Brazil Senate forex probe seen losing steam
ReutersPlus, Monday, May 17, 1999 at 15:13
BRASILIA, May 17 (Reuters) - A Brazilian Senate probe of
insider trading and favoritism during January's shock currency
devaluation has faded from the political radar screen, after
weeks of testimony have failed to nail down any wrongdoing,
analysts said.
While a Senate committee will forge ahead with an
investigation into irregularities in the banking system, the
high-profile probe of two firms bailed out by the Central Bank
on the heels of the devaluation is virtually over.
"The two principal points that drew most attention have
already been clarified," said Ricardo Pedreira, a political
analyst at Santa Fe consulting firm. "Now, the (inquiry) enters
a more routine phase, more predictable."
Lawmakers said they had concluded a probe into charges that
the Central Bank warned some banks in advance of the
devaluation, allowing them to make big profits.
Brazil's financial markets had feared the inquiry would
taint Finance Minister Pedro Malan and other sitting officials
just as Brazil is buffing its image abroad. Those concerns have
proved unfounded.
The Senate investigated allegations that the now-defunct
Banco Marka and FonteCindam had access to inside information
prior to the mid-January devaluation and then received
privileged treatment following the currency's plunge.
The two banks would have taken big losses in foreign
exchange futures as a result of the devaluation. The Central
Bank said it sold the two firms dollars at below-market prices
to prevent their collapse on concerns the whole financial
system could be at risk.
But after weeks of testimony from former Central Bank
directors and representatives of the two institutions, the
committee ended their investigation last week and began
preparing a report that may be out in two weeks.
Former Central Bank chief Francisco Lopes provided the
probe's only excitement with his emotional refusal to testify
and brief arrest in late April. Others also failed to reveal
any explicit wrongdoing by senior government officials,
analysts said.
"The (investigation) did not do any damage to the
government," Pedreira said.
The Rio de Janeiro state attorney general will continue
looking into the two banks and former Central Bank directors,
but the media hype surrounding the scandal has mostly died
down.
The Senate committee will begin investigations this week
into alleged tax evasion at banks and will later take a look at
institutions that showed surprisingly strong gains after the
devaluation.
Copyright 1999, Reuters News Service
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