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.”Continue reading the main story
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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.”
Governing amid scandal is nothing new for Mr. Temer, a centrist who drifted to the right over the past year. Allies of his have been forced to resign from his cabinet over reports that they sought to stymie the extensive investigation into graft connected with Petrobras, the national oil company.
Mr. Temer, with approval ratings hovering around the single digits, had even expressed fury at the end of 2016 after one of his cabinet ministers secretly recorded their conversation, accusing the president of pressuring him to help an ally in a property deal. More recently, Mr. Temer was accused of negotiating a $40 million bribe in 2010 for his scandal-ridden Brazilian Democratic Movement Party, a claim that he denied.
But the newest scandal around Mr. Temer appears to be more destabilizing, raising the possibility of even greater turmoil in Brazil. Adding to the pressure on Mr. Temer, the country’s economy remains weak after enduring a harrowing decline and surging unemployment, despite tepid signs of recovery.
If Mr. Temer resigns, the next in line of succession is Rodrigo Maia, the speaker of the lower house, who is facing his own federal graft investigation. Still, Mr. Maia could serve as president for only 30 days, according to Brazil’s constitution, after which Congress would elect a new president to serve the remainder of Mr. Temer’s term, which lasts through 2018.
Critics of the beleaguered president have been organizing street protests calling for direct elections, a prospect feared by some allies of Mr. Temer over the potential for figures like Luiz Inácio Lula da Silva, a leftist and former president, to capitalize on the political tumult.
While Mr. da Silva is facing his own corruption investigations, he still ranks among Brazil’s most influential political figures, largely thanks to the vigorous expansion of antipoverty programs during his presidency from 2003 to 2010. Outspoken foes of Mr. da Silva, such as Mayor João Doria of São Paulo, are also rising in national prominence.
At the same time, some of Brazil’s most powerful men are fighting for their political survival in the newest scandal hitting Mr. Temer. They include Aécio Neves, a senator from the centrist Brazilian Social Democracy Party and the runner-up in the 2014 presidential race.
Mr. Neves, a top ally of Mr. Temer, was a key figure in the latest revelations, with Globo describing how Mr. Neves asked for around $600,000 in bribes to pay for legal fees. A justice on Brazil’s Supreme Court suspended Mr. Neves from the Senate on Thursday, while the police searched properties belonging to Mr. Neves.
The shock waves of the scandal around the capital, Brasília, were so intense since the Globo report on Wednesday evening that Sensacionalista, a widely followed satirical website, compared the events to the “Netflix model” of releasing all the episodes of a series at once for binge watching.
“In Brazil we are living the collapse of the political system, the collapse of the parties that are part of the political system,” said José Álvaro Moisés, a professor of political science at the University of São Paulo. “You don’t resolve this from one day to another.”