By Paulo Trevisani
BRASÍLIA--An alleged corruption scandal at Brazil's largest
company is threatening President Dilma Rousseff's ability to govern
Latin America's biggest nation.
Police have arrested former executives of Petróleo Brasileiro
SA, or Petrobras, in their investigation into alleged price rigging
of contracts and bribery at the state-controlled firm. Some
executives have struck plea deals with prosecutors, officials
say.
In testimony that local media have said was leaked to them,
these executives have implicated high-profile politicians, among
them members of Ms. Rousseff's ruling Workers' Party.
No charges have been filed. And the politicians have denied
wrongdoing.
But the developments appear to be emboldening an opposition that
gained seats in the new Congress set to open in January. Opposition
lawmakers are calling for deeper investigations into Petrobras's
management and political links and are threatening to block
government legislation.
In a further distraction to Ms. Rousseff's rule, opposition
legislators this week passed a measure to bring politicians to
testify in Congress over Petrobras.
The accusations are feeding an "opposition mood" in Congress,
said Ricardo Caldas, a political scientist at the University of
Brasília.
The president's office didn't respond to a request to
comment.
Government allies in Congress on Tuesday sought to play down any
political risks.
Due to the Petrobras scandal, "It won't be an easy discussion
with the opposition, but at the end common sense will prevail,"
said Sen. José Pimentel, government's leader in Congress.
Prosecutors allege that Petrobras executives who were political
appointees took kickbacks from the company's suppliers and
contractors. The employees then passed part of that money along to
political parties, prosecutors said. Local media, citing leaked
reports from Petrobras executives, say the parties allegedly used
the money to finance election campaigns.
Ms. Rousseff, who hasn't been accused of wrongdoing,
acknowledged that public money was diverted at the company and
pledged to support all investigations.
Some of the alleged wrongdoing occurred when Ms. Rousseff was
Mines and Energy minister in the administration of President Luiz
Inácio Lula da Silva, whom Ms. Rousseff succeeded as president. As
energy minister, Ms. Rousseff was also Petrobras's chairwoman. Mr.
da Silva hasn't been accused of wrongdoing.
The developments appear to be complicating Ms. Rousseff's task
of selecting a cabinet ahead of her Jan. 1 inauguration following
her narrow election in October to another four-year term. That is
because she wants to avoid naming someone who could end up in the
growing suspects list, said Murillo de Aragão, founder of Arko
Advice, a political analysis firm in Brasília.
"It isn't only who she chooses as minister, but also whose
recommendation that was," Mr. Aragão said. "You don't want to take
somebody's recommendation who down the road may be named as a
suspect in the case."
While Ms. Rousseff "is taking her time the situation gets
worse," he said. "It delays the re-establishment of credibility in
the economy [and her] ability to govern depends on that," he
said.
The Brazilian leader's task is further complicated by the fact
that her cabinet contains 39 ministerial positions, and those
top-level jobs are typically traded with political parties for
their support in congress.
Ms. Rousseff has said that she will appoint a new finance
minister to succeed Guido Mantega, who has said he was
retiring.
The situation increases uncertainty at a time of sputtering
economic growth and rapidly rising prices. Brazil's gross domestic
product is likely to expand only 0.2% this year, according to a
central-bank survey of economists, while the 12-month inflation
rate is above the central bank's 2.5%-to-6.5% target range.
Government spending is rising faster than revenue, leading to a
deterioration of Brazil's fiscal profile and raising questions
about the country's ability to keep its investment-grade credit
ratings.
The Petrobras scandal will add to President Rousseff's growing
list of problems. Given Brazil's notably slow judicial system, the
affair could remain a distraction well into the president's second
term.
"It will suck up a lot of energy and wear out her popularity,"
said political analyst Humberto Dantas, adding that the case also
weakens her standing with Congress. "Even political allies may take
advantage and increase their demands on the president."
Edla Lula contributed to this article.
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