Union members dressed as former Brazilian president Luiz Inácio Lula da Silva and a cow take part in a protest. (Ueslei Marcelino/Reuters)

The chant went up from the Workers’ Party faithful: “Lula, warrior of the Brazilian people!” Brazil’s popular former president, Luiz Inácio Lula da Silva, was getting up on the stage here to cap the celebration of his party’s 35 years of existence.

Flanked by his successor, Dilma Rousseff, and Uruguay’s outgoing president, José Mujica, Lula should have been reveling in the party’s electoral success as it begins an unprecedented fourth consecutive term in government.

Instead, Brazil’s worsening “Big Oil” scandal — in which prosecutors allege hundreds of millions of dollars were siphoned off contracts from the state- controlled oil company, Petrobras — hung like a big black cloud over the celebrations.

The Workers’ Party is facing a crisis. The struggling economy is heading toward a potential recession this year, Rousseff’s new finance minister is proposing unpopular cuts and tax increases, and a drought afflicts the economically vital southeast of the country. A poll last weekend showed Rousseff’s approval rating had halved just three months after she won the election.

And the day before Lula spoke here, television news showed images provided by federal police of officers climbing over the front gate of party treasurer João Vaccari’s Sao Paulo home, to take him in for questioning over legal and illegal donations. A key Big Oil witness estimated $150 million to $200 million was paid to the Workers’ Party from Petrobras contracts over a decade. Vaccari was released and not charged.

A demonstrator dressed as Brazil's President Dilma Rousseff participates in a protest against corruption. (Ueslei Marcelino/Reuters)

“I have to be very careful not to pass on to this 35th birthday party the indignation I really feel,” Lula said.

As Big Oil forces the Workers’ Party further onto the defensive, it is struggling to reinvent itself after 12 years in power, during which it went from being an idealistic coalition of workers, unionists and intellectuals to a political elite increasingly seen as corrupt. In the poll, 52 percent said they believed that Rousseff knew about corruption at Petrobras and did nothing.

There is even opposition talk of impeaching Rousseff. A small group of protesters here called for military intervention and a return to dictatorship.

Vaccari’s attorney said in a statement that the party received only legal donations, and never in cash.

“What they want to do is criminalize the legal money that the Workers’ Party used in its campaigns,” Lula said in his speech. “People are being accused by means of the press.”

This is a party whose original manifesto read: The Workers’ Party “intends to be a real political expression of all those exploited by the capitalist system.”

In power, the party helped transform the lives of millions of poor Brazilians with its income and housing support for poor families.

A worker who labors for Rio de Janeiro's Petroquico Complex. (Marcelo Sayao/European Pressphoto Agency)

But it also became bloated and inefficient. “It became more corporate,” said Guilherme Simões, a political scientist at Rio de Janeiro’s federal UNIRIO university.

Even as he defended the party against what he and other party chiefs described as an attack by powerful elements in Brazil’s ruling elite allied with concentrated media interests, Lula acknowledged the problem. “If we are not careful,” he warned, “it will stop being a grass-roots party and become more and more a party of cabinets.”

A number of those on stage in Belo Horizonte were former members of the armed resistance to Brazil’s military dictatorship who were imprisoned and tortured by that regime: Rousseff, Rui Falcão, the party president; and Fernando Pimentel, the new governor of Minas Gerais state, of which Belo Horizonte is the capital.

In 1970, Rousseff used to visit her then-husband, Carlos Araújo, in the same prison in Porto Alegre, in the south of Brazil, where Pimentel and Falcão were held. “Comrade Rui Falcão,” said Pimentel in his speech, “in the cell, we two could never have imagined that you would be . . . president of the party, I would be governor, and Dilma would be president of the republic.”

As of now, 86 people have been charged in the Big Oil scandal. On Feb. 5, federal prosecutors made extensive testimony available from Pedro Barusco, a former executive at both Petrobras and at Sete Brasil, a company set up to contract oil rigs and platforms to exploit the country’s vast ultra-deep-water reserves.

Barusco is one of 12 to have turned state’s evidence. He detailed bribes paid to himself and other Petrobras and Sete Brasil executives and said 0.5 to 1 percent of each contract was paid to the Workers’ Party. Barusco said the party’s cut was administered by Vaccari, nicknamed “Moch” on Barusco’s spreadsheets because he always carried a rucksack, or “mochila” in Portuguese. A Workers’ Party statement said the testimony did not present any proof.

In his speech at the birthday rally, Falcão argued that the party needed to go out and defend Rousseff’s government. “To win this challenge will demand a rebirth of the Workers’ Party, a return to the values of our origins,” he said.

The party’s second line of defense is a long-standing proposal for political reform, in which private and business donations to campaigns would be banned and replaced by public funding. It also wants to overhaul Brazil’s tax system, so that richer citizens will pay more.

“In my personal opinion, Lula will come back to be a candidate in 2018,” said Tarso Genro, a former Workers’ Party minister and former governor of Rio Grande do Sul state.

Wellington Dias, a senator reelected in October as governor of Piaui state in the Workers’ Party heartlands in the northeast of Brazil, said it had done more to combat corruption than any other party. “Today we bleed more over corruption. There is more transparency,” he said.

With indigenous roots, Dias’s family suffered from hunger, and he was a penniless student when he helped found the Workers’ Party in his home state in 1980. As a state governor, 35 years later, he flew home from Belo Horizonte in a private jet.