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Temer seeks spending cap after losing minister to scandal
Michel Temer, Brazil’s interim president, sought to bounce back from the first political crisis of his nascent government on Tuesday with the announcement of ambitious measures to restore the country’s sinking public finances.
One day after losing his first minister to a corruption scandal, Mr Temer announced he would seek a constitutional amendment in congress to limit rises in budget spending to inflation — effectively capping the ballooning growth of the state. The measure is aimed at rebalancing Brazil’s sinking public finances.
“We will present a proposal to amend the constitution that will limit the growth of primary expenses. We will complete this task by next week,” said Mr Temer, accompanied by his economic team.
The programme aims to tackle Brazil’s thorniest issues, among them capping the budget and addressing its complex labour laws and expensive pension system.
Absent from the line-up of ministers was Romero Jucá, the former planning minister, who took leave of absence on Monday after newspaper Folha de S.Paulo published a transcript of a tape in which he allegedly plotted to obstruct corruption investigations. Mr Temer took office less than two weeks ago after congress voted to impeach Dilma Rousseff for allegedly manipulating the public accounts to hide a growing deficit.
Seven ministers including Mr Jucá are implicated in Lava Jato (Car Wash), a sweeping investigation into corruption at Petrobras, the state-owned oil company. Analysts said what was concerning for Mr Temer was that the incident showed that Lava Jato, which contributed to bringing down the leftist government of Ms Rousseff’s Workers’ party, or PT, was now targeting the leadership of his party, the Brazilian Democratic Movement party, or PMDB.
Mr Jucá, a PMDB leader, was taped in a private conversation with Sérgio Machado, a former executive of a subsidiary of Petrobras. During the exchange, which took place before the senate voted to begin the formal impeachment process against Ms Rousseff earlier this month, Mr Jucá allegedly told Mr Machado they needed to remove the president from power “to stop the bleeding” from Lava Jato.
Newspaper reports alleged on Tuesday that Mr Machado, who was not available for comment, was carrying a wiretap during the conversation with Mr Jucá. He had also taped similar conversations with other senior PMDB figures, the reports said.
Mr Jucá did not deny the existence of the recording but said the newspaper’s conclusions about its content were taken out of context.
“We are now entering the PMDB phase of the investigation,” said Carlos Melo, a political scientist at Insper, a university in São Paulo.
He said the Jucá incident showed that Lava Jato was still going strong despite fears in some quarters that it might end with the impeachment of Ms Rousseff.
On Monday she said Mr Jucá’s comments confirmed her claims that the impeachment was a coup plot by the opposition to take power and shut down the Lava Jato investigation.
“If anyone was still unconvinced that a coup was under way?…?the seriously incriminating remarks of Jucá about the real objectives of the impeachment?…?should eliminate any doubt,” she said.
However, the discussion between Mr Jucá and Mr Machado reported by Folha de S.Paulo contained a suggestion that Ms Rousseff should have resigned so that Mr Temer could then step in to protect her mentor and predecessor, former PT president Luiz Inácio Lula da Silva. He is under investigation over allegations that he received illegal payments from construction companies. This is said to be part of a grand bargain between the parties to protect themselves from the investigation.
“I think there must be a [political] pact,” Mr Jucá said.
Analysts said the incident signalled further volatility ahead for Mr Temer’s administration, given the number of his ministers implicated in the investigation.
“Jucá may only be the first member of the new administration to fall in disgrace,” said Jimena Blanco, head of Latin America at Verisk Maplecroft.
Yet Mr Temer’s response in letting Mr Jucá go had been swift and had contained some of the damage, analysts said.
This had enabled Mr Jucá to return to the senate, despite stepping down as a cabinet minister, where he could help push through the government’s reform agenda.