Menu Search Facebook Twitter
Search Close
  • Capital Coahuila
  • Capital Hidalgo
  • Capital Jalisco
  • Capital Morelos
  • Capital Oaxaca
  • Capital Puebla
  • Capital Quintana Roo
  • Capital Querétaro
  • Capital Veracruz
  • Capital México
  • Capital Michoacán
  • Capital Mujer
  • Reporte Índigo
  • Estadio Deportes
  • The News
  • Efekto
  • Diario DF
  • Capital Edo. de Méx.
  • Green TV
  • Revista Cambio
Radio Capital
Pirata FM
Capital Máxima
Capital FM
Facebook Twitter
X Welcome! Subscribe to our newsletter and receive news, data, statistical and exclusive promotions for subscribers

Brazil's New Government Buffeted By Pension Fund Scandal

Political observers in Brasilia doubt that Temer's Brazilian Democratic Movement Party will emerge unscathed from the new scandal, since it shared power with the Workers Party during the years the fraud allegedly took place

Brazil's President Michel Temer arrives at the Hangzhou Xiaoshan international airport before the G20 Summit in Hangzhou, Zhejiang province, China September 2, 2016, photo: Reuters/Aly Song
By Reuters Whatsapp Twitter Facebook Share
12 months ago

The government of Brazil’s new President Michel Temer scrambled on Tuesday to distance itself from a multibillion-dollar corruption scandal that broke less than a week after he took office, involving fraud in the country’s largest pension funds.

With the country already reeling from a sprawling bribery and kickback scandal at state oil company Petrobras, the new corruption case could hamper the conservative Temer’s efforts to restore credibility and turn the page on the leftist government of impeached President Dilma Rousseff.

Police on Monday arrested five people linked to fraudulent investments made by four huge pension funds of state-run companies. The investigation snared dozens of businessmen and fund managers suspected of involvement in a fraud scheme valued at around 8 billion reais ($2.5 billion), including the chief executive of the world’s biggest beef exporter.

The coveted appointments of directors to the funds’ boards were made by political parties and the probe is expected to spread to Brazil’s political establishment, where some 50 politicians are already under investigation in the Petrobras scandal.

Temer’s office said the appointments were made during the 13 years of Workers Party rule that ended with Rousseff’s removal from office last week, and the “irregularities” uncovered by the police had nothing to do with the current administration.

“The Workers Party appointed the pension fund directors from the moment it took office in 2003 and they were closely linked to the unions,” said a Temer aide who asked not to be named.

“The Workers Party was responsible for the big loss suffered, ironically, by the workers of the state companies who were saving for their retirement,” the aide said. “This has not even scratched the image of the new government.”

Temer’s government will press for a thorough investigation as it pushes through proposed legislation that will depoliticize the appointment to directors of state companies, he said.

The investigation focuses on investments in overpriced assets, including private equity funds with artificially inflated share prices, according to the federal police.

The Workers Party declined to comment on the investigation but its president, Rui Falcao, denounced as “arbitrary” a raid and seizure of documents at the home of the party’s former treasurer Joao Vaccari, jailed a year ago in the Petrobras scandal.


Political observers in Brasilia doubt that Temer’s Brazilian Democratic Movement Party will emerge unscathed from the new scandal, since it shared power with the Workers Party during the years the fraud allegedly took place. The party has also been deeply implicated in the Petrobras scandal.

The state-company pension funds, flush with cash, have long been vulnerable to political interference and dogged by suspicions of fraud, said political risk consultant Andre Cesar.

“The 8 billion reais is just the tip of the iceberg. They have opened a Pandora’s Box and names of politicians will inevitably appear sooner or later,” Cesar said.

Even if nobody in Temer’s government is implicated, the new scandal underscores some of the unsavory ties between business and political interests in Brazil that have undermined confidence in Latin America’s largest economy.

“What are voters going to think? We just got rid of one government and corruption continues just the same in the new one,” Cesar said.

The pension funds caught up in the investigation are those of state-run banks Banco do Brasil and Caixa Economica Federal [CEF.UL], the postal service Correios and oil company Petrobras, or Petroleo Brasileiro SA. The funds have said they are cooperating with the investigation.

The funds, which controlled 280 billion reais in assets last year, have been an important source of investment in Brazil’s credit-starved economy, now in its second year of recession.

($1 = 3.2183 Brazilian reais)

Comments Whatsapp Twitter Facebook Share
More From The News

Citing Trump Remarks, Entire President's ...

23 mins ago

Eclipse Mania Sends Americans Scurrying ...

47 mins ago

Ousted: Trump Pushes Out Controversial A ...

1 hour ago

In Germany, Neo-Nazis Get to March But T ...

2 hours ago
Most Popular

German Toolmakers Open up Shop in San Mi ...

By Ricardo Castillo

UAEM Celebrates 45th Anniversary of Medi ...

By The News

What You're Doing This Weekend in Mexico ...

By The News

Mazatlán's Many Historical Firsts

By Bob Schulman

Thousands to Be Evacuated From Lebanon-S ...

By The Associated Press