Brazil

Brazil’s Fiscal Reform Faces Headwinds Amid Scandals

Brazilian President Michel Temer and Rodrigo Maia at the Presidential Palace in Brasília on Feb. 3.
Brazilian President Michel Temer and Rodrigo Maia at the Presidential Palace in Brasília on Feb. 3.

BRASÍLIA—Brazilian President Michel Temer’s efforts to rein in state spending faced new headwinds this week as some key allies of the administration were hit by accusations of corruption.

In the past few days, several top politicians backing Mr. Temer’s unpopular economic reform proposals became embroiled in scandals related to Operation Car Wash, the sprawling corruption investigation centered on state oil company Petróleo Brasileiro SA, or Petrobras.

The distractions come as lawmakers began discussions this week on controversial pension and labor reforms. The latest accusations of wrongdoing have been denied and investigations are under way, but they could weaken the reform agenda, said André Cesar, a political analyst in Brasília.

“The reforms are very sensitive and any noise has the potential to derail them,” he said. “And anything related to Car Wash makes a lot of noise.”

A spokesman for Mr. Temer said the administration is focused on keeping the government moving despite the crisis.

Mr. Temer’s week of troubles first centered on Wellington Moreira Franco, a longtime economic adviser to the president’s Brazilian Democratic Movement Party (PMDB) and whom Mr. Temer nominated for a ministerial position earlier this month.

Some lower-court judges are working to block the nomination, saying the administration is trying to make Mr. Franco a minister only to give him the protection from prosecution granted to cabinet members by Brazilian law. The judges cited unconfirmed local media reports that Mr. Franco had been mentioned by a state witness in the Petrobras probe as having solicited illegal payments in exchange…

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