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Brazil sinks deeper as Temer’s allies openly consider options

Michel Temer (right) talks with Aécio Neves during a ceremony where the Brazil president made his first public remarks, after the Brazilian Senate voted to impeach President Dilma Rousseff in May 2016.

After a groundshaking 48 hours for the political class, Brasilia clicks back into gear

Brazil’s political crisis deepened yesterday as government allies began openly discussing scenarios for the replacement of embattled President Michel Temer.

Brazilians watched in shock as federal police carried out search and arrest warrants throughout the capital, Brasilia, in dramatic scenes reminiscent of the impeachment process last year that brought Temer to power. The president later addressed the nation but rumours and outrage continued to sweep across the nation.

The operation came after the O Globo newspaper reported on leaked audio-tapped testimony that Temer allegedly approved payoffs to buy the silence of Eduardo Cunha, the mastermind behind last year’s ouster of former president Dilma Rousseff. Cunha is now in prison on corruption charges.

The recorded testimony was submitted to the Supreme Court by two senior executives from meat-packing giant JBS as part of a plea-bargain deal, according to the paper. The allegations are the latest twist in a sprawling corruption scandal that has reached the top levels of the country’s financial and political elite.

Markets tanked yesterday on the prospect that renewed turmoil would kill a reform agenda designed to fix depleted public coffers and pull the economy out of its deepest recession on record. Brazilian assets had rallied over the past year as Temer pursued austerity measures designed to rein in a ballooning a budget deficit.

Congress was due to vote on a long-anticipated and controversial overhaul of the pension system by the end of May. Eurasia Group said in a note that Temer has lost the capacity to continue his reform agenda.

Ricardo Tripoli, a Lower House leader from the administration’s main coalition ally, the Brazilian Social Democracy Party (PSDB), said the party would abandon the government if the recording confirms the allegations.

Despite initial attempts to show Temer was conducting business as usual at the presidential palace yesterday, the 76-year-old career politician was deeply shaken by the events, according to a person familiar with his thinking who requested not to be named because of the matter’s sensitivity.

Temer’s angry performance at the press conference later in the day did nothing to calm mumurings of his removal from office. While the president acknowledged having met with the businessman, Joesley Batista, a meat-packing executive, he denied any attempt to silence Cunha, who is serving 15 years in prison for corruption. Cunha had been one of the country’s most powerful men and is believed to have compromising information on several top politicians.

Opposition deputies quickly filed impeachment proceedings. People close to Temer said that the most honourable exit may be the president’s removal by Brazil’s top electoral court. The court is currently assessing whether to nullify the results of the 2014 elections on the basis it was illegally financed. Hearings on the case are due to resume in a few days.

There are several options to replace Temer in office, said Luiz Carlos Hauly, Lower House deputy leader of the PSDB, the main coalition partner. “The menu is open,” he told Bloomberg, adding that the electoral court process may take too long.

Minister Wellington Moreira Franco, one of Temer’s closest aides, said in a video posted on his Twitter account that the government was surprised by the plea-bargain testimony, and urged the coalition to remain united “so the country wouldn’t be paralysed.”

Scattered protests erupted across the country with both Temer’s rivals and supporters urging him to step down.

“The president’s resignation has become imperative to prevent the crisis from worsening,” Carlos Siqueira, president of the Brazilian Socialist Party (PSB), a small member of the government coalition, told O Globo. “The Temer government ended today.”

An unpopular president who ascended to the job after Dilma Rousseff was impeached, Temer’s legitimacy rested on his ability to unite Brazil’s three dozen political parties. With his political base divided, many questioned his ability to govern.

The president’s opponents may have another route to kick him out of office. Rousseff and Temer are on trial in a case separate from the Operation Car Wash investigation, for allegedly accepting illegal donations as part of their 2014 campaign. If convicted, the pair could see their victory invalidated, forcing Temer to step down.

While this possibility was seen as remote when the trial began a few weeks ago, it is now seen as more likely, since Brazilian courts often take their cues from public opinion.

— Herald with Bloomberg, Washinton Post,

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