Brazil president Temer rejects calls to quit as political crisis grows

Brazil’s President Michel Temer has refused to resign despite allegations in a leading national newspaper that he assented to bribe-paying to buy the silence of a former coalition ally.

Mr Temer instead demanded a rapid investigation after the Supreme Court authorised on Thursday the opening of a criminal inquiry into the allegations, which have threatened his fiscal reform programme and rocked financial markets.

“I will not resign, repeat, I will not resign,” Mr Temer told a brief news conference. “I demand a full and rapid investigation.”

The allegations, published by the O Globo newspaper late on Wednesday, have undermined a president who is already one of Brazil`s most unpopular on record, according to opinion polls.

If he is found guilty, he could be impeached, which would mark the second forced removal of a Brazilian president in as many years — a development that would be unprecedented in the modern history of Latin America`s largest country.

Mr Temer was brought to power by the impeachment of his leftist predecessor Dilma Rousseff on budgetary violations last year. 

In his short address, Mr Temer said he had not yet had access to the documents detailing the corruption allegations and sought to remind voters that his government`s reforms to turnround Brazil`s fiscal deficit had helped stabilise an economy that has suffered its worst recession in history.

“My government this week had its best moment and its worst moment,” he said, saying that economic indicators had been turning positive.

Brazil’s real lost 8 per cent of its value against the dollar, as fears took hold of yet another economically disruptive change of president. Shaken investors also sold off Brazilian stocks, forcing market regulators to trigger a circuit breaker after the Ibovespa benchmark dropped 10.47 per cent in morning trading before recovering slightly to be down about 8.8 per cent on the day.

The report in O Globo newspaper that triggered the turmoil alleged an executive of meatpacking group JBS told Mr Temer the company was secretly bribing former lower house of congress head, Eduardo Cunha, who has been jailed for corruption, to remain silent. No further details were given on what information Mr Cunha was being paid not to disclose.

Mr Temer is said to have encouraged the JBS executive to continue the payments. While he has confirmed meeting the executive, the president denies ever engaging in corruption.

Analysts said the case could throw Brazil into constitutional limbo. Ives Gandra, professor of constitutional law at Mackenzie University in São Paulo, said Mr Temer could only be suspended with the permission of congress.

“The Supreme Court can order an investigation . . . but it cannot have him suspended without congressional approval,” said Professor Gandra. 

Mr Temer, who rules Brazil through an unwieldy coalition, has already faced a call to resign if he cannot disprove the allegations from one of his most important congressional allies, former president Fernando Henrique Cardoso of the PSDB centrist party.

“Those affected have the obligation to explain and offer their versions of the truth to the public,” Mr Cardoso wrote on Facebook. “If their arguments in their defence are not convincing, it is not enough to say that there needs to be proof — those implicated have a moral obligation to facilitate the situation with their resignations. The country does not have time.”

The party president of the PSDB, senator Aécio Neves, was also cited in the allegations. He has stepped down to fight the case. 

Brazil is entering uncharted waters with a criminal inquiry into a sitting president, analysts said.

Arthur Maia, a lawmaker sponsoring Mr Temer’s pension reform bill, said in a statement on Thursday there was “no room to advance” on the legislation right now, because Brazil is “living in a critical moment” after his the president came under investigation. “It’s time to clean up the house, clear up dark facts,” he said.

Carlos Melo, a political scientist at São Paulo’s Insper university, said Mr Temer could most likely stay in his position until he was proved guilty, unless political pressure made this untenable.

He believed, however, that it was unlikely that Mr Temer would survive the scandal. Anti-Temer activists are calling for protests this weekend, after some have gathered last night in some cities.

Other analysts said the scandal, if confirmed, represented a further unravelling of the political system established by Brazil`s 1988 constitution, which was written to mark the country`s return to democracy from dictatorship a few years earlier.

The constitution contained over-generous social welfare benefits that have proven fiscally unsustainable and established an electoral system with proportional representation and fragmented political parties that makes it difficult for a president to pass legislation.

This has indirectly led to corruption and vote buying, analysts said. The country for the past three years has been gripped by a huge political corruption investigation into Petrobras, the state-owned oil company, that has implicated all the major parties. 

“What was collapsing has collapsed and it needed to collapse — the thing is how to remove this thing and replace it,” said Paulo Sotero, director of the Brazil Institute at the Wilson Center in Washington DC.