Brazil president weakened by graft charge, losing fiscal battle

Brazilian President Michel Temer has burned through political capital fighting corruption charges and is struggling to push forward his economic agenda meant to rein in a gaping budget deficit.

Even allies in Congress now doubt he can achieve anything but watered-down measures, likely delaying any fix to Brazil's fiscal crisis until the economy recovers from deep recession.

With continued deficits, Brazil risks further downgrades in its credit rating. It lost its investment grade two years ago, adding to the cost of financing mounting public debt.

In a sign of Temer's failure to restore fiscal health, the government is expected to revise upward its 2017 and 2018 deficit targets on Monday due to falling tax revenues in an economy that is barely growing.

More pessimistic analysts worry the insolvency already faced by some Brazilian states that cannot pay employees or provide basic services will reach the federal government.

Temer had a window to pass a pension overhaul earlier this year, but it closed in May when allegations emerged that he condoned bribes in a taped conversation with the then CEO of the world's largest meatpacker JBS S.A.."We are dancing samba at the edge of the precipice," said Sao Paulo-based wealth manager Fabio Knijnik. "I don't see the political class at all concerned with resolving this."

The deeply unpopular president won enough backing in Congress on Aug. 2 to block a corruption charge that could have led to his suspension pending trial by the Supreme Court. To survive, he approved about $1.5 billion in pork barrel spending to keep lawmakers happy.

His closest ally in Congress, the center-right Democrats Party of Speaker Rodrigo Maia, does not believe Temer has the 308 votes, or three-fifths of the lower chamber, needed to pass pension reform, the key measure in his fiscal rescue plan.

Speaking in Rio on Friday, Maia said Temer's political troubles and lower-than-expected tax revenues had created the crisis. He said Brazil had no alternative but to seek whatever pension fix it could, given Congress would not raise taxes.

Congressman Efraim Filho, the Democrats whip, told Reuters Temer must dilute the pension bill to get it past Congress. He said the measure had to be stripped down to its most important provision, a minimum age for retirement of 65 years for men and 63 for women in a country where people only work on average until age 54.

CRUMBLING COALITION

Temer's government coalition is in disarray. Parties who stood by the president are now demanding they be rewarded with cabinet positions, such as the big-budget Cities Ministry. It is now controlled by the Brazilian Social Democracy Party (PSDB), which split over whether to abandon the scandal-plagued president.

Until they get their way, the allies at the core of his coalition have said they will not put his proposed pension bill to the vote. Maia said the "climate" was not right to move to a floor vote and the bill could languish and miss a legislative window likely to close in December as an election year approaches in 2018.

The government has already made concessions on the pension bill provisions that will reduce planned fiscal savings by up to 25 percent in 10 years and nearly 30 percent in 30 years, according to Finance Minister Henrique Meirelles.

The pension overhaul is vital for Brazil to comply with a 20-year spending cap that was Temer's first move to restore fiscal discipline, albeit without a full impact on accounts until 2019.

"That ceiling was like saying you are going on a diet two years from now," said Daniel Freifeld of Callaway Capital, a Washington D.C.-based investment firm.

Source: Reuters

Brazil's president expects weaker pension bill to pass

Brazilian President Michel Temer expects Congress to water down his proposal to overhaul pension rules and approve the new legislation by a slim majority this year, he said in a newspaper interview published on Saturday.

It was the first time Temer acknowledged there would be further changes to the proposal.

Legislators had already softened the bill earlier this year. Finance Minister Henrique Meirelles and other officials had been reiterating the importance of approving the overhaul without further changes to avoid a potential budget crisis.

Temer said he believed Congress will change the bill to have it merely set a minimum retirement age and cut public servants' benefits. The original proposal would also limit survivors' pensions, set tougher rules for rural workers and change the way retirement payments are calculated.

Another pension overhaul would probably be necessary within six years, newspaper O Estado de S. Paulo quoted Temer as saying.

Temer sees up to 310 votes in the Lower House of Congress, slightly more than the 308 needed, in favor of the proposal.

"We will do what is possible, and a possible reform will not be as thorough as it should," O Estado quoted Temer as saying.

Temer added that he saw no need to fire cabinet ministers to punish coalition parties that have not given their full support in Congress.

"Those who have not voted in line with the government will feel uncomfortable to participate in an administration that they are not supporting," Temer said. "I have the impression that they will end up leaving."

Temer said he expected interest rates to continue falling in coming months from the current 9.25 percent, with a 7.5 percent rate "very possible" by year-end.

Prosecutor General Rodrigo Janot charged Temer last month with taking bribes from meatpacker JBS SA (JBSS3.SA), which the president denies. Congress voted on Wednesday to block those charges from proceeding to the Supreme Court, but Janot may still bring additional charges in the case.

Temer said the prosecutor general was motivated politically and was not complying with his institutional role. Janot's term ends in September, and his successor, Raquel Dodge, was hand-picked by Temer in June.

Dodge will put the corruption investigations on the "right path", Temer was quoted as saying.

"The right path is to obey the law," he added. "Rigorously, to obey the law."

Source: Reuters

Brazil's Temer says no more tax hikes, for now

President Michel Temer said on Friday that his government has no plans for now to raise taxes again in its effort to meet this year's fiscal target, one day after raising taxes on fuels and announcing an additional spending freeze.

"There is no plan. For the time being, our economic team is just looking at this increase (announced Thursday)," Temer told journalists during a meeting of the South American trade bloc Mercosur. He added: "I don't know if there will be a need for more later, but not now."

In a speech earlier, Temer said Brazilians would understand the need to raise taxes to shrink the budget gap and recover investor confidence in Brazil's overdrawn government accounts.

The tax hike was blasted by business leaders as the wrong way to go in restoring fiscal balance because it would hurt Brazilian's incipient recovery from its worst recession on record.

"Their reaction is natural; nobody wants more taxes. But I am sure this will pass when they understand that meeting the fiscal target is fundamental for the country's stability and encouraging growth," Temer said.

The Finance and Planning ministries announced on Thursday that the government was freezing an additional 5.9 billion reais ($1.9 billion) in federal spending this year, and increasing the federal PIS/Cofins social contribution tax on gasoline, diesel and ethanol to raise about 10.4 billion reais in new revenues.

Brazil plans to cut its budget deficit to 139 billion reais this year before interest payments. Earlier this year it had announced a budget freeze of 39 billion reais to meet that target. The deficit in the 12 months through May was at 167.6 billion reais, equivalent to 2.59 percent of gross domestic product.

Brazil lost its investment-grade rating in 2015 after missing budget targets for years. But slow recovery from a two-year recession has meant dismal tax revenues.

Source: Reuters

Brazil congressional panel votes against putting Temer on trial

Brazilian congressional committee on Thursday voted against sending a corruption charge against President Michel Temer to the Supreme Court for the leader to be put on trial.

The vote is non-binding and the full house must still vote on the charge, which would only be approved if two-thirds of legislators vote for it.

Temer was charged last month in connection with a graft scheme involving the world's largest meatpacker, JBS SA. General Prosecutor Rodrigo Janot accused Temer of arranging to receive a total of 38 million reais ($11.85 million) in bribes from JBS in the next nine months.

The full house will vote on August 2, after a two-week recess. Though Temer's support has waned, he is widely expected to survive the full house vote.

Janot has said he expects to level at least two new graft charges against Temer in the coming weeks, however.

Several lawmakers have told Reuters in recent weeks that if they were forced into multiple votes to protect the deeply unpopular president from a trial, the chances of one of the charges being accepted by the lower house would greatly increase.

Temer, who replaced impeached President Dilma Rousseff last year, would be removed from office for at least 180 days if he were forced to stand trial in the Supreme Court.

Source: Reuters

Brazil top court lambastes alleged Temer espionage attempt

Brazil's Supreme Federal Court urged a thorough investigation into reports that the country's secret security service spied on Justice Edson Fachin, in the latest clash involving President Michel Temer's embattled administration.

Court president Carmen Lúcia said in a statement on Saturday that, if proved accurate, such reports show an inadmissible meddling into the court and an attack against democratic liberties in Latin America's biggest country.

Magazine Veja reported late on Friday that the agency known as Abin might have been used to spy on Fachin - the top court justice in charge of a massive corruption probe that has ensnared Temer.

Temer's office denied the Veja report, saying the Abin "acts in accordance with the purpose for which it has been created".

If the report proves accurate, Lúcia said in the statement, punishment of the alleged espionage should take into account the grave "legal, political and institutional consequences of such an act."

"Common in dictatorships, these practices ... are serious and, when carried out against a judge, are completely unacceptable in a democracy," Lúcia said in the statement. "It has to be probed and repudiated, and any responsible parties properly punished."

Her remarks add to tension between the executive and judiciary branches of power, which gained intensity in the wake of Fachin's decision to validate a plea deal involving Temer in a corruption probe. Prosecutors allege that Temer worked to obstruct justice and condoned efforts to pay for the silence of a potential witness.

Source: Reuters

Brazil electoral court case against Temer loses force

After its chief judge urged his peers to consider Brazil's political stability, the country's top electoral court on Thursday excluded testimony of engineering company executives in an illegal campaign funding case against President Michel Temer

The decision by the Supreme Electoral Court suggested it may throw out the case that has threatened to unseat the scandal-hit president. That would clearly be a temporary win for Temer, but analysts say it would still leave him weakened and by no means bring an end to the political crisis roiling Brazil.

A guilty ruling would annul the 2014 election victory of former President Dilma Rousseff and her then running mate Temer and unseat Temer, though he could appeal and likely remain in office until a final decision, which would take months. That would deepen uncertainty over his austerity agenda aimed at plugging a gaping budget deficit and pulling Brazil out of its worst ever recession.

So far, only one judge has ruled in the trial. Herman Benjamin voted to annul the 2014 Rousseff-Temer ticket for accepting bribes and illegal donations.

But four of the seven justices are expected to vote the other way on Friday morning, including the head of the court, Gilmar Mendes, who said any ruling had to consider the stability of the country and Temer should not be compelled to step down for a minor reason.

Exclusion of the plea-bargain testimony from Odebrecht SA [ODBES.UL] executives strengthened Temer's line of argument that his campaign received no illegal funds.

The executives told prosecutors they funneled millions of dollars into the 2014 Rousseff-Temer campaign in return for government contracts and other kickbacks.

The Temer and Rousseff defense teams requested the Odebrecht testimony be scrapped, holding that it went beyond the scope of the original complaint filed to the court by the Brazilian Social Democracy Party (PSDB) after it lost the 2014 election.

"Temer has the votes to stay in office," said Welber Barral, a Brasilia insider and political consultant who is following the case closely, as is much of the country and its investors.

Barral said the court, known as the TSE, would most probably vote 4-3 to throw out the case. Any of the judges, however, could ask for more time to study the case, which could delay a final ruling for weeks.

Brazil's currency BRBY strengthened as investors sensed the court would likely favor Temer, raising the survival chances of his measures to close the budget deficit. Interest rate futures, a gauge of concern over Brazil's future, fell off morning highs on the decision to exclude Odebrecht testimony.

IF TEMER SURVIVES TSE, UNLIKELY TO FALL

Temer opponents had been counting on a TSE ruling to force him from office. The country is stuck in a political crisis triggered by Brazil's biggest ever graft scandal and last year's impeachment of Rousseff, whose supporters called it a soft coup arranged by Temer and allies to thwart the scandal probe.

Temer himself is under investigation for allegedly receiving millions in bribes and obstruction of justice, and Brazil's top federal prosecutor is widely expected to formally charge him soon.

Temer, whose government's approval ratings are in the single digits, canceled meetings to follow the court session on television in his presidential office, an aide said. "The president is confident his defense with prevail," spokesman Marcio de Freitas told Reuters.

If Temer is forced from office, lower house Speaker Rodrigo Maia would take over, and Congress would have 30 days to pick a caretaker to lead the country until elections in late 2018.

Temer has refused to resign despite separate bribery allegations made in plea-bargain testimony by executives of the world's largest meatpacker JBS SA (JBSS3.SA).

Even if Temer survives the electoral court case and is charged by prosecutors for corruption, he is unlikely to fall.

For the top court to put him on trial, the charges would have to be authorized by two thirds of the lower chamber of Congress, where his allies are still a majority.

The PSDB party, Temer's main coalition ally, delayed until Monday a meeting on whether to pull its three ministers from his cabinet, which would erode his support in Congress, but not to the point that charges against him would pass the chamber.

Source: Reuters

Brazil's labor reform bill advances in Senate

Brazilian President Michel Temer's proposal to modernize the labor market was approved by the Senate's economic affairs committee on Tuesday, clearing an important hurdle despite a political crisis that has jeopardized the government's reforms agenda.

The committee passed the bill 14-11. The proposal still needs the approval of two other Senate committees before it reaches the floor.

Temer is facing calls to resign due to allegations he took bribes from meatpacker JBS SA. The scandal is threatening to derail his reform agenda that includes an overhaul of the costly pension system.

The labor reform bill has already been approved by the lower house, but faces fierce opposition from labor unions that will lose power over workplaces. The bill allows more temporary work contracts and outsourcing, eliminating mandatory union dues.

The proposal to modernize Brazil's labor laws, some of which date back to the 1940s, is eagerly awaited by Brazilian businesses so they can lower labor costs that undercut their ability to compete in foreign markets.

The senator sponsoring the bill, Ricardo Ferraço, has said he expects the final vote in late June.

Source: Reuters

Brazil court opens case that could unseat President Temer

Brazil's top electoral court (TSE) reopened a case on Tuesday about illegal campaign funding by the Rousseff-Temer ticket that could annul their 2014 election victory and unseat President Michel Temer.

Temer's opponents see a court ruling as a way out of a political crisis set off by corruption allegations leveled against the center-right leader, but a decision could take weeks if not months and can be appealed by Temer.

The case was postponed in April to allow for new evidence arising from Brazil's biggest ever corruption scandal involving billions of dollars in kickbacks paid by companies to scores of politicians and government officials.

The court's decision is key to deciding the political future of Brazil, where the prospect of having a second president ousted in one year has generated political volatility. The uncertainty has weakened the Brazilian currency, stocks and bonds in recent days.

Temer was the running mate of leftist President Dilma Rousseff and replaced her when she was impeached last year.

If Temer is removed from office, lower house Speaker Rodrigo Maia would take over and Congress would have 30 days to pick a caretaker to lead the country until elections in late 2018.

Left-wing parties are calling for early general elections for Brazilians to pick a new president directly.

If Temer is found guilty, he is expected to appeal, which could delay the process for months. The government would likely destabilize and prompt members of his coalition to withdraw their support, increasing chances he could be forced to resign.

The main ally in Temer's governing coalition, the Brazilian Social Democracy Party (PSDB), is waiting for the court ruling to decide whether to abandon Temer's government, which would sink his fiscal reform agenda.

The electoral court had been expected to blame Rousseff and absolve Temer, but that is now unlikely due to recent plea-bargain testimony by executives of giant meatpacker JBS SA (JBSS3.SA) and engineering group Odebrecht who alleged they gave illegal funds to his campaign.

Temer has refused to resign since the Supreme Court late last month authorized an investigation against him for alleged corruption, racketeering and obstruction of justice.

The investigation is based in part on a secret recording of a conversation with a JBS executive in which Temer appeared to agree to the payment of hush money to silence a key witness in a massive graft scandal.

The political crisis engulfing Temer's government deepened on Saturday with the arrest of a close aide, former lawmaker Rocha Loures, who was seen in a police video receiving a bag filled with 500,000 reais ($152,000) in cash.

The Supreme Court has given Temer until Friday to answers questions by federal police on his conversation with the JBS executive and whether Loures was a middleman.

Temer's political standing took another blow on Tuesday with the arrest of his former minister of tourism, Henrique Eduardo Alves, for suspected graft in the building of a soccer stadium in northeastern Brazil for the 2014 World Cup.

Source: Reuters

Close aide to Brazil's leader Temer arrested in corruption inquiry

Former Brazilian lawmaker Rodrigo Rocha Loures, a close aide and friend of President Michel Temer, was arrested at his home on Saturday in a corruption investigation that also targets the president, a federal police spokesman said.

In a police video released in May, Loures was seen running out of a Sao Paulo restaurant carrying a bag with 500,000 reais ($154,000) in cash that prosecutors say was a bribe from the owners of the world's largest meatpacker JBS SA.

Plea bargain testimony by two executives of JBS's holding company J&F Investimentos SA implicated Temer and other politicians in graft and led prosecutors to accuse Rocha Loures of being a middleman for Temer, which the president has denied.

The Supreme Court authorized the investigation of Temer and Rocha Loures for corruption, criminal organization and obstruction of justice, triggering the worst political crisis since Temer took over from impeached leftist Dilma Rousseff last year.

Since the leaking of a recording of a late-night conversation with a JBS executive in which he appeared to condone corrupt practices, Temer has faced calls for his resignation or impeachment.

An electoral court investigation of his 2014 election for illegal campaign funding could also oust him from office.

Loures, a businessman turned politician, is expected to seek a plea bargain with prosecutors that could damage the president's case that he did nothing illegal.

Loures has hired a lawyer to prepare a plea bargain, a source with knowledge of the matter told Reuters.

Last week, he turned over a bag full of cash to police, apparently as a step to reaching agreement with prosecutors, who are investigating him for negotiating 15 million reais in bribes from JBS.

It was not immediately possible to reach the lawyer of Loures. Temer's office had no immediate comment on the arrest of his former aide.

Temer has said his relationship with Loures was purely "institutional" yet Loures had an office in the presidential palace close to Temer when he was Rousseff's vice president.

Source: Reuters

Scandal-hit Brazilian leader Temer picks new justice minister

Scandal-plagued Brazilian President Michel Temer on Sunday named a new justice minister, placing a respected legal figure in the position as the leader defends himself against corruption allegations.

The presidential palace gave no reason for naming Torquato Jardim as his new justice minister in a short written statement.

Since March, Jardim was the nation's transparency minister. Before that, he had served as a justice on Brazil's top electoral court.

Jardim replaced Osmar Serraglio, a lawmaker from Temer's own party, who had been in that post for just three months. A source close to Temer told Reuters that Serraglio will soon be announced as the new transparency minister.

Source: Reuters

Brazil's Temer says 'I won't resign, oust me if you want'

Brazil's President Michel Temer said he will not step down even if he is formally indicted by the Supreme Court, according to an interview published by newspaper Folha de S. Paulo on Monday.

"I will not resign. Oust me if you want, but if I stepped down, I would be admitting guilt," Temer said, after denying allegations of corruption and attempting to obstruct a sweeping graft investigation.

Source: Reuters

Brazil's Temer refuses to resign in face of investigation

Brazil's President Michel Temer on Thursday defiantly said he would not resign from office despite a Supreme Court decision authorizing an investigation into allegations he condoned bribery of a potential witness in a major corruption probe.

In a terse five-minute speech broadcast nationwide, Temer said he had done nothing wrong, that his presidency was helping turn around Brazil's stalled economy and that he welcomed an investigation so that he could prove his innocence.

"I did not buy the silence of anyone," Temer said, referring to the allegations made against him. "I will not resign."

The investigation into a sitting president sent Brazilian financial markets tumbling and raised doubts that Congress would pass Temer's ambitious austerity agenda.

Temer's situation grew more perilous after the Supreme Court approved an investigation into allegations against him, according to a source with direct knowledge of the decision.

A Supreme Court justice also approved plea-bargain testimony and an audio recording that allegedly captured him conspiring to obstruct justice with Joesley Batista, chairman of the world's largest meatpacker, JBS SA (JBSS3.SA). That approval allows the court to quickly make both the testimony and audio public.

Leaders of Temer's biggest allied party in Congress, the PSDB, said that if the allegations proved true, they would demand the resignation of three of their members who are in the president's cabinet.

"The president is absolutely convinced he committed no crime, but that has to be made clear to the eyes of everyone," a top presidential aide told Reuters.

Brazilian markets plunged on concerns the investigation could derail Temer's sweeping fiscal reforms.

Shares of state-controlled companies, such as Banco do Brasil SA (BBAS3.SA) and Centrais Elétricas Brasileiras SA, or Eletrobras (ELET6.SA), lost about a fifth of their value, and the nation's currency fell 7.5 percent, wiping out its gains for the year.

Brazil's Treasury and central bank said they stood ready to keep markets liquid before acting to smooth volatility in local currency and bond markets.

Source: Reuters

Brazil markets plunge as Temer scandal threatens reforms

Brazilian markets plummeted on Thursday as allegations that President Michel Temer condoned bribes to silence a key witness deflated investor optimism about the prospects for his ambitious pension and labor reform agenda.

Brazil's benchmark Bovespa stock index .BVSP closed 8.8 percent lower, its biggest daily decline since the 2008 financial crisis. Trading had been halted for an hour after a 10 percent drop triggered a circuit-breaker mechanism.

Blue-chip stocks such as lender Itaú Unibanco Holding SA (ITUB4.SA) and state-controlled oil company Petróleo Brasileiro SA (PETR4.SA) dragged the index lower.

The declines slashed 26 billion reais ($7.7 billion) off the market values of Itaú and Petrobras.

The Sao Paulo stock exchange saw 3.1 million transactions, breaking a previous record set in October 2014, the day former President Dilma Rousseff won a narrow runoff election, according to exchange operator B3 Bolsa Balcão Brasil SA (BVMF3.SA).

Temer was caught on tape encouraging a prominent executive to pay a monthly fee to keep jailed former House Speaker Eduardo Cunha silent in the country's biggest-ever graft probe, sources said on Wednesday, confirming a report in newspaper O Globo.

"Brazilian stocks and assets and their currency have rallied very strongly up until really today. It's a big pullback and ... it at least brings the risk up to the surface again," Alliance Bernstein Managing Director of Equity Product Management Eric Sprow said.

The report threatened to torpedo a two-year rally in Brazilian assets as traders quickly reassessed the chances of success for efforts to streamline the country's social security system and reform labor regulations. As a result, policymakers' attempts to curtail the growth of public debt and foster economic growth may also be in doubt.

Strategists at JPMorgan Securities and UBS Securities downgraded their recommendations on Brazilian equities to "neutral," citing increased risks to the implementation of structural reforms.

Trader Thiago Castellan at São Paulo-based Renascença brokerage said: "For the market, it's not a question of whether Temer will be ousted or not. The question is whether it will be quick and for how long reforms will be delayed."

Temer denied the allegations on Thursday, saying he will not resign. His remarks disappointed traders who had hoped for a swift resolution to the political crisis, putting renewed pressure on Brazilian stocks and currencies going into the close.

POLICYMAKERS SPRING TO ACTION

The Brazilian real BRBY slumped 8 percent to 3.38 reais per U.S. dollar, the biggest percentage drop since the currency was devalued in 1999, wiping out its gains in 2017, while bond prices tumbled.

Strategists at Credit Suisse Securities revised forecasts for the Brazilian real, saying the reform agenda was likely to be put on hold. They expect the currency to weaken to 3.50 in three months and 3.70 in 12 months, compared to 3.20 and 3.50 previously.

The sharp moves drove the market operator B3 to widen the limits on trading of several derivatives and put policymakers on alert.

The central bank sold $4 billion worth of new traditional currency swaps, increasing the stock of outstanding swaps by nearly a fourth from the current $17.7 billion.

Over the last two years, the bank has acted to reduce the amount of swaps, which function like future dollar sales to investors, from more than $100 billion by late 2015, to cut taxpayers' exposure to currency moves and limit market imbalances.

The National Treasury also swept to action, calling off an auction of fixed-rate and floating-rate bonds scheduled for Thursday and offering to buy or sell local notes in three extraordinary auctions in coming days.

Yields paid on Brazilian interest rate futures <0#2DIJ:> spiked as traders bet the central bank would be forced to cut rates at a slower pace as the reforms outlook dimmed.

Rate futures prices indicated traders saw a 79 percent chance that the central bank would cut the benchmark Selic rate by 50 basis points this month and a 21 percent chance of a 75 basis-point reduction. On Wednesday, most bets pointed to a cut of 125 basis points.

Source: Reuters

Brazil electoral court to take up case that may annul 2014 election

The head of Brazil's top electoral court said on Tuesday that justices would again next month take up a case that could annul the 2014 election on charges of illegal campaign financing and even unseat President Michel Temer.

Justice Gilmar Mendes, who also sits on Brazil's supreme court, said the trial would restart June 6 and that it could take up to a year before a verdict is reached.

It had been halted in early April so new testimony and arguments by the defense could be heard.

The case is a potential threat to Temer, who in 2014 was elected as vice president to President Dilma Rousseff, and could potentially be tossed from office depending on the full Supreme Electoral Court's ruling.

Temer took over the presidency a year ago when Rousseff was impeached on illegal budgetary maneuvers. Dilma and her supporters labeled it a "coup" orchestrated by Temer and his allies in an attempt to halt a sweeping political kickback investigation.

Despite the potential threat against Temer, Mendes, who is strongly linked to a party that is allied with Temer's, told Reuters in a March interview that the president would not necessarily lose power if the election were annulled because he was not the head of the ticket.

Prosecutors allege that Rousseff's Workers Party received millions in illegal campaign donations as part of a wider corruption scheme that involved billions in bribes paid by large construction firms in return for winning lucrative contracts from state-run oil company Petrobras.

Executives from the Odebrecht construction group have said in plea bargain testimony that they made 300 million reais ($97 million) in illegal campaign contributions to Rousseff's 2014 re-election campaign, which Rousseff strongly denies.

But they said Temer had not requested donations himself, which could bolster his lawyers' argument that he was not responsible for the illegal payments.

Source: Reuters

Brazil's Temer calls $40 million Odebrecht bribe accusation 'a lie'

Brazil's President Michel Temer denied on Thursday that he hosted a meeting in 2010 where an executive of engineering firm Odebrecht SA [ODBES.UL] was asked to arrange an illegal payment of $40 million to his political party.

The graft accusation, which Temer dismissed as "a lie," was made in plea bargain testimony by Marcio Faria da Silva, a former vice president of the industrial arm of scandal-plagued Odebrecht.

Though potentially damaging to his credibility, and efforts to shore up Latin America's biggest economy, Faria's allegation does not threaten Temer's hold on power. As president, he has temporary immunity for anything that occurred before he took office last year.

The accusation was made public on Wednesday as part of a rash of plea bargain deals by 77 Odebrecht executives caught up in a massive corruption scheme.

Faria said he met with Temer in 2010 in his Sao Paulo legal office, together with former lower house speaker Eduardo Cunha and Congressman Henrique Eduardo Alves, all members of the Brazilian Democratic Movement Party (PMDB).

At the meeting, the payment was requested as a 5 percent levy on a contract Odebrecht was seeking from state oil company Petroleo Brasileiro SA's for the maintenance of assets in nine countries, Faria said.

Temer confirmed in a video statement posted on social media that he took part in a meeting with a company executive in 2010 but there was no talk of an illegal donation.

"It is a lie that in that meeting I heard any reference to money or any shady dealings between the company and politicians," the president said.

Earlier on Thursday, Temer's office confirmed in a separate statement he met with Faria in 2010 in the presence of Cunha for a "quick and superficial" meeting, but denied that Alves participated.

Representatives for Alves and Cunha, who is in prison pending trial on other charges, could not be reached for comment.

The testimony by Faria was among dozens of plea bargain testimonies released by Supreme Court Justice Luiz Edson Fachin.

Based on the testimony, Fachin ordered investigations into nearly 100 politicians as part of the Operation Car War probe into billions of dollars in bribes and illegal kickbacks on contracts with state companies, particularly Petrobras.

The allegations come as Temer is trying to push an overhaul of Brazil's pension system through Congress, part of a business-friendly agenda that has sparked a rise in Brazil's stockmarket and currency. Congress is due to start discussions of the reform next week.

Some lawmakers on Thursday said the government would look to speed up the passing of reforms now that so many politicians were under investigation, but admitted that such a move might prove difficult.

In his testimony, Faria alleged that, while Temer did not speak about any figures, Cunha made it clear that a payment was expected.

"He explained that we were seeking a contract with Petrobras. A commitment that it would be signed would require a very important contribution to the party," Faria said, adding it was clear that a bribe was being sought.

Once the contract was won, the payment was made in cash in Brazil and to foreign bank accounts, Faria said. He said the PMDB took 4 percent of the value of the contract, leaving 1 percent for the left-leaning Workers Party of then-President Luiz Inacio Lula da Silva.

Odebrecht's former Chief Executive Marcelo Odebrecht, currently jailed for his part in the Car Wash scheme, said in a separate plea bargain deal that he had made available $40 million to Lula. He said the payment was negotiated via a minister, not with Lula himself.

Lula also denied any wrongdoing on Thursday while hinting that he was gearing up for presidential elections next year, despite five court cases pending against him related to Operation Car Wash.

Elected as Brazil's first working class president in 2002 and returned to office four years later, Lula is ahead in opinion polls for the 2018 vote.

"I will fight if they let me fight and I will prove that this country can be happy again," Lula said, adding that "plea bargains have to be proved."

Source: Reuters

Brazil's Temer says government offered 'all it could' on pension reform

Brazilian President Michel Temer said his government has offered "all it could" to ease lawmakers' resistance to a landmark pension reform bill, key to rebalance the government's strained finances, according to an interview published on Saturday.

Temer's center-right government, which took office last year pledging to tackle Brazil's massive government deficit, proposed five concessions to wavering congressmen on Friday, amid signs of resistance among legislators to the unpopular reform.

These included easing the rules on the transition to the new system and on rural workers, pensions for police and teachers, as well as benefits for the elderly and disabled.

Temer told the Folha de S. Paulo newspaper that he would not compromise on the central tenet of the legislation, which is introducing a minimum retirement age. While the government wants a minimum age of 65 for men, it could discuss reducing that for women, if necessary, Temer said.

"If we set the minimum age for men at 65, and 64 or 63 for women, it would not mean a big change," Temer said, adding that a different age for women is still not under discussion.

The pension plan, submitted last year to Congress, is aimed at curbing a growing deficit in Brazil's generous pension system, meant to provide rights guaranteed in the country's 1988 Constitution. It would require more years on the job for workers to gain full pension benefits.

The government said on Friday it faces a deficit in the pension system of 202 billion reais ($64.21 billion) next year.

Temer also said he does not intend to issue any decree exempting workers from the outsourcing law he sanctioned last month, adding he does not see the law harming workers´ rights.

Press representatives at the presidential palace confirmed to Reuters the content of the interview to Folha de S. Paulo.

Source: Reuters

Brazil court delays ruling in case that could unseat President Temer

Brazil's top electoral court on Tuesday decided to hear new witnesses in an illegal campaign financing case that could remove President Michel Temer from office, delaying any verdict in the trial until at least May.

The Supreme Electoral Tribunal (TSE) voted to reopen the landmark case to allow former Finance Minister Guido Mantega to respond to allegations he solicited an illegal donation of 50 million reais ($16 million) from engineering conglomerate Odebrecht in return for favorable tax legislation.

The delay plays into what Temer's aides have outlined as a defense strategy that centers on dragging the case out through 2018. If successful, that would allow Temer to complete the term of impeached leftist Dilma Rousseff and spare Brazil the turmoil of having two presidents ousted in a year.

The center-right president served as Rousseff's vice president, before he replaced her in 2016.

If the seven-justice tribunal decides that Rousseff and Temer, her running mate, used illegal money to fund their 2014 campaign, it could annul the election result and force Temer from office.

Congress would then have 30 days to elect a successor, plunging Latin America's largest nation deeper into the political turbulence that has prolonged its worst recession on record.

The court on Tuesday also granted a prosecutor's request to call Rousseff campaign strategist João Santana as a witness, following allegations that 20 million reais of his fees were paid offshore by Odebrecht.

The three political parties involved - Rousseff's Workers Party, Temer's PMDB and the PSDB that lost the 2014 election - were also given another five days to present their arguments.

"With the new proceedings, there is no way of knowing when this trial will be over," said Temer lawyer Gustavo Guedes.

'AN ENDLESS TRIAL'

The TSE judge given the task of studying the case, Herman Benjamin, criticized the calling of new witnesses in a case that opened 2-1/2 years ago.

"We can't turn this into an endless trial. We can't hear everybody. We can't hear Adam and Eve and the serpent," Benjamin told the court.

Brazil's currency and stock market were among the best performing in the world after Temer assumed office in May and pledged to cut a gaping deficit and overhaul pension laws. Investors welcomed the shift toward a more business-friendly agenda after 13 years of Workers Party government.

But the prospect of removing a second president in the space of a year could be devastating.

"It would create more confusion," former President Fernando Henrique Cardoso warned in a radio interview on Monday, urging the court not to make a decision that would scare off investors.

Cardoso's PSDB party filed the complaint about illegal campaign funding in 2014 after narrowly losing the elections. However, since Rousseff's impeachment, it is an ally in Temer's coalition and its lawyers are arguing that he was not responsible for the illegal money.

Among possible outcomes, the court could decide to close the case because Rousseff is no longer president or declare her election victory void, but not punish Temer with a ban from politics.

Temer is currently serving the third year of Rousseff's second four-year term. If a president is removed in the last two years of a four-year term, Congress would get to pick the successor rather than via a popular vote.

Since Temer's coalition holds a majority in Congress, that could potentially enable him to stay in office.

Source: Reuters

Most Brazilians disapprove of Temer government

A growing majority of Brazilians disapprove of President Michel Temer's scandal-plagued government, and faith is flagging in his ability to steer the country out of its worst recession ever, according to a poll published on Friday.

The survey by pollster Ibope, conducted between March 16 and 19, said the number of people who consider Temer's government "bad" or "terrible" rose to 55 percent from 46 percent in the previous survey carried out in December.

The proportion of those who rate Temer's government as "great" or "good" slipped to 10 percent from 13 percent, putting its popularity at the same level as leftist former president Dilma Rousseff in March last year, before she was impeached.

Six of Temer's cabinet ministers, including his two closest aides, have been named in plea bargain testimony for allegedly receiving under-the-table payments, casting uncertainty over his ability to pass reforms needed to restore fiscal discipline and pull Brazil from its worst recession on record.

The number of Brazilians that approve of how Temer is governing Brazil slid to 20 percent from 26 percent in December, while those that disapprove has risen to 73 percent from 64 percent in December, the poll said.

Distrust of the president has grown steadily since he took over from Rousseff, vowing to restore growth and business confidence to Latin America's largest country.

Almost eight in every 10 Brazilians (79 percent) now say they do not trust Temer, up from 72 percent three months ago, the survey showed.

The poll commissioned by the National Confederation of Industry lobby CNI surveyed 2,000 people and has a margin of error of two percentage points.

Source: Reuters

Former Brazil house speaker Cunha sentenced to 15 years for graft

A federal court sentenced Brazil's former speaker of the lower house, Eduardo Cunha, to more than 15 years in prison on Thursday for corruption, making him the highest-profile political conviction yet in the "Operation Car Wash" scandal.

The former politician's defense team said they would appeal the decision. Cunha will remain imprisoned pending appeal.

Cunha, who drove the successful impeachment of former President Dilma Rousseff, was forced from his position as speaker in July and arrested in October on accusations he received millions in bribes from the purchase of an oil field in Benin by state-controlled oil company Petróleo Brasileiro SA.

Over 200 people have been charged in the "Operation Car Wash" probe, a far-reaching investigation that centers on bribes and political kickbacks from contracts at Petrobras and other state firms. The Supreme Court is likely to approve soon the investigation of dozens of sitting politicians.

In February 2015, Cunha, a member of President Michel Temer's Brazilian Democratic Movement Party (PMDB) that for a decade was the main member of left-leaning Workers Party (PT) governments, defied the wishes of his own coalition to run for and win the speakership of the lower house of Congress.

Just six months later, he officially broke with the Rousseff administration, saying that she was using the Petrobras investigation as a tool of "political persecution" against him.

As speaker, only Cunha could allow impeachment proceedings to begin against Rousseff, whom critics accused of breaking budgetary laws.

He did just that in December 2015, just hours after PT deputies cast deciding votes for him to face an investigation by the House's ethics committee for lying about bank accounts he and his wife held in Switzerland.

By May, Rousseff was impeached and Temer installed as successor. But Cunha could not shake free of corruption allegations that eventually led to his downfall.

Once he was kicked out of congress, Cunha lost the privilege given to sitting politicians that only the badly overburdened Supreme Court can try them.

His case was instead sent to crusading anti-corruption judge Sergio Moro, who has been the driving force behind Brazil's fight against graft. Moro has a reputation for plowing through cases efficiently, with over 98 percent of his convictions in Car Wash cases being upheld by higher courts.

Cunha faces another trial for allegedly receiving $5 million skimmed from Petrobras contracts for two drillships in 2006 and 2007.

Separately on Thursday, federal prosecutors leading the Car Wash probe for the first time accused a party of the civil crime of "misconduct in political office" for taking part in the Petrobas scheme.

The authorities said they are seeking 2.3 billion reais ($731 million) from the Progressive Party (PP) for bribes its members received and for fines. Prosecutors are also demanding six sitting PP congressmen and four former deputies lose their offices and rights to run for office in the future.

Source: Reuters

EU asks Brazil to suspend meat shipments amid scandal

The European Union has asked Brazil to voluntarily suspend all shipments of meat to its member countries to avoid imposing a ban that would take time to lift, but the Brazilian government has not agreed, EU diplomats in Brasilia told Reuters on Thursday.

Brazilian meat exports have in any case ground almost to a halt following a police investigation into corruption involving food-sanitation inspectors and accusations that rotten products were sold.

A spokeswoman said Brazilian Agriculture Minister Blairo Maggi was not aware of the request.

The Brazilian government suspended meat shipments from the 21 meat-packing plants under investigation by the federal police, while insisting the quality of Brazilian meat was not in doubt.

But European farm groups called on the EU Commission on Thursday to take stronger action against Brazilian meat imports because of the scandal. EU experts meet in Brussels on Friday to decide on possible further measures.

The EU had already suspended imports from four Brazilian meat-processing facilities earlier this week.

EU ambassadors have been seeking more information on the irregularities discovered in Brazil's meat industry and have criticized Brazil's government for failing to deal with the problem as a public health issue, according to a European diplomat who attended a EU meeting on Wednesday.

"We asked the Brazilians to suspend all exports but they refused," said the diplomat, who asked not to be named because of the sensitivity of the matter.

"There is overall disappointment with the way Brazil is treating this as a public relations issue rather than from a public health point of view," the diplomat said.

Another European diplomatic source confirmed the request that Brazil voluntarily suspend all meat shipments to the EU because a ban would take a long time to undo, whereas meat sales could resume at any time if Brazil held off shipments.

LARGEST MEAT EXPORTER

The corruption scandal has hurt Brazil's reputation as the world's largest meat exporter, with sales of almost $14 billion last year. The industry employs 4 million workers.

Brazil's JBS S.A. (JBSS3.SA), the world's biggest meat processor, said on Thursday it suspended beef production at 33 of its 36 plants in Brazil for three days because of the lack of sales.

A dozen countries, including Brazil's largest trading partner, China, have suspended imports of Brazilian meat as a precaution, and eight others have stopped imports from the plants under investigation.

Brazil exported beef, chicken, pork and other meat products worth $1.76 billion to EU members in 2017, and a similar amount to China, where some of the largest Chinese food suppliers have pulled Brazilian beef and poultry from shelves.

Brazilian President Michel Temer said he would call his Chinese counterpart to urge China to review its import ban.

Maggi said on Wednesday that Brazilian meat exports sank to $74,000 on Tuesday from a daily average of $63 million. He told a congressional hearing the scandal could cost the meatpackers $1.5 billion or 10 percent of annual meat exports.

He said on Thursday the police announcement of the corruption probe was exaggerated and wrongly suggested meat quality was being investigated instead of the individuals who violated sanitary rules.

Still, European farm groups Copa and Cogeca said corruption cases were unacceptable.

Brazil's failure to apply EU-equivalent food safety standards raises "serious concerns" about ongoing trade talks between the EU and South American trade bloc Mercosur that Brazil is part of, they said in a letter to the EU Commission.

Source: Reuters