RIO DE JANEIRO — President Michel Temer of Brazil defied calls to resign on Thursday as an exploding scandal over claims that he authorized the payment of hush money to a jailed ally engulfed Latin America’s largest country.
Brazil’s currency, the real, fell sharply against the dollar and stocks plunged in a sell-off punctuated by fears that Mr. Temer would be forced to step down or find himself politically paralyzed, effectively stalling the president’s ambitious agenda of pushing broadly unpopular austerity measures through Congress.
The crisis swirling around Mr. Temer, 76, points to a crucial turning point in a political system already defined by remarkable turmoil. Mr. Temer rose to power last year after a power struggle in which his predecessor, Dilma Rousseff, was ousted in bitter impeachment proceedings.
“The country is in a state of shock,” Marina Silva, a former environment minister and an aspirant to Brazil’s presidency, said in a video posted on Facebook. “The president of the republic is no longer in any condition to govern Brazil.”
Calls for Mr. Temer to step down multiplied on Thursday across Brazil’s political establishment, after a report by Globo, the country’s most powerful media group, of a secret recording in which the president endorsed bribes paid to silence Eduardo Cunha, an imprisoned politician who helped orchestrate Ms. Rousseff’s ouster.
Mr. Cunha, the former speaker of Brazil’s lower house of Congress, exerted considerable sway over Brazilian politics and was one of Mr. Temer’s top allies. But only weeks after he helped impeach Ms. Rousseff, he was arrested on charges of taking as much as $40 million in bribes. In March, he was found guilty on multiple charges.
Mr. Temer has confirmed meeting at his official residence in March with Joesley Batista, the magnate at the helm of the JBS food processing company who was said to have made the recording and delivered it to prosecutors as part of a plea deal. But Mr. Temer denied authorizing hush payments.
In a televised address on Thursday, Mr. Temer was defiant in rejecting calls to resign. He raised his voice and appeared under stress as he contended that efforts to mend Brazil’s economy could be put at risk if he stepped down.
“I will not resign,” Mr. Temer said emphatically. “I did not buy anyone’s silence.”
Different interpretations of the recording emerged on Thursday…