Brazil Government Key Coalition Ally to Stick With Temer

(Bloomberg) -- The Brazilian government’s main ally in Congress intends to maintain its support for embattled President Michel Temer, according to one of its most senior members.

Senator Jose Serra, a former foreign minister in the Temer administration, said that the Brazilian Social Democracy Party will not give up its cabinet positions and remains committed to the reforms underway in Congress, in comments to reporters in Brasilia on Monday evening.

The PSDB, as the party is known, plays a key role in Temer’s market-friendly reform agenda. Four cabinet ministers belong to the party, and its votes in both houses of Congress are essential for the administration. But the party’s support has been in doubt since explosive allegations emerged against the president last month. Investors are closely watching the party’s decision as a sign that Temer may be able to pull together enough votes to advance crucial labor and pension reforms.

"The PSDB will not make any move at the moment toward leaving the government," Serra said.

Previously, party leaders had indicated that their support would depend on a positive outcome for Temer at Brazil’s top electoral court, known as the TSE. On Friday the court acquitted Temer of illegal campaign financing in the 2014 election. But the president still faces numerous impeachment requests, an investigation at the Supreme Court and rock-bottom popularity levels.

Serra said that some in the party had called for the PSDB to withdraw, while continuing to support the reform program. PSDB acting head Tasso Jereissati said after the meeting that the party would allow its deputies to vote freely in the event that the lower house must decide on whether to move forward with possible charges against Temer, and that it may also appeal the TSE decision.

"We understand that there was corruption and improper use of public funds," Jereissati said. "We don’t have to keep quiet."

Before political turbulence picked up last month, Temer was close to securing votes needed to pass his proposed pension overhaul in the lower house, and was also pushing ahead with a bill that loosens decades-old labor laws.

To contact the reporter on this story: Rachel Gamarski in Brasilia at rgamarski@bloomberg.net.

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Matthew Malinowski, Bruce Douglas