Latest Twist in Brazil Political Scandal Has a Hefty Price Tag

(Bloomberg) -- Brazil’s President Michel Temer is learning the hard way that, when it comes to the weeks that lawmakers will dedicate to hearing criminal charges against him, time is money.

That’s because each day that they focus on corruption allegations instead of passing crucial fiscal measures could cost 33 million reais ($10.4 million) in lost revenue from next year’s budget, according to two government officials with knowledge of the matter who were not authorized to speak on the record.

The lower house’s Constitution and Justice Committee started its deliberations on the case against Temer on Tuesday. In the next stage of proceedings the committee will send its report to the plenary for a vote on whether to put the president on trial. Though most analysts expect the committee to recommend shelving the charges, securing the votes will deplete yet further the administration’s political capital. The government wishes to avoid burdening deputies with unpopular legislation during the debate over the Temer charges for fear of undermining economically important projects, according to one member of cabinet.

The administration needs lawmakers to pass tax changes on investment funds this year in order to reap an expected six billion reais in 2018. Other proposals, including the end of tax breaks for some companies and higher pension contributions by public servants, are expected to generate four billion reais and 1.9 billion reais next year, respectively, but will only come into effect 90 days after being passed into law.

From the political perspective, the government believes its best strategy is to push back a vote on these measures until the end of December, one of the persons said. Economically, the fear is that the closer the vote comes to October 2018’s elections, the less willing lawmakers will be to pass difficult measures.

To contact the reporters on this story: Rachel Gamarski in Brasilia at rgamarski@bloomberg.net, Simone Iglesias in Brasília at spiglesias@bloomberg.net.

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