BRASILIA • Brazil has plunged back into political crisis, reminiscent of the chaos surrounding last year's impeachment process, following reports that President Michel Temer was involved in an alleged cover-up scheme with the jailed former speaker of the lower house of Congress.
One of the country's largest newspapers, O Globo, reported on Wednesday that two senior executives from JBS, a giant meat-packing firm, have submitted a tape to the Supreme Court of a secret recording of Mr Temer approving a payment to Eduardo Cunha - the mastermind behind last year's impeachment of former president Dilma Rousseff - in return for his silence as a witness in a corruption case.
The executives' evidence forms part of a plea-bargain deal, according to O Globo, in which information is offered in exchange for reduced sentences on graft charges.
Mr Temer immediately denied the report. "President Michel Temer never requested payments to obtain the silence of ex-deputy Eduardo Cunha," a statement from his office said. "The President defends a deep and wide investigation to get to the bottom of the claims put forward in the media."
Both JBS and its holding company, J&F, declined to comment.
The allegations come just over a year after Mr Temer assumed the presidency, following the start of impeachment proceedings against Ms Rousseff. Over the past 12 months, his administration has embarked on an ambitious reform programme that has pleased investors and fuelled a rally in both the currency and stock market. Many Brazilians, however, are opposed to his austerity measures and his approval rating hovers at around 10 per cent.
The allegations are the latest development in Operation Carwash, a three-year-long corruption investigation that has implicated many in Brazil's business and political elite, including some in both the government and the President's own party.
According to the newspaper's report, when the President became aware that the executives were paying Cunha to keep silent, he said: "You've got to keep this up, right?"
O Globo did not provide a transcript of the conversation, or the question leading up to the President's alleged comment. Nor did it explain how it obtained the information.
The report caused an uproar in Congress, where opposition congressmen shouted anti-government slogans. The session was suspended.
Five opposition parties have called for Mr Temer's resignation and early elections. As protests began in Brasilia, military police surrounded the presidential palace, while protesters also gathered in Sao Paulo, Brazil's largest city.
A senior member of the government told Bloomberg on condition of anonymity that the administration's economic team was worried that the crisis could impact its reform agenda. The government is on the verge of sending a long-anticipated and highly controversial pension reform proposal to the lower house of Congress.
"The dramatic political weakening of the government must, at a minimum, delay the timetable for passage of the labour and pension reforms," political consultancy Arko Advice said in a note. It added that the episode may affect the ruling of Brazil's top electoral court, which is currently assessing whether to scrap the results of the 2014 election. Such a decision could eventually strip Mr Temer of the presidency, pending possible appeals.
The head of the Brazilian Bar Association, Mr Claudio Lamachia, said that the alleged recordings need to be made public as soon as possible.
"Brazilians can no longer live with doubts regarding their representatives," Mr Lamachia said.
BLOOMBERG
