President’s attempt to dig in risks leaving Brazil with lame duck

(Reuters) - Brazilian President Michel Temer’s refusal to resign in the face of a Supreme Court investigation raises the prospect of a drawn-out fight for survival by an unpopular leader that would stall reforms, deter investors and leave Latin America’s largest economy adrift.

Legal experts and some of Temer’s political allies said his determination to fight corruption allegations could prolong a political crisis for months. That could halt congressional passage of measures needed to pull Brazil from its worst-ever recession, including moves to ease labour regulations and raise the pension age.

BRASILIA

The prospect of Brazil tumbling back into political paralysis just a year after the impeachment of former President Dilma Rousseff sent the benchmark Bovespa stock index toppling 9 per cent on Thursday, its biggest daily decline since the 2008 financial crisis.

Details of a plea bargain deal by executives of the world’s largest meatpacking company JBS released on Friday showed Temer is accused of attempts to obstruct a sweeping corruption investigation and of receiving $4.6 million in bribes - shocking even Brazilians inured to three years of the graft probe.

In a strongly worded televised address yesterday, a defiant Temer said a secret recording by JBS Chairman Joesley Batista had been edited to deliberately incriminate him. He asked the Supreme Court to suspend its investigation until the recording’s integrity could be verified.

“Brazil will not be derailed. I will continue to lead the government,” Temer said from the podium in the presidential palace, denouncing Batista as a ‘criminal’ who fled to New York before the storm surrounding his plea deal broke. Batista was not available for comment.

In addition to the Supreme Court investigation, Temer faces growing calls for his impeachment and a legal battle over the alleged illegal funding of his 2014 campaign, when he ran as the vice presidential candidate to Rousseff.

Protests in several Brazilian cities this week were relatively small. But analysts said the possibility of an increasingly isolated, lame-duck president clinging to power could bring hundreds of thousands of angry Brazilians onto the streets, as was the case last year.

With more than 14 million Brazilians unemployed and many frustrated by the government’s austerity agenda, Temer’s popularity is languishing near single figures.

Some allies have already abandoned his coalition and the coming days will determine whether he has enough support in Congress to weather the storm.

“Temer should only stay on if he is able to get his coalition to approve the reforms. If not, he has to step down,” said José Anibal, a leading member of the Brazilian Social Democrat Party (PSDB), the president’s main ally.

Opponents seeking Temer’s ouster filed eight separate impeachment requests on Thursday. Any impeachment would take at least six months, generating further uncertainty that could smother an incipient recovery in Brazil’s $2 trillion economy, according to economists, government officials and lawmakers.

Temer and his most trusted aides, including Finance Minister Henrique Meirelles, worked the phones furiously over the last two days to convince politicians and investors to back him amid what some analysts are calling the worst crisis since Brazil returned to democracy in 1985.

“We need to convince the political class that there is no better option for Brazil at this moment,” said a presidential aide who asked for anonymity to speak freely. “This is not about Temer but is about investment, generating new jobs and improving the lives of Brazilians.”

Protracted fight Temer’s critics argue he is not fit to govern after meeting in the presidential residence with Batista and allegedly endorsing - or at least not reporting - his efforts to derail the Operation Car Wash investigation into political kickbacks and bribery at state-run companies, particularly oil firm Petrobras.

Batista handed a recording of the conversation to prosecutors as part of a plea bargain deal. Testimony by JBS executives released on Friday also accused former Presidents Luiz Inacio Lula da Silva and Rousseff of accepting tens of millions of dollars in bribes and named scores of other politicians.

Lawyers for Lula said he was innocent. Rousseff denied any wrongdoing in a statement.