Brazil's President Should Resign

Fighting through to the end of his term puts the country's economic recovery at risk.

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Photographer: Evaristo SA/AFP/Getty Images

You'd think Brazilians would be inured to scandal. After seeing one president ousted, the worst recession in a century, and the nation's top moguls and political bosses tarred in a historic corruption probe, what more could go wrong?

Silly question. Consider President Michel Temer, who was allegedly caught on tape blessing the payment of hush money to a political crony jailed in the giant Carwash probe into political graft, and whose own job is now on the line.

Yes, Temer isn't bending. With rumors flying over his imminent fall, he ruled out resignation and denied that he'd "bought off anyone" or conspired to obstruct justice, both impeachable offenses. By then it didn't matter much: Brazil had already fallen into turmoil over what looked like yet another government imploding in scandal.  The real plunged against the dollar and investor panic drained $150 billion from the Sao Paulo stock market. One minister resigned, two parties quit the governing coalition, and the superblock of lawmakers Temer had pasted together to push aggressive economic reforms was wobbling. In Brasilia, Rio de Janeiro and Sao Paulo, protestors took to the streets. And that was in just 24 hours.

Already the country's least popular leader in recent history, Temer has clung to office by the thinnest of threads. One was that for all the corruption swirling around him, he had yet to be directly implicated much less charged with wrongdoing. The other was that he was Brazil's last best hope to avoid economic collapse. Hoisted to office a year ago after the fall of Dilma Rousseff, a protege of populist legend and former president Luiz Inacio Lula da Silva, he teed up potentially transformative economic reforms, whipped a fractious legislature to get behind them and became the toast of the markets.  "We cannot throw all this work for the country in the historical trash heap," Temer said on a national broadcast yesterday. Now both of those bets are off.

Temer's strident tone was predictable, and not entirely without motive. The audio tape containing his indiscretions was released only late Thursday -- hours after choice bits were leaked to the press, causing a furor. It was recorded on the sly by Joesley Batista who, with his brother Wesley, runs JBS SA, the world's largest meat-packer. They became billionaires during the Lula and Rousseff years, donating generously to Rousseff's 2014 reelection campaign as well as that of her opponent Aecio Neves. Targeted by several police probes for allegedly dirty dealings with state lenders and pension funds, the Batistas apparently agreed to entrap Temer and his allies, handing over the compromising tapes to Brazilian prosecutors and pledging to pay $67 million in fines in a plea bargain deal. According to Brazilian media reports, more explosive revelations could soon surface.

Temer could fight through to the end of his mandate in January 2019, mustering his remaining allies against impeachment or winning acquittal in Supreme Court. He also will have his day in Electoral Court, where he and Rousseff face charges of taking illegal campaign funds in 2014. But there is another way. As a politician who proposed to build a "bridge to the future," he also might step aside and let congress choose a new leader, as the constitution prescribes, or even pass an amendment to hold new general elections. Such a gesture might rescue what remains of his tattered reputation, not to mention Brazil's tender economic recovery. "Fourteen million people are unemployed and Brazil is still a fiscal mess," Monica de Bolle, of the Peterson Institute for International Economics, told me. "That's not Temer's fault, but the recovery and reforms he was banking on are likely over."

Alternatively, by clinging to power, Temer risks prolonging the agony of a government that critics have likened to a tropical version of the "Walking Dead." Perhaps it's political pride or, more cynically, a play to retain executive immunity, which shields sitting elected officials from answering to the common courts. Whatever the drive, Temer has decided to double down.

That was Rousseff's strategy in 2015. Even with a far shakier coalition, her impeachment dragged on for eight months, leaving her hapless government stuck between economic stagnation and political deadlock. Brazilians deserve a new script.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Mac Margolis at mmargolis14@bloomberg.net

    To contact the editor responsible for this story:
    James Gibney at jgibney5@bloomberg.net

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