazil's still-young democracy, which saw its last elected president resign in 1992 over corruption charges.

Sao Paulo has already been rocked by its own corruption scandal this year, as Mayor Celso Pitta battled impeachment proceedings over accusations from his family that he bribed city councilors and won millions of dollars in kickbacks.

Rio de Janeiro suffered a corruption scandal at the top levels of its security forces earlier this year, forcing mass firings over embarrassing kickback allegations.

The scandal comes just as Cardoso had hoped to boost his dismal popularity rates amid a budding economic recovery, with the economy expected to expand by 4 percent this year after a crushing 1999 currency devaluation.

Instead, opposition parties and social groups have rallied against the government's pro-market reforms they say have done little to remedy income inequalities in Brazil, where half the population still lives in poverty while a small chunk reap the benefits of Latin America's top economy.

The radical Landless Movement (MST), the main leader of this week's protests, have pledged that more than 250,000 families will join the protests later this week. Labor unions and opposition parties are also expected to join.

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