MercoPress. South Atlantic News Agency

Brazilian political crisis impacts financial markets

Brazil's orthodox Finance Minister Antonio Palocci was linked to the corruption scandal of the ruling Workers Party by a former aide who claims he received money from a sanitary company when he was mayor of Ribeirao Preto.

Solicitor Rogerio Buratti claimed before the Attorney General Office that when Mr. Palocci was mayor he received monthly payments equivalent of 21,000 US dollars from the company responsible for the city's garbage disposal.

Apparently the money was then handed to the former Treasurer of the Workers Party, Delubio Soares who admitted before the Brazilian Congress he managed a parallel accountancy with which political campaigns were financed.

Mr. Palocci was mayor of Ribeirao Preto, 300 kilometres to the northeast of Sao Paulo for two periods 1993/96 and 2000/01, when he left the Town Hall to become President Lula da Silva's Finance minister.

Allegedly payments were done during his second mandate as mayor.

Buratti who is currently under arrest for money laundering and destroying evidence in an extortion case involving a lottery and games corporation, was Cabinet Chief of Mr. Palocci during this first period and later legislative advisor to President Lula da Silva's former Cabinet Chief Jose Dirceu who was forced to resign because of his involvement in the Workers Party bribes for votes scheme.

One of the companies which made payments to Mr. Palocci according to Buratti was Leao-Leao, where he worked as legal advisor.

Mr. Buratti made the claims after having reached an agreement with the Attorney General Office which privileges witnesses who collaborate with the prosecution. The allegations had an immediate impact in Brazil's markets with the Sao Paulo stock exchange plunging 2,8% and the Real loosing 4% against the US dollar.

So far financial markets had remained immune to the Brazilian political crisis because the barrage of claims and accusations had not involved President Lula da Silva or Finance Minister Palocci, which are considered the guarantors of the current economy program continuity.

But according to financial analysts if the political crisis sweeps away with Mr. Palocci it will be virtually impossible to avoid the advance of uncertainty to markets.

Furthermore Jackson da Silva, one of the president's fifteen brothers said he believed it was "impossible" Lula da Silva did not know what was happening around him.

"Dirceu and Soares have been with my brother for years. My wife can cheat on me for a month, but not years and years", underlined Jackson da Silva.

"If Dad was alive he would have pulled his ear for not saying the truth".