Brazil’s Temer Escapes Corruption Trial to Focus on Economy

EghtesadOnline: Brazil President Michel Temer has survived a massive corruption scandal with a victory in the lower house that allows him to cling to power and focus back on the economy.

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03 August 2017

According to Bloomberg, Temer allies on Wednesday defeated the motion that would have put him on trial and forced him to step aside, with 263 against 227 votes. The result paves the way for Temer to ride out his term next year and at least temporarily pivot his attention toward economic reforms needed to fix Brazil’s battered public finances.

"It’s urgent to put the country on the path of growth, job creation, modernization and social justice," Temer told reporters at the presidential palace after the congressional vote. "I won’t rest until December 31 of 2018."

The final voting tally is in line with what many analysts had considered to be an acceptable showing for Temer. The "next battle" is approval of the administration’s flagship pension overhaul, Chief of Staff Eliseu Padilha told O Estado de S. Paulo newspaper on Thursday. Considered essential by the finance ministry to put Brazil’s rising debt on a more sustainable path, the proposal would need 308 out of the 513 votes in the lower house.

Worst Over?

"Temer has problems, but he has a very good agenda," said Rafael Menin Teixeira de Souza, Co-CEO of MRV Engenharia e Participacoes SA, Latin America’s largest homebuilder by delivered units. "We’re confident that the worst is in the past," he said earlier on Wednesday regarding the state of the economy during an interview with Bloomberg News in New York.

Eurasia Group’s analysts increased their odds on Temer completing his term next year to 70 percent from 60 percent before the vote. He is accused of having authorized payments to hush a disgruntled former ally and himself having taken bribes in exchange for granting favors. Temer denies the charges, saying that he was set up and that evidence was doctored.

Temer, who two months ago looked like he could be ousted or forced to resign, applied all the political savvy he acquired during half a century in public office to rally support. With his government’s approval rating at only 5 percent, he personally lobbied over 160 legislators in recent weeks. On Tuesday he had lunch with at least 50 deputies from the agriculture caucus, offering to increase the government-mandated use of sugar cane-based ethanol.

The Brazilian real was little changed and futures for the country’s benchmark stock index fell marginally as the final vote tally left doubts over the prospect for reforms. “It is far from clear that this would be a good estimate of how many lawmakers would vote in favor of the social security reform proposed by the government,” Credit Suisse analysts led by Nilson Teixeira wrote in a report.

Keeping Distance

Yet with an eye on next year’s general election, many legislators even in his own coalition tried to distance themselves from the 76 year-old constitutional lawyer who has seen numerous allies go to jail as a result of the three-year anti-corruption wave that has swept the country.

The Brazilian Social Democracy Party, one of the largest in his coalition, allowed its members to vote as they wish but recommended they accept the charges against Temer.

The president may have only a small window of opportunity for meaningful progress. Lower house speaker Rodrigo Maia has said that August may be the last chance to vote on the pension reform.

Also, top prosecutor Rodrigo Janot has indicated he may bring new charges against Temer before leaving office in September. That would push the government back to square one, restarting a process in Congress that took five weeks and ended with Wednesday’s vote.

"What kind of government can we expect starting tomorrow? Will there be a ministerial shuffle? Will there be reconciliation?" said Luiz Henrique Mandetta, a legislator for the ruling coalition’s DEM party. "There will be more charges against him."