(Adds market reaction in paragraph 9)
By Anthony Boadle
PENEDO, Brazil, Aug 23 (Reuters) - Former Brazilian president Luiz Inacio Lula da Silva told Reuters on Wednesday that his recent conviction for corruption might mean that his Workers Party will have to field a candidate other than him in next year’s election.
In an interview during a marathon bus tour through Brazil’s impoverished northeastern states, Lula said the Brazilian government should spend its way out of its worst recession on record and even use some of its international reserves instead of cutting government programs that hurt the poor.
Lula’s 2003-11 government lifted millions from poverty and polls show he is still one of Brazil’s most popular politicians.
However, his political future hangs in the balance after he was convicted last month of receiving bribes from a construction firm in return for help winning government contracts.
If that conviction is upheld on appeal, Lula will likely be barred from running and could be imprisoned.
“I know my enemies want to block any possibility of me being a candidate and I am fighting that,” Lula, 71, told Reuters in a hotel room where he complained that his arms hurt from physically embracing thousands of supporters who have turned out at every stop of his tour.
“But nobody is irreplaceable,” he added. “If there is any problem, the Workers Party has to be able to launch another candidate.”
A possible stand-in is the former mayor of Sao Paulo, Fernando Haddad, who gained national prominence as education minister under Lula and extended university access to poorer Brazilians.
Brazil’s real currency extended gains on the news that Lula was contemplating his own replacement, firming more than 1.2 percent to its strongest in more than two weeks. Traders said the prospect of a 2018 race without Lula reinforced bets on Brazil sticking to fiscal austerity and pursuing structural reforms.
Lula’s gravelly voice has lost strength after he beat throat cancer five years ago, but his fiery speeches have lost none of their power to rally audiences with populist criticism of Brazil’s elites.
Corruption accusations and the impeachment of Lula’s hand-picked successor Dilma Rousseff, who was ousted due to budget irregularities in 2016, caused many members to quit the party last year and led to major setbacks in local elections.
Lula said members who left have not joined other parties and, with corruption scandals entangling most of Brazil’s political class, they are still undecided, so the Workers Party is hoping to win them back.
His three-week, 4,000-kilometer (2,500-mile) tour of a region that greatly benefited from his social programs aims to reconnect his party with its working class base and rebuild what is still Latin America’s largest left-wing party.
Polls show Lula would handily win the first round of a presidential election but he is in a statistical tie with his former Environment Minister Marina Silva, no relation despite the last name, largely because Lula has a 46-percent rejection rate, the highest among likely contenders.
Lula sharply criticized President Michel Temer for privatizing state assets to try to plug a record budget deficit that cost Brazil its investment-grade credit rating two years ago. Temer’s ministers blame the fiscal crisis on excessive public spending by Lula and Rousseff.
Lula said Temer’s spending cuts were the wrong way to pull Brazil from its worst recession on record. He would expand public investment, even if it meant increasing government debt at first, to restart the economy and recover tax revenues.
“Honestly, I would use some of the international reserves, and money from bank reserves, to make Brazil grow again,” he said.
Lula said Temer’s market-friendly government did not have the courage to raise taxes and make wealthy Brazilians contribute more to government finances. Instead, the government is selling state companies, such as power utility Eletrobras.
“When there is nothing left to sell, they will sell their souls to the devil,” he quipped. (Reporting by Anthony Boadle; Editing by Alistair Bell)