Brazil's Wire-Tapping Scandal May Undermine Fiscal Plans
Dow Jones Newswires
SAO PAULO (AP)--Allegations that two top Brazilian officials may have
tried to influence the outcome of a phone company's privatization could
throw a monkey wrench into the government's efforts to stabilize its ailing
economy, analysts said Tuesday.
The allegations involve Communications Minister Luiz Carlos Mendonca
de Barros and Andre Lara Resende, president of Brazil's national
development bank, or BNDES.
Conversations, secretly recorded on the eve of last July's 22 billion-real
(BRR)($1=BRR1.19) privatiaztion auction of federal telecommunications
holding Telebras, apparently show Barros and Resende favoring a
consortium of personal friends in its bid to purchase part of Telebras'
operations. The two officials helped coordinate the privatization process.
Since the tapes surfaced last week, the brewing scandal has been the top
news story in Brazilian media. Veja magazine published excerpts of the
taped conversations in this week's issue.
It is unclear where the tapes came from or who made them. Both Barros
and Resende have denied any wrongdoing. In fact, the consortium they
allegedly favored lost the auction.
But that hasn't stopped opposition politicians from calling for a full
congressional investigation, which analysts say could divert attention away
from the government's fiscal austerity measures designed to revive South
America's largest economy.
"The tapes reveal a promiscuous relationship between the government and
investors," said Congressman Marcelo Deda, of the leftist Workers Party.
"At this stage of the game a congressional investigation is morally
irreversible."
In late October, the Brazilian government unveiled a mix of tax increases
and spending cuts in a bid to restore investor confidence in the country's
beleaguered financial markets. Much of the fiscal plan, which aims to save
around BRR28 billion in 1999, requires congressional approval.
"The government's worst nightmare at the moment is a congressional probe
into the tapes," said Alexandre Barros, a Brasilia-based political and
business consultant. "It will draw attention away from the austerity
measures and possibly weaken them."
Some politicians, Barros said, will agree with the creation of a
Congressional Inquiry Committee "so they can later indulge in some horse
trading with the government."
"They'll negotiate withdrawal of their support in exchange for approval of
projects that can dilute the fiscal austerity package," he added.
Political consultant Jose Luciano Dias said an investigation will give
Congress a stronger hand when it votes on the austerity measures. "The
President will become more dependent on the good will of Congress," he
said.
Aware of the danger, the government is marshaling its allies to delay a
possible investigation, at least until after Congress approves the
belt-tightening measures.
"We cannot stray away from our main objective," said Congressman Jose
Roberto Arruda. "We must prioritize the measures."
The wiretapping case reveals something more than an attempt to influence
the outcome of a privatization auction, said Miriam Leitao, an influential
commentator on economic affairs.
In a column published in Tuesday's O Globo edition, Leitao said that the
tapes underscore a "basic error in the entire privatization program -
government banks financing the purchase of its own companies."
The use of public funds, made available at subsidized interest rates by the
BNDES, hurts the economy and the privatization process, she said.
Police are also looking into allegations that President Fernando Henrique
Cardoso and three close allies stashed away $368 million in a Cayman
Islands corporate account.
The allegations emerged in documents sent to authorities over the weekend
implicating Sao Paulo Gov. Mario Covas, Health Minister Jose Serra and
ex-Communications Minister Sergio Motta, who died last April.
It is unclear where the documents came from. The original documents have
not been released; only copies have been seen.
Unlike the wiretapping, the impact of these allegations is quickly fizzling
out, said political consultant Jose Luciano Dias.
"The documents are so grotesquely false that no one is giving them any
credence at all," he said. |
