Brazil Plunges Into Fresh Political Crisis After Temer "Hush Money" Recordings Emerge; Stocks Crash

The presidency of Brazil’s Michel Temer, who replaced disgraced and impeached predecessor Dilma Rouseff last summer, lasted about one year without a major corruption scandal.

That changed tonight, when Brazil’s O Globo newspaper which was instrumental in exposing the Carwash scandal which ultimately led to Rouseff’s downfall and the arrest and incarceration of countless politicians, reported that the chairman of meatpacking giant JBS secretly recorded his discussion with Temer about “hush money” payments to jailed former House Speaker Eduardo Cunha in return for his silence.


Brazil’s President Michel Temer

The allegations are the latest development in Operation Carwash, a sprawling corruption probe that has implicated many of Brazil’s business and political elite, including some in the president’s own party. Temer has repeatedly denied any wrongdoing.

Readers may recall that in a delightfully ironic case study of political irony and power vacuum, Eduardo Cunha, the conservative Brazilian political leader who led the push in 2016 to oust Dilma Rousseff, was sentenced in March to more than 15 years in prison himself, when a Brazil judge found him guilty of corruption, money laundering and illegally sending money abroad, all in connection with the sprawling graft investigation involving the state-run oil company Petrobras, and which Cunha himself used as a pretext to dispose of Rouseff.

The tragically ironic Cunha was the highest-profile politician to be sentenced as a result of the Operation Car Wash investigation into corruption at Petrobras, which has shaken Brazil’s political and business establishments to their core. Ultimately, he was convicted of charges that included receiving bribes during Petrobras’ acquisition of a Benin oil field for $35.5 million in 2011, and of money laundering crimes between 2011 and 2014. Yet somehow he was the man tasked with bringing justice to Rouseff.

Furthermore, Cunha, once a powerful member of Temer’s ruling party, has previously said he had compromising information about a host of senior politicians linked to a vast political bribery scandal at state oil firm Petrobras. And yet he never spokeup.

Now, not only do we know why Cunha kept silent, but there is finally proof of a corruption link between Cunha and Temer himself.

According to the O Globo report, JBS Chairman Joseley Batista recorded the discussion with Temer about hush money the executive paid to Cunha, according to the newspaper. The report did not say what Cunha was asked to keep quiet about. When Batista told Temer he was paying Cunha to remain silent, the president was recorded saying, “You need to keep that up, okay?”


Batista and Temer

Temer on Wednesday acknowledged he had met with the JBS Chairman in March but denied any part in alleged efforts to keep jailed former House Speaker Eduardo Cunha from testifying.

According to O Globo, executives from JBS submitted a tape to the Supreme Court of a secret recording of Temer approving a payment to the abovementioned Cunha. Batista and his brother, JBS Chief Executive Wesley Batista, presented the recording to prosecutors as part of plea bargain negotiations underway since March.

Reuters adds that  JBS also hired a law firm to discuss a leniency deal with the U.S. Department of Justice. JBS declined to comment immediately.

To be sure, the presidential press office immediately issued a statement vehemently denying the allegations. “President Michel Temer never requested payments to obtain the silence of ex-deputy Eduardo Cunha,” it said. “The president defends a deep and wide investigation to get to the bottom of the claims put forward in the media.”

Unfortunately for Temer, Brazil appears to no longer believe politician lies, especially of Temer, whose approval rating is in the single digits. As a result, as Bloomberg writes, “Brazil has plunged back into political crisis, reminiscent of the chaos surrounding last year’s impeachment process.”

Bloomberg adds that O Globo’s report caused an immediate stir in Congress, where opposition congressmen started to shout anti-government slogans. The session was subsequently suspended. Legislators from five opposition parties called for Temer’s resignation and early elections, according to a statement sent by the opposition leader in the lower house. Temer went to his official residence after an emergency meeting with some of his closest aides.

According to further press reports, legislators from 5 opposition parties have demanded Temer’s resignation and call for new elections, according to statement from lower house opposition leader’s press office. And while the US spent much of the day talking about impeachment, in Brazil they actually did it: Rede party deputy Alessandro Molon filed an impeachment request against Temer, according to his press office.

The local authorities already know what’s coming: amid growing protests in Brasilia on Wednesday evening, military police have moved into position around the presidential palace and one of the judges on Brazil’s Supreme Court has called for calm. “It’s a moment for calm, moderation and watching the institutions work,” said Marco Aurelio Mello.

“We still need more information, but on the face of it there’s enough to say that it weakens substantially the government,” said Andre Cesar, an independent political analyst. “I see a huge increase in the difficulties in approving reforms. Pension reform could take a step back.”

The head of the Brazilian Bar Association, Claudio Lamachia, said in a statement that society needs immediate answers and that the alleged recordings need to be made public as soon as possible. “Brazilians can no longer live with doubts regarding their representatives,” Lamachia said.

On Wednesday evening, people were already lining up on the streets of Sao Paolo, preparing to protest against Temer:

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Meanwhile, the same market which soared last year after the Rouseff impeachment, for some still unknown reason, is now plunging on the news. A Brazilian ETF trading in Tokyo, tumbled more than 8% on the O Globo news, its biggest drop since November.

At this point it is unclear if there is any politician left in Brazil who has not been tainted by the Carwash scandal; it is also not clear who could replace Temer when he too is kicked out of office.


Source: ZeroHedge