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(AFP) - A Brazilian appeals court Wednesday upheld ex-president Luiz Inacio Lula da Silva's conviction for corruption, dealing a body blow to his hopes of running for re-election this year.

The three-judge panel sitting in the southern city of Porto Alegre unanimously ruled that his original 9.5-year jail sentence be extended to more than 12 years.

Thousands of Lula supporters rallied in Sao Paolo to protest the verdict.

Wearing a short-sleeved black T-shirt, the 72-year-old was defiant, telling the crowd of around 10,000 that he intended to run for the presidency despite the court setback.

"Now I want to run for the presidency," he said to wild cheers. "They can take away my rights; no big deal. What I'd like to differ with them on is the conscience of the Brazilian people.

"Mandela was put in prison and then he came back and became president of South Africa," he added, comparing himself to the great African statesman.

One of the judges, Joao Gebran Neto, said in his ruling that during his 2003-2010 presidency, Lula was one of the architects "of a sophisticated scheme of fraud and corruption" that had weakened Brazil's entire political system.

A defiant Lula said before the judgment he would continue to fight "for the dignity of the Brazilian people" and insisted he had committed no crime.

Lula is likely to remain out of prison for many months. He is expected to continue to challenge the conviction through higher courts, initially in the Superior Court of Justice and ultimately in Brazil's Supreme Court.

However, Wednesday's ruling deals a severe blow to his hopes of running in this year's presidential election, which he was favored to win.

"It complicates his plans to run for the presidency this year but it doesn't finish them altogether," said market analysts Capital Economics in a note.

"The unanimous verdict is important since it reduces the avenues of appeal that are now open to Lula. That being said, it does not close them off completely.

"If pushed, we would say that there is still something like a 30 percent chance that he ends up on the ballot," it said.

The deadline for registration of candidates is August 15. The Workers' Party has until September 17 to replace Lula as their candidate, if necessary -- three weeks before the first round of the election on October 7.

- High security -

The court convened amid high security in the tense southern city of Porto Alegre to rule on Lula's appeal against his July conviction in Brazil's sprawling "Car Wash" graft scandal, with thousands of supporters and opponents of the leftist icon gathered to await the ruling.

As the judges presented their verdicts, Lula was hundreds of kilometers (miles) away near Sao Paulo, addressing former colleagues in the powerful metalworkers' union he once led.

"I am extremely calm, with the awareness that I have committed no crime," he told union members.

The key allegation against him is that he was gifted a three-floor seaside apartment from Brazil's OAS construction group in exchange for public contracts from state-controlled oil company Petrobras during his two-term presidency.

Defense lawyer Cristiano Zanin Martins had told the court it was clear OAS owned the renovated apartment, and that Lula "never got the keys and never spent a night there."

But in his judgment, Gebran Neto said there was evidence "that the triplex apartment, from the beginning, even before the OAS took over the works, was reserved for President Lula."

The defense had argued that no title existed in his name, but the judge said the lack of a document was intended precisely to hide the real recipient of the apartment.

A second judge, Leandro Paulsen, agreed with that understanding but considered an aggravating circumstance the fact that Lula had operated as guarantor "of a scheme that emptied the coffers of Petrobras."

- Market up -

Helicopters hovered near the courthouse, and even ships were being used to protect the building, which is located next to a river.

Argentine ex-footballer Diego Maradona used social media to voice his support for Lula, and released pictures of him holding a Brazil football jersey printed with Lula's name.

"My dear Lula, Diego is with You," wrote Maradona in Portuguese.

But Lula is also hated by many Brazilians who want to see him behind bars. Similarly, the markets were betting against a Lula run for the presidency.

Sao Paolo's stock exchange soared 3.7 percent to a record high within an hour of the court confirming Lula's conviction.

"Markets cannot hide their enthusiasm: a ruling against Lula, who has promised to revert part of President Michel Temer's business-friendly reforms, is widely seen as a fatal blow to his presidential bid," said Silvio Cascione in a note from the Eurasia consultancy.

© Agence France-Presse