BRAZIL: FINANCE MININSTER ANTONIO PALOCCI STEPS DOWN OVER CORRUPTION CHARGES.
Brazilian Finance Minister Antonio Palocci stepped down from his post on March 27 after an investigation into corruption allegations against him made his life "hell," in his words. Guido Mantega, president of the Banco Nacional do Desenvolvimento Economico e Social (BNDES), took over the position of finance minister. Investors view the position as the most important ministerial post and had seen Palocci as their "guarantee" of fiscal stability in the Brazilian government, so Brazilian markets and the value of the national currency, the real, dove in the days following news of his resignation. President Luiz Inacio Lula da Silva may also face political consequences from the incident.
Palocci implicated in misuse of bank records
Palocci, commonly known as the architect of Brazil's economic recovery and market-friendly fiscal policy, sent a resignation letter on March 27 to President Lula, who accepted the resignation.
Palocci faces accusations that he frequented a house in Brasilia where lobbyists held parties with prostitutes and money arrived by the suitcase, possibly for political payoffs. He denies the accusations.
The scandal was low profile until the week before his resignation, when bank records from the caretaker who placed Palocci at the house were leaked from the state-owned Caixa Economica Federal (CEF). A key allegation against Palocci was that he violated banking-secrecy laws by making public the bank's records of house caretaker Francenildo dos Santos Costa to discredit him as a witness against the finance minister. Santos Costa had previously testified that he had seen Palocci "at least ten times" at the house.
There had been speculation that Palocci's supporters leaked the records in the hope of showing Santos Costa was paid for his testimony. The records showed recent deposits of US$11,400, but the caretaker, who was born out of wedlock, said the money came from his biological father, who was trying to avert a paternity suit.
CEF President Jorge Mattoso told police on March 27 that he personally handed the bank records over to Palocci, whose ministry oversees the bank. Police charged Mattoso with violating bank-secrecy laws, the government's official news agency Agencia Brasil reported.
Palocci denies ever being in the house, but analysts and opposition-party leaders said he would be forced to resign if he were linked to the release of the bank records.
The week before, Palocci said his policies to contain inflation and reduce the budget deficit would remain in place even if he resigned because of political pressure from opponents. "Brazil's economy has nothing but clear skies ahead, even though the finance minister is going through hell," Palocci told executives in Sao Paulo on March 24.
The Partido da Social Democracia Brasiliera (PSDB) on March 23 proposed Palocci's impeachment to lower-house president Aldo Rebelo. The party accused Palocci of committing perjury during his testimony before a congressional committee probing corruption.
Allegations against Palocci had been lingering for several...
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