New fraud mars Temer’s deficit win

Brazil’s interim president Michel Temer celebrated a first victory on Wednesday for his urgent economic reforms after Congress agreed to widen the budget deficit, but fresh corruption allegations haunted his government.

The leaking of a secret recording in which his powerful ally, Senate president Renan Calheiros, is said to discuss a plan to weaken a huge anti-corruption probe posed fresh embarrassment for the new administration.

The 2016 budget plan, given the green light after more than 16 hours of debate overnight in Congress, will allow the government to run up a primary deficit — the difference between public spending and revenue, before interest payments on debt — of 170.5-billion reais ($48 billion).

Temer was quoted by the Globo news site as hailing the “beautiful victory” after the vote. The record sum will buy his administration some time and  flexibility to enact austerity measures and other market-oriented reforms to pull Brazil out of deep recession.

Although pro-Temer lawmaker Dagoberto Nogueira praised the move authorising a deficit increase, Communist Party lawmaker Jandira Feghali criticised “giving the government a blank cheque”.

Temer, who was vice-president and took over from president Dilma Rousseff after her suspension for an impeachment trial on May 12, is racing against time to stamp his authority on the economy and Congress.

Not only is the country in economic disarray, but his fledgling government is already suffering serious fallout from a corruption scandal sweeping through the country’s elite.

On Tuesday, one of Temer’s main allies, Romero Juca, was fired from his planning minister post after the leaking of a recording in which he apparently discussed using Rousseff’s impeachment as a way to derail a huge probe into an embezzlement and bribery scheme at state oil company Petrobras.

The probe, code-named Operation Car Wash, has seen investigations and prosecutions opened against dozens of politicians and executives, including Juca.

Rousseff, who is being impeached on charges that her government broke budget accounting rules, called Juca’s leaked comments proof of a coup plot against her.

On Wednesday, Folha newspaper published another leaked recording, this time involving the president of the Senate, who is from the acting president’s centre-right Brazilian Democratic Movement Party (PMDB) and a key figure in the coming impeachment trial of Rousseff.

Comments in the recording allegedly show Calheiros discussing weakening the law on the use of plea bargains, a technique that Car Wash prosecutors have used to devastating effect to turn corruption suspects into witnesses for the state.

Calheiros is also being probed in the Petrobras embezzlement scheme. He told Folha that his comments were misinterpreted.

The new budget deficit target marks a dramatic loosening of purse strings for Temer. Rousseff’s government had estimated that it would only need a target deficit of 97-billion reais.

According to Temer’s team, the higher figure reflects a more realistic portrait of the economy. Rousseff is accused of having taken unauthorised loans to keep the budget going and mask the depth of the financial holes.

She denies this and says the accounting manoeuvres were common practice with past governments and a temporary measure that did not constitute an impeachable crime.  According to Rousseff, the impeachment is being pushed by Brazil’s right to demolish her Workers’ Party after 13 years in power.

There has been only muted popular support for Rousseff. She suffers from near single-digit approval ratings and frustration from a country fed up with economic drift, political paralysis and the never-ending corruption revelations.

Temer is also highly unpopular but his economic team has backing from investors and his PMDB party appears able to get legislation moving again in Congress, meaning he has a window to bring change.

Other Temer economic proposals include possibly cashing in a sovereign wealth fund and considering asking the state development bank BNDES to repay about $28-billion in debt owed to the government.

A centrepiece of his reforms —pegging public spending increases before debt servicing to the previous year’s inflation rate — will require Congress to approve a constitutional amendment.

“It won’t be 12 days or two months that will pull Brazil out of crisis,” Temer warned on Tuesday, as he presented his austerity measures to lawmakers.

In addition to high inflation, the effect of low commodity prices and rising unemployment, investors are spooked by Brazil’s political instability. Rousseff’s trial could go on for as long as six months and she has vowed to fight all the way, although analysts say she is not expected to win. — AFP

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