Brazil Transport Minister Steps Down on Corruption Allegations

Brazilian President Dilma Rousseff’s government saw its second minister resign in a month amid corruption charges yesterday.

Transport Minister Alfredo Nascimento resigned four days after two of his top aides quit, one was suspended, and one went on official vacation in the wake of an article in “Veja” magazine that alleged irregularities in the granting of contracts. The Transport Ministry on July 5 suspended for 30 days its auctions to award contracts for public works and services.

Nascimento is a member of the Party of the Republic, which is allied with Rousseff’s ruling coalition in Congress. The party has 40 members in the 513-seat lower house and seven in the 81-seat Senate.

The resignation shows that Rousseff’s relationship with her allies is likely to be more “fraught with tension” than that of her predecessor, Luiz Inacio Lula da Silva, as she tries to rein in spending, said Christopher Garman, a director for Latin America at Eurasia Group, a Washington-based political risk group.

Paulo Sergio Passos was named acting transportation minister, Social Communications Minister Helena Chagas told reporters yesterday in Brasilia.

Rousseff aims to ramp up investment in transport infrastructure while simultaneously controlling spending to cool the fastest inflation since 2005. The resignation is a sign that she’ll keep a close eye on how her allies manage their ministries, Garman said.

‘Blind Eye’

“She’s not going to turn a blind eye to overpricing and overinflating costs,” Garman said, speaking by phone from Washington. “Her government is going to be held accountable for its capacity to overcome some of these infrastructure bottlenecks. And the Transport Ministry is key.”

Federal prosecutors are investigating Nascimento’s 27-year- old son, Gustavo Morais Pereira, who saw a company he founded increase in value to 50 million reais ($32 million), two years after being founded with capital of 60,000 reais, O Globo newspaper reported yesterday, citing documents from the federal prosecutor in Amazonas state.

Pereira’s construction firm, Forma Construcoes, did business with S.C. Carvalho Transportes e Construções, a company that benefitted from contracts awarded by the Transport Ministry, the Rio de Janeiro-based newspaper said.

Nascimento said he will cooperate with any investigation, according to the e-mail sent by the Transport Ministry.

On June 7, Rousseff’s Cabinet chief, Antonio Palocci, resigned amid allegations he used his position to enrich himself, depriving Rousseff of one of her closest allies.

To contact the reporters on this story: Carla Simoes in Brasilia at csimoes1@bloomberg.net Matthew Bristow in Brasilia at mbristow5@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net