Brazil Urges Business as Usual as Graft Probe Roils Congress

  • President Michel Temer says probe will not paralyze agenda
  • Dozens of senior politicians face investigation over graft

Brazil’s President Michel Temer said the government’s work in Congress would continue, a day after a Supreme Court judge authorized investigations into dozens of the country’s most senior politicians.

In one of the most significant developments to date of the wide-ranging corruption scandal known as Operation Carwash, Judge Edson Fachin approved inquiries into eight ministers, 24 senators, around 40 federal deputies and three governors.

Brazil’s entire political establishment is reeling from the decision, but its immediate impact is most severe for the government. While President Michel Temer does not face investigation, some of his closest ministerial aides are on Judge Fachin’s list, as is the speaker of the lower house, the head of the Senate, and the deputy responsible for guiding a crucial pension bill through Congress. Though no immediate arrests or suspensions from government are likely, the uncertainty provoked by the investigations may jeopardize the reform program. All deny wrongdoing.

"I’ll let the judiciary act," Temer said, when asked about the probe at an event in Brasilia on Wednesday morning, adding that he would not allow it to paralyze the government’s work. “If we aren’t careful, soon the executive power won’t function, Congress won’t function and the judiciary won’t function,” he said.

Finance Minister Henrique Meirelles told Bloomberg later on Wednesday that the government had spoken to the leaders of its allied base in Congress and all were determined to stick to the current timetable. "Supreme Court proceedings take a long time and during this period Congress functions normally," he said.

Other government allies also said that the investigation would not harm the reform program.

Senator Romero Juca, the government leader in the Senate and one of those facing further investigation, said that the latest development would not delay the passage of reforms in Congress. Juca appeared on Fachin’s list on Tuesday, but said that he has always acted within the law.

Others, such as Darcisio Perondi, the deputy leader of the government in the lower house, said that the levels of anguish in Congress had risen but that the administration would stick to its timetable.

Eurasia Group argued in a note published on Wednesday that the repercussions would impact the 2018 elections more than Temer’s reform agenda this year. The political consulting group cite likely delays to the progress of the investigations and the willingness of those under suspicion to support the government as reasons to conclude that the reforms remain on track.

Indeed, investors seem to have taken the publication of the much-anticipated list in their stride. Declines in both the real and the Bovespa stock index were limited.

David Fleischer, professor emeritus at the University of Brasilia, said that the news meant the price of negotiation with Congress had risen. "The government will need to free up some of the various parliamentary projects that traditionally act as bait to persuade deputies," he said.

— With assistance by Mario Sergio Lima

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