Brazil’s Temer Loses a Second Minister to Audio Leak Scandal

  • Ministry workers occupied Silveira’s office Monday morning
  • Government’s top anti-corruption official heard in recording

The ministry that Acting President Michel Temer created to demonstrate his commitment to fighting corruption was caught up in the fringes of the sweeping investigation that has rattled Brazil’s political establishment for two years.

Fabiano Silveira, the Minister of Transparency and Control, resigned on Monday after local press published a recording of a conversation in which he criticized the graft probe known as Carwash and offered advice to a politician under investigation. He was the second minister in two weeks to resign because of leaked audio, threatening the stability of Temer’s administration less than a month after he took over Latin America’s largest economy.

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Yields paid in local swap rates rose while the Brazilian real weakened 0.5 percent to 3.59 per dollar as investors worried that the political crisis may deprive Temer of the votes he needs to pass crucial austerity measures through Congress. Two senators who had voted for the beginning of the impeachment trial of President Dilma Rousseff are also reconsidering their votes, according to O Globo newspaper.

Temer, who is serving as Brazil’s interim president while Rousseff remains suspended for trial, has announced outlines of the policies he will send to Congress to help address Brazil’s budget woes and get the economy growing again. However, the honeymoon period investors hoped would give him some political space has been spent responding to crises of public opinion and the Carwash corruption probe.

“The loss of two ministers within 18 days of taking office underscores the fragility of the Temer administration, which stems from its reliance on exchanging cabinet appointments for the support of congressional allies,” Jimena Blanco, head of Latin America at Verisk Maplecroft, wrote in a note to clients. She noted that another six ministers in Temer’s cabinet are being investigated by Carwash, which means more recordings may emerge.

While Temer himself isn’t officially under investigation, prosecutors are gathering evidence against members of his government and political party. Temer’s planning minister Romero Juca stepped down last week after he appeared to offer protection to a former executive turned state’s witness. Juca denied wrongdoing and returned to his job as a senator.

Civil servants occupied Silveira’s office on Monday after Globo’s news magazine Fantastico published audio from a conversation about the corruption probe that took place before he was named minister. In a statement provided by his press office, Silveira defended his conduct, yet said it was best for him to step down from the Transparency Ministry, formerly known as the Comptroller-General under Rousseff.

About 300 protesters marched to the presidential palace and set off fireworks Monday afternoon, asking for Silveira’s resignation. Their demands also included changing the name of the Transparency Ministry back to the Comptroller-General and restoring its status as a federal institution rather than part of Temer’s administration.

Public pressure forced Temer to reinstate the Culture Ministry after he initially downgraded it to a secretariat.

The acting president met with Silveira Sunday after being notified of the news reports and spoke with him by phone again Monday, but didn’t demand that he step down, according to the Transparency Ministry.

There was some positive news for the economy Monday to counter-balance the new government’s growing political challenges. The Brazilian real gained after the Treasury reported a higher-than-expected primary fiscal surplus for April, which refers to the surplus before interest payments and excludes results of states, municipalities and state-owned companies. Analysts also forecast a slightly less deep economic contraction this year.

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