Brazil's Temer, in battle for survival, plans economic stimulus

BRASILIA (Reuters) - President Michel Temer, fighting for survival over corruption allegations against him and his government, is planning new measures to jump start Brazil’s stalled economy, improve his dismal approval ratings and stifle calls for his resignation.

Slideshow ( 2 images )

The stimulus measures, to be unveiled this week, include steps to relieve indebted consumers and also force credit card companies to pay businesses faster than the current 30 days, government sources said on Monday.

Temer is gambling the micro-economic measures will counter discontent over his failure to deliver on his promise to recover Latin America’s largest economy from a two-year recession.

Finance Minister Henrique Meirelles confirmed measures to revive the economy could be unveiled after a key public spending cap passes Congress. Dismissing tax breaks or fiscal stimulus resorted to by the previous government, he said the steps would raise productivity and make it easier to set up businesses.

The Senate is expected to give final approval on Tuesday to the 20-year spending ceiling that is the centerpiece of the president’s plan to restore fiscal discipline.

But fallout from more corruption allegations in the sweeping probe into kickbacks at state-run oil company Petrobras could complicate passage of pension reforms needed to bring Brazil’s budget deficit under control.

Six months after he took over from impeached leftist Dilma Rousseff, Temer’s political survival is threatened by accusations that he, members of his Cabinet and his party’s leaders received under-the-table payments from engineering conglomerate Odebrecht.

Odebrecht, the company prosecutors say benefited the most from the Petrobras scam, agreed to a leniency deal with federal prosecutors that requires 77 of its executives and employees to turn state’s witness and likely implicate over 200 politicians.

In the first leaked testimony, one Odebrecht executive alleged that Temer requested 10 million reais ($3 million) for his PMDB party’s 2014 election campaign.

Disapproval of Temer’s government rose to 51 percent from 31 percent in July, according to a Datafolha poll published on Sunday. More worrying for Temer, 63 percent of those polled said they would like to see him resign and a new president chosen in direct elections and not by a Congress discredited by scandals.

Under Brazil’s constitution, if Temer were to resign after Dec. 31, Congress would elect his successor, an intolerable option, according to lawmaker Miro Teixeira of the leftist Rede party.

“In this tense national environment, the people would not accept a president imposed by Congress,” said Teixeira, who authored a legal amendment to allow a direct vote.

To shore up his scandal-buffeted government, Temer hopes to strengthen his Cabinet by giving the centrist PSDB party a larger role. Several PSDB senators were involved in shaping the stimulus package.

The PSDB is Brazil’s third-largest party and already holds three cabinet positions, and it could greatly help Temer get his unpopular austerity measures passed, including pension reforms that will mean Brazilians will need to work longer years before retiring.

Left-wing parties obstructed debate of the pension proposal for hours in a committee hearing on Monday.

Editing by Alan Crosby