Bolsonaro Allies Shielding Brazil Reforms From Carwash Woes

(Bloomberg) -- President Jair Bolsonaro’s allies are closing ranks to avoid a scandal involving one of his “superministers” from derailing the approval of crucial reforms in Brazil’s Congress.

The mantra repeated by government leaders and allies is to “shield” the economic agenda, in particular plans to overhaul Brazil’s pension system, from the political maelstrom that followed the release of messages allegedly showing then federal judge Sergio Moro in a too cozy relationship with prosecutors. The investigation they were working on, dubbed Carwash, sent President Luiz Inacio Lula da Silva to jail, barring him from running in last year’s elections, and catapulted Moro into Bolsonaro’s cabinet.

“We’ll shield the lower house from any crisis,” Speaker Rodrigo Maia said in a post on his Twitter account. “Our focus is the approval of reforms that are essential to Brazil.”

After intense negotiations at a joint budget committee, the opposition accepted a government proposal that freed up billions of reais for education, housing, infrastructure and research -- long-time demands from leftist parties. With the deal, the committee approved a government request for additional 248 billion reais ($64 billion) to pay social benefits and pensions this year. The lower house and the Senate followed suit and also approved the deal on Tuesday.

That created a moment of rare consensus in a Congress shaken by scandal. Since the messages received by The Intercept website were made public Sunday, lawmakers have either been calling for Moro to resign or for Lula to be immediately released from jail. Members of the leftist Workers’ Party initially said they wouldn’t vote on any of Bolsonaro’s legislative proposals as long as Moro remained in office. Some of them even started collecting signatures to open a parliamentary inquiry committee to investigate the case.

It is still to be seen how lawmakers will react to a much more controversial pension reform proposal that’s expected to go to a floor vote in the lower house over the next few days. A report on the proposal that has been discussed for days at a lower house special committee will be sent over the next few days to the floor of the house, where it will be put up for a first vote. The initial piece of good news was already enough to boost local markets, with the Brazilian real closing 0.8% stronger on Tuesday, at 3.86 per U.S. dollar.

Fallen Star

For Moro, however, if was undoubtedly a tough day. The former judge and current justice minister, considered by many Brazilians as a superhero fighting the country’s endemic corruption, has emerged weaker than ever from the episode. While he received the backing of his loyal fan base on social media, Bolsonaro himself refrained from tweeting or making direct comments about the case. Instead, he received the minister at the presidential residence Tuesday morning and both attended a navy event together, where Moro was awarded with a medal from Bolsonaro himself.

Meanwhile, an anti-crime package Moro sent to Congress early in the year is expected to remain on the back burner for an indefinite period of time. He also lost control over the Coaf financial watchdog during negotiations in Congress. The top court will reopen discussions about the legality of arrests following an appeals court conviction, which is crucial to encourage those convicted of crimes to sign plea bargain deals that made Carwash possible.
Even what’s arguably Moro’s biggest life achievement, the sentencing of Lula, will be scrutinized by Supreme Court justices, who’ve scheduled for June 25 a discussion about potential bias in his decision to send the former president to jail.

Moro has said the messages published by The Intercept were taken out of context and don’t show anything out of the ordinary in his actions. He has no intention of stepping down, two people with direct access to the minister have said. Yet the Brazilian Bar Association recommended that he resign from public office while investigations continue.

--With assistance from Murilo Fagundes.

To contact the reporters on this story: Simone Iglesias in Brasília at spiglesias@bloomberg.net;Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net

To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Walter Brandimarte, Robert Jameson

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