Brazil minister under fire over favoritism charges
Reuters, Thursday, November 19, 1998 at 14:00
By William Schomberg
BRASILIA, Nov 19 (Reuters) - Brazil's embattled
Communications Minister Luiz Carlos Mendonca de Barros denied
Thursday fresh suggestions he sought to influence the outcome
of the privatization of telecommunications firm Telebras
(SAO:TELB3).
A magazine published new excerpts from taped telephone
conversations in which the minister and other officials
appeared to discuss ways of favoring a group in the sale of one
of Telebras' subsidiaries in July.
As investors worried about the chances of the case
upsetting the government's drive to tackle an economic crisis,
the minister told a Senate hearing the tape of the
conversations had been edited to insinuate he was seeking to
influence the outcome of the $19 billion privatization.
"That is not true, that is a lie," the minister said in
reference to the allegations of favoritism in the sale.
He was summoned to address the Senate after Brazil's media
last week published parts of illegally recorded telephone
conversations between him, the president of Brazil's National
Development Bank Andre Lara Resende and other officials.
The conversations seemed to imply that the officials were
seeking ways of ensuring a group led by local investment bank
Banco Opportunity and including Telecom Italia (MILAN:TIT) won the
bidding for a fixed-line company, Tele Norte Leste.
In the end, the Opportunity-Telecom Italia group picked up
another fixed-line company earlier in the auction, preventing
it from bidding for Tele Norte Leste which went to an
all-Brazillian group referred to by officials in the tapes as
"the enemy."
The incident has turned into a political scandal in Brazil,
just as the government is seeking to tackle the country's worst
economic crisis in years. Mendonca de Barros and Lara Resende
have said they will not resign.
Left-wing opposition parties are trying to muster support
for a parliamentary inquiry, a prospect the government is keen
to avoid to prevent delays in voting on a crucial austerity
plan.
Brazilian markets were glued to Mendonca de Barros'
testimony. The Bovespa index of share prices in Sao Paulo fell
over 1 percent as investors worried about the chances of the
scandal deepening, but recovered as the Senate hearing
progressed.
So far, the case has not affected voting on the austerity
plan.
Late Wednesday, Congress approved two controversial
presidential decrees included in the plan which seek to narrow
the country's pension system deficit -- set to pass $35 billion
in 1998 -- by more than $6 billion next year.
There was, however, no sign that the case would go away.
The new excerpts of the conversations, published in magazine
Carta Capital Thursday, showed Mendonca de Barros apparently
bragging about his ability to influence the Telebras
privatization.
"The deal is in our hands. You know why, Beto? We control
the money, the group...We make those sorry groups here...Pio
(Borges, BNDES vicepresident) puts them together and then
knocks them down..." the minister was quoted as telling his
brother, Jose Roberto Mendonca de Barros, also a senior
government official.
In another excerpt, the minister was quoted telling a top
official from Banco Opportunity, who is a former BNDES
president, how to bid in the auction for Tele Norte Leste.
Mendonca de Barros spent much of the opening part of his
Senate testimony explaining how the government had sought to
ensure that at least two companies took part in the auction for
Tele Norte Leste to maximize revenues from the sale.
He also said all rules for the privatization of Telebras
had been followed.
william.schomberg@reuters.com))
Copyright 1998, Reuters News Service |
