Brazil's ruling party leader in Senate quits ahead of labor reform vote

BRASILIA (Reuters) - A harsh critic of President Michel Temer in Brazil’s Senate quit the leadership of the ruling party on Wednesday, exposing a rift within Temer’s coalition but suggesting the president retained enough support for a key vote on a labor overhaul.

Senator Renan Calheiros, looks on during a meeting at Economic Affairs Committee (CAE) of the Brazilian Federal Senate in Brasilia, Brazil June 20, 2017. REUTERS/Ueslei Marcelino

Senator Renan Calheiros announced his resignation as party leader saying that, unlike most of his party members, he could not give his backing to proposals that hurt Brazilian workers, especially if they came from a president lacking credibility in the middle of a corruption scandal.

Temer, whose government has an approval rating in the single digits, has resisted repeated calls to resign after executives of the world’s biggest meatpacker, JBS SA, accused him of discussing bribe payments.

While Calheiros gave his speech, the Senate’s committee on constitutional affairs prepared to vote on Temer’s proposal to revamp the labor code, in what was expected to be a close decision.

“I don’t hate Temer,” Calheiros said. “What I don’t tolerate is his cowardice as the labor code is dismantled.”

Calheiros was partly responsible for a surprising setback for the bill earlier this month at the Senate’s social affairs committee. Investors feared Temer had lost support for an economic measure regarded as fundamental for Brazil as it tries to shake off its worst recession ever.

Despite the possibility of another setback at the constitutional committee, approval of the labor overhaul seemed likely on the Senate floor soon, analysts with Eurasia Group wrote in a note earlier on Wednesday.

The labor reform bill has already been approved by the lower house, but faces fierce opposition from labor unions that will lose power over workplaces. The bill allows more temporary work contracts and outsourcing, eliminating mandatory union dues.

Temer was charged Monday night by Brazil’s top prosecutor with taking multimillion-dollar bribes. He must retain support of at least one third of the House of Deputies to stop a formal trial by the Supreme Court, during which he would be suspended from office.

PMDB senators were due to meet later on Wednesday to elect a new party leader.

Reporting by Silvio Cascione and Maria Carolina Marcello; Editing by Marguerita Choy and Andrew Hay