Brazil crisis deepens with probe of president, top senator

Andrew Cummings
May 19, 2017

In another blow for the veteran leader of the PMDB party, the prosecutor general asked for authority to arrest his key ally Senator Aecio Neves from the PSDB party on bribery charges.

Simon Quijano-Evans, an emerging-market strategist, said all the optimism generated over the past year in Brazil has been crushed.

The new crisis calls into question everything from Temer's crucial pension reform to the presidency itself and could trigger a rout when Brazilian markets reopen. Loures is accused of receiving bribes on behalf of Temer, which he denies.

(AP Photo/Silvia Izquierdo). Federal police officers leave the building where Brazilian Sen.

On Thursday, police searched Neves' Rio de Janeiro home and Brasilia office, and Brazil's highest court suspended him from office.

Batista recorded the conversation in which he and Temer allegedly discussed making illegal payments to jailed former House Speaker Eduardo Cunha, of the PMDB, to keep him from testifying about corruption.

"Nobody right now knows what to do or what is going to happen", said a senior aide to party leadership in Congress.

"I will not resign".

If Temer eventually resigns or is impeached, Brazil's constitution calls for the leader of the lower house to temporarily take over and for Congress to name a successor within 30 days.

"I can't see how Temer survives this", said David Fleischer, a political science professor at the University of Brasilia. The columnist who reported the bombshell claims clarified today that he had not personally heard the recording but had had it described to him "in the most detail possible". Neves, who almost won the presidency in 2014 and planned to run again next year, has denied wrongdoing. Temer has repeatedly denied any wrongdoing.

An exchange-traded fund tracking Brazil's benchmark Bovespa stock index fell more than 8 percent in Tokyo, while American depositary receipts for Petrobras fell as much as 11 percent in after-hours NY trading as investors ditched Brazilian assets at the sight of more political turmoil. Brazilian bonds and the real also fell sharply in value, with Brazil's currency losing more than 8 percent against the dollar.

Globo's report had an immediate impact.

"President Michel Temer has never requested payments to obtain the silence of former Representative Eduardo Cunha". His administration has lurched from one crisis to another since he took office just over a year ago.

He was then himself sentenced to 15 years in prison in March for his role in the corruption scandal at state oil giant Petrobras.

In an official statement, Temer admitted to meeting Batista, but said he never tried to buy Cunha's silence.

- Brazil's central bank said on May 18 it was monitoring the impact of media reports about Temer and would act to keep markets functioning properly.

The accusations against Mr Temer were made by O Globo newspaper.

JBS did not immediately comment on the latest revelations.

A poll in April showed that 92 per cent of Brazilians thought the country was on the wrong path, with Temer's own approval rating standing at just 4 per cent.

A recent survey credited Temer with only 9-percent voter endorsement for performance - below Rousseff's standing at the moment of her suspension for allegedly masking data on the depth of the country's recession.

Many believe that Cunha, who was widely viewed as Brazil's most powerful politician before being ensnared in several corruption cases, could provide damaging testimony about dozens of others if he reaches a plea bargain with investigators.

The news of the recordings spread quickly throughout congress on Wednesday afternoon, leading Chamber of Deputies President, Rodrigo Maia, to interrupt Chamber sessions.

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