RIO DE JANEIRO — Just a few days ago, Brazil seemed to be turning a corner. The stock market was soaring. Bankers were cheering. The nation’s cutthroat lawmakers were lining up to curb spending. Inflation had been tamed.
Brazil, it appeared, was finally on the mend.
Then, in a matter of hours, it all started falling apart. President Michel Temer, long embroiled in graft scandals, suddenly became tangled in a new one, accused of taking millions of dollars in illicit payments and caught on tape discussing how to obstruct an anticorruption drive.
The allegations — including testimony released Friday in which executives at one of the world’s largest food companies accused him of taking about $4.6 million in illegal campaign contributions — have ignited broad calls for Mr. Temer’s resignation, sent markets whipsawing and set off fears that Brazil will slide back into the political and economic turmoil that has rattled it for the last two years.
The testimony, released by the Supreme Court, also described tens of millions of dollars in illicit payments into offshore accounts intended to benefit his impeached predecessor, Dilma Rousseff, and her mentor, former President Luiz Inácio Lula da Silva, both of whom have denied any wrongdoing in the matter.Continue reading the main story
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The bombshell made it clear that the political and economic upheaval in Latin America’s largest country is far from over. Mr. Temer, who took over after Ms. Rousseff’s ouster only a year ago, is facing the biggest crisis of his already rocky presidency. Mr. da Silva, who has been angling for a comeback, was facing multiple corruption investigations even before the allegations were revealed on Friday.
On top of that, the politicians in line to take over if Mr. Temer falls — including the speaker of the house and the leader of the Senate — are also embroiled in corruption investigations, raising deep concerns over the nation’s leadership and future.
“The damage done to our institutions and to rule of law needs to be stanched,” Paulo Sérgio Pinheiro, a former secretary of human rights, wrote in the newspaper Folha de S.Paulo, describing the latest crisis as a “unique and tragic moment in our history.”
“We’ve arrived at the end of the line,” he said.
Beyond the torrent and staggering scale of the accusations, many Brazilians have been shocked that the latest scandal became public because Mr. Temer, a veteran of Brazil’s Machiavellian politics, stepped into a trap that has ensnared him before: He was caught on tape by someone he trusted.
“It’s stunning that this isn’t even the first time Temer has been recorded and betrayed in recent months,” said Mauricio Santoro, a political scientist at the State University of Rio de Janeiro. “You’d think a Brazilian president would be less careless.”
Mr. Temer called it “appalling” the last time a secret recording of him came out, late last year. One of his own ministers had captured their conversation, accusing the president of pressuring him to help an ally in a property deal.
Even then, the double crossing should not have come as a surprise. At each turn in Brazil’s long-simmering political crisis, secret recordings have produced one revelation after another, tripping up some powerful politicians.
Now, Mr. Temer is on tape again, this time caught by one of Brazil’s richest men.
The latest scandal involves Joesley Batista, 44, an heir to JBS, a food empire with operations across Brazil and the United States. The secret recording is not only raising anxiety over what Mr. Temer did, but also his susceptibility to subterfuge in a political system where leaders often rush to inform on one another.
Mr. Temer, 76, “wound up getting ambushed by a billionaire one March night in Brasília,” the capital, said José Casado, a columnist for the newspaper O Globo.
In a move worthy of a plot twist in a thriller, Mr. Batista handed over the recording to investigators as part of a plea deal. The tape caused jaws to drop over Mr. Batista’s description of moves that seem to crudely refer to buying off a prosecutor and judges, as well as bribing Eduardo Cunha, the jailed politician who helped to orchestrate the impeachment of Ms. Rousseff.
“I’m good with Eduardo, O.K.?” Mr. Batista is heard telling Mr. Temer on the recording, emphasizing that he had “paid up” his obligations to Mr. Cunha.
“You need to keep that up, got it?” Mr. Temer replied.
At other points in their conversation, which occurred at Mr. Temer’s official residence, Mr. Batista described “taking care” of two unnamed judges and counting on a prosecutor who had informed him about a fraud investigation at Brazil’s largest pension funds.
Mr. Temer insists that he did nothing wrong and is rejecting calls to resign. But the recording offers a glimpse into how one of Brazil’s richest men bragged about obstructing justice to the nation’s president.
Critics of Mr. Temer argue that he should never have met in the first place with Mr. Batista, who is the target of a graft investigation. Mr. Temer’s growing chorus of opponents is also asking why the president took no legal action upon being told by Mr. Batista about an array of illicit activities.
Mr. Temer was already struggling with dismal approval ratings as he sought approval for cutting pension benefits and curbing the influence of unions. Now a new phase in Brazil’s instability seems to have started — just when it appeared Brazil was turning the page on political upheaval.
“The government’s popularity was already low, but now it’s even lower,” said Carlos Melo, a political scientist at Insper, a business school in São Paulo. “It will be difficult for the government to approve unpopular reforms.”
Mr. Temer has governed under a cloud of scandal since taking office a year ago. Ministers in his cabinet have resigned amid claims of trying to stymie corruption inquiries. Mr. Temer also faces accusations that he negotiated a $40 million bribe for his party in 2010, a claim he denies.
Marcos Troyjo, who teaches international relations at Columbia University, said the latest scandal could severely damage the view that Mr. Temer was “getting the economic agenda going.”
After being gripped by panic selling on Thursday, Brazilian markets stabilized somewhat on Friday as investors tried to gauge how Mr. Temer’s refusal to step down would affect Brazil’s economy. Unions were already marshaling resistance to the austerity measures he has proposed.
“I don’t even have a job yet and they want us to work until we die,” said Julia Canedo, 21, a university student who expressed disgust with Mr. Temer’s proposed overhaul of the pension system, which allows many Brazilians to retire in their 50s. “Everyone is lost and can barely follow what’s going on because it’s so crazy and unstable. I want him to leave.”
In addition to the secret recording, executives at JBS, Mr. Batista’s company, said that they paid about $4.6 million in illegal campaign contributions to Mr. Temer in 2014, some of which he pocketed himself, according to the court testimony released Friday.
It also described deposits of tens of millions of dollars into offshore accounts to benefit Ms. Rousseff and Mr. da Silva, both of the leftist Workers’ Party.
The JBS executives recounted a remarkably ambitious effort to get public loans for the company’s global expansion into markets like the United States. They described efforts to influence officials across Brazil’s public bureaucracy, regardless of their party affiliation.
The calls for Mr. Temer to resign have come from many sides, including an editorial Friday in O Globo, part of Brazil’s most powerful media group.
“If he doesn’t go,” the newspaper warned, “he’ll drag Brazil through an even more profound political crisis.”
Stepping down, however, could also expose Mr. Temer to an array of legal battles: He would lose the privileged legal standing that senior officials enjoy in Brazil, often allowing them to avoid prison.
If Mr. Temer resigns, “he can be tried and convicted,” said Daniel Vargas, a law professor at Fundação Getúlio Vargas, a university in Rio.